PH-Indonesia Joint Venture Sought in Exotic Coffee Blends

By Paul M. Icamina

Major players in the Indonesian coffee scene are looking for joint ventures with Filipinos.

The match is perfect. Indonesia is the world’s third largest coffee producer. The Philippines is projected to become one of the world’s largest five coffee consumers by 2021, according to the Philippine Coffee Board.

Harvesting Arabica coffee in Cordillera.

The Philippines consumes about 135,000 MT of coffee but only produces 35,000 MT, according to the coffee board. This is up from 23,000 MT just three years ago. To fill the gap, it imports around 80 percent of its coffee requirements or about 100,000 MT a year, largely from Indonesia and Vietnam.

Local coffee production accounts for less than 1 percent of the US$ 21 billion world market. The value of its 2015 exports of green and roasted coffee, according to the Department of Trade and Industry, accounted for less than 0.0004 percent and 0.003 percent of global trade, respectively.

In contrast, Indonesia produces 8 percent of the world’s coffee, following Brazil (34 percent) and Vietnam (18 percent).

“More than the coffee from South America or Africa, now is the time for Asean coffee,” said Pacita U. Juan, chair of the Philippine Coffee Board. “The difficulty is, there’s no ‘face’ for the producers. We don’t know them.”

That’s why, for a start, the Indonesians came to Manila, she said in an interview. “They’re some of the biggest importers, many in the specialty coffee trade, not the instant coffee variety.”

Darma Santoso of Jakarta would like to fill the specialty coffee market and was one of the players looking for a local partner. “The Philippines is good in the service business; you speak good English and are confident,” he told Agriculture Magazine. “We can even train my staff here.”

Santoso runs Warunk Upnormal, one of Indonesia’s leading coffee-restaurant chains, with 55 outlets in 27 cities. Its outlets have private rooms, even fun games and “lots of power plugs.”

“There’s more income in the coffee-restaurant business,” he said, which is why he wants to bring it to Manila. It would cost at least P11 million to start up a 200 square-meter outlet, he said.

Santoso also sells coffee beans, such as Mocha Java Arabica for the equivalent of P834/kg and Toraja Sapan from Sulawesi for P945/kg. They compete well with Filipino beans, which sell
for about as much, if not more.

Juan said the Philippines can compete with world prices anytime. As for possible joint ventures, Filipinos “must have the bigger share.” Santoso agreed, putting it at 80 percent for locals. Juan has convinced Santoso that one of its coffee shops, Upnormal, should carry both Indonesian and Filipino coffee if and when it opens Philippine outlets.

The Indonesians brought some of the world’s best blends. One trader brought Gayo, the
strongest, from the hillsides around the town of Takengon and Lake Tawar, in northern Sumatra. They also brought Mimosa, a mild and popular blend from Celebes. Preanger, also mild, is named after the mountainous region in West Java where it is harvested. All for the equivalent of about P600/kg.

The variety of the blends was coffee heaven. There was Lintong coffee grown in the District of Lintong Nihuta, to the southwest of Lake Toba in Sumatra. Mandheling coffee came from Northern Sumatra as well as Aceh. They’re described as sweet, earthy, spicy, and chocolatey. Strong Peaberry and Gayo is tea-like, sweet, spicy, and chocolatey as well. Longberry is herbal with a floral hint to it. Then there’s luwak, the most expensive coffee in the world produced from the beans ingested by the civet cat.

Except for the luwak, all were priced at about the same range as Filipino beans. Asked if the freight cost of bringing them here would jack up prices, former Jakarta envoy to Manila Johnny Lumintang, who brought the Indonesian coffee traders to the Philippines, pointed to Kopiko, the three-in-one coffee brand very popular with Filipinos. Prices will adjust to competitive levels, he said. What is important, he said, is that the Indonesians were in Manila to bring a “much needed supply to the market.”

This appeared in Agriculture Monthly’s February 2018 issue. 

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