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.
aligaya@thenational.ae
Company%20profile
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Greatest of All Time
Starring: Vijay, Sneha, Prashanth, Prabhu Deva, Mohan
Kill%20
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Wonka
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What are the GCSE grade equivalents?
- Grade 9 = above an A*
- Grade 8 = between grades A* and A
- Grade 7 = grade A
- Grade 6 = just above a grade B
- Grade 5 = between grades B and C
- Grade 4 = grade C
- Grade 3 = between grades D and E
- Grade 2 = between grades E and F
- Grade 1 = between grades F and G
COMPANY%20PROFILE
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COMPANY%20PROFILE
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Fixtures
Tuesday - 5.15pm: Team Lebanon v Alger Corsaires; 8.30pm: Abu Dhabi Storms v Pharaohs
Wednesday - 5.15pm: Pharaohs v Carthage Eagles; 8.30pm: Alger Corsaires v Abu Dhabi Storms
Thursday - 4.30pm: Team Lebanon v Pharaohs; 7.30pm: Abu Dhabi Storms v Carthage Eagles
Friday - 4.30pm: Pharaohs v Alger Corsaires; 7.30pm: Carthage Eagles v Team Lebanon
Saturday - 4.30pm: Carthage Eagles v Alger Corsaires; 7.30pm: Abu Dhabi Storms v Team Lebanon
A Bad Moms Christmas
Dir: John Lucas and Scott Moore
Starring: Mila Kunis, Kathryn Hahn, Kristen Bell, Susan Sarandon, Christine Baranski, Cheryl Hines
Two stars
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
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COMPANY%20PROFILE%20
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Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Company%20Profile
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In Full Flight: A Story of Africa and Atonement
John Heminway, Knopff
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”