Chairman Jeremy Block puts Dorman’s on the coffee map

On 17 June 2011, Dorman’s Chairman, Jeremy Block, had a glass of Champagne he could scarcely afford. Block was celebrating the acquisition of the controlling share of a company he’s been leading since 1986. With Dorman’s under ED&F Man’s umbrella for the last two and a half decades, Block has spent the last two years, and most of his resources, purchasing their controlling share. “It’s like a new lease on life,” the Kenyan citizen tells GCR from his farm in the East African countryside. “I’m thrilled to be back in control.” Block’s management of Dorman’s dates back to ED&F Man’s purchase of the company in 1986. He recounts that after enabling the international group to purchase a controlling stake in Dorman’s from its founder Charles Dorman’s widow Ellen, ED&F Man ran it for just a few months before handing Block the reigns. It was a move that saw him go from a shareholder to Managing Director. “It was a matter of being in the right place at the right time ,” he says. “I thought about it, and figured I would just try and run it.” Block’s first instinct was to start in the accounts department. At a time before computers, he sat down with accounts and went over the hand-filled ledgers to get an idea of the company’s financials. “The first thing I noticed was that the numbers weren’t all adding up,” he says. “They were buying and processing coffee and paying 60 per cent more than if they had bought some of the finest coffee they could buy at the auction.” From his early number crunching, however, Block’s attention quickly turned to the quality of the coffee. He initially had two tasters on the staff and was happy to delegate the task of identifying quality to them. As he got to know the industry, however, it became clear that to work in quality coffee, he would have to recognise exactly what quality is. It’s in discussions of a passion for quality that Block most remembers his relationship with Ellen Dorman. Up until ED&F Man’s purchase, Ellen, a German refugee, had run the company after taking over when her husband Charles passed away. Charles had established the company following his involvement in the coffee industry before the Second World War (as Chairman of the Mild Coffee Trade Association of East Africa in 1939 and 1940). After his death, Ellen took an active role in running the company. Even on her death bed, it’s said she insisted on being updated on the particulars of the day’s cupping and roasting results. Today, Ellen’s memory lives on as the ‘Grand Old Dame of Kenya Coffee’. Before her death, Ellen had taken Block under her wing and into the tasting room. “I realised then that the key to the business was understanding value,” he says. “Unless you can taste a coffee, you can’t understand the value. It was an important part of the equation, that unless I understood the value it would be difficult to communicate with customers and understand their needs.” When Block took the reigns, the company was exporting just 12,000 bags of coffee a year. His first step to increasing business was to expand the portfolio of what the company offered. Using ED&F Man’s connections as one of the top five traders in the world, Block worked closely with their London Arabica traders, looking to offer a range of quality. “Customers had enough faith and trust to be prepared to buy from us,” he says. “From there we just expanded.” The key was not just in increasing volume, but taking from the lessons of his first days in the accounts department and ensuring that what they did sell was profitable. “There was coffee that they thought was profitable that was actually selling at a loss,” he says. “We had to sell not just more coffee, but ensure it was all profitable.”
