Thursday, July 28, 2011

Brazil's Quality Coffee or Capabilities?

A few years back I went to Managua in Nicaragua one of the poorest countries on this side of the world torn through a revolution and war 20 years ago during the Reagan administration. Currently anybody can go and you wouldn't think anything like that happened there. It's peaceful and the political stability is good. Once there I noticed two things; poverty, and how agriculture was one of their biggest industries in the rural locations. Many Americans and International investors were going to Nicaragua for one thing "Coffee Beans". Coffee is the second most traded product in the world after petroleum. Nicaragua hosts one of the cleanest and purest tasting coffees in the world and it's due to the numerous volcanoes in the regions and is very similar to Hawaii's world re-known coffee taste. Colombia is considered the richest tasting coffee beans in the world and it's clearly due to the high elevation where they are being produced. The list of high quality beans extends to Ethiopia, Indonesia, India, Jamaica, Kenya, etc. In quality, the perfect bean is based upon the combination of soil quality, climate, and the higher the altitude, the better the quality.

For the first time I drank real coffee from Nicaragua and let me tell you, it gives you a lasting impression. As I headed north into the county I noticed the higher elevations and I started noticing the fields of coffee and the companies. Once, a truck was full of coffee was ready to be shipped to Costa Rica. It seems like Starbucks was only buying from Costa Rica and not Nicaragua. I was told that it was being sent to the U.S. with the label that said “produced in Costa Rica.”

Currently, Brazil grows roughly a third of the world's coffee and exports it through the ports of Santos, while re-known coffee from Colombia only produces 12%. Below is a map of the top coffee country producers in the world.

I was surprised to see Brazil at number one but after awhile you notice that it's cheaper and easier to get it from Brazil because of the mass production of coffee, great infrastructure, great branding, the ease of doing business in terms of exporting, and the supply chain to the U.S. was direct. Keep in mind, the top coffee consumers in the western hemisphere are the U.S. and Brazil, so it wasn't a shock to see that Brazil was a top producer of coffee.

Although Colombia and Nicaragua are better in quality and closer to the U.S., their economy is poor and their infrastructure is underdeveloped, which makes transporting to the coffee processing plants a difficult task. In addition, Nicaraguan coffee was not imported into the United States because of the political differences between the U.S. and Nicaraguan governments, but just recently U.S. allowed the importation of coffee from Nicaragua, which is the reason for the large number of international investors who are going to Nicaragua and buying land.

Three things I learned from this trip: the taste of real coffee, the advantage of a country with a sound infrastructure, and how Brazil leverages all its capabilities to brand its coffee as one of the best in the world.

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