Exploring the World of CoffeeBy: David Cyr S. Verano

I. Etymology and History

The English word coffee first came to be used in the early- to mid-1600s, but early forms of the word date to the last decade of the 1500s. It comes from the Italian caffè. The term was introduced to Europe via the Ottoman Turkish kahve which is in turn derived from the Arabic: قه�وة, qahweh. The origin of the Arabic term is uncertain; it is either derived from the name of the Kaffa region in western

Ethiopia, where coffee was cultivated, or by a truncation of qahwat al-būnn, meaning "wine of the bean" in Arabic. In Eritrea, "būnn" (also meaning "wine of the bean" in Tigrinya) is used. The Amharic and Afan Oromo name for coffee is bunna. Coffee use can be traced at least to as early as the 9th century, when it appeared in the highlands of Ethiopia. According to legend, Ethiopian shepherds were the first to observe the influence of the caffeine in coffee beans when the goats appeared to "dance" and to have an increased level of energy after consuming wild coffee berries. The legend names the shepherd "Kaldi." From Ethiopia, coffee spread to Egypt and Yemen. It was in Arabia that coffee beans were first roasted and brewed similarly as they are today. By the 15th century, it had reached the rest of the Middle East, Persia, Turkey, and northern Africa.

In 1583, Leonhard Rauwolf, a German physician, gave this description of coffee after returning from a ten year trip to the Near East: “A beverage as black as ink, useful against numerous illnesses, particularly those of the stomach. Its consumers take it in the morning, quite frankly, in a porcelain cup that is passed around and from which each one drinks a cupful. It is composed of water and the fruit from a bush called bunnu.”

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Abstract: Coffee is a stimulant beverage prepared from roasted seeds, commonly called coffee beans from the coffee plant is one of the most popular beverages worldwide being the second-most-traded physical commodity in the world, ranking second only to petroleum. This beverage was first consumed in the 9th century, when it was discovered in the highlands of Ethiopia and from there it spread to Egypt and Yemen, and by the 15th century had reached Azerbaijan, Persia, Turkey, and northern Africa. From the Muslim world, coffee spread to Italy, then to the rest of Europe, Indonesia and the Americas. Coffee berries, which contain the coffee bean, are produced by several species of small evergreen bush of the genus Coffea. The two most commonly grown species are Coffea canephora also known as Coffea robusta and Coffea arabica. These are cultivated in Latin America, Southeast Asia, and Africa. Once ripe, coffee berries are picked, processed, and dried. The seeds are then roasted, undergoing several physical and chemical changes. After which, they are roasted to varying degrees, depending on the desired flavor; Cooled then ground and brewed to create coffee. Today, coffee is no longer a typical hot served beverage but rather imaginatively concocted and presented in a variety of ways.

Coffee has played an important role in many societies throughout modern history. In Africa and Yemen, it was used in religious ceremonies. As a result, the Ethiopian Church banned its consumption until the reign of Emperor Menelik II of Ethiopia. It was banned in Ottoman Turkey in the 17th century for political reasons, and was associated with rebellious political activities in Europe. In modern day business, it is not just a beverage for entertainment but also an important export commodity. In 2004, coffee was the top agricultural export for 12 countries, and in 2005, it was the world's seventh largest legal agricultural export by value. Some controversy is associated with coffee cultivation and its impact on the environment. Many studies have examined the relationship between coffee consumption and certain medical conditions; whether the effects of coffee are positive or negative is still disputed.

From the Muslim world, coffee spread to Italy. The thriving trade between Venice and North Africa, Egypt, and the Middle East brought many goods, including coffee, to the Venetian port. From Venice, it was introduced to the rest of Europe. Coffee became more widely accepted after it was deemed a Christian beverage by Pope Clement VIII in 1600, despite appeals to ban the "Muslim drink". The first European coffee house opened in Italy in 1645. The Dutch were the first to import coffee on a large scale, and they were among the first to defy the Arab prohibition on the exportation of plants or un-roasted seeds when Pieter van den Broeck smuggled seedlings from Aden into Europe in 1616. The Dutch later grew the crop in Java and Ceylon. The first exports of Indonesian coffee from Java to the Netherlands occurred in 1711. Through the efforts of the British East India Company, coffee became popular in England as well. It was introduced in France in 1657, and in Austria and Poland after the 1683 Battle of Vienna, when coffee was captured from supplies of the defeated Turks.

When coffee reached North America during the colonial period, it was initially not as successful as it had been in Europe. During the Revolutionary War, however, the demand for coffee increased so much that dealers had to hoard their scarce supplies and raise prices dramatically; this was partly due to the reduced availability of tea from British merchants. After the War of 1812, during which Britain temporarily cut off access to tea imports, the Americans' taste for coffee grew, and high demand during the American Civil War together with advances in brewing technology secured the position of coffee as an everyday commodity in the United States.

II. Biology and Cultivation

The Coffea plant is native to subtropical Africa and southern Asia. It belongs to a genus of 10 species of flowering plants of the family Rubiaceae. It is an evergreen shrub or small tree that may grow 5 meters (16 ft) tall when un-pruned. The leaves are dark green and glossy, usually 10–15 centimeters (3.9–5.9 in) long and 6.0 centimeters (2.4 in) wide. It produces clusters of fragrant, white flowers that bloom simultaneously. The fruit berry is oval, about 1.5 centimeters (0.6 in) long, and green when immature, but ripens to yellow, then crimson, becoming black on drying. Each berry usually contains two seeds, but from 5 to 10 percent of the berries has only one; these are

called pea berries. Berries ripen in seven to nine months.

Coffee is usually propagated by seeds. The traditional method of planting coffee is to put 20 seeds in each hole at the beginning of the rainy season; half are eliminated naturally. Coffee is often intercropped with food crops, such as corn, beans, or rice, during the first few years of cultivation. The two main cultivated species of the coffee plant are Coffea canephora and Coffea arabica. Arabica coffee (from C. Arabica) is considered more suitable for drinking than Robusta coffee (from C. canephora); Robusta tends to be bitter and have less flavor than Arabica. For this reason, about three-quarters of coffee cultivated worldwide are C. arabica however, C. canephora is less susceptible to disease than C. arabica and can be cultivated in environments where C. arabica will not thrive. Robusta coffee also contains about 40–50 percent more caffeine than Arabica. For this reason, it is used as an inexpensive substitute for Arabica in many commercial coffee blends. Good quality Robusta are used in some espresso blends to provide a better foam head and to lower the ingredient cost.

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Other cultivated species include Coffea liberica and Coffea esliaca, believed to be indigenous to Liberia and southern Sudan, respectively.

Most Arabica coffee beans originate from either Latin America, eastern Africa, Arabia, or Asia. Robusta coffee beans are grown in western and central Africa, throughout Southeast Asia, and to some extent in Brazil. Beans from different countries or regions usually have distinctive characteristics such as flavor, aroma, body, and acidity. These taste characteristics are dependent not only on the coffee's growing region, but also on genetic

subspecies (varietals) and processing. Varietals are generally known by the region in which they are grown, such as Colombian, Java, or Kona.

There are two main species of bean that thrive in equatorial regions: Arabica and Robusta.

