Wednesday November 9 2011

Selling Ugandan coffee on US shelves: A story of persistence and constant lessons

Above, Andrew Rugasira (seated in the centre)

Above, Andrew Rugasira (seated in the centre) after signing a partnership agreement with Church of God in Christ (COGIC ) at their annual convocation in St Louis, Missouri. The partnership will allow Good African Coffee to distribute its coffees throughout the COGIC network of over 12,000 churches. Extreme left, patrons enjoy some coffee and left, the brew being made. COURTESY Photos and photos by Ismail Kezaala 


Tall, trim and handsome, Andrew Rugasira sits upright, his hands resting on the small table in his Good African Café at Lugogo, next to a half-empty bottle of mineral water.

His words, when they come, are deliberate and measured. His stare is intense and searching, only broken to glance and wave at patrons or upwards, when he cracks a joke and his laughter, deep and sincere, bellows out of his frame.

Right now Rugasira is laughing as he recalls being advised to “avoid sudden movements” when meeting potential business partners in Europe. In a world informed by stereotypes, African businessmen have to earn trust at every turn, even if it means learning a whole new body language.

Rugasira has spent most of the last decade learning, both in class where he returned to university in the UK for two master’s degrees, and in the school of hard knocks where he built a fortune and lost it, then rediscovered his inner self – and God – when he started to rebuild it.

It has been a long decade. Back in the 1990s, Rugasira was a household name and king of the castle. His VR Promotions ruled the world of events management, from providing the public address system for Bill Clinton’s visit to Uganda, to promoting the biggest concerts, including that Lucky Dube one.

In this “Viva La Vida” existence, Rugasira would roll the dice and feel the fear in his competitors’ eyes but it was a world as rewarding as it was unsatisfying. In search of self-fulfilment, Rugasira literally woke up and smelt the coffee.

He had earlier taken over the family estate which included a chalk factory (later sold) but as he discovered, coffee involved more than just buying and selling beans; it required breaking up and reinventing the business model.

Coffee is a fascinating crop. It grows in the tropics but is mostly consumed in Europe, the United States and Japan. About 70 per cent of all the coffee produced is imported by only nine countries – half of it by the USA, Germany, France and Japan.

It is an industry controlled by the middlemen and the retailers; Nestle, Kraft and the supermarket chains in the UK control over 90 per cent of the entire trade in the country. In fact, growers receive only 10 per cent of the value of the crop, with exporters keeping another 10 per cent; shippers and roasters sharing 55 per cent and the retailers taking 25 per cent.

Money made
A cup of coffee sold in a Starbucks shop, for instance, is made from five to seven grammes of coffee and sold at between $2 - $3 (about Shs5,200 to Shs7,800), giving the kilogramme equivalent a value of over $400 (about Shs1m). However, a Ugandan farmer at current green coffee prices would be getting about one per cent of that value. “Obviously, one must factor in other overheads and costs involved with retail chains,” Rugasira says, “nevertheless the differential is still huge.”

This is the kind of industry that Rugasira ventured in about seven years ago when he turned his back on events management and real estate. He set up Rwenzori Fine Coffees, later renamed Good African Coffee (GAC), at a time of an ideological shift in global development that favoured “trade not aid” as a way of ending poverty in Africa and elsewhere.

Although scholarly types like Dambisa Moyo, author of Dead Aid, sang the same mantra, Rugasira was one of the African entrepreneurs trying to practise what they preached by trying to overcome trade and cultural barriers to add value to African exports to the west.

Six years after GAC was born, the company has a roasting plant in Kampala – the first in the country – served by a network of 14,000 farmers organised in savings and cooperative societies, and has its branded coffee on the shelves of UK supermarket chains Waitrose, Tesco and Sainsbury’s.

GAC is run on a social entrepreneurial model where part of the benefits of exporting value-added coffee are passed on to the farmers. “Our farmers get a premium for quality coffee of around 15-20 per cent above the prevailing market price for comparable coffees. When prices were depressed this percentage was higher.”

Last month Rugasira took his coffee to American shelves. The US is the largest coffee consumer market in the world; over 150 million consumers drink 400 million cups a day, a market worth $20b (about Shs51.7 trillion) a year – larger than Uganda’s entire economy.

GAC has a distribution hub in Chicago from where it has been distributing its coffee throughout the US via the Internet since March but, as of last month, can now also be found on the shelves of retailers in the American Midwest like Meijer and Jewel-Osco ,among others.

“Every time you break into a high value market, it is significant because rather than just supply green beans, we can now supply processed coffees to that market therefore retaining the full value of our products at source.”

Rugasira recently signed a distribution arrangement with a large Episcopal church network to promote GAC coffee throughout their thousands of churches across the US. He says progress has been “encouraging” and the prospects “exciting”. While “trade not aid” sounds smart, Uganda, like many African governments, are yet to be weaned off dependence on hand-outs and are not doing enough to make value-added cases such as GAC the rule, rather than the exception.

Credit crunch
One of the biggest barriers to African firms breaking into global markets is the lack of access to cheap, long-term capital. One study shows that only one small-to-medium enterprise in every 10,000 trying to access capital ends up getting it.

“So, many creative and innovative ideas die at the early stages of gestation due to the inability to fund those ideas,” Rugasira says, pointing out that European and Asian economies have a deliberate strategy to provide “patient and cheap capital” for their local entrepreneurs. “In our financial environment, the banks are risk-averse and focus on historical performances over future potential and viability,” he adds. “Novel and disruptive business models are shunned in favour of the well-trodden and time-tested business segments and industry. This is not how to spur rapid economic transformation.”

Building a brand that appeals to global consumers also costs time and money. Rugasira made over a dozen trips to the UK while negotiating for shelf space for his coffee, burning through capital in flight, hotel and related expenses – before production, transport and marketing costs kicked in. He believes government can help local entrepreneurs by exposing them to global product and brand standards in order to help them compete.

Government, which publicly supports value-addition, does not always put its money where its mouth is; Uganda Coffee Development Authority receives less than Shs10b, wages inclusive, to promote the crop and value-addition. The higher world prices – Uganda is on course to receive over $400m in coffee exports this year – also provide temporary reward for volume exports and dull the urgent need to invest in value-addition.

However, Rugasira notes that with Uganda’s fast growing population, value addition at source unleashes the bottom-of-the-pyramid opportunities with real prospects for transformation by creating a domestic finished goods market.

It is a lesson Rugasira has learnt over the last six years – and what a price he has paid! – but he sees the reward of his effort, not in his personal finances, but in the improved welfare of the farmers that work with GAC.

“I see myself as privileged to be having the opportunity to do what I am doing. Any business with a social mission will demand a degree of sacrifice, but that sacrifice is much smaller compared to the sacrifices the producers and peasant farmers pay every working day of their lives.

He adds: “Of course, there are many things I would love to have done differently. Life is one big university with constant schools fees being paid. It is natural to want to change things with hindsight and I always aim be a better person, to make better choices and to do better.

The important thing, however, is to change what I can, learn from my mistakes and strive to the best ideals in whatever I do. “It has been a long journey but, God willing, it will prove to be not only lucrative but very worthwhile.”

“Long journey” does not really do justice to what, for Rugasira, has actually been a gruelling marathon during which he bet the farm on coffee farmers he hardly knew, worked himself to near-bankruptcy and spent several weeks at a time away from his family. Yet through it all, he found God, found himself, and proved that while aid-built castles stand on pillars of salt and pillars of sand, trade can change lives in a dignified and empowering way.