01 May 2008
Ethiopian Coffee Brands Go Global, Wake Up Local Economy
Before branding, some farmers cut down valuable trees to plant a narcotic
Washington -- Ethiopia is beginning what it hopes is a steady climb out of poverty, with strong reliance on intellectual property rights protection.
"I believe that every country, whether poor or rich, has the capacity to create intellectual property assets," says Ethiopian Intellectual Property Office Director General Getachew Mengistie. "In many developing countries, people perceive intellectual property as being in the interest of America, Europe and Japan. This is a misperception. Intellectual property, if properly used, can meet the needs of countries like Ethiopia."
Mengistie believes that intellectual property rights protection played a big role in the economic development of the United States, and Ethiopia wants to harness the same power.
The director general took an audacious step to implement this concept in 2004, when he accepted advice from Light Years IP, a development group based in Washington, and moved to secure global recognition of three of Ethiopia's specialty coffees -- Yirgacheffe, Sidamo and Harar -- as trademarks owned by Ethiopia. In so doing, Ethiopia overcame an attempt by the U.S. National Coffee Association to block the registration of the coffee trademarks at the U.S. Patent and Trademark Office. Starbucks Corporation, the world's largest coffee distributor, was converted from an opponent registration into a licensee and vigorous supporter.
Today, the fine coffee designations of Harar, Yirgacheffe and Sidamo are protected as trademarks in 29 countries. Ethiopia selects the global distributors for its coffee and sets the conditions for sale. Ethiopia charges no royalty fees for coffee distribution licenses, but, in return, asks the distributors to market each coffee under its separate brand name.
Explaining why Ethiopia has bypassed royalty fees, Mengistie said Ethiopia is not focused on immediate income, but rather on expanding global demand for specialty coffees, which over time will generate greater wealth. That strategy, he said, involves forming close partnerships with coffee importers, distributors and roasters, with the aim of educating the growing number of coffee connoisseurs around the world about the distinctive qualities of the Ethiopian fine coffee beans.
"Working with foreign coffee roasting and distributing companies, we are trying to create a situation where everybody wins. In the past, a producer would just sell his coffee without knowing where it went after it left his farm gate. The same held true for exporters. Likewise, coffee drinkers abroad did not know where the coffee came from, much less that Ethiopia is the birthplace of coffee," Mengistie said. Today, Ethiopia participates in and organizes international gatherings of coffee producers, distributors and advertisers to strengthen the partnerships.
"We underline that partnership with foreign companies is very important to countries like Ethiopia to use intellectual property for development," he said.
Although it is premature to draw definitive conclusions, there are early signs that Ethiopia's use of trademarks and branding is improving the lives of the 15 million Ethiopians who depend on the coffee sector, which accounts for 60 percent of the country's wealth.
"Before Ethiopia embraced intellectual property, coffee farmers were making so little that they were forced to cut down heritage Harar coffee trees and plant the narcotic khat," Mengistie said. "That would have been a disaster for Ethiopia and the rest of mankind."
Ron Layton, the head of Light Years IP, said that before Ethiopian coffee was trademarked, it was bringing only about 25 cents per pound more than standard commodity prices. Commodity prices sank as low as 37 cents a pound at one point, which devastated exporters selling in that price range. Today, the commodity price hovers around $1.30 per pound, but Ethiopian coffee, which is benefiting from the branding, sells at roughly double the commodity prices.
"In spite of producing highly distinctive fine coffee, the Ethiopian farmer was living on one of the lowest agricultural export incomes of any farmer in the world," Layton said, referring to the period before the branding effort got under way.
During the past year, as the result of improved negotiating strength, the price of Ethiopian fine coffee has doubled and no longer is set according to commodity markets. While visiting Yirgacheffe coffee farmers earlier this year, Layton was struck by the amount of new housing construction, the higher number of children in school and the increased numbers of bicycles and animals in the community. Those are all signs of economic improvement, he said.
"It may take another 12 months before Ethiopia's negotiating power stabilizes its long-term fine coffee prices. The goal is to break out of commodity markets and sustain a higher price over time, which will generate more investment in quality and raise production. That will also allow families to send children to school and college. Agricultural co-ops will have the funds to build schools, health clinics and water systems," Layton predicted.
