QA_Neumann_Kaffee
By Dan Bolton
Neumann Kaffee Gruppe (NKG) is comprised of 49 companies operating in 27 countries. In the US these include Atlas Coffee Importers in Seattle and InterAmerican Coffee and Rothfos Corp.
With sales of 15 million 60-kilo bags in 2018, about 10% of the global consumer market, NKG is the largest coffee service group in the world. NKG employs 2,200 staff serving 4,000 commercial clients.
In 2004 Managing Partner David M. Neumann succeeded his father, becoming the third generation since 1934 to lead the firm. Last December NKG joined The Sustainable Coffee Challenge, an initiative of 120 partners committed to making coffee the first sustainable agricultural product in the world. Neumann met with STiR at the Specialty Coffee Expo in Boston.
“One of the reasons I’m standing here is that we’re coming to a point in the world where in many ways politics is failing us. We want to be a little bit more present on topics that are dear to us,” Neumann explained.
“I think entrepreneurs have to stand for something. We have to take over what our elected officials obviously don’t want or can’t do. One can like it or not, but in certain areas today, we’ve got to stand up and be counted.
“Coffee is the only thing we do. At the end of the day, our concerns involve everything that has to do with coffee because it’s the only thing we think we know a little bit about,” says Neumann.
STiR: The coffee industry has experienced three pricing crises during the past few decades. The latest continues. NKG, as a respected intermediary, is positioned to see legitimate concerns on both sides of the buy-sell divide. Will you offer your insight?
Neumann: I don’t have an answer as to how it will be resolved, but my impression is that part of the pricing crisis is artificial. To say in a blanket sentence that all producers are suffering or that producers cannot cover costs is simply not true. In Brazil, we see growers efficiently producing coffee for 59 cents or 68 cents a pound. So, they’re potentially making a profit selling at 98 cents ― but it’s not a bonanza. A lot of effort goes into coffee and there is risk. It is something that you can only harvest once a year. The price is too low, period.
The price is too low, also, when you consider that people will happily spend, I don’t know, $10 bucks a shot at retail and more. The delta is much too big between what the producer gets and what the roaster or retailer earns today. I’ve never seen it as big and, if anything, it’s growing.
So, all that said, it’s a lousy price but there is a difference between accepting a lousy price and leaving the farm on a caravan north. The Brazilian producer is at break-even or better. Vietnam is doing fine right now, robusta producers are making money. Colombia’s growers will be supported for better or for worse.
So, who are we talking about? We’re talking mainly about washed Arabica grown by smallholders in several important but less and less relevant producing countries.
When you call it a pricing crisis ― which it is, I think part of the crisis also comes from the fact that the roasting and retailing industry has for a long, long time not been able to make as much money on coffee as they are now: Godspeed to them. That’s great.
One could say this is the moment ‘to put your money where your mouth is.’ If there is something to be done overall for an economically sustainable coffee market, then one should fix the roof when the sun is shining. And for the roaster and retailers, the sun is shining.
It’s easy for traders and producers to sit around and criticize the roasting industry but roasters have done a fantastic job in the last 40 years marketing coffee. Retailers have been making coffee sexy for decades. That doesn’t happen with consumer products. They come and go. With coffee, there is always something new.
It’s the roasters and retail brands, the product people, who’ve managed to keep it sexy for the consumer. Today more and more people want to consume coffee. It’s a brand story. It’s a health story. It doesn’t make you fat. It’s good for you.
Another way of viewing the pricing crisis is that it’s occurring because we are not reinvesting at a moment in time when we have the opportunity to reinvest, while clouds on the horizon gather in the form of the climate change and changing tastes.
I suggest to our customers, think about how you want to keep your coffee flow going.
STiR: Global trade is turning contentious in these times, with tariffs and the Paris Climate Agreement under attack, yet you committed NKG to an initiative involving organizations in 45 countries, calling sustainability “a commercially viable way ahead to a bright future for everyone in the green-coffee value chain.”
Neumann: The world right now is becoming more regional, more protectionist, more local, ‘no more foreigners’, no this... no that. As coffee merchants, we’ve always believed that we can create better business, better relationships, and better services by being local. That said, I agree with you: globalization is a great idea. It was a great idea. It was left to the markets for too long and one reaction is that things turn inwards. You can’t blame Mr. Trump for everything. A lot has been done wrong in the last 20 years and people are saying, ‘what do I care what’s going on in Korea or Germany? It’s not my problem.’
Sustainability has been a driver for us long before it became a buzz-word amongst competitors. Our own farming activities since the early 1990s taught us the importance of it very quickly. Ever since that we have been actively engaged in the proliferation of sustainability amongst farmers big and small. Especially the small-farmer-sector is in our focus today, we regard sustainability not as a “fix-it-all-miracle-cure” but rather as a commercially practicable way ahead to a viable future for everyone in the green-coffee value chain. A number of important projects and contributions over the years show our commitment.
STiR: Asian countries including Vietnam, even Colombia are experimenting with growing hardy robusta as a hedge against climate change.
Neumann: This is maybe something that one shouldn’t say, especially at this convention, but the world cup has overall become better because of planting material, better husbandry, better milling procedures and quality consciousness at origin. Exporters have become total professionals, they communicate, they travel, they know what their customers want and deliver it. And consumers’ tastes have changed: People want a different taste profile... maybe less acid, a little smoother cup. If you are comparing Vietnam against Guatemala high-growns, yes sure, robusta can be seen wanting but you don’t taste white wine against red. You taste it against other whites. It’s a different animal. It is more economical, maybe easier to handle and roasting a batch of coffee is not just throwing it in the roaster and pulling it out when it turns brown like it used to be... it’s high tech, leading to better results.
STiR: Is consolidation benefitting coffee? If so, how so?
Neumann: Our specialty people, they tell us our customers want, I don’t know, 139 origins. The retailer is investing in marketing and saying, ‘what a close relationship we have and how wonderful it is that we do good things with all these people.’
We say, well, that’s fine but if that origin doesn’t go mainstream, and if your customers don’t mean it seriously, we will end up with five super producers producing 100% of the world’s consumption. Everybody who produces coffee in the world today is competing with Brazil. You’re not competing with your neighbor; you’re not competing with another country that produces the same qualities. You are competing with Brazil and Brazil is rushing ahead with larger steps than anybody else. Sooner or later that will mean walking into a coffee shop where the guy says, ‘what would you like? We have both kinds.’
That’s kind of sad. It’s culturally sad. It’s historically sad. It’s socially sad in the inefficient producing countries. As the concentration of production of the top five origins goes up, the number of producers in the world is also rising. That can’t really correlate.
Farm size is decreasing. In Kenya, in Colombia, you see quality producers where two kids inherit the farm, and the farm is now half the size because it’s culturally important for each to own land. Meanwhile, they are living in the city and doing something else.
This is not a non-for-profit, big-hearted endeavor. It could be about keeping your business diverse. It’s really very, very simple. I can’t sell a consumer coffee if I can’t buy it. If it’s all Vietnam robusta, well, that’s not good news for the people [who want 139 origins].