Roast_SeptOct15_CupOfExcellence

September | October 2015 55
TechnoServe Report
Details Outcomes
in Brazil and Honduras
by Emily McIntyre
continued on page 56
2015 Brazil Naturals COE winner Sebastião Afonso da Silva on his farm, Sítio Baixadão, in the Minas Gerais region. | photo courtesy of the Brazil Specialty Coffee Association
Impact
Cup of Excellence
the
of the
A
fter 15 years and more than 100 contests, the Cup of Excellence
(COE) specialty coffee competition has had a sweeping impact
that reaches beyond the producer participants to fuel economic growth
and develop the specialty coffee industry in host countries. A recent
study by TechnoServe, a global nonprofit that creates business solutions
to address poverty, surveyed the impact COE has had on two partner
countries—Brazil and Honduras. The study found that COE has created
an immense value for both countries: $137 million in Brazil and $25
million in Honduras in total benefits, including benefits related to
auction sales, increased direct trade and boosted specialty coffee trade.
Quantifying

56 r o a s t September | October 2015 57
COE is operated by the Alliance for Coffee
Excellence (ACE), a nonprofit based in Portland,
Oregon. The COE concept was launched in
Brazil in 1999, with the goal of increasing sales
of high-quality coffees and promoting Brazil as
a specialty coffee origin. COE built on previous
efforts to promote specialty coffee and attract
buyers, but it introduced something new: a
competitive process to identify the best coffees,
followed by an exclusive, limited-volume
auction to garner the highest prices for winning
coffees.
Since 1999, COE has convened more than
105 competitions globally, auctioned more than
2,800 lots of coffee, and generated direct auction
sales of more than $40 million for farmers
worldwide. Only the best lots reach auction,
with rigorous and comprehensive vetting to
identify the best coffees from a larger pool of
submissions. COE lots represent the top quality
of a country’s coffee production and sell for
prices several times the prevailing market rates
(see Figure 1, page 57).
Quantifying the Impact of the Cup of Excellence | TechnoServe Report Details Outcomes in Brazil and Honduras (continued)
COE auction lots earn significant price premiums
BRAZIL HONDURAS
Volume
(Bags)
Differential
(cents per lb.)
Volume
(Bags)
Differential
(cents per lb.)
Conventional
43 million
(including robusta)
-10 to -25 4 million 0 to +10
Specialty* 4 million +20 to +40 500,000 +10 to +20
COE
Auction Lots**
900 +500 to +700 300 +800 to +1,000
*Prices are for general specialty trade (before any additional premiums for certification) and not direct trade. Direct trade prices range
from $3–4 per pound for both origins • ** COE volumes based on average of last two years; prices based on range from last two years
Note: Differentials are calculated above the average“C” price.
Sources: Exporter interviews; COE; Brazil Specialty Coffee Association; Instituto Hondureño del CaféSebastião Afonso da Silva (pictured)—along with his brother, Antônio Márcio da Silva—scored a record-
breaking 95.18 points in the 2015 Brazil Naturals Cup of Excellence competition. | photo courtesy of the
Brazil Specialty Coffee Association
Figure 1.

