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plants with different environmental impact, but the push given to coffee growing is similar to that of rubber a few years ago. The monoculture of rubber has led to the aridification of areas in Xishuangbanna. Given that extensive coffee cultivation could lead to similar problems, rainforest and shade coffee and multi-cropping systems are necessary to reduce the environmental impact on the soil. Moreover, they believe that deforestation due to land expansion is a common practice in agricultural development in Yunnan. For environmentalists, the data on the growth of coffee land in Pu’er shows that such expansion is not possible only by change of crops or use of wastelands; “some logging must be taking place” (S02; & S03). They point out that this phenomenon also happened before with rubber tree and eucalyptus in the Xishuangbanna-Pu’er area. To put it simply, “they cut trees to plant whatever gives them more money” (S03). Even though they believe the reduction of forested areas in the region is alarming, they also acknowledge the efforts of the government in encouraging citizens to plant trees and stop the deterioration of the forest. In short, they do not believe the government is intentionally letting farmers cut down trees and destroy the forest; however, they express their concern for the fast development plans for coffee industry, because it can only happen, to some extent, at the expense of the environment (S02; & S03).
4. Analysis
The data gathered during the field research provides an inclusive perspective of the evolution and current state of coffee industry in Pu’er. This study aims to offer an insight on the origins, driving forces and future plans for the development of the local coffee business. These interviews and on-site observation serve to support or refute the few existing hypothesis about the actors responsible of this fast growth and their incentives; they help interpret aspects of Pu’er coffee that have not yet been analyzed in the literature; and, finally, this qualitative data provides a base for the formulation of conjectures about the future implications of this industry and its potential setbacks.
An industry of the government
Interviews with coffee-related government officials and members of the Coffee Association of Yunnan show a consistent tendency to minimize the importance of the local government in the development or the industry. Instead, the role of farmers and companies is considered crucial in the increase of production and the promotion of local coffee. While government
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assistance. Companies, entrepreneurs, growers and distributors interviewed grant the local government great recognition, but highlight that they are not the sole agent responsible for the development of coffee industry. Contrary to the arguments of both groups of interviewees, this study argues that only the government of Pu’er can claim full responsibility for the fast development of coffee production. Aside from Aini, domestic companies would have not pushed for the innovation of the sector without the support of the government. Multinationals play an important role in the progress of the business, but their presence in Pu’er is a direct consequence of the government’s coffee policies.The implication of the government of Pu’er in the coffee boom is of great importance. Like in many other coffee-producing countries, the involvement of the national and local governments is vital for the development and proper management of this industry. The role of the government surpasses the mere encouragement and extends to areas such as providing seeds for farmers, providing training and technical support, offering subsidies and compensations after natural disasters, and supporting investigation. Thus, compared with other countries in Latin America and Asia, the heavy involvement of the government of Pu’er is considered a natural part of the process. The government provided the initial impulse by bringing Nestlé to the region, developing policies for a specialty industry, and attracting foreign investment. Without these three strategies, coffee industry would most likely not have prospered. In fact, it could be argued that without the involvement of local authorities there would be no industry altogether. Even though the government’s full support to the industry only began after profits were higher and more visible, authorities are now fully involved.
Despite the fast growth, production in Pu’er is in the early stages of maturity; as a consequence, the role of the government remains vital. Nonetheless, they should gradually adopt a secondary role to start sharing more responsibilities with local companies. The government should continue developing the bureaucratic net of coffee associations and offices, formulating more coffee-specific regulations, and promoting branding and coffee consumption. Simultaneously, local companies should work closely with the government in the organization of coffee competitions and exhibitions in order to increase quality and publicize the Pu’er Coffee brand. In other words, although currently a much more present role is needed, in the future the government of Pu’er should merely act as the leader that connects all actors together and coordinates the correct implementation of the policies and
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regulations. By taking a step behind, Pu’er authorities will empower local firms to take action and upgrade the coffee industry.
Local coffee companies have grown fast and they now play an increasingly important role in the development of the industry. With the support of the government and the technical assistance from multinationals, these firms are now climbing up the technology ladder to improve the quality and variety of their coffee. Yet nowadays, most companies limit their activities to coffee growing and primary processing or just purchasing beans. Despite the improvement, domestic enterprises have not reached levels of autonomy necessary to become more involved in the development of the industry. The majority of companies still depend on government support, external technical assistance and large exports of cheap coffee beans.
Without the government’s guidance, coffee business would most likely stagnate and Pu’er coffee would not be known. Local authorities need to direct coffee into a more profitable, more ecological, less export-dependent business led by local companies. Aini, the indisputable leader of domestic coffee companies in Yunnan, is most likely the ideal candidate for such task. They have a clear business vision that they are developing over the years. They are changing target markets and creating products that adapt to the changing needs of their customers; they are raising awareness of the Pu’er Coffee label, promoting coffee culture and advertizing their own brand; they care about raising quality standards, investing in technology and engaging in ecological farming; and, most importantly, they are close partners with the local government, providing and receiving assistance when needed.