A. Robusta is grown at lower altitudes, 0 to 700 meters, and has a high yield per plant and high caffeine content (1.7 to 4.0%). It accounts for about 30% of world production. Robusta has a stronger flavor than Arabica with a full body and a woody aftertaste which is useful in creating blends and especially useful in instant coffee which is mainly grown in the following regions:

Western and Central Africa (Ivory Coast, Cameroon, Uganda, Angola, etc.) Malaysia (Vietnam, Sri Lanka, Sumatra, Java, etc.) Brazil India

B. Arabica grows at higher altitudes, 1000 to 2000 meters, and while it has a lower yield and less caffeine content (0.8 to 1.4%) it is widely recognized to be superior to Robusta. Arabica accounts for about 70% of world production, although only about 10% of this yields "grand cru" beans. Arabica has a delicate acidic flavor, a refined aroma and a caramel aftertaste which is grown in the following regions:

Central America (Mexico, Guatemala, El Salvador, Nicaragua, Costa Rica, Panama)

South America (Venezuela, Colombia, Ecuador, Peru, Bolivia, Paraguay, Argentina)

India Eastern Africa (Ethiopia, Kenya, Tanzania, Zambia, Mozambique) Papua New Guinea

Many of the cheaper blends have a higher proportion of Robusta compared to Arabica. Some high quality blends use a small quantity of the very best Robusta beans to give body and character to the blends, particularly in espresso blends.

III. Processing

Processing of coffee is the method converting the raw fruit of the into the coffee. The cherry has the fruit or pulp removed leaving the seed or bean which is then dried. While all green coffee is processed, the method that is used varies and can have a significant effect on the flavor of roasted and brewed coffee.

A. Picking

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A coffee plant usually starts to produce flowers 3–4 years after it is planted and it is from these flowers that the fruits of the plant (commonly known as coffee cherries) appear, with the first useful harvest possible around 5 years after planting. The cherries ripen around eight months after the emergence of the flower, by changing color from green to red, and it is at this time that they should be harvested. In most coffee-growing countries, there is one major harvest a year; though in countries like Colombia, where there are two flowerings a year, there is a main and secondary crop.

In most countries, the coffee crop is picked by hand, a labor-intensive and difficult process, though in places like Brazil, where the landscape is relatively flat and the coffee fields immense, the process has been mechanized. Whether picked by hand or by machine, all coffee is harvested in one of two ways:

Strip Picked: The entire crop is harvested at one time. This can either be done by machine or by hand. In either case, all of the cherries are stripped off of the branch at one time.

Selectively Picked: Only the ripe cherries are harvested and they are picked individually by hand. Pickers rotate among the trees every 8 – 10 days, choosing only the cherries which are at the peak of ripeness. Because this kind of harvest is labor intensive, and thus more costly, it is used primarily to harvest the finer Arabica beans.

The laborers who pick coffee by hand receive payment by the basketful. As of 2003, payment per basket is between US$2.00 to $10 with the overwhelming majority of the laborers receiving payment at the lower end. An experienced coffee picker can collect up to 6-7 baskets a day. Depending on the grower, coffee pickers are sometimes specifically instructed to not pick green coffee berries since the seeds in the berries are not fully formed or mature. This discernment typically only occurs with growers who harvest for higher end/specialty coffee where the pickers are paid better for their labor. Mixes of green and red berries, or just green berries, are used to produce cheaper mass consumer coffee beans, which are characterized by a displeasingly bitter/astringent flavor and a sharp odor. Red berries, with their higher aromatic oil and lower organic acid content, are more fragrant, smooth, and mellow. As such coffee picking is one of the most important stages in coffee production.

B. Processing

(1) Wet process

In the Wet Process, the fruit covering the seeds/beans is removed before they are dried. Coffee processed by the wet method is called wet processed or washed coffee. The wet method requires the use of specific equipment and substantial quantities of water. The coffee cherries are sorted by immersion in water. Bad or unripe fruit will float and the good ripe fruit will sink. The skin of the cherry and some of the pulp is removed by pressing the fruit by machine in water through a screen. The bean will still have a significant amount of the pulp clinging to it that needs to be removed. This is done either by the classic ferment-and-wash method or a newer procedure variously called machine-assisted wet processing, aquapulping or mechanical demucilaging.

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(a) Sorting coffee in water

Ferment-and-Wash Method: In the ferment and wash method of wet processing the remainder of the pulp is removed by breaking down the cellulose by fermenting the beans with microbes and then washing them with large amounts of water. Fermentation can be done with extra water or, in "Dry Fermentation", in the fruit's own juices only.

The fermentation process has to be carefully monitored to ensure that the coffee doesn't acquire undesirable, sour flavors. For most coffees, mucilage removal through fermentation takes between 24 and 36 hours, depending on the temperature, thickness of the mucilage layer and concentration of the enzymes. The end of the fermentation is assessed by feel, as the parchment surrounding the beans loses its slimy texture and acquires a rougher "pebbly" feel. When the fermentation is complete, the coffee is thoroughly washed with clean water in tanks or in special washing machines.

Machine-assisted wet processing: In machine-assisted wet processing, fermentation is not used to separate the bean from the remainder of the pulp; rather, this is done through mechanical scrubbing. This process can cut down on water use and pollution since ferment and wash water stinks. In addition, removing mucilage by machine is easier and more predictable than removing it by fermenting and washing. However, by eliminating the fermentation step and prematurely separating fruit and bean, mechanical demucilaging can remove an important tool that mill operators have of influencing coffee flavor. Furthermore, the ecological criticism of the ferment-and-wash method increasingly has become moot, since a combination of low-water equipment plus settling tanks allows conscientious mill operators to carry out fermentation with limited pollution.

Any wet processing of coffee produces coffee wastewater which and still unjustifiable can be a pollutant. Around 130 liters of fresh water is required to process one kilogram of quality coffee. After the pulp has been removed what is left is the bean surrounded by two additional layers, the silver skin and the parchment. The beans must be dried to a water content of about 10% before they are stable. Coffee beans can be dried in the sun or by machine but in most cases it is dried in the sun to 12-13% moisture and brought down to 10% by machine. Drying entirely by machine is normally only done where space is at a premium or the humidity is too high for the beans to dry before mildewing.

(2) Dry process

Dry process, also known as unwashed or natural coffee, is the oldest method of processing coffee. The entire cherry after harvest is first cleaned and then placed in the sun to dry on tables or in thin layers on patios:

Cleaning: The harvested cherries are usually sorted and cleaned, to separate the unripe, overripe and damaged cherries and to remove dirt, soil, twigs and leaves. This can be done by winnowing, which is commonly done by hand, using a large sieve. Any unwanted cherries or other material not winnowed away can be picked out from the top of the sieve. The ripe cherries can also be separated by flotation in washing channels close to the drying areas.

Drying: The coffee cherries are spread out in the sun, either on large concrete or brick patios or on matting raised to waist height on trestles. As the cherries dry, they are raked or turned by hand to ensure even drying and prevent mildew. It may take up to 4 weeks before the cherries are dried to the optimum moisture content, depending on the weather conditions. On larger plantations, machine-drying is sometimes used to speed up the process after the coffee has been pre-dried in the sun for a few days.

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The drying operation is the most important stage of the process, since it affects the final quality of the green coffee. A coffee that has been over dried will become brittle and produce too many broken beans during hulling (broken beans are considered defective beans). Coffee that has not been dried sufficiently will be too moist and prone to rapid deterioration caused by the attack of fungi and bacteria.

The dried cherries are stored in bulk in special silos until they are sent to the mill where hulling, sorting, grading and bagging take place. All the outer layers of the dried cherry are removed in one step by the hulling machine.

The dry method is used for about 95% of the Arabica coffee produced in Brazil, most of the coffees produced in Ethiopia, Haiti and Paraguay, as well as for some Arabicas produced in India and Ecuador. Almost all Robustas are processed by this method. It is not practical in very rainy regions, where the humidity of the atmosphere is too high or where it rains frequently during harvesting.