TechnoServe focused on COE’s impact in Brazil and Honduras
because both countries had poor reputations for coffee quality
when COE was introduced. Though vastly different, both countries
historically have been viewed as“commodity” producers: Brazil was
perceived as a massive, mechanized producer of low-quality coffees
that regularly traded at a negative differential to the benchmark
arabica price, while Honduras, the largest Central American coffee
producer, was plagued by quality issues related to the standard
practice of trading in wet parchment, which often resulted in
Honduran coffee selling for less than coffee from neighboring
countries. TechnoServe interviewed dozens of farmers, exporters,
buyers and other stakeholders in the specialty coffee industry to
evaluate COE’s impact in each country.
The Findings
The study found that COE has had a profound impact in Brazil
and Honduras, beginning with the auction sales themselves. COE
auctions raised $8 million for winning Brazilian producers from
1999–2014, and nearly $4.4 million for Honduran winners from
2004–2014. Subtracting what growers likely would have received
for these coffees in other specialty markets, these numbers represent
an incremental increase of $6 million in premiums paid to Brazilian
producers and $3.4 million to Honduran farmers.
COE has had a far-reaching impact beyond auction premiums as
well. The financial incentive provided by COE triggers a beneficial
cycle of improvement and growth, which has a positive spillover effect
in the broader specialty coffee sector.
“Farmers who participate in the COE program seek to repeat
their success,” according to the TechnoServe study report.“New
farmers are also attracted to participate. Farmers are driven to utilize
better farming and processing practices, and to invest in better
infrastructure. There is also an attitudinal shift to afford greater
attention to detail and differentiation. This increased focus and
participation results in increasing supplies of specialty coffee for the
country and for COE.”
The incentive of higher prices for quality coffee encourages
producers to make the investments necessary to enter the specialty
market. Producers cited three principal areas of additional
investment enabled by higher coffee prices: improved post-harvest
practices, improved processing infrastructure, and greater care and
differentiation within the farm.
COE auction differentials have grown significantly since
the auction started in 1999
Historical COE prices relative to NY “C” • US$ per pound
Note: Since 2012, Brazil has held two auctions per year. No auction was held in Brazil in 2007
Source: COE; NY Board of Trade
1999
12.00
11.00
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
NY “C”
Benchmark
Figure 2.

The study also found that COE helped increase the quality
of coffees available in the market. More than 80 percent of
Brazil buyers surveyed agreed that COE has encouraged greater
production of specialty coffee within Brazil. In Honduras,
buyers described a dramatic increase in their perception of
Honduran coffee as being high quality, noting that most of
the world’s top roasters bought no Honduran coffee just a
decade ago, while now it’s common.
The increase in quality has resulted in increased demand,
with more buyers participating in COE auctions. While only
five buyers participated in the first COE auction, by the end
of 2014, 269 different buyers had participated in Brazil’s COE
auctions and 184 in Honduras’ auctions. In addition, auction
differentials have widened (see Figure 2, page 58), direct trade
relationships have grown, and COE has promoted broader
sales of specialty coffee.
As an example, the specialty coffee market in Japan has
grown by an estimated 15 percent every year since 2000, and
Taiwan is growing at a similar rate. One Japanese buyer is
quoted in the report as saying,“I would have no interest in
Honduras if it were not for COE.”
COE has raised the profile of Brazil and Honduras as
specialty producers, and has helped put new coffee regions on
the map. For instance, the region of Mantiqueira de Minas,
which has produced the majority of winning coffees in Brazil
since 1999, previously was not well-known as a source of high-
quality coffee. It is now viewed as Brazil’s primary source
for specialty coffee. Honduras has experienced the same
phenomenon.
“The Cup of Excellence catalyzed a dramatic change in
the way specialty coffee buyers viewed coffees from Brazil
and Honduras,” says Geoff Watts, chief coffee buyer for
Intelligentsia Coffee and chairman of ACE’s board of directors.
“The tiny, but delicious, mouthwatering lots coming out of those
early competitions served as powerful international ambassadors
for the countries’ nascent specialty sectors and attracted the
attention of global tastemakers.”
In addition to the millions of dollars in auction premiums that
have been paid to producers, COE winners tend to continue to sell to
specialty markets after the competition, as changes farmers make in
In Brazil, more than $100 million
in added value has been created
1999
$0M
$0M
$2M
$3M
$5M $5M
$3M
$4M
$3M
$5M
$8M
$11M
$10M
$20M
$27M
$30M
2000 2001 2002 2003 2004* 2005* 2006 2007 2008 2009 2010 2011 2012 2013 2014
Direct program costs
Auction premiums
Increased direct trade
Increased specialty trade**
COE auction estimated cost
and benefits, US$, millions
*Decreases in value driven by shrinking differentials between specialty and conventional prices ** Includes benefit from both COE winners and other farmers
Source: Farmer and exporter interviews, TechnoServe analysis
$116
million
$16
million
$5
million
-$2
million
Cumulative total
Sitio Sertaozinho, Brazil. | photo courtesy of the Brazil Specialty Coffee Association
A group of cuppers on the international jury at the 2015 Honduras Cup of Excellence
competition. | photo courtesy of ACE
Figure 3.

