Peter Muchiri’s first interaction with coffee was his childhood – he grew up on a coffee farm in Kenya’s central highlands. Six years ago, Muchiri and his wife Bernice started Rockbern Coffee, which trades in green and roasted beans for local and export markets. Recently, the firm invested in a US$3m factory in Ruiru, a town in the outskirts of Nairobi. The investment was funded through debt and equity from a private equity partner.
According to Muchiri, the export market accounts for 95% of Rockbern’s sales, but the company is keen to grow its local market.
A highly controlled system with a few big players
“Six years later,” says Muchiri, “We’re still learning.” He explains that the main challenge has been gaining product knowledge and understanding the intricacies of the coffee industry.
Over 85% of Kenyan coffee is sold through auctions at the Nairobi Coffee Exchange (NCE), a spot market. The rest is sold through direct sales contracts, but these must be registered with the Coffee Directorate of Kenya’s Agriculture, Food and Fisheries Authority.
And, despite Rockbern’s owners having a background as coffee farmers, they also buy coffee from the NCE rather than directly from farms.
Muchiri explains that this is because, “Buying coffee from the auction is easier than buying directly from the farmers. We get better quality and prices as only the best quality coffee is brought to the auction. It prevents what we call ‘gate sales’, where farmers may engage in shady deals in order to sell their produce quickly, if allowed to sell directly.”
The industry is also dominated by giants that have muscle when it comes to financing, distribution networks and technological know-how. According to Euromonitor International, Nestlé Foods Kenya continues to lead when it comes to sales, with a value share (the amount of money Nestlé makes from coffee sales compared to others in the market) of 44%. In 2015, Nestlé invested KES40m (US$395,000) in initiatives expected to boost the company’s coffee production.
Low domestic consumption
For a country known for its coffee production, Kenya’s domestic consumption still accounts for just 3% of the total production, according to a USDA Foreign Agricultural Service report. Kenya’s Coffee Directorate attributes this to, “The predominant tea-drinking culture, poor preparation methods, and a previously stifling legal regime that criminalized domestic roasting.”
However, the report estimates that growth has been strong over the last few years, “At 15-20% annually, driven by the growing population of the middle class and expatriate community.”
Fuelling Kenyan coffee culture
If Rockbern is going to grow domestically, it’s not just about beating the competition – the company needs to encourage people to want to drink coffee in the first place.
Rockbern has decided to grow its local market by targeting 18-40 year-olds. One of the ways that the company is doing this is by setting up experiential centres during events, where Rockbern baristas offer demonstrations on how to brew coffee properly. These baristas are trained as part of Rockbern’s barista academy, which is, according to the company’s website, “the first internationally accredited barista course [to be provided by a coffee company in Kenya].”
The public trainings by baristas are part of a campaign to dispel some of the perceptions non-drinkers have of coffee. As Muchiri explains, “Previously we had cases of people saying that coffee was bitter, whereas it was all in the way they made their coffee, without going through the proper brewing procedures – hence they end up with bad coffee.
“The company also engages with customers and potential customers online through its social media pages, working with influencers to drive conversations about the brand and develop a coffee culture.
However, customers between 18 and 40 years old are not uniform. So Rockbern has different ways of reaching the sub-groups within this target market.
Rockbern targets university students through Muchiri’s alma mater, Strathmore University, where the coffee shop has been equipped by Rockbern with machines, baristas and coffee. This shop also acts as a “research centre” where Rockbern gathers insights and feedback on the product and the evolution of the target market from the students.
Muchiri explains that, “We look at these students as our future brand ambassadors. The fact that they are exposed to Rockbern Coffee in their campus days means that they will always look for our brand even when they are out of university.”
The company targets older customers by providing coffee to offices. Among these are the IBM and Citi Bank offices. The company has a partnership with Chandarana Supermarkets to stock their products in the retail stores, which are frequented by middle to high-income customers. Another part of targeting the older generation is the direct supply of roasted beans to private member clubs such as Royal Nairobi Golf Club.