Sun Drying: When dried in the sun coffee is most often spread out in rows on large patios where it needs to be raked every six hours to promote even drying and prevent the growth of mildew. Some coffee is dried on large raised tables where the coffee is turned by hand. Drying coffee this way has the advantage of allowing air to circulate better around the beans promoting more even drying but increases cost and labor significantly.After the drying process (in the sun and/or through machines), the parchment skin or pergamino is thoroughly dry and crumbly, and easily removed in the Hulling process. Coffee occasionally is sold and shipped in parchment or en pergamino, but most often a machine called a huller is used to crunch off the parchment skin before the beans are shipped.

(3) Semi dry process

Semi dry is a hybrid process used in Indonesia and Brazil. In Indonesia, the process is also called "wet hulled", "semi-washed" or "Giling Basah". Literally translated from Indonesian, Giling Basah means "wet grinding". Most small-scale farmers in Sumatra, Sulawesi, Flores and Papua use the giling basah process. In this process, farmers remove the outer skin from the cherries mechanically, using locally built pulping machines. The coffee beans, still coated with mucilage, are then stored for up to a day. Following this waiting period, the mucilage is washed off and the parchment coffee is partially dried in the sun before sale at 30% to 35% moisture content.

(C) Milling

The final steps in coffee processing involve removing the last layers of dry skin and remaining fruit residue from the now dry coffee, and cleaning and sorting it. These steps are often called dry milling to distinguish them from the steps that take place before drying, which collectively are called wet milling.

(D) Hulling

The first step in dry milling is the removal of what is left of the fruit from the bean, whether it is the crumbly parchment skin of wet-processed coffee, the parchment skin and dried mucilage of semi-dry-processed coffee, or the entire dry, leathery fruit covering of the dry-processed coffee. Semi-dry hulling at 30% to 35% moisture (Giling Basah), as occurs in Indonesia, is thought to reduce acidity and increase body.Hulling is done with the help of machines, which can range from simple millstones to sophisticated machines that gently whack at the coffee.

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(E) Polishing

This is an optional process in which any silver skin that remains on the beans after hulling is removed in a polishing machine. This is done to improve the appearance of green coffee beans and eliminate a byproduct of roasting called chaff. It is described by some to be detrimental to the taste by raising the temperature of the bean through friction which changes the chemical makeup of the bean.

(D) Cleaning and sorting

Sorting by Size and Density:  Most fine coffee goes through a battery of machines that sort the coffee by density of bean and by bean size, all the while removing sticks, rocks, nails, and miscellaneous debris that may have become mixed with the coffee during drying. First machines blow the beans into the air; those that fall into bins closest to the air source are heaviest and biggest; the lightest (and likely defective) beans plus chaff are blown in the farthest bin. Other machines shake the beans through a series of sieves, sorting them by size. Finally, a machine called a gravity separator shakes the sized beans on a tilted table, so that the heaviest, densest and best vibrate to one side of the pulsating table, and the lightest to the other.

Sorting by Color: The final step in the cleaning and sorting procedure is called color sorting, or separating defective beans from sound beans on the basis of color rather than density or size. Color sorting is the trickiest and perhaps most important of all the steps in sorting and cleaning. With most high-quality coffees color sorting is done in the simplest possible way: by hand. Teams of workers pick discolored and other defective beans from the sounds beans. The very best coffees may be hand-cleaned twice (double picked) or even three times (triple picked). Coffee that has been cleaned by hand is usually called European preparation; most specialty coffees have been cleaned and sorted in this way.

Color sorting can also be done by machines. Streams of beans fall rapidly, one at a time, past sensors that are set according to parameters that identify defective beans by value (dark to light) or by color. A tiny, decisive puff of compressed air pops each defective bean out of the stream of sound beans the instant the machine detects an anomaly. However, these machines are currently not used widely in the coffee industry for two reasons:

First, the capital investment to install these delicate machines and the technical support to maintain them is daunting.

Second, sorting coffee by hand supplies much-needed work for the small rural communities that often cluster around coffee mills.

Nevertheless, computerized color sorters are essential to coffee industries in regions with relatively high standards of living and high wage demands.

(E) Grading

Grading is the process of categorizing coffee beans on the basis of various criteria such as size of the bean, where and at what altitude it was grown, how it was prepared and picked, and how good it tastes, or its cup quality. Coffees also may be graded by the number of imperfections (defective and broken beans, pebbles, sticks, etc.) per sample. For the finest coffees, origin of the beans (farm or estate, region, cooperative) is especially important. Growers of premium estate or cooperative coffees may impose a level of quality control that goes well beyond conventionally defined grading criteria, because they want their coffee to command the higher price that goes with recognition and consistent quality.

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(F) Aging

All coffee, when it was introduced in Europe, came from the port of Mocha in what is now modern day Yemen. To import the beans to Europe the coffee was on boats for a long sea voyage around the Horn of Africa. This long journey and the exposure to the sea air changed the coffee's flavor. Later, coffee spread to India and Indonesia but still required a long sea voyage. Once the Suez Canal was opened the travel time to Europe was greatly reduced and coffee whose flavor had not changed due to a long sea voyage began arriving. To some degree, this fresher coffee was rejected because

Europeans had developed a taste for the changes that were brought on by the long sea voyage. To meet this desire, some coffee was aged in large open-sided warehouses at port for six or more months in an attempt to simulate the effects of a long sea voyage before it was shipped to Europe.

Although it is still widely debated, certain types of green coffee are believed to improve with age; especially those that are valued for their low acidity, such as coffees from Indonesia or India. Several of these coffee producers sell coffee beans that have been aged for as long as 3 years, with some as long as 8 years. However, most coffee experts agree that a green coffee peaks in flavor and freshness within one year of harvest, because over-aged coffee beans will lose much of their essential oil content.

(G) Decaffeination

Decaffeination is the process of extracting caffeine from green coffee beans prior to roasting. The most common decaffeination process used in the United States is supercritical carbon dioxide (CO2) extraction. In this process, moistened green coffee beans are contacted with large quantities of supercritical CO2 (CO2 maintained at a pressure of about 4,000 pounds force per square inch (28 MPa) and temperatures between 90 and 100 °C (194 and 212 °F)), which removes about 97% of the caffeine from the beans. The caffeine is then recovered from the CO2, typically using an activated carbon adsorption system.

Another commonly used method is solvent extraction, typically using oil (extracted from roasted coffee) or ethyl acetate as a solvent. In this process, solvent is added to moistened green coffee beans to extract most of the caffeine from the beans. After the beans are removed from the solvent, they are steam-stripped to remove any residual solvent. The caffeine is then recovered from the solvent, and the solvent is re-used. Water extraction is also used for decaffeination. Decaffeinated coffee beans have a residual caffeine content of about 0.1% on a dry basis. Not all facilities have decaffeination operations, and decaffeinated green coffee beans are purchased by many facilities that produce decaffeinated coffee.

(H) Storage

Green coffee is fairly stable (approx. up to 1 year) if stored correctly. Most often it is in a Jute sack kept in a cool, clean, and dry place.(I) Roasting

Although not considered part of the processing pipeline proper, nearly all coffee sold to consumers throughout the world is sold as roasted coffee. Consumers can also elect to buy non-roasted coffee to be roasted at home. Roasting coffee transforms the chemical and physical properties of green coffee beans into roasted coffee products. The roasting

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process is what produces the characteristic flavor of coffee by causing the green coffee beans to expand and to change in color, taste, smell, and density. Non-roasted beans contain similar acids, protein, and caffeine as those that have been roasted, but lack the taste. It takes heat to speed up the Maillard and other chemical reactions that develop and enhance the flavor.