From those early years, Block has seen the company grow exponentially. In 1989, Block bought Merali out of Sirima General Trading and formed Dorman’s (Tanzania) Ltd with ED&F Man. In 1993, when Tanzania liberalised its coffee sector, Dorman’s was the first company to build and run a private coffee mill. The Tanzanian operation grew from three employees to over 300 within two years and they acquired or built offices in Moshi, Mbeya, Mbozi and Mbinga, and even built an airstrip to facilitate transport of cash near Mbozi. In 1993 the group formed Dorman’s Uganda. Before they withdrew from Uganda a few years later, in 1996 Dorman’s was exporting 500,000 bags of coffee a year – a 40-fold increase in business in 10 years. While ED&F Man provided the financial backing, Block remained a shareholder throughout the process and managed the expansion. Block says that last year’s decision to purchase the controlling share was for him a big step in moving the company away from focusing on green bean trading, and towards his vision of a fully-vertically integrated coffee company.           Dorman’s has been marketing its own roasted coffee from early on. The final step in full vertical integration was the launch of Dorman’s coffee shops, an exercise that for Block has helped every part of the business. “The idea behind Dorman’s coffee shops is fairly simple. We felt that Kenya, as a producer of the best coffees in the world, should understand its coffees and be able to appreciate them,” Block says. While he’d had the idea for a while, Block initially thought the shops wouldn’t work because Kenya is mainly a tea-drinking nation. After seeing another shop open with some success, he decided it was time to turn ideas  into reality. Without any personal experience in coffee shops, he paired up with a friend who owned a famous local restaurant chain, the Tamarind Group, and a consultant recommended by the Chairman of an American chain, Peet’s Coffee & Tea, to develop the business. Running a coffee chain, Block soon learned, was a far different experience than dealing in green and roasting coffee. But, it proved to be a vital step in helping them grow the business. “It’s been very useful in getting to understand both sides of the equation,” says Block. Dorman’s now has 11 shops around Nairobi and Mombasa, and three franchised units that cover delivery service, office service and outside catering. It’s just the beginning, however, of a business that Block sees rapidly expanding. As the region’s middle class grows, more and more consumers can afford to purchase coffee and the drink is being touted as a positive alternative to alcohol. As such, Block is positioning the coffee chain to put Dorman’s on the map as the pride of Kenyan coffee. “Let me put it this way. In North America, you have Starbucks, Caribou Coffee, Peet’s and so on. In Europe, you also have Starbucks as well as Costa Coffee. In India you have Coffee Day. In Africa – you just don’t have anything,” he says. “There’s a gap there, a vacuum. I think Dorman’s is there and ready to lead the charge into that vacuum.” The move will come sooner rather than later, along every part of the chain. With operations already in place in Kenya and Tanzania, Dorman’s Coffee Management Services Ltd (CMS) operations, a service provider and marketing agent, already has a presence in Rwanda, and they are in talks to expand their operations in Uganda, Ethiopia and Burundi. Dorman’s recently engaged Christopher Jordan as a Director to manage the expansion. Jordan brings his experience as a former Regional Director at TechnoServe and Director of Quality at Starbucks Coffee Trading. In their surge forward, Block says the future will require a fresh approach, as modern coffee trade has changed drastically from when he first started. “When I took over at Dorman’s, I think less than 5 per cent
of the coffee community knew anything about coffee futures and hedging,” he says. “The understanding of risk management was minimal. These days, I’d say 95 per cent of the market understands risk management.” While Block expects direct trade to continue, in his experience at the region’s coffee auctions, he says these auctions are the best way for farmers to get a fair price in an efficient system. “Both Kenya and Tanzania are trying to promote direct selling, and we’re seeing an increase in direct sales, but the auction system still works better as a whole,” he says. “Direct trade doesn’t really work for coffee that’s of average quality or less. Buyers need an incentive to buy, and at the auction you see buyers fight over the coffee and it creates a higher price.” The availability of world prices to farmers and buyers alike is part of the greater trend of transparency that Block has noticed along the chain. Buyers want to know if a price is valid and justifiable. They want to know the margins, Block says, and they want to follow coffee from the grower to the cup. Certifications have emerged as one way to ensure this transparency and in this regard C Dorman, the company’s trading arm, has led certification efforts in the region. In 2006, the company was the first in Kenya to be accredited with ISO 22000 and HACCP (food safety provisions); Utz Kapeh (now Utz Certified, a sustainability certification); Rainforest Alliance (RFA) and FLO Fairtrade. While Dorman’s promotes the certifications to farmers as a way to ensure transparency and sustainability, he says that the biggest advantage of certifying coffee is simple – it makes good business sense. “Certification gives more people to sell to,” he says. “Whatever the certification, they are all initiatives that promote sustainability and many roasters are demanding them. If you’re not involved, than you decrease the number of customers you can sell to.” While the company does their best to help farmers with funding, communicating this market reality to them has proven a good incentive to encourage farmers to gain certification. For Block, certification is just one step forward in further entrenching the company’s regional market leading position. “We are also helping all the other East African countries to improve their qualities and hence generate better earnings for their farmers. This will ensure Dorman’s maintains it’s leading position in the region, both with customers and the producers and not forgetting the regulators,” he says. “We’re putting Dorman’s on the Kenyan map in promoting the region’s coffee. It’s all about creating pride in the industry we have here. While Kenya has some good tea, it’s nothing special. But, our coffee sells from 20 to 500 per cent more than other coffees and for a good reason. Any coffee taster around the world, any roaster, any buyer, will tell you that we produce some of the best coffees in the world.”