JAPAN BUYS 70% OF JAMAICAN COFFEE

Jamaica 2018 | AGRICULTURE | VIP INTERVIEW

TBY talks to Mark McIntosh, Vice Chairman of Wallenford and Mavis Bank Coffee Companies, on the evolution of the company since 2013, potential for growth in the Jamaican coffee industry, and differentiating the firm as a premium brand.

Could you give an overview of the evolution of Wallenford since it was acquired in 2013?

We purchased Wallenford from the government of Jamaica, which sought to divest assets in general, and we are one of the largest divestments in recent times. Purchasing Wallenford and working to transform it into an efficient coffee company has been part of our evolution since 2013. It has been four years since we got into coffee. The justification for that investment was the reputation for Blue Mountain Coffee. Everywhere around the world, people have heard of Blue Mountain Coffee, and it is described as extremely expensive and high quality, but not available. Any company would want their product to be described as excellent, expensive, and in limited supply. That underpinned the parent company's decision to enter the agriculture sector, which has generally been a difficult industry in Jamaica.

Wallenford acquired Mavis Bank Coffee in 2016. Do you plan to further scale up the company?

The Jamaican coffee industry is relatively small; we are talking less than USD100 million in sales. Our view is that it is possible to triple or quadruple that through developing new products. Despite our 250-year history, we took an objective look and saw all that the business focuses overwhelmingly on the sale of green wholesale coffee. If we want to turn the corner and make more money, we have to get closer to the final end product by selling more roasted coffee. Blue Mountain Coffee is similar to champagne in terms of regional production. If a farm is located outside the border of the defined region, it cannot be called Blue Mountain Coffee—it has to be sourced from a particular area in Jamaica. By definition, it is restricted, and at the same time, it is not efficient. Although a farm should have 900 trees per acre, many Blue Mountain Coffee farms have far less. There is a great deal more that could be grown on existing farms. As the largest holder of land in the Blue Mountain Coffee area, we are in the best position to lead this effort.

What marketing activities are you engaged in to keep the business profitable?

We supply the Starbucks Reserve line, which is sold in special stores. We have to meet strict quality, production, corporate social responsibility and environmental standards in order to supply to them. We, we have been supplying them our coffee for three years. In London, we are a key product in the Harrods coffee selection. These are some examples of the key activities we do to maintain the brand. Many Jamaicans and global drinkers of Jamaica Blue Mountain Coffee think of Wallenford when they think of a leading provider of high-end coffee, largely because we spend a great deal of energy differentiating our company. We have old farms running for over 200 years in some of the areas where we grow coffee, and we want to leverage that as we seek to diversify geographically. Currently, Japan buys 70% of Jamaican coffee, a reduction from almost 100% not too long ago. Japan has a special interest in Jamaican coffee, having invested in Jamaica Blue Mountain for over 50 years.. Our large coffee factory was built with Japanese financing, and they truly deserve much of the credit for helping to develop this market. When the financial crisis hit Japanese orders in 2008-09, the focus on developing new markets increased.

Do you plan to enter any new markets in order to diversify further?

Every day, we look for ways to sell more coffee. A further increase in China sales would be great; however, it is still not a coffee country. Still, the country is getting more interested in coffee every year, and based on the size of the market, even a 1% growth in coffee sales per year is significant. However, the problem is, even though China has a large luxury goods market, they haven't begun to latch on to premium coffee. One of the drivers of our increased exposure in China is Starbucks, which carries our coffee in their high-end Chinese stores. We are one of the most expensive brands sold by Starbucks globally and have had significant success across the world, including in China.

Do you plan to partner with other companies to give away complementary items with your coffee to boost sales?

No, we do not. We are a premium brand of coffee that is for people who truly enjoy and appreciate excellent coffee. We tailor our coffee to address a specific market. For example, several Michelin star Chefs drink our coffee at home, and have served it intheir restaurants. Although we are asked to produce limited edition packages bearing company names or logos, we have only agreed in the rare cases where the brand meets our strict criteria for brand association.

What are your projects for Wallenford in 2018?

The integration of Mavis Bank and Wallenford is huge and managing it has led us to increase our focus on efficient coffee production, and targeted branding and market positioning. They are two strong companies on their own, and we want to create efficiencies without diluting the brands or creating confusion. Some customers are Wallenford customers, and some are Mavis Bank loyalists so we focus on managing that. We are two separate names and markets; however, we can gain efficiencies on the back end in areas like accounting. A huge part of who we are is about improving farm efficiency and making coffee cultivation and transportation more manageable for farmers. We source a large amount of coffee from farmers and we need to hold them to high standards so that we can be sure the coffee we buy from them is as good as the coffee grown on our own farms. We want our farmers to earn higher incomes. If they are earning more, it increases the chance that they will maintain a high quality supply and their success will contribute to our success. We have to find the right balance between helping them to grow their crops efficiently and paying them fairly for the coffee. That plays a large role in the overall sustainability of the industry. The price we pay is always a topic of discussion. When we came into the industry, farmers were being paid about USD45 per box of coffee, and we realized that we had to adjust that once we did our own research to establish how much that box actually costs the farmer to produce. They were not being paid enough, so we began paying more. That was one of the first things we were known for when we got into coffee: paying a higher price to the farmers. We try to encourage them to use the extra money to plant and cultivate more coffee and we provide extensive farmer training to increase their likelihood of success.