As green coffee is more stable than roasted, the roasting process tends to take place close to where it will be consumed. This reduces the time that roasted coffee spends in distribution, helping to maximize its shelf life. The vast majority of coffee is roasted commercially on a large scale, but some coffee drinkers roast coffee themselves in order to have more control over the freshness and flavor profile of the beans.

(a) Process The coffee roasting process consists essentially of sorting, roasting, cooling, and packaging operations but can also include grinding in larger scale roasting houses. In larger operations, bags of green coffee beans are hand or machine-opened, dumped into a hopper, and screened to remove debris. The green beans are then weighed and transferred by belt or pneumatic conveyor to storage hoppers. From the storage hoppers, the green beans are conveyed to the roaster. Roasters typically operate at temperatures between 370 and 540 °F (188 and 282 °C), and the beans are roasted for a period of time ranging from 3 to 30 minutes. Roasters are typically horizontal rotating drums that are heated from below and tumble the green coffee beans in a current of hot gases. The heat source can be supplied by natural gas, liquefied petroleum gas (LPG), electricity or even wood. These roasters can operate in either batch or continuous modes and can be indirect or direct-fired.

Those who roast coffee often prefer to follow a "recipe" or "roast profile" to highlight certain flavor characteristics. Any number of factors may help a person determine the best profile to use, such as the coffee's origin, varietals, processing method or desired flavor characteristics. A roast profile can be presented as a graph showing time on one axis and temperature on the other, which can be recorded manually or using computer software and data loggers linked to temperature probes inside various parts of the roaster.

Indirect-fired roasters are roasters in which the burner flame does not contact the coffee beans, although the combustion gases from the burner do contact the beans. Direct-fired roasters contact the beans with the burner flame and the combustion gases. At the end of the roasting cycle, the roasted beans are cooled using a vacuum system. Roasted coffee beans are also cooled using fine water mist, which is known as "quenching" and is considered inferior to air cooling as the water soaks the fresh beans with moisture and oxygen particles making it stale almost instantly. Following roasting, the beans are cooled and stabilized. This stabilization process is called degassing. Following degassing, the roasted beans are packaged, usually in light-resistant foil bags fitted with small one-way aroma-lock valves to allow gasses to escape while protecting the beans from moisture and oxygen. Roasted whole beans can be considered fresh for up to one month. Once coffee is ground it is best used immediately.

(b) Darkness

As the bean absorbs heat, the color shifts to yellow and then to varying shades of brown. During the later stages of roasting, oils appear on the surface of the bean, making it shiny. The roast will continue to darken until it is removed from the heat source. At lighter roasts, the bean will exhibit more of its "origin flavor" - the flavors created in the bean by the soil and weather conditions in the location where it was grown.

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Coffee beans from famous regions like Java, Kenya, Hawaiian Kona, and Jamaican Blue Mountain are usually roasted lightly so their signature characteristics dominate the flavor. As the beans darken to a deep brown, the origin flavors of the bean are eclipsed by the flavors created by the roasting process itself. At darker roasts, the "roast flavor" is so dominant that it can be difficult to distinguish the origin of the beans used in the roast.Below, roast levels and their respective flavors are described. These are qualitative descriptions, and thus subjective. As a rule of thumb, the "shinier" the bean is, the more dominant the roasting flavors are.

Roast level Notes Surface Flavor

LightCinnamon

roast, half city, New England

After several minutes the

beans “pop” or "crack" and

visibly expand in size. This

stage is called first crack. American

mass-market roasters

typically stop here.

Dry

Lighter-bodied, higher acidity,

no obvious roast flavor

Medium

Full city, American,

regular, breakfast,

brown

After a few short minutes

the beans reach this

roast, which U.S. specialty sellers tend to

prefer.

Dry

Sweeter than light roast; more body

exhibiting more balance in acid,

aroma, and complexity

Full RoastHigh, Viennese,

Italian Espresso,

Continental

After a few more minutes

the beans begin popping again, and oils

rise to the surface. This is called second

crack.

Slightly shiny

Somewhat spicy;

complexity is traded for heavier

body/mouth-feel. Aromas and flavors of roast become

clearly evident.

Double Roast French

After a few more minutes

or so the beans begin to smoke.

The bean sugars begin to

carbonize.

Very oily

Smokey-sweet; light bodied, but

quite intense. None of the

inherent flavors of the bean are recognizable.

(C) Packaging

Extending the useful life of roasted coffee relies on maintaining an optimum environment for the beans. The first large scale preservation technique was vacuum packing. However, because coffee emits CO2 after roasting, coffee to be vacuum packed must be allowed to degas for several days before it is sealed. To allow more immediate

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packaging, pressurized canisters or foil-lined bags with pressure-relief valves can be used.

(D) Home Roasting

Home roasting is the process of roasting small batches of green coffee beans for personal consumption. Roasting coffee in the home is something that has been practiced for centuries, and has included methods such as heating over fire coals, roasting in cast iron pans, and rotating iron drums over a fire or coal bed. Computerized drum roasters are available which simplify home roasting and some home roasters simply roast in an oven or in air popcorn poppers.

Up until the 20th century, it was more common for at-home coffee drinkers to roast their coffee in their residence than it was to buy roasted coffee. During the 20th century, home roasting faded in popularity with the rise of the commercial coffee roasting companies. In recent years home roasting of coffee has seen a revival. In some cases there is an economic advantage, but primarily it is a means to achieve finer control over the quality and characteristics of the finished product.

(E) Emissions and Control

Particulate matter (PM), volatile organic compounds (VOC), organic acids, and combustion products are the principal emissions from coffee processing. Several operations are sources of PM emissions, including the cleaning and de-stoning equipment, roaster, cooler, and instant coffee drying equipment. The roaster is the main source of gaseous pollutants, including alcohols, aldehydes, organic acids, and nitrogen and sulfur compounds. Because roasters are typically natural gas-fired, carbon monoxide (CO) and carbon dioxide (CO2) emissions result from fuel combustion. Decaffeination and instant coffee extraction and drying operations may also be sources of small amounts of VOC. Emissions from the grinding and packaging operations typically are not vented to the atmosphere.

Particulate matter emissions from the roasting and cooling operations are typically ducted to cyclones before being emitted to the atmosphere. Gaseous emissions from roasting operations are typically ducted to a thermal oxidizer or thermal catalytic oxidizer following PM removal by a cyclone. Some facilities use the burners that heat the roaster as thermal oxidizers. However, separate thermal oxidizers are more efficient because the desired operating temperature is typically between 650°C and 816°C (1200°F and 1500°F), which is 93°C to 260°C (200°F to 500°F) more than the maximum temperature of most roasters. Some facilities use thermal catalytic oxidizers, which require lower operating temperatures to achieve control efficiencies that are equivalent to standard thermal oxidizers. Catalysts are also used to improve the control efficiency of systems in which the roaster exhaust is ducted to the burners that heat the roaster. Emissions from spray dryers are typically controlled by a cyclone followed by a wet scrubber.

IV. Economics

Noted as one of the world’s largest, most valuable, legally traded commodities after oil, coffee has become a vital cash crop for many Third World countries. Over one hundred million people in developing countries have become dependent on coffee as the primary source of income. Coffee has become the primary export and backbone for African countries like Uganda, Burundi, Rwanda, and Ethiopia as well as many Central American countries. Brazil remains the largest coffee exporting nation, but in recent years Vietnam has become a major producer of Robusta beans. Indonesia is the third exporter and the largest producer of washed Arabica coffee. Robusta coffees, traded in London at much lower prices than New York's Arabica, are preferred by large industrial clients, such as

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multinational roasters and instant coffee producers, because of the lower cost. Four single roaster companies buy more than 50 percent of all of the annual production: Kraft, Nestlé, Procter & Gamble, and Sara Lee. The preference of the "Big Four" coffee companies for cheap Robusta is believed by many to have been a major contributing factor to the crash in coffee prices, and the demand for high-quality Arabica beans is only slowly recovering.