value of the direct trade and indirect
sales benefits described in the report. The
multiplier effect accelerates over time,
as the beneficial cycle continues and
greater numbers of COE winners influence
additional farmers to produce specialty
coffee. These benefits create a“snowball
effect,” building off the previous years’
momentum.
To quantify the cumulative effect, total
COE spending in Brazil was approximately
$1 million from 1999–2014, and TechnoServe
estimated a total of $120 to $140 million
was created in additional value for the
Brazilian coffee sector over that same
period (see Figure 3, page 61). In Honduras,
approximately $1 million was spent from
TechnoServe and the primary author of
the report.“To see that farmer then go on
to place in the international auction as
well was rewarding, and underscored the
impact this program has had.”
Buyers and local businesses also are
more likely to invest in these areas, as
their reputations for quality have been
proven.
Return on
Investment
For every $1 of COE-related direct cost to
the countries of Brazil and Honduras,
$1.50 to $3 has been generated in
incremental auction premiums for
farmers. The return on investment is even
greater when including the estimated
Quantifying the Impact of the Cup of Excellence (continued)
2004–2014, generating a total estimated
benefit of $15 million.
Benefits for
Farmers
In addition to the overall impact on the
Brazilian and Honduran specialty coffee
markets, COE has provided direct benefits
to coffee producers. COE-winning farms
typically generate higher incomes over the
long term than other farms, not just from
auction winnings, but also from increased
sustainability related to growing specialty-
processing and lot differentiation tend to
be permanent. As a result, the premiums
and recognition of winning COE producers
contribute to a“multiplier effect” for
these farmers. TechnoServe estimated, for
example, that winning farmers in Brazil
received an incremental $1 to $2 or more per
pound in specialty premiums each year after
a COE win.
There is also a spillover effect for farms
that do not win COE competitions. Producers
in successful COE areas tend to be motivated
and inspired by winners’ experiences,
often deciding to enter specialty production
themselves.
“I was able to speak with a farmer in
Espirito Santo, Brazil, who entered the
competition after being inspired by his
neighbor [a COE finalist], illustrating the
program’s multiplier effect,” says Julio
Erdos, manager of strategic initiatives at
Top: COE jury member Mark Howard, of Mecca Espresso in Australia, visits a coffee plant nursery in
Honduras. | photo courtesy of ACE Bottom left: Grower Job Neel Caceres was a winner in the 2015
Honduras Cup of Excellence. | photo courtesy of IHCAFE Bottom right: Sitio Sertaozinho, Brazil. | photo
courtesy of the Brazil Specialty Coffee Association
Sitio Sertaozinho, Brazil. | photo courtesy of the Brazil Specialty Coffee Association

