Entrepreneur eyes cafes in West to profit from African coffee

The Ugandan entrepreneur's goal resonates across a continent that has long sold commodities that are processed and consumed in industrialised nations, such as cocoa for chocolate or beans for espressos, while Africans get a fraction of the profits.

The idea is to sell cappuccinos and lattes with a 'Made in Africa' story to draw customers who might otherwise go to America's Starbucks or Britain's Costa.

"When you add value you retain not just the financial value in country but you create jobs, businesses pay more taxes and that's how you develop the economy," he told Reuters.

But Rugasira's efforts to break into international markets, which began when he set up his firm in 2003, highlight the challenges facing African businesses as they seek to add more value and turn a local product into a global brand.

British supermarkets Tesco and Sainsbury's, which initially bought his packaged coffee, have taken it off their shelves. And there is no guarantee his cafes will find it easy in markets with established international chains.

"Whether you can scale that up and be up against a behemoth like Starbucks, which really knows the coffee business and the retail business, that's an incredibly tall order," said Victoria Crandall, an analyst for Africa's Ecobank.

RETURNING VALUE

While Brazil, Vietnam and Indonesia are the world's top coffee exporters, coffee is big business in east Africa, which produces some of the world's finest arabica and robusta beans.

In Uganda, Africa's biggest exporter and the eighth biggest exporter globally, about 500,000 small farmers grow coffee. It is Uganda's biggest commodity export, accounting for up to 30 percent of the country's foreign exchange earnings.

But Rugasira says less than 0.5 percent of the value of a cup of coffee sold in the West is earned by the bean growers.

Rugasira is undaunted. His coffee beans may have struggled to draw supermarket browsers, but he said cafes offer a bigger shop front to entice customers keen to try something new and ready to support sustainable development.

"As a small company we do better when we interface with customers directly than putting a product on a shelf," he said in a telephone interview from Kampala.

"Part of our brand is to have a conversation around some of the development issues in Africa. We're an ethical brand that speaks to a specific and a conscious consumer," he added.

Good African Coffee says it shares 50 percent of all the company's profits with farmers in the fields. The firm pays about 25 percent above the average market price to its network of 14,000 coffee farmers, according to Rugasira.

The next step includes opening a cafe in the smart Washington DC district of Georgetown by the end of 2015 and another in London by 2016.

He also aims to tap a growing taste among Africa's middle classes for coffee. Outside a few places like Ethiopia, which consumes more than half the coffee it produces, few Sub-Saharan African markets have a taste for the drink. That is changing.

AFRICAN CHAINS

In Kenya's capital Nairobi and other centres, local chains are growing, such as Java cafe and Dormans, a coffee producer since 1950, that has been expanding its branded cafes.

The Nigerian chain Cafe Neo tells customers on its website that it is "celebrating the return of coffee to its African roots." It has outlets in Lagos and one cafe in Kigali, the capital of Rwanda.

Rwanda's own Bourbon coffee, which says it is "bringing profits back to the hands of the coffee farmers," has eight locations globally, including in the United States.

Yet even if such African chains are starting to branch out, cracking the market beyond the continent may be tougher.

Rugasira, educated at a British university, has faced his other challenges in convincing investors his brand is marketable and can overcome challenges of working from a land-locked country with poor transport connections.

"Agriculture is perceived to be high-risk," he said. "There isn't enough patience and institutional accommodation. Yet it has the highest potential."

But he says African entrepreneurs need to keep pushing to succeed in building international brands that add value if they want to secure higher returns on their commodities.

"Empowerment and community transformation require more than just better prices for third-world growers," he said. "They necessitate linking African farmers to African processors."

Entrepreneur eyes cafes in West to profit from African coffee

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