Frandan Tumukunde.
Frandan Tumukunde (C) with his Chinese business partners
The Government of Uganda through Uganda Coffee Development Authority (UCDA) has intensified interventions to increase the country’s coffee exports to China.
Uganda’s coffee exports to China have been increasing over the years, but there’s still huge unexploited potential. UCDA figures show that Uganda exported 33,000 bags (60kg each) of coffee to China in 2018, 66,000 bags in 2019 and 83, 000 bags in 2020.
Further statistics from UCDA show that China’s coffee market is estimated at US$11.5bn (Shs44.2 trillion) in annual sales and is expected to grow by 10% in the next five years. Additionally, Coffee consumption in China is growing at between 15%-20% annually. With the increasing volumes of organically grown coffee, Uganda has an advantage over other African countries to capture the China coffee market.
As Uganda tries to earn big from the China market, there are a few Ugandan companies already exporting coffee to China and thus have valuable experience and lessons on how best this lucrative market can be captured.
Kangamamo Agro Processors & Exporters is one of the few companies exporting coffee to China. Frandan Tumukunde and Aggrey Tumuhairwe, are the brains behind this company.
Business Focus had an exclusive interview with Tumukunde, about the China market and what can be done by the Government to exploit the Shs44.2 trillion market.
Below are the excerpts of our Q&A;
Q: When was your first time to fly to China with coffee beans and what was your experience like?
A: It was in 2019, but before that, I used to send coffees there. We took 100 Kgs in packs of 250g and different roasts. We are one the first guys that tried to sell the final bean (roast and ground) to China. So, after going into the market, we realized that the market was very vast but again tricky due to language barrier, transport costs (which arise due to lack of direct flights from Uganda to China) and lack of storage.
When we came back, we proposed to UCDA on what needs to be done to gain from the China market; avail (cheap) capital to export oriented products (Coffee and other serials) to China, engage in marketing since most Chinese in the middle class don’t go to shop physically but use smartphones. So we suggested to them to list on online shops (Alibaba etc). We have been told that UCDA is in touch with the developers and so we are yet to know when those platforms will be ready.
Q: What was the prices like per kilogram when you first exported coffee to China?
A: It was between Shs 98, 000 and Shs 120, 000.
Q: From your experience, what do you make of the China market in general? It it a good market for business?
A: The market is vast. The profit margins are really huge but again for you to penetrate the market, you must invest heavily in marketing. They (Chinese) don’t understand English. You need a translator. The good thing is that they buy trust.
Q: Again from your experience, what would you advise the Government to do in order to penetrate this market?
A: What the government needs to do is to put up a fund that targets exporters keen to export products like coffee to China.
Most of the players exporting coffee to China are multinationals. What Government needs to do is support our local traders in terms of maybe access to cheap capital. This is where Ministry of Finance and Uganda Development Bank (UDB) should come in and avail capital for the guys that are targeting to export coffee to China. Now, for us who have been there are stuck here; we cannot travel yet our businesses are there. Maybe they can have a government-to-government engagement so that us business people have a window to travel.
Q: You talked about transport costs. Uganda Airlines was recently granted landing rights at Guangzhou. Do you think this will solve this challenge?
A: This is a very big win for Uganda. We will have cargo go direct into the Chinese market. Previously, we were using RwandAir and Kenya Airways that have flights to Guangzhou but again most of these guys are carrying their products. For example, Rwanda is taking a lot of their pepper and coffee. During last year’s Black Friday, Rwanda sold almost about 5, 000 Kgs of coffee in a second on Alibaba. So, this is a very big win for us because we will have more of our products going to the market and with more support, we can really penetrate the Chinese market.
Q: What advice do you have for the farmers?
A: They should plant more coffee because we are seeing markets change. Brazil has been hit by climate change. In a long run, we will have most of our coffees enter these new markets. Secondly, value addition is key;farmers have mainly been hit by the middlemen because you can find a farmer can grow coffee but then again they cannot even afford to buy a cup of coffee (the gap between living wage and living income). So, to the farmers, plant more coffees.
I like Tumukunde’s business ideas and the efforts him and his colleagues put in to help find a new potential market for Uganda’s coffee farmers and dealers, and it’s at this point that our government should step in to give a sustainable and helping hand, thank you so much