Thailand’s transitioning times

Three baristas are hard at work in Gallery Drip Coffee, a tiny, tasteful enclave café next door to its brash neighbour, the towering Siam Centre mall. Floor-to-ceiling wood shelving is packed with antique coffee making equipment and photography books, and post-it notes with quirky hand-drawn portraits sit next to cut flowers in glasses below an undulating, honeycombed ceiling. It’s a great space to serve coffee. The café is an impressive example of Bangkok’s emerging specialty coffee scene. NutRada Kunavivattananon, known as Noon, Head of International Relations for the Speciality Coffee Association of Thailand (SCATH), drops a few other names of note in the city: Bluekoff, of which Noon is the CEO, Factory, Phil’s, Kaizen, Roots, Pacamara and Kad Kokoa. Gallery Drip Coffee offers locally produced Arabica beans alongside foreign imports. As its name implies, its focus is filter coffee, although it does offer espresso-based drinks too. The specialty scene in Thailand today is all about the country’s Arabica supply which is interesting since, like its Association of Southeast Asian Nations neighbours, the country is mostly associated with Robusta. “In Thailand, we produce lots of Arabica but the rest of the world doesn’t know. It actually ramped up about six years ago when specialty coffee emerged,” says Noon. “SCATH was formed three years ago but before that it was a kind of a struggle. Being a small group isn’t easy. It was difficult to get a good collaboration from other parties. Then we enrolled as an association with the government.” The vision behind the group is to improve Thai Arabica quality from the farm level. Even though Arabica production is increasing, the majority of the country’s crop is still Robusta where the picture is mixed. Total coffee production in Thailand is in decline. According to ICO figures (see table on page 48), the industry has enjoyed some high peaks, followed by a few troughs over the past decade. During that period, the net trajectory has been the wrong way.  “The highest level the country has reached was back over 10 years ago when it produced 1.6 million bags. Currently [it] produces on average of 600,000 bags, sometimes 500,000 bags. Production has dropped more than half,” the ICO’s Chief Economist Denis Seudieu tells Global Coffee Report. “The obvious [reason] is that farmers are not getting the right price so they shift to a more profitable crop. Also, they are not using enough fertiliser.” Varri Sodprasert, President of the Thai Coffee Association, adds that Thailand’s production decline is due to “limited land for expansion and also because we don’t have enough labour to work in the coffee farms”. The yield is unsurprisingly low compared to regional powerhouse Vietnam. “There is room for improvement,” Seudieu says. “Yield is 300 kilograms, or maximum 400 kilograms, per hectare compared to 2.1 tonnes, or 2.5 tonnes, per hectare in Vietnam.” Seudieu does not suggest the Thai coffee industry can reach its neighbour’s performance in the short term but says the difference between the two figures indicates an opportunity for improvement. “They can get to one tonne per hectare, that is possible,” Seudieu says. However, Sodprasert adds that there’s cause for optimism in a growing demand among coffee drinkers. “Yes, we feel positive, local consumption is still increasing. People love to drink coffee more and more, especially roasted coffee. Also, people on lower incomes are drinking more coffee mix and instant coffee,” Sodprasert says. Aside from the boutique outlets of the specialty market, Thailand is scattered with popular chains including Starbucks, PTT’s Café Amazon, True Coffee and D’Oro. According to the ICO figures, locals are drinking between two and 2.5 times as much as they were a decade ago. Combine that thirst with faltering domestic production, and the result is an inflow of coffee, an unusual situation for a producer nation. The effect is exaggerated by Nestle using Thailand as a base to produce instant coffee, for which it needs to import before re-exporting the finished product in the region. “Only in this ASEAN region do we see an exporting country being a net importer,” says the ICO’s Seudieu. “The export figure is relatively low, and concerned in terms of green beans, only with Arabica. If you combine with what they process and re-export in the region, they export 480,000 to 500,000 bags in total including soluble and green.” Locals say the coffee industry owes a debt to the government and its monarchy for its support during the 80s, as a lure to farmers in the so-called Golden Triangle bordering Laos and Myanmar to move away from heroin production. The north is more associated with Arabica production, and the south with Robusta. While Arabica is the coffee of choice in Bangkok’s high-end cafés, specialty establishments tend to offer imported coffee in tandem with local produce for blends, such as what a café called Phil does for its espresso-based drinks. Its imported coffee mixed in the blend was a Brazilian at the time of GCR’s visit. The establishment, also a roaster, offers a range of foreign coffees for filter coffee, such as Ethiopian, El Salvador and Kenyan beans alongside its Thai offering. Meanwhile, what’s striking at Gallery Drip Coffee, which imports Ethiopian, Guatemalan and Kenyan beans, is the price difference between the local and imported product. Thai coffee typically carries a price tag between 10 and 30 per cent lower than its foreign counterparts. Similarly, at another local establishment the Bangkok Espresso Bar, the local beverage costs barely more than half of the imports from Brazil, El Salvador, Ethiopia, Kenya and Rwanda.  However this isn’t always the case. Some cafés charge equal or a higher price for both Thai and foreign coffee. SCATH’s Noon says the price of imported coffee is comparable to the price Australians pay for locally produced coffee. “It’s expensive for local people because if we have the same price as Australia and Europe, but our average income per capita is lower, this makes the coffee expensive. It’s because the cost of imported coffee is extremely high,” Noon adds. This of course restricts drinking espresso or filter coffee to the middle classes, wealthy foreign residents and tourists. Less well-off locals drink instant coffee or popular sweet teas. Key to the higher price is the import taxes placed on incoming coffee by the Thai government. The tax is lower on imports from immediate neighbours in ASEAN countries: their rate is five per cent for green beans, and zero per cent on roasted coffee. However, for non-ASEAN countries, the price rockets up to 90 per cent (out of quota) for both green beans and roasted coffee. Defenders will say import taxes are a means for the government to support local producers and ensure they have a market for their products in the country’s cafés. Critics say it discourages local roasters from accessing and learning from leading international coffee producers, as well as restricting consumers from drinking the best in the world. It also puts a stop to the spread of roasted and filtered coffee to the widest possible audience by keeping prices high. “Yes, we can put some pressure on the government to reduce the tax, but I understand both sides,” Noon says. “There is a need to protect farmers. However, what we need to do is to find a balance. The farmer sees coffee as a plant, we see it as a drink. They can sell at a very high price because the imported beans are so expensive.” Of course, there are other ways to support local industry too. The government has its Coffee Strategies 2017-2021 program designed to support farmers in growing better quality, higher grade coffee, as well as lowering the cost of production, so enabling a local roaster or factory to compete with imported products. Industry also has its own initiatives. The Thai Coffee Association has projects on the supply side to educate farmers to meet the requirements of its roasters, with attention to improving quality more than quantity. There is a belief locally that now neighbours Laos and Myanmar are growing good coffee, Thailand must up its game. ICO’s Seudieu gives an example of Vietnam where, historically, the government supported coffee farmers, for instance with credit arrangements to purchase fertiliser. For Thailand, such change would involve developing a skill level for coffee that is akin to what it can already do with rice. For SCATH’s Noon, that means using Arabica varieties such as Java and Geisha and keeping away from Robusta. Suitably, her talk is less about production volumes and more about cupping quality. She believes a shift in the type of coffee the country grows is tied up with another change. “Thai coffee is perceived as low quality because it was like that before. That’s because the farmer did not have the knowledge, that’s our role. Right now the new generation is coming along and doing it properly,” she says. “We can see a big difference. A transition will go on. Ten years from now the changeover to a new generation will be complete and the world will see Thailand as a specialty coffee producing country.”

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