Coffee Planet plans to buy plantations

As prices hit 13-year high, retailer examines plans to keep costs under control and secure a assured supply.

The son of a Honduran farmer, Neri Rodriguez, harvests the first ripe coffee berries on his family's property in Pena Blanca, September 25, 2009. The Honduran coffee harvest has begun amid concern that political turmoil could interrupt the key export industry through continued curfews, highway-blocking protests and border closures. Picture taken September 25. REUTERS/Sean Mattson (HONDURAS AGRICULTURE BUSINESS POLITICS) *** Local Caption ***  HON502_HONDURAS-_0928_11.JPG
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Coffee Planet has a plan to keep the surging price of roasted beans from hitting its bottom line - to buy its raw material direct from the farmer in Honduras, or perhaps to buy the farm itself.

Richard Jones, the managing director of Coffee Planet, said the retailer, based in Dubai, had already tied up agreements with farmers in five countries including Honduras, and may eventually buy its own coffee plantations.

"We've looked at buying land and buying plantations, and that might be something for the future … You don't want to push up the prices for the consumer too much, so you've got to control the price," he said. "One of the ways you do that is to guarantee your sources of supply and the price associated with that. We are trying to take more and more control of our supply chain, so there is a real incentive to get involved."

Coffee prices hit a 13-year high this year, largely because of bad weather in major coffee-growing countries. This has forced coffee retailers to examine raising their own prices. Starbucks said in September it planned to implement price adjustments in certain markets.

Coffee Planet now sources its coffee from 15 different markets, but has signed agreements to buy the entire crop from farms in Honduras, Ethiopia, Kenya, Rwanda and Brazil. This is to control the price, as well as the quality, and to ensure fair trade, he said.

The rising cost of the beans has not held back the growth of Coffee Planet, which now has 135 self-service kiosks in Abu Dhabi National Oil Company and Emirates National Oil Company petrol stations in the UAE.

Coffee Planet's sales so far this year have grown by 25 per cent, compared with the same period last year, said Mr Jones.

Since 2004, volume sales of fresh coffee have grown by 20 per cent in Egypt, more than 30 per cent in Morocco and Saudi Arabia, and 85 per cent in the UAE, indicating strong demand for both at-home and on-the-go coffee drinks, according to Euromonitor International data.

Catering to this growing demand, Coffee Planet is to open what it says will be the largest premium roastery in the Middle East next month, increasing its capacity by at least five times to fuel its expansion into international markets.

"We've had a roastery in Dubai for the last two-and-a-half years, but we've reached capacity," said Mr Jones. "So we've invested US$2 million (Dh7.34m) in Jebel Ali to open a much larger capacity roastery. And the reason for doing that is we want to explore bigger international contracts."

Mr Jones said the new facility would increase Coffee Planet's output from 12 tonnes per month to between 60 and 100 tonnes.

The company has already expanded into Oman, with 10 outlets, and has signed contracts to provide coffee in Qatar and Malaysia next year.

It aims to enter 10 markets over the next five years.

Coffee Planet, which also has standalone kiosks in the UAE, will begin selling coffee beans for in-home consumption in the first quarter of next year, said Mr Jones.

It is also developing an iPhone application to allow consumers to buy coffee beans for their homes. "I just want to be everywhere the consumer is," said Mr Jones.