Many experts believe the giant influx of cheap green coffee after the collapse of the International Coffee Agreement of 1975–1989 led to the prolonged price crisis from 1989 to 2004. In 1997 the price of coffee in New York broke US$3.00/lb, but by late 2001 it had fallen to US$0.43/lb. In 2007, wholesale coffee was about US$1/lb (e.g. 69 cents in London in March to 134 cents in New York in October), with Robusta being about 70% of the price of Arabica. Retail prices varied from an average of $3 in Poland to $3.50 in the US to $17 in the UK.

The concept of fair trade labeling, which guarantees coffee growers a negotiated pre-harvest price, began with the Max Havelaar Foundation's labeling program in the Netherlands. In 2004, 24,222 metric tons out of 7,050,000 produced worldwide were fair trade; in 2005, 33,991 metric tons out of 6,685,000 were fair trade, an increase from 0.34 percent to 0.51 percent. A number of studies have shown that fair trade coffee has a positive impact on the communities that grow it. A study in 2002 found that fair trade strengthened producer organizations, improved returns to small producers, and positively affected their quality of life.

A 2003 study concluded that fair trade has "greatly improved the well-being of small-scale coffee farmers and their families" by providing access to credit and external development funding and greater access to training, giving them the ability to improve the quality of their coffee. The families of fair trade producers were also more stable than those who were not involved in fair trade, and their children had better access to education. A 2005 study of Bolivian coffee producers concluded that Fair-trade certification has had a positive impact on local coffee prices, economically benefiting all coffee producers, Fair-trade certified or not.

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TABLE 1Top ten green coffee producers — 11 June 2008 Country Production (Tons)

 Brazil 17,000,000 Vietnam 15,580,000 * Colombia 9,400,000 F Indonesia 2,770,554 * Ethiopia 1,705,446 * Mexico 962,000 F India 954,000 F

 Peru 677,000 Guatemala 568,000 F Honduras 370,000 F World 7,742,675 A

Legend: No symbol = official figure, P = official figure, F = FAO estimate, * = Unofficial/Semi-official/mirror data,

C = Calculated figure, A = Aggregate (may include official, semi-official or estimates)

Source: Food And Agricultural Organization of United Nations: Economic And Social Department:

The production and consumption of "Fair Trade Coffee" has grown in recent years as some local and national coffee chains have started to offer fair trade alternatives. Coffee is also bought and sold by investors and price speculators as a tradable commodity. Coffee futures contracts are traded on the New York Mercantile Exchange (NYMEX) under ticker symbol KT with contract deliveries occurring every year in March, May, July, September, and December.

V. Social Aspects

Coffee was initially used for spiritual reasons. At least 1,000 years ago, traders brought coffee across the Red Sea into Arabia (modern day Yemen), where Muslim monks began cultivating the shrub in their gardens. At first, the Arabians made wine from the pulp of the fermented coffee berries. This beverage was known as qishr (kisher in modern usage) and was used during religious ceremonies.

Coffee became the substitute beverage in place of wine in spiritual practices where wine was forbidden. Coffee drinking was briefly prohibited to Muslims as haraam in the early years of the 16th century, but this was quickly overturned. Use in religious rites among the Sufi branch of Islam led to coffee's being put on trial in Mecca: it was accused of being a heretic substance, and its production and consumption were briefly repressed. It was later prohibited in Ottoman Turkey under an edict by the Sultan Murad IV. Coffee, regarded as a Muslim drink, was prohibited to Ethiopian Orthodox Christians until as late as 1889; it is now considered a national drink of Ethiopia for people of all faiths. Its early association in Europe with rebellious political activities led to its banning in England, among other places.

A contemporary example of coffee prohibition can be found in The Church of Jesus Christ of Latter-day Saints. The organization claims that it is both physically and spiritually unhealthy to consume coffee. This comes from the Mormon doctrine of health, given in 1833 by Mormon founder Joseph Smith, in a revelation called the Word of Wisdom. It does not identify coffee by name, but includes the statement that "hot drinks are not for the belly", which has been interpreted to forbid both coffee and tea.

Quite a number of members of the Seventh-day Adventist Church also avoid caffeinated drinks. In its teachings the church requires members to avoid tea and coffee and other stimulants. Studies conducted on Adventists have shown a small but statistically significant association between coffee consumption and mortality from ischemic heart disease, other cardiovascular disease, all cardiovascular diseases combined, and all causes of death.

VI. PharmacologyCoffee ingestion on average is about a third of that of tap water in North America and Europe. Worldwide, 6.7 million metric tons of coffee were produced annually in 1998–2000, and the forecast is a rise to 7 million metric tons annually by 2010. Scientific studies have examined the relationship between coffee consumption and an array of medical conditions. Findings are contradictory as to whether coffee has any specific health benefits, and results are similarly conflicting regarding negative effects of coffee consumption.

Coffee consumption has been linked to breast size reduction and taking regular hits of caffeine reduces the risk of breast cancer. Coffee appears to reduce the risk of Alzheimer's disease, Parkinson's disease, heart disease, diabetes mellitus type 2,

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cirrhosis of the liver, and gout. It increases the risk of acid reflux and associated diseases. Some health effects of coffee are due to its caffeine content, as the benefits are only observed in those who drink caffeinated coffee, while others appear to be due to other components. For example, the antioxidants in coffee prevent free radicals from causing cell damage.

Over 1,000 chemicals have been reported in roasted coffee: more than half of those tested (19/28) are rodent carcinogens. Coffee's negative health effects are often blamed on its caffeine content. Research suggests that drinking caffeinated coffee can cause a temporary increase in the stiffening of arterial walls. Coffee is no longer thought to be a risk factor for coronary heart disease. Some studies suggest that it may have a mixed effect on short-term memory, by improving it when the information to be recalled is related to the current train of thought, but making it more difficult to recall unrelated information. About 10% of people with a moderate daily intake (235 mg per day) reported increased depression and anxiety when caffeine was withdrawn, and about 15% of the general population report having stopped caffeine use completely, citing concern about health and unpleasant side effects.

VII. Ecological

Originally, coffee farming was done in the shade of trees, which provided habitat for many animals and insects. This method is commonly referred to as the traditional shaded method. Many farmers (but not all) have decided to modernize their production methods and switch to a method where farmers would now use sun cultivation, in which coffee is grown in rows under full sun with little or no forest canopy. This causes berries to ripen more rapidly and bushes to produce higher yields but requires the clearing of trees and increased

use of fertilizer and pesticides. Traditional coffee production, on the other hand, caused berries to ripen more slowly and it produced lower yields compared to the modernized method but the quality of the coffee is allegedly superior. In addition, the traditional shaded method is environmentally friendly and serves as a habitat for many species. Opponents of sun cultivation say environmental problems such as deforestation; pesticide pollution, habitat destruction, and soil and water degradation are the side effects of these practices. The American Birding Association has led a campaign for "shade-grown" and organic coffees, which it says are sustainable harvested. However, while certain types of shaded coffee cultivation systems show greater biodiversity than full-sun systems, they still compare poorly to native forest in terms of habitat value.

Another issue concerning coffee is its use of water. According to New Scientist, it takes about 140 liters of water to grow the coffee beans needed to produce one cup of coffee, and the coffee is often grown in countries where there is a water shortage, like Ethiopia.

