ethiopia coffee presentation_mercon

May 1, 2023 1

Ethiopia Coffee

www.mercongroup.com

May 1, 2023 2

General Facts about Ethiopia

• 99.4 million people (13th most populous)

• 46% population growth since 2000• Density: 97 per km2• Median age: 17.6 years • Population growth rate: 2.9 %• GDP: USD 232 billion (PPP)• GDP growth: 9.9 % (11th fastest

growing economy, fastest growing non-oil producer country in Africa)

• Inflation: 7.4 % (stable since 2013)• Education: 5.5% of GDP budget• Unemployment: 17.5 %• Population living below poverty

line decreased from 46% to 30% between 2000-2014

Source: US Department of State: 2015 Investment Climate Statement; : World Bank Databank

May 1, 2023 3

Pros:• Political: stable

government system since 1991 – US is an ally, considering Ethiopia as island of stability in the region.

• Ranked 118 of 185 on the competitiveness index.

• 1100% increase in FDI in the past 5 years.

• Rated B1 by Moody’s, B by Fitch and B by S&P’s indicating stable environment.

• Free trade agreements with both EU & USA.

Cons:• Access to local credit is a

problem because of the need for 100% collateral and a fragmented banking system.

• Corruption Perception Index Ethiopia ranks at 110 out of 175. Low quality of governance.

• Infraestructure: road system growing but still deficient. Poor connection to coffee-growing areas.

• Need of local partner to establish local companies.

Source: US Department of State: 2015 Investment Climate Statement; : World Bank Databank

Ethiopia:to invest or not to

invest?

http://www.eac.int/initiatives/european-union-everything-arms

http://agoa.info/about-agoa.html

May 1, 2023 4

Coffee in Ethiopia

Source: http://madcapcoffee.com/experience/blog/ryans-trip-to-ethiopia

May 1, 2023 5Source: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Coffee%20Annual_Addis%20Ababa_Ethiopia_6-13-2016.pdf*Source: Ethiopian Coffee Exporter Association / USDA: 6.4M Industry Consensus: 6M

General Background

Flowering season is from March to

June

Harvest season is from October to

April

Shipping seasons: Washed starts in

Nov – Dec. Naturals start in

Feb - Mar

All exports must be made by an

Ethiopian company

2014/15 Crop:Production:

6.4M*Consumption:

3.4M(60Kg Bags)

2014/15 coffee exports:

3M 60 kg bags

EXPORT FROM ETHIOPIA

2014/2015 Exports

May 1, 2023 6Source: International Coffee Organization

May 1, 2023 7

Production

6.4M 60Kg Bags

(4.5% of global production)

Estimated 525,000 Ha producing

coffee

Small farmers under 5 Ha

Total estimated production: 5.7M 60Kg

Bags

Commercial farms over 10

Ha:0.7M 60Kg

Bags

Natural Process:

70%

Washed Process:

30%Garden:

50%

Forest: 40%

Plantation: 10%

Source: https://bootcoffee.com/wp-content/uploads/2013/01/Ethiopian_Coffee_Buying_Gu

ide.pdf

8

Quality Classifications

Example: Ethiopia Djimmah, 5 Ethiopia Arabica from the

region of Djimmah, Grade 5

• Besides mentioning the region, ECX can use a letter system (A, B, C...) can be used to describe the area of the region where the coffee comes from.

• Exporters use Under-Grade “UG” to describe a lower quality cup & defect

• Washed and Un-Washed• Most common type sold is 5• Grade 5 “Europrep” is an

improved Grade 5, under 80 defectsMay 1, 2023

Grade Defects

1 0 - 3

2 4 - 12

3 13 - 25

4 25 - 45

5 46 - 100

6 101 - 153

7 154 - 340

8 Over 340Not

allowed for

export

Specialty

Commercial

May 1, 2023 9Source: http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Coffee%20Annual_Addis%20Ababa_Ethiopia_6-13-2016.pdf

Commercialization

All Ethiopian coffee must be exported by a local company.

Four main channels of commercialization:1. Village-level trading that occurs between

growers, collectors, and cooperative unions.

2. Ethiopia Commodity Exchange (ECX) in Addis Ababa where exporting companies purchase coffee still stored in ECX warehouses in the growing areas.

3. Cooperative unions and large commercial farms which sell coffee to the international market without passing through ECX.

4. Direct Specialty Trade auction from ECX is an ongoing project to allow roasters to bid on coffees they cup, straight from the farmer.

There are further complexities, described in the graph that follows…

May 1, 2023 10

E.C.X.• Quality &

Grading• Warehousing• Trading

Export

Small Farmers

1st Level Coffee Market

Red Cherry

Dry CherryFarmers

Cooperatives

Dry/Red Cherry

Unions

Washing/HullingPrivate

Exporters

Export

Large Farmers

Dry/Red Cherry

Suppliers

(akrabi)Washing/hulling

Washing/Hulling

Export

Reject Coffee Wholesalers Domestic Consumption

Source: https://bootcoffee.com/wp-content/uploads/2013/01/Ethiopian_Coffee_Buying_Gu

ide.pdf

These two routes allow for full TRACEABILITY of the coffee.

