Profiles

Volcafe: Quietly leading the front

Sitting down for an interview with the Divisional Managing Director of Volcafe, Jan Kees van der Wild, is no easy feat. The lead up is a study in introductory emails, careful arrangements and preparatory questions. With most interview subjects you can access dozens of articles for back-up research, but any probe into Volcafe turns up very little. A quest for insights from past interviews with its divisional head turns up even less. As van der Wild sits down, he explains that the company has not done much in regard to seeking media attention and this interview with Global Coffee Review is a rare occurrence. In a media landscape where prominence and reach so often attract the public eye, it’s a surprising discovery that a company leading the global green bean trade on both accounts has managed to stay so far out of the spotlight.  The 228-year-old company currently has a presence in 92 per cent of coffee producing countries and 80 per cent of coffee consuming nations. Those in the know who haven’t heard of ED&F Man or Volcafe, have likely heard of Cofi Com, Dakman, Carcafe, or another of their 26 holding companies around the globe. Those not in the coffee business will almost certainly have heard of their major clients – Starbucks, Nespresso, Green Mountain Coffee, Tchibo, Paulig, Nestle and Kraft, just to name a few. When ED&F Man, one of the world’s leading commodity trading companies, purchased Volcafe in 2004, the company became one of the world’s largest green bean merchants and one of the largest privately-owned companies of its kind. “It was a great marriage merging the businesses, bringing together the expertise of Volcafe, that is the cupping knowledge, knowledge about quality and customers, together with the resources of ED&F Man,” van der Wild notes. “Between our 20 senior managers we have something like 600 years of coffee experience. Coffee isn’t something you can study – it’s something you have to learn by experience.” When you peel back the layers of Volcafe, the reasons behind the company’s lack of media attention start to become apparent. There are no external shareholders to report to, so Volcafe is not a company that needs to devote efforts to promoting the company image. Rather, their generations of experience steer the corporate energy towards heavy investment in on-the-ground resources to support and adapt to a complex and changing coffee industry – a global landscape as diverse and rich as ED&F Man are themselves. From sustainable production to increased flow of information about the production process and even the growing demand for specialty coffee, Volcafe has quietly been at the forefront, leading rather than following the developments in the industry. Their efforts, van der Wild emphasises, have been driven by customer demands. They do this as a solutions provider with a structure that caters to the dozens of diverse markets in which they operate. An example lies in the specialty coffee division Volcafe launched in 2001 when it anticipated the growing demand for better quality beans. “It’s like fine wine. The demand for specialty coffee is growing alongside the demand for information,” van der Wild says. “Customers want to know where their coffee is coming from and how it’s grown and we’re seeing a large demand for sustainable coffees.” Stemming from the company’s position as a solutions provider, where a demand for information has risen Volcafe has responded. With a presence in 92 per cent of origin countries, van der Wild points out they’re in a strong position to provide that information: “There are very few countries where we’re not present. Sixty per cent of the coffee we trade we originate ourselves, so we have a good understanding of where it comes from.” With 17 holding companies that operate at origin, maintaining close relations with producing countries is not a trend the company has latched onto, but rather a fundamental and well-planned part of the ED&F Man business. With a long history of acquisitions and mergers to expand their operations, van der Wild notes that an important lesson they’ve taken on board has been to maintain the local identity of their holding companies. “When I came into this company, I had to ask why don’t we just call every company ED&F Man? Or why not Volcafe? But, imagine the coffee farming family in Guatemala who has been dealing with Waelti Schoenfeld for generations. With all the market volatility in coffee they have come to trust that company,” van der Wild explains. “Coffee does not grow in easy countries and for them Waelti Schoenfeld has been a stable presence. That’s the way the customer wants it.” For ED&F Man, van der Wild says, the farmer is considered a customer as much as the roaster is. As the company sees itself as a solutions provider for their customers, they are driven as much by the needs of the agricultural end as they are on the commodity end. Maintaining these local identities has not only been about retaining known names, but also about employing experienced people who live in the communities where they work. The company, van der Wild says, is blessed with low staff turnover, thus helping retain the expertise employees have generated over decades. Instead of transplanting employees to positions away from their home countries, they prefer to train people from within those origin countries. Through their recently established Volcafe Academy, van der Wild says the goal is to pass that knowledge on, and also to ensure that most of their employees, up to top-level buyers, are from those coffee producing countries. The academy provides a minimum of two years training to potential buyers, who then go back to work in their countries of origin. Van der Wild notes that he tries to interview personally at least 30 per cent of potential trainees. “I go back to these origins and I see these people we hired. It’s so great to see them in action,” he says. “In origin countries, I believe that the local farming community prefers to work with