VIII. Coffee in the Philippines

The production and export of coffee was once a major industry in the Philippines, which 200 years ago was the fourth largest coffee producing nation. Today, however, the Philippines produces only .012% of the world's coffee supply. Efforts are being undertaken to revive the industry however, with the majority of coffee produced in the mountain areas of Batangas, Bukidnon, Benguet, Cavite, Kalinga Apayao, Davao, and Claveria.

The Philippines is one of the few countries that produces the four varieties of commercially-viable coffee: Arabica, Liberica (Barako), Excelsa and Robusta.

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Climatic and soil conditions in the Philippines – from the lowland to mountain regions – make the country suitable for all four varieties.

In the Philippines, coffee has a history as rich as its flavor. The first coffee tree was introduced in Lipa, Batangas in 1740 by a Spanish Franciscan monk. From there, coffee growing spread to other parts of Batangas like Ibaan, Lemery, San Jose, Taal, and Tanauan. Batangas owed much of its wealth to the coffee plantations in these areas and Lipa eventually became the coffee capital of the Philippines.

By the 1860s, Batangas was exporting coffee to America through San Francisco. When the Suez Canal was opened, a new market started in Europe as well. Seeing the success of the Batangeños, Cavite followed suit by growing the first coffee seedlings in 1876 in Amadeo. In spite of this, Lipa still reigned as the center for coffee production in the Philippines and Batangas barako was commanding five times the price of other Asian coffee beans. In 1880, the Philippines was the fourth largest exporter of coffee beans, and when the coffee rust hit Brazil, Africa, and Java, it became the only source of coffee beans worldwide.

The glory days of the Philippine coffee industry lasted until 1889 when coffee rust hit the Philippine shores. That, coupled with an insect infestation, destroyed virtually all the coffee trees in Batangas. Since Batangas was a major producer of coffee, this greatly affected national coffee production. In two years, coffee production was reduced to 1/6th its original amount. By then, Brazil had regained its position as the world’s leading producer of coffee. A few of the surviving coffee seedlings were transferred from Batangas to Cavite, where they flourished. This was not the end of the Philippines’ coffee growing days, but there was less area allotted to coffee because many farmers had shifted to other crops.

During the 1950s, the Philippine government, with the help of the Americans, brought in a more resistant variety of coffee. It was also then that instant coffee was being produced commercially, thus increasing the demand for beans. Because of favorable market conditions, many farmers went back to growing coffee in the 1960s. But the sudden proliferation of coffee farms resulted in a surplus of beans around the world, and for a while importation of coffee was banned in order to protect local coffee producers. When Brazil was hit by a frost in the 1970’s, world market coffee prices soared. The Philippines became a member of the International Coffee Organization (ICO) in 1980. Today, the Philippines produces 30,000 metric tons of coffee a year, up from 23,000 metric tons just three years ago.

IX. Philippine Coffee Board

The Philippine Coffee Board is a private sector-led group established in May 2002 as the National Coffee Development Board. The goal of the Coffee Board is to develop and promote the Philippine coffee industry through technical assistance and credit programs for coffee farms; and through marketing and promotions of coffee for domestic and export markets.

Research / training, certification and credit programs are carried out in partnership with Cavite State University (CavSU), Department of Trade and Industry – International Coffee Organization Certifying Agency (DTI-ICOCA) and Quedan & Rural Credit Guarantee Corporation (Quedancor).

Aside from rehabilitation, certification, and credit programs, the Coffee Board also conducts a marketing and promotional program for Philippine coffee called Kape Isla. Kape Isla is intended for the use of the industry as a Philippine coffee quality seal.

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The Coffee Board conducts several events a year, including coffee farming courses, coffee shop seminars, trade shows, farm tours, and its annual Coffee Break festival. The Coffee Board is composed of members from the growers, millers, roasters, retailers, local governments, and agriculture credit sectors.

X. CURRENT TRENDS IN THE NEWS

(1) The Philippines' taste for Civet Coffee By Sarah Toms BBC News, Manila11 April 2006

The Philippines has recently discovered it produces one of the world's most expensive and coveted kinds of coffee but it comes from an unusual source - the droppings of a nocturnal, cat-like animal called the Palm Civet.

Civets, related to the mongoose, are usually seen as pests in the Philippines and hunted for their meat. But their droppings are worth their weight in gold. Known locally as alamid, civets are carnivorous but they also have a taste for the sweet, red coffee cherries that contain the beans. The beans pass through the civet whole after fermenting in the stomach and that's what gives the coffee its unique taste and aroma.

'Best-kept secret'

A group of professional coffee lovers followed the trail of the civet droppings high into the Malarayat mountain range, south of Manila, in search of the exotic beans. One of them, Antonio Reyes of the Philippine coffee certifying board, said civet coffee was one of the Philippines' best-kept secrets. "I heard the old folks in the coffee farming areas have been gathering this coffee for their own consumption. They never told people they had this kind of coffee," he said. "It goes through some kind of natural processing which you can see from the roasted beans. It's oilier, there's more aroma and it's such a good taste that you can get value for money even if the cost is so high." Civet coffee is one of the worlds most expensive. In the Philippines, only 500 kg are produced a year and the roasted beans sell for more than $115 a kilogram.

Bean hunt

Lusina Montenegro, who collects the beans for a living, led the coffee experts to the civet droppings. She climbs the mountain in her flip-flops, hunting for the beans in the thick undergrowth. "Sometimes it's a big civet and then the droppings are also big, but sometimes it's a small one and then the droppings are small," she said. Ms Montenegro puts the droppings in two containers - for the old ones, which resemble chalky beans, and for the fresh ones, which look like yellow beans in gravy. She rinses the beans in forest streams and dries them on her patio before they are sold on to Bote Central, a company that exports the beans to Japan.

Niche market

The developers of the brand are a husband and wife team, Vie and Basil Reyes. The couple was involved in conservation work for the sugar palm and the civets that live among the trees. They made organic vinegar from the palms and started selling the civet coffee alongside it in small bazaars. Now the coffee has become so successful they are hoping to start brewing up profits in Taiwan and North America.

Mr. Reyes of the coffee certifying agency also hopes the struggling local coffee industry can mirror the success Indonesia and Vietnam have enjoyed with their brands of civet

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coffee. "I never thought it was also available in the Philippines, so when I first heard of it I thought this is one kind of coffee that we can look at and develop," he said. "If we have the volume then it's good for the niche market."

'Dark chocolate'

Andrew Gross, an Australian roast master, climbed the mountain to find out for himself what the attraction is of coffee that passes through the backside of a furry mammal. Just like a wine connoisseur, he slowly slurped the brewed coffee, letting it travel across his tongue for the first time. Mr. Gross said he was surprised at how much he liked it, comparing the taste to fermented plum and dark chocolate with hazelnuts. "There's obviously some substance to this in terms of what waves I am getting, but beyond the difference in flavors a lot of it has to do with hype and a lot of it has to do with the fact that it's fairly rare," he said. It may not be everyone's cup of tea. But experts here hope coffee lovers will want to treat themselves to something special that might just help perk up the Philippine coffee industry.

(2) Agri-Food Trade ServiceThe Brewing Business of the Philippine Specialty Coffee Shop IndustryBy Ronald Mark G. Omaña - Center for Food and Agri Business University of Asia and the Pacific 2006

In the past, people were used to drinking instant coffee. This was before the advent of specialty coffee shops in the country. Today, coffee shops are a common sight especially in the Manila metropolis. Specialty coffee refers to the highest-quality green coffee beans roasted to their greatest flavor potential by true craftspeople and then properly brewed to well-established standards (Specialty Coffee Association of America (SCAA). The SCAA further explained that specialty coffee tastes better than instant or mass-produced coffee because it is made from coffee beans grown only in ideal climates and prepared according to exacting standards. Also, specialty coffee possesses a richer and more balanced flavor.