grade coffee and direct trade sales. Particularly in Honduras, COE
farmers have had success increasing their incomes through direct
trade—70 percent of Honduran COE finalists interviewed reported
having entered into direct trade as a result of COE.
The price for direct trade typically raises average farm-gate prices
from 90 cents to $2.50 per pound, which, for a typical farm, translates
into an additional $15,000 per year in net profit. In both countries, the
promotion of long-term direct trade relationships benefits producers
by providing a predictable, recurring revenue stream. This allows
farmers to improve planning in the face of the typical environment of
fluctuating prices.
1
Providing a platform for buyers
to source exceptional coffees.
Buyers are assured the coffees they buy are
exceptional because of the strict competition
standards and the multiple rounds of
cuppings by reputable international cuppers.
The presence of COE also helps specialty
coffee penetrate new markets, such as East
Asia, by providing a trusted source of high-
quality coffees.
2
Facilitating the creation of long-
term buying relationships.
COE introduces buyers to producers and
exporters who work with the highest quality
coffees. This provides the opportunity for
buyers to seek out these suppliers for
additional purchases. Eighty percent of COE
buyers surveyed cited the ability to discover
new producers and new regions as one of the
primary benefits of participating in COE.
“COE changed the world’s perception
about Brazilian coffee and, of course, COE is
mainly responsible for the establishment of
direct trade for specialty coffee in Brazil,” says
Vanusia Nogueira, executive director of the
Brazil Specialty Coffee Association.
Orieta Pinto, quality assurance coordinator for Instituto
Hondureño del Café (IHCAFE) in Honduras, says relationships formed
through COE have had a long-term impact on producer financing.
“We are now finally seeing importers willing to pay 50 percent
upfront for quality coffees in order to help farmers have money to
finance their crop management,” Pinto notes.“None of this would
have been possible without COE.”
COE also helps establish greater transparency around coffee quality
and pricing. The program has set an expectation among producers
for a transparent correlation between price and quality, a change in
perception that extends beyond COE auctions. Producers expect a
price premium based on quality and try to differentiate their coffees
accordingly. In this way, producers are
able to capture more value from their
crop and better serve a diverse mix of
buyers and markets.
Although the principal benefits
of COE competitions for producers
are financial, the competition also
promotes a shift toward greater attention
to detail and care, and management
practices geared toward specialty coffee
production.
Benefits for the
Coffee Industry
In addition to benefiting producers, COE
has helped develop the specialty coffee
industry in Brazil, Honduras and other
participating countries, improving the
marketplace in four key ways:
Coffee cherries in Brazil. | photo courtesy of the Brazil Specialty Coffee Association
Cuppers on the international jury at the 2015 Honduras Cup of Excellence competition. | photo courtesy of ACE
Among COE finalists in Brazil, for
example, 46 percent reported having
formed direct trade relationships, and
92 percent had received farm visits from
buyers. (As noted previously, 70 percent
of COE finalists in Honduras reported
having formed direct trade relationships
because of COE.) Buyers also report
meeting producers through COE, then
expanding these relationships to include
buying coffee from family members and
neighbors of the farmers.
3
Developing cupping skills
and a deeper understanding
of quality.
By exposing cuppers to exceptional
coffees from around the world—and to
other top-rate cuppers—COE helps
develop cuppers’ technical skills and
deepen their understanding of specialty
coffee. Cuppers interviewed reported
that they appreciate the opportunity to
share knowledge and experiences with
each other, while newer cuppers are
given an opportunity to learn from
seasoned experts.

COE also has helped buyers develop technical cupping skills
and synchronize their definitions of cup quality, and has been
instrumental in developing cuppers at origin. The survey found that
local cuppers in Brazil view COE as an important source of technical
knowledge, and that COE has been credited with encouraging the
development of specialty coffee cuppers in Honduras and providing
much of the technical knowledge for the curriculum of the
Honduran cupping school.
4
Fostering a community of specialty coffee
professionals.
COE’s cross-border nature helps foster an international community
Cup of Excellence judges at the Instituto Hondureño del Café in Honduras.
photo courtesy of IHCAFE
ACE Executive Director Debbie Hill (left) and Rafael Trochez, IHCAFE, leader of the cupping
support team at the 2015 Honduras Cup of Excellence competition. | photo courtesy of ACE
of specialty coffee industry participants. Local cuppers also appreciate
the opportunity to network with other industry professionals from
around the world.
“It is very exciting to finally be able to quantify the tremendous
impact, both directly and indirectly, that COE has had on farmers,
partner countries and the specialty coffee market as a whole,” says
ACE Executive Director Debbie Hill. “Although this TechnoServe report
focused on Brazil and Honduras, I would expect to see a similar result
in every other partner country with an extended COE history.”
Find the full report at www.allianceforcoffeeexcellence.org.
EMILY MCINTYRE is a coffee-focused journalist
specializing in coffee culture, people and innovations around
the world. As co-owner of Catalyst Coffee Consulting, a full-
spectrum coffee services company based in Portland, Oregon,
McIntyre invests in coffee producers, workers and roasters
through her unique blend of storytelling and marketing savvy.
She also has served as marketing coordinator for the Alliance for
Coffee Excellence.
Eulogio Martínez earned the top score (91.19) in the 2015 Honduras
Cup of Excellence. | photo courtesy of the ACE

Roast_SeptOct15_CupOfExcellence

Recommended

Recommended

More Related Content

What's hot

What's hot (9)

Viewers also liked

Viewers also liked (9)

Similar to Roast_SeptOct15_CupOfExcellence

Similar to Roast_SeptOct15_CupOfExcellence (20)

Roast_SeptOct15_CupOfExcellence