locals, who know their language and their culture. In the past, there was a time when we would send ex-pats to work in origin, but I believe that time has gone. From both a cost and a cultural perspective, it just does not make sense.” So, in an era when international trends seem to be favouring business consolidation, van der Wild notes that they are going in the opposite direction by decentralising their business. It would seem then that the days of sending someone from the consuming nations to work in the producing nations are over, as the line between these two worlds are increasingly blurred. In the decades that ED&F Man has been in operation, there has been a fairly clear distinction between the production and consumption countries. That line is disappearing not only in this change in work practices, but also as they anticipate their greatest growth on the consumption end from those producing countries. “It’s safe to say that in established countries, consumption growth will only come from population growth,” van der Wild notes. “The largest growth is going to come from these producing countries.” Van der Wild is careful here in his choice of words. “Some people still call these emerging markets, but I have to call them leading,” he says. He points to their impressive gross domestic product growth figures that are dwarfing countries such as the United States and Japan that have long led the global market. “These countries are coming up rapidly… and where there’s economic growth, an increase in coffee consumption follows.” Van der Wild anticipates that we will see new consumption patterns in these markets. Traditionally, dogma states that new markets first demand low quality coffee and then upgrade to better quality. Van der Wild predicts these countries will skip that stage and go straight to demanding quality beans. “It’s no coincidence that China is becoming a top consuming nation for fine wine and Champagne,” he says. “It’s naïve to think that they will go for a $200 bottle of wine, but not demand the same quality from their coffee. They’re going to go straight for the highest segment… Where Asia were once market followers they are now market leaders and the food and luxury industries are going to cater for those markets.” As such, Asia has been a strong focus in ED&F Man’s recent efforts. But, as with everything they do, they’re looking for local partners and only carefully making their moves. Van der Wild points to the company’s two centuries of experience in saying that they are not interested in rushing into any market they’re not prepared to stay in. “If we settle somewhere we want to set up a long-term, sustainable business,” he says. “ED&F Man is 228 years old. With every business decision that is taken into account, we plan on being there for 200 more years.”  Van der Wild is using the term sustainable here mainly in the economic sense. However, environmental sustainability has also been at the forefront of their operations. Once again, customer demand has been the key driver in this space. They are a founding member of the 4C Association and work with every major certification system as demand dictates. ED&F Man also have a formal charity with a long history of supporting medical facilities and other community initiatives. However, van der Wild is careful not to oversell their philanthropic efforts. “We don’t see ourselves as a builder of schools. However, with our long-standing presence we are committed to our communities,” he notes. “We don’t really publicise these efforts because it’s not about that, it’s about our commitment to these communities.” The company’s long-standing relationship with the communities where they operate is a subject that comes up not only in discussions about sustainability, but also in talks of recent record-high coffee prices. As a part of the supply chain, Volcafe does feel the strain of higher prices in that more money is caught up in the tracks. But, with the extent of their operations – and most importantly their history – they’re in a position to do business “at $1.50 per pound or $3 per pound” as van der Wild points out. As for where we will see prices go from here, van der Wild is careful not to make too many strong predictions. “I expect a downward correction… what I will not say now is that prices will crash. We see demand is outpacing supply. It is the function of the market to create more supply and encourage farmers to increase their output,” he says. “Demand is increasing by 2 per cent per year and we need to ensure countries grow more crops to match those demands.” From a company that deals day to day with buying and selling beans, you can be sure van der Wild knows what he’s talking about. To help their customers deal with fluctuating prices, the company offers a price risk management strategy. They have undergone extensive research worldwide on crops and demand, and where the customer requires they share their findings and provide buying guidelines. Interestingly, whenever market volatility increases, van der Wild notes that they see an increase in their business in that customers look for a secure and stable price to ensure they’re not locking into the market. Van der Wild has noticed a trend where both farmers and roasters are moving away from working with opportunistic buyers, as an increase in prices is leading to an increased instance of default. “The market is gravitating to these longer-term relationships over strict price buying,” he says.  Recent trends in an increase in direct trade may affect the shape of their business, van der Wild says, but not necessarily their scale. With their various holding companies at origin, they are prepared to do business in any shape the customer demands. “Although we’re proud to be a coffee trading company, the word trade has come to be perceived in a negative way,” he says. “We are coffee suppliers… The chain stops at the roaster, and for everything in between farmer and roaster we try to be the best.”

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