HISTORY

Specialty coffee shops trace their roots from the coffee shops of Europe in the 16th and 17th century upon the introduction of coffee which became a popular drink. In the United States, specialty coffee shops are said to have been popularized by Starbucks Coffee.

Starbucks Coffee was established in 1971 by Gordon Bowker, Jerry Baldwin, and Zev Siegl originally to sell coffee beans only. The company's current business of retailing coffee beverages came about when then marketing person Howard Schultz (currently Chairman) got interested in selling espresso by the cup after visiting Italy. Initially, the company tested the new business model in one of its outlets and became an instant hit. Despite of this success, however, one of the owners opposed Schultz's idea of expanding the concept to all of its stores.

In 1985, Schultz left Starbucks and opened his own specialty coffee shop called Il Giornale. By 1987, the owners of Starbucks decided to sell the company to focus on a 1983 acquisition Peet's Coffee and & Tea, which was Starbuck's coffee bean supplier. Schultz, together with other investors, purchased Starbucks for US$3.7 million. Schultz eventually changed II Giornale's name to Starbucks Coffee Company.

Starbucks currently has more than 10,000 outlets worldwide, with 93 located in the Philippines operated by its franchisee Rustan Coffee Corporation. In the Philippines, even before Starbucks came in 1997, there were enterprising Filipinos who had the

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foresight to put-up specialty coffee shops. The pioneers in the local industry are Figaro Coffee Company and The Coffee Experience, both established in early 1993.

Figaro Coffee Company was set up by a group headed by Pacita Juan, the company's president and chief executive officer. Its first outlet was a small kiosk located at the Glorietta mall in Makati. The outlet was initially called the F store.

The Coffee Experience, meanwhile, started in the same mall in Makati, also under a different name - Coffee X. It now has 24 outlets located mainly in Metro Manila.

PRODUCTS

The main product is specialty coffee. Differentiation is made through the various coffee concoctions and variants. Companies also offer other beverages such as tea and juices, complementing products such as breads, cakes, and pastries which are produced in the operators' own commissary plant, supplied by an affiliate or purchased from third party suppliers. Some even serve breakfast, lunch, and dinner.

MARKET AND PLAYERS

The market for specialty coffee shops was estimated to be at least P2.6 billion in 2004 (Figure 1). Foreign brands accounted for 69 percent of the market; the rest are local brands.

Figure1. Estimated Market Shares by Brand Type, 2004

Source: SEC, Interviews with Key Players, February-March 2006

As of February 2006, the Philippine specialty coffee shop industry consisted of at least 15 major players - 10 are foreign and five are local brands.

The foreign brands include Café Nescafe, The Coffee Bean & Tea Leaf, Dome Café, Gloria Jean's Coffees, McCafe, San Francisco Coffee Co., Seattle's Best Coffee, Segafredo Zanetti Espresso, Starbuck's Coffee and UCC Coffee (Table 1). Local companies have managed to get the master franchise for the operation of these foreign specialty coffee shops in the country. Some of the outlets are owned and operated by other companies through sub-franchising offered by the master franchise holders.

The local brands, meanwhile, are Bo's Coffee Club, Figaro Coffee Company, Mocha Blends, and The Coffee Beanery. Other local specialty coffee shops that have recently sprouted in Metro Manila include Baang Coffee, Libreria, and Coffee Republic, with less than five outlets each. Meanwhile, the total number of specialty coffee shop outlets or branches has reached more than 300 as of February 2006. The outlets are located mainly in Metro Manila and in key cities such as Baguio, Cebu, and Davao. The large number of outlets is attributed mainly to the growing specialty coffee shop chains.

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Table 1. List of Key Players in the Philippine Specialty Coffee Shop Industry, 2006

Brand CompanyYear

EstablishedNumber

of OutletsAffiliates

(Food Businesses)FOREIGN

The Coffee Bean & Tea

Leaf

The Coffee Bean & Tea Leaf Philippines Inc.

2003 10 -

Gloria Jean's Coffees

Specialty Beans Philippines Inc. and various companies

2003 19Chef Donatello / Wetzel Pretzels

Segafredo Zanetti

EspressoLiberty Ventures Inc. 2002 3 -

CaféNescafe

 

La Barista Inc. 2001 5 Le Coure de France

San Francisco Coffee Co.

Coffee Partners Inc. / Hot Business Ventures

Inc.2001 6 -

Seattle's Best Coffee

Coffee Masters Inc. 2000 20Kenny Rogers

Roasters / Popeye's Chicken and Biscuits

UCC CoffeeBlue Mountain Coffee

VenturesCoffee Brewmasters Inc.

2000 7Sakae Sushi / Crepes

and Cream

Dome CafeDome Café Franchise

Corporation1997 4 -

Starbucks Coffee

Rustan Coffee Corporation

1997 93Hi-Lo Café / Bon

Appetit / Yum-Yum Tree / Char-Q

McCafeGolden Arches Development Corporation

NA 4 McDonald's

LOCAL

Mocha BlendsMocha Blends

Corporation and various companies

2002 39 -

Bo's Coffee Club

Coffee Centrale The Bean Co. Inc. / Bo's

Coffee Franchise Corporation

1996 23 -

Figaro Coffee Company Figaro Coffee Co. Inc.

and various companies1993 49* -

The Coffee Beanery

Cravings Food Svcs Inc. 1993 7 Cravings Restaurants

The Coffee Experience

CX Food Enterprises Inc. and various

companies1993 24 Potato Corner Kiosks

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Source: Securities and Exchange Commission (SEC) / Interviews with Key Players, February 2006As of February 2006

NA = not available* = excluding three outlets overseas

Gloria Jean's Coffees International explained that the specialty coffee shop industry is moving to chains because of their advantages in purchasing power, focused advertising, product innovations, management control systems, and specialized training.

Across brands, Starbucks Coffee accounted for nearly half of the market in 2004 (Figure 2). Local brand Figaro Coffee Company followed with 15 percent, then Mocha Blends (9%), Gloria Jean's Coffees (7%), and UCC Coffee (4%). The others cornered the remaining 16 percent of the market .Local and foreign key players estimated growth at an average of 10 percent to 20 percent per year since 2002. The financial statements of industry leader Starbucks Coffee even showed a higher growth of nearly 23 percent per year over the same period.

Figure 2. Estimated Market Shares by Brand, 2004

Source: SEC; Interviews with Key Players, February-March 2006

PRICING

A comparison of retail prices of selected foreign and local brands for Café Latte revealed that foreign brands generally charge higher prices compared to local brands (Table 2). The cheapest Café Latte in small cup from foreign brands costs P7.00 higher than the most expensive among local brands. The same price difference is observed in the medium cup but increases to P11.00 on the large cup.

Table 2. Comparative Retail Prices of Café Latte from Selected Brands

Product/BrandPrice (In Php) / Size

SMALL MEDIUM LARGE ForeignThe Coffee Bean & Tea Leaf 85 100 115Gloria Jean's Coffees 85 95 110Starbuck's Coffee 85 95 110Seattle's Best Coffee 82 92 107LocalBo's Coffee Club 75 85 naMocha Blends* 70 85 na

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Figaro Coffee 69 na 89The Coffee Beanery 60 78 naThe Coffee Experience 60 na 70Source: Specialty Coffee Shop survey (April 2006)Small = 8oz / medium = 12oz / large = 16oz* medium size is 14ozna = not applicablePRICE SUBJECT TO CHANGE WITHOUT PRIOR NOTICE

SOURCES OF SUPPLY

The main raw materials used are coffee beans; espresso machines; fresh milk; whipped cream; and packaging materials (Table 3).