With or without government help, it is evident that Aini Coffee has become a major model for other coffee companies in Yunnan, and an important motor for the development of this industry.
Foreign companies have been key to the international exposure of Pu’er coffee. Growers and officials in the region do not place great importance to the role of those well-known brands that purchase coffee once a year, mainly because their contribution to the development of the industry is merely transactional, not constructive, and their presence is transitional. In contrast, Pu’er-based Nestlé and Starbucks have a great significance in the development of coffee industry, and their contribution is highly acknowledged. They brought knowledge and technology, trained farmers free of cost, and established farmer centers and procurement facilities where growers could learn more about coffee cultivation and improve their techniques. These famous multinationals not only provide unlimited training and support;
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coffee blends —except for the local "South of Clouds Blend" of Starbucks—, their work in the region and improvements achieved over the years are known outside Yunnan. For instance, the World Business and Development Award granted to Nestlé for their assistance in Yunnan hit international news, contributing to the advertising of local coffee sponsored by a well-known international brand. The significance of Nestlé in the origins and development of Pu’er coffee industry can not be denied. Not surprisingly, all subjects interviewed —scholars, government officials, coffee company managers, and even regular people in the prefecture—acknowledge the importance of Nestlé in the improvement of coffee farming in Pu’er and, instead of considering them as competitors, they hold the firm in high regard. Starbucks is a recent resident of Pu’er, but has already gained a place of respect in the local business. Their strategy is, in principle, similar to that of Nestlé; but the current approach of Starbucks seems to be less focused on coffee purchases and more into marketing strategies. This joint-venture clearly is a partnership of interest in which each party expects to gains more customers and recognition with their mutual help. Starbucks provides a solid endorsement for Aini in the domestic and international market, generating the idea that any company in partnership with Starbucks meets their quality standards. Similarly, Starbucks presence in Chinese land, not only to purchase coffee but mainly to improve the quality of coffee farming and generate more profits, is highly valued among Chinese consumers and may lead to an increased popularity of Starbucks in China. The good relationship of the local government with these two main multinationals, particularly with Nestlé, is manifest in the close cooperation of both entities in different aspects of the industry. The government meets regularly with their executives and agronomists to discuss ways to improve different aspects of the coffee business. The government of Pu’er seeks advice from them and takes them into account in the decision-making process of coffee-related issues in the region. They also make use of the expertise of these multinationals to improve the general standards of the industry in Pu’er. In exchange, the government is offering these companies exclusive benefits to settle in the region, expand their business, and enjoy certain degree of freedom in the local business. Not only they enjoy reduction of taxes and other similar benefits; companies like Nestlé have also profited from government property. The firm’s procurement center and regional headquarters are located inside the National Grain Reserve of Simao. The government handed over one of their state-owned granaries and office buildings to help Nestlé establish in the region and set up a functioning office where farmers can seek advice and sell their beans. Interviewees from
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both sides explained that their relationship was simply cordial and it did not differ much from the collaboration of the government with local companies; observation and contrasting interviews suggest otherwise. It may be argued that, in an attempt to attract foreign investment, multinationals enjoy privileges that many local companies are not even offered.
Farmers are the most vulnerable participants and the ones that benefit less from coffee business. Contrary to what authorities and producers claim, the impact of coffee growing on small farmers is not always positive and the economic benefits are not as significant as advertised. While the real motivations for each individual farmer are yet to be analyzed, growers generally enter the coffee business mainly because of external encouragement and benefits offered. Clearly, the farmer makes the ultimate decision of switching to this new crop;
however, the current environment in Pu’er —in which coffee is becoming a major crop and it is strongly fostered by the authorities and local entrepreneurs— pressures them into entering the business. Farmers hear stories of success of farmers escaping poverty; they have easy access to training and resources, like free coffee seeds and cheaper products; and the system of suppliers and buyers is more organized than for other agricultural products. These strategies seem to be aimed at persuading farmers into growing coffee. Many times, they are just encouraged to try, but the time and labor investment is such that only few farmers stop growing coffee even if they are not successful. Growing coffee entails several risks for farmers. They need to understand that coffee is a relatively unstable crop in terms of prices and market demand. It may not always be profitable, and the support system that exists now for the coffee industry May disappear when a coffee crisis hits the market, just as it happened in the late 1990s. If not provided with all that knowledge they need to make an informed decision, farmers could face problems when coffee prices are low or quality does not reach the minimum standards. Information for farmers, thus, is the key to the improvement of their lives and to the sustained growth of this industry. Nonetheless, coffee farming could mean a substantial increase of income for some growers. Especially benefited from coffee are farmers that work for companies that grow, produce and sell their own coffee. Firms like Aini and Manlao offer growers a steady salary and a further increase according to sales, reaching monthly incomes higher than the average. Independent farmers that sell their beans to different purchasers are in a less stable situation. Their success in the coffee business depends on the quality of their products, when they sell, and who they sell their beans to. Sometimes selling beans to companies that offer higher prices may entail a higher risk because they demand higher standards that require heavier investments; if the company does not need to
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purchase more beans or considers that the quality is not desirable, the farmer would end up selling the product to a company with lower standards and prices. On the other hand, independent farmers in a good harvest season may obtain high prices for their beans. The most important factor is that they are prepared for potential setbacks. If independent farmers acknowledge that coffee is not a reliable source of income and diversify the crops they grow, the success of their coffee business is more likely to happen.