May 1, 2023 11

Exporters purchases to the ECX on washed

coffees*

Source: Orchid Coffee Exports

*in parchment

Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 -

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Washed Purchases from ECX Evolution by Coffee Region (60Kg bags)

Sidama LimmuGuji Yirgacheffe

63,719.40 19,853.45

102,304.02

23,484.37

14,292.47

142,020.83

302,282.60

12,930.85

68,403.70

Nov '15 - May '16 Purchases of Washed Coffee from ECX (60Kg bags)

Others Bebeka GujiKochere Lekempti LimmuSidama Teppi Yirgacheffe

No mayor ICE price fluctuations occurred in this time, meaning this seasonal pattern is natural.

May 1, 2023 12Source: Orchid Coffee Exports

Exporters purchases to the ECX on un-washed coffees*

Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 -

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

Unwashed Purchases from ECX Evolution by Coffee Region (60Kg bags)

Lekemti Djimma Forest Sidama

5,284.20

356,945.60

252,352.25

26,187.08 154,474.43 26,672.62

212,404.47

17,955.12

415,659.92

53,048.78

Nov '15 - May '16 Purchases of Unwashed Coffees from ECX (60Kg bags)

Others Djimma Forest GujiHarrar Kaffa Sidama KochereLekemti Yirgacheffe

*in dry cherry

No mayor ICE price fluctuations occurred in this time, meaning this seasonal pattern is natural.

May 1, 2023 13http://www.ethiopianfinecoffees.com

Coffee Growing Regions

May 1, 2023 14

HararGeographical LocationDry, hot, and desert climates are the characteristics of this region, which is the easternmost coffee producing region in Ethiopia. It is sub-divided into the different sub-regions: East Harrar, West Harrar, Bale, and Arsi. Dire-Dawa is the largest city, where most coffee trading occurs.

Information on the CoffeePractically all Harrar coffee is sun-dried Natural. When the drying process is finished, they hand process the parchment coffee in order to obtain the best quality.Cup Profile

Quality Harrar coffees are notable for a fruity characteristic and a creamy body. The finest Harrar coffees have a distinct note of blueberry, and a unique Mocha flavor.

ElevationBetween 1510 – 2120 mts. above sea levelSource:

https://bootcoffee.com/wp-content/uploads/2013/01/Ethiopian_Coffee_Buying_Guide.pdf

May 1, 2023 15

SidamaGeographical LocationThe coffee growing regions of Sidama lie in the famous Great Rift Valley that runs through southwest Ethiopia all the way to Kenya. It encompasses many individual origins, including, geographically, the area of Yirgacheffe. However, Yirgacheffe is classified as its own separate origin because of it’s fine cup quality.

Information on the CoffeeSidama is home to the renowned coffee knows as Sidamo. Sidamo coffee features an extraordinarily wide variety of flavors, both washed and un-washed.

Cup ProfileSidamo coffee has spicy and sweet tones with bright acidity. Nonetheless, varying soil types, micro climates, and specially the countless heirloom coffee tree varietals make for a world of different flavors. The strength of Sidamo lies in it’s diversity.ElevationBetween 1520 – 2200 mts. above sea levelSource:


May 1, 2023 16

YirgacheffeGeographical LocationYirgacheffe is a micro-region inside Sidama. Yirgacheffe itself is a small town of about 20,000 people, located somewhat centrally in relationship to the other coffee growing areas of Sidama.

Information on the CoffeeYirgacheffe produces both washed and unwashed coffees. While it originally became famous mostly for its washed coffees, recent years have seen the export of some highly sought-after top-rate unwashed coffees as well. Cup Profile

Top grade washed coffees from Yirgacheffe are renowned for bright citrus acidity, often with a lemony character, with excellent sweetness and distinctive floral notes. The other hallmarks of the coffee is a light, herbaceous quality that compliments the fruit flavors well, for a complex and flavorful coffee.ElevationBetween 1770 – 2200 mts. above sea levelSource:


May 1, 2023 17

JimmaGeographical LocationLocated in the west of Ethiopia, this vast coffee growing region has great potential for future growth. It’s deep red soil and exhaustive rainfall have attracted the attention of investors looking to develop coffee estates, specially in the area of Kaffa.

Information on the CoffeeIn Jimma, two main coffees are produced: Limmu is the washed coffee, and Djimmah is the natural, un-washed coffee, which constitutes the greatest basket of Ethiopian unwashed coffees.

Cup ProfileLimmu: well-balanced body and winey and spicy flavors, often fruit-toned, pleasantly sweet and vibrant with floral overtones. Djimmah: well balanced cup, medium acidity and body with distinct winey flavor.



May 1, 2023 18

LekemptiGeographical LocationLekempti is a region in Western Ethiopia which collects the coffees grown in Wellega and Gimbi, the regions with the highest rainfall in Ethiopia. Lekempti is named after Nekempte, the town where most of the coffee trading occurs.

Information on the Coffee Originally, Lekempti is a sun-dried natural bean, coffee is known for its large bean size, and the flavor can have a pronounced perfume-like aftertaste.

Cup ProfileThis area has a much different profile than the traditional washed Sidamos. Coffees have a much sweeter cup with less distinctive delicate citric acidity, and more big sweet stone fruit.



May 1, 2023 19www.mercongroup.com

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