Table 3. Sources of Main Inputs Brand Beans (mainly Arabica type) Espresso Machines Brand

FOREIGN BRANDS

Café Nescafe100% from Nestle (from foreign

affiliates)100% from Nestle (from foreign

affiliates)Gloria Jean's

Coffees100% from Gloria Jean's Coffees -

International (Australia)Astoria (Italy) from local distributor

Seattle's Best Coffee

100% from Seattle's Best (Japan)Rafaello / Michaelangelo (Italy)

from local distributor

Starbucks Coffee 100% from Starbucks Coffee (USA)Granarcoso (Italy) from local

distributor

UCC Coffee 100% from UCC Coffee (Japan)Not Applicable (Uses siphon

machine)

LOCAL BRANDSFigaro Coffee 100% local / own farm Astoria (Italy) from local distributor

Mocha Blends90% Imported from Australia (Mocha Coffee); 10% local

Elektra (Italy) from Australia

The Coffee Beanery

100% local (1 supplier only)San Marino Expresso (Italy) from

local distributorThe Coffee Experience

100% local (1 supplier only)Unic (France) from local

distributor

Table 3. Sources of Main Inputs Brand Fresh Milk Whipped Cream Packaging Materials

FOREIGN BRANDSCafé Nescafe 100% from Nestle 100% from Nestle Local suppliers

Gloria Jean's Coffees

Two farms in Laguna province

Imported brand from local

distributors

Local suppliers / Gloria Jean's International

(Australia)

Seattle's Best Coffee

Local supplierImported brand

from local distributors

Seattle's Best (USA)

Starbucks Coffee

One farm in Batangas province

Imported brand from local

distributorsLocal suppliers

UCC CoffeeUses cream - 100% from

UCC Coffee (Japan)

Imported brand from local

distributorsLocal suppliers

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LOCAL BRANDS

Figaro CoffeeImported brand from

local distributors / local suppliers

Imported brand from local

distributorsLocal suppliers

Mocha Blends Local supplierImported brand

from local distributors

Local suppliers

The Coffee Beanery

Imported brand from local distributors

Imported brand from local

distributorsLocal suppliers

The Coffee Experience

Local supplierImported brand

from local distributors

Local suppliers

Source: Interviews with Key Players, February-March 2006

According to players foreign and local alike, it is easy to get suppliers for their major inputs. The prevalence of suppliers - which normally cater to restaurants, hotels and other institutional clients - has led to a situation wherein the suppliers themselves approach the companies to offer their products. The critical factor among players is the coffee bean roasting "formula" because it is at this stage where the coffee bean releases its fullest flavor potential. Poorly roasted beans would yield poor-tasting coffee drink. As such, every player treats his proprietary roasting techniques and recipe as highly confidential.

Nearly all of the foreign brands interviewed say their coffee beans - prepared and packed - are supplied by their parent company overseas, which does the purchasing and roasting of beans bought from many popular coffee-growing areas like Indonesia, East Africa, and Latin America. In terms of variety, the foreign brands mainly use the Arabica coffee bean types. The local brands, meanwhile, are known to use mostly local coffee beans including the famous Kapeng Barako (Liberica beans).

Because of this practice, the local players are seen as major supporters of the local coffee industry. Further, their use of Kapeng Barako sets them apart from their foreign counterparts because the beans are said to have the following characteristics: (a) particularly strong taste, (b) powerful body, and (c) a distinctly pungent odor which the popular Arabica beans do not have.

For espresso machines, majority of the foreign and local players use Italian brands which they acquire through local distributors.

For fresh milk, the players buy from various sources. Many purchase from well-known milk suppliers such as Alaska Milk Corporation, Consolidated Dairy and Frozen Food Corporation, Nestle Philippines, New Zealand Milk (Philippines) Inc., and San Miguel Corporation. However, players like Starbucks Coffee and Gloria Jean's Coffees have opted to source from dairy farms in Batangas and Laguna. Both players provide technical assistance to the farm-suppliers so that they could meet the quality standards set by their parent companies.

For whipped cream, nearly all players use imported brands distributed by local companies in the country.

Lastly, packaging materials are either sourced from affiliates overseas or from local packaging companies. Interestingly, Starbucks Coffee being the industry leader requires exclusivity from its suppliers. In other words, their suppliers are not allowed to cater to other specialty coffee shops. They can, however, still service hotels, restaurants and other foodservice outlets.

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While the other players do not require their suppliers to be exclusive, they do not allow them to sell to other specialty coffee shops exactly the same products (e.g. breads, cakes, and pastries) as some of the recipes are proprietary.

INDUSTRY ASSOCIATIONS

Some of the major players meet and discuss as members of the private sector-led National Coffee Development Board (NCDB), which aims to promote and save the local coffee industry from declining production and area planted. The group incidentally started as the government's National Task Force on Coffee Rehabilitation which was sworn into office by President Gloria Macapagal-Arroyo in May 2002. One of NCDB's programs is the Kape Isla Cooperative Marketing whose objective is to develop loyalty to Philippine coffee, reduce imports, increase domestic production, and create new jobs. The Program's Kape Isla seal is intended for the use of the different players in the industry as a Philippine coffee quality seal.

The Program's members are specialty coffee retail shops such as Bo's Coffee Club, Coffee Experience, The Coffee Beanery, Figaro Coffee Company, Mocha Blends, Starbucks, and Seattle's Best Coffee, as well as coffee bean growers, millers, roasters, local governments, and agriculture credit sectors.

Another organization is the Specialty Coffee Association of the Philippines (SCAP), which was established in 1998 to promote and support the specialty coffee trade in the country. SCAP's objectives are: (1) to advocate Philippine specialty coffee as world class; encourage members to use Philippine specialty coffee in their coffee outlets; (2) sponsor events and forums that showcase Philippine specialty coffee; provide programs (3) to assist local coffee farmers; upgrade the quality of coffee; and (4) to promote general awareness and appreciation of Philippine specialty coffee (F&B World, November/December 2003).

PROSPECTS

The specialty coffee shop industry is seen to sustain its growth of 10 percent to 20 percent yearly for the next three to five years.

Players attribute this to the growing awareness of specialty coffee among consumers, the improving image of coffee in general as something that is good for the health, and the expanding family spending on eating-out.

On the growing adoption of coffee by other restaurants, players say their wide list of coffee concoctions make them stand-out among other foodservice outlets. Their unique ambiance is also a big come-on. Players also capitalize on what is popular such as the availability of wireless internet or WIFI and the offering of potential product substitutes such as tea, juices, shakes, chocolate drinks, and healthy products such as salads, low-calorie versions of their best-selling drinks, pastries and the like. The offering of customer loyalty programs also helps them push their sales targets.

Overall, the continuing focus on addressing key success factors such as product development and innovation, brand and product promotion, and outlet expansion would allow the industry to continue to enjoy a brewing business and at the same time, help the development of the domestic coffee growing industry.

References:

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BusinessWorld, November 2000 F&B World, November/December 2003. Interviews with Key Players, February-March 2006 Securities and Exchange Commission Specialty Coffee Association of America www.starbucks.com

Resources: FAO Statistical Yearbook 2004 Vol. 1/1 Table C.10: Most important imports and exports of

agricultural products (in value terms)(2004)" (PDF). FAO Statistics Division (2006). Pendergrast, Mark (1999). Uncommon Grounds: The History of Coffee and How It Transformed

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