An unbalanced chain region. In the case of Pu’er, the most favorable situation would be that all primary processing and some secondary production of coffee were done in the region.
Given that the coffee industry in Pu’er is still in earlier stages of development, the number of companies producing coffee as a final product is very small. Moreover, there is an important lack of secondary processing businesses, and the numbers have not increased significantly in the past years. Currently there are over 118 registered coffee companies in Pu’er city, but the majority of those are primary processing factories. Only the primary processing is growing faster than any other aspect of coffee processing, but this part of the business is not enough to increase regional profits and regain control over the industry. Thus, nowadays the business in Pu’er is still focused on coffee growing and direct procurement. Whereas direct procurement brings higher benefits to the farmers, the total share of the profit that remains in the region is smaller. Companies that only purchase coffee beans offer higher prices for their beans because the farmers have already transformed the cherries into beans with primary processing;
companies that buy unprocessed cherries offer lower prices to farmers, but more and more often carry out the primary processing in Pu’er, bringing more profits to firms and entrepreneurs and expanding the industry. Either way, the majority of coffee beans end up being exported to other countries for secondary processing, packaging and sales. Sometimes, those beans will be sent to domestic coffee factories in prosper regions like Guangdong, but they rarely stay in Pu’er. Both systems bring reduced gains to the region and do not
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contribute to a more balanced distribution of the profit. Consequently, Pu’er officials and entrepreneurs need to consider the creation of secondary processing factories to bring production to the region, generate business, and increase prices paid to farmers by reducing costs of transportation and middlemen.
Promoting quantity and quality
The involvement of government, companies and farmers alone does not explain the fast development occurred in the past three to five years. Under the rigorous management of the Coffee Industry Development Office of Pu’er, the government has developed four main strategies to boost coffee production and increase sales. During the course of interviews, several contradictions emerged among different interviewees on the issue of motivations, role involvement and future developments of coffee industry. Nonetheless, the question of what measures have been most widely put forward received and unanimous response, pointing at expansion, quality control, and promotion as the standard approach taken in Pu’er.
The expansion of land for coffee is one the most conflicting topics of this research.
Interviewees claim that coffee production is growing at a steady rate since the 1980s and reject the assumption that it has developed particularly fast in the last few years. They argue that the years from 2008 to 2010 can be considered a turning point in terms of management and policy development, but not in significant terms. Yet the official data on cultivated area and projected area expansion presents a different picture. Numbers clearly show a sharp increase in land, production and revenue after 2009. Before that, the increase of area cultivated with coffee was not consistent or was relatively slow. Taking the arrival of Nestlé in the late 1980s as the start of coffee production in Pu’er, it is reasonable to argue that the area expanded rapidly in the decade until the late 1990s; however, the coffee price crisis and the lack of interest on this crop led to a sharp decrease, followed by a slow recovery. It was not until the late 2000s when the government started promoting coffee cultivation and the area expanded faster and more consistently —that is, there were no periods of decrease or deceleration. Consequently, this study argues that the area available for coffee has in fact expanded more rapidly in the last three to five years, and it is expected to develop more in the coming decade. The development of coffee production has not been gradual. Surprisingly, one government official that argued that coffee area and production were growing gradually declared that coffee could soon surpass the development of all other crops in Pu’er, including tea. Whereas no data is available to confirm this prediction, and it is yet to be seen the extent
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of expansion for the next years, his affirmation contradicts his claims that expansion of coffee in Pu’er is taking place at a normal speed.
Local authorities need to avoid falling into the traps of the coffee cycle. If the cultivated land continues to expand without proper planning and many more farmers are encouraged to grow
Local authorities need to avoid falling into the traps of the coffee cycle. If the cultivated land continues to expand without proper planning and many more farmers are encouraged to grow