Pricing bitterness as Pu'er coffee demands recognition

Pu'er in southwest China's Yunnan Province is ready for coffee harvest season in December when the trees producing this prized crop develop bright red "cherries."

However, while the city may be lent a suitably festive feel, many local coffee farmers coop themselves up indoors, anxiously checking the price of their bounty.

In an area already celebrated for its tea, Pu'er coffee's struggles for recognition have been complicated by a new round of global price fluctuations that has squeezed farmers' profits.

Pu'er's high-quality coffee beans, though used as a raw material for most of the world's big coffee brands, lack the profile to be sold en masse in their own right. That leaves the industry at the mercy of the big brands and the market.

"While savoring their cup of coffee, people around the world are unlikely to know the contribution that beans from Pu'er play in its unique aroma," says Li Kaishun, a coffee farmer in Nanping Township of Pu'er.

He is referring to the common practice by big names including Nestle, Starbucks and Maxwell House of playing down the nevertheless significant role that Pu'er coffee plays in their ingredients lists. While the International Coffee Organization places Pu'er in the same class as Colombian coffee, the two hardly have equal marketing appeal.

The situation has left Li feeling depressed this harvest season as the per-kilo purchase price of his coffee is 12 yuan (about 1.97 U.S. dollars), little more then the 11 yuan it costs him to produce it.

According to Dong Zhihua, vice president of the Coffee Association of Yunnan, over 60 percent of coffee from Yunnan is exported as raw, unprocessed beans, mostly to European countries and destined for blending by major brands. Its high quality has not yet won Pu'er coffee a market position.

"Coffee farmers here are familiar with the global market cycle after experiencing rounds of price fluctuation, while Pu'er coffee is always the biggest sufferer with no renowned brands," adds Li.

With about one-tenth of Pu'er's registered population working in the coffee industry, the stakes are high when it comes to improving matters.

The key, points out Peng Yuanguo, deputy mayor of Pu'er, is to form a price protection mechanism, just as the world's major coffee producers such as Colombia and Brazil have done to stabilize their coffee production.

To that end, Pu'er is planning to set up a coffee reserve and trading center to ensure the stable income of coffee farmers and boost the healthy development of China's coffee industry, he says.

And ultimately the Pu'er coffee industry must establish its own brands to better promote itself.

The deep crisis for China's coffee producers, basically all in Yunnan, comes from the lack of domestic coffee brands and being at the bottom of the industrial chain, concludes Liu Minghui, founder and chairman of Ai Ni Group, a coffee-growing and -processing firm in Yunnan that last year entered a joint venture with U.S. giant Starbucks.