Nestlé eyes bigger coffee procurement

By Madelaine B. Miraflor

MARAMAG, Bukidnon — Multinational food company Nestlé, the leading buyer of locally produced Robusta coffee beans in the Philippines, is seeing bigger coffee procurement this crop year on the back of good climate, among others.

This was less than a year since the company assured that its coffee manufacturing operations is here to stay in the Philippines despite the high cost of raw material and production.

Benedict Ella, Assistant Manager at Nestlé Philippines, said that in terms of volume, Nestlé is seeing bigger coffee procurement for this current crop year.

For coffee, the crop year varies per region. In Mindanao, the planting starts in July and harvest takes place from October up to the first three months of the following year. In Luzon, the harvest is at the first quarter of the year.

Nestlé gets its biggest supply of coffee from Mindanao through its two coffee buying stations, one here and the other one in General Santos City in South Cotabato.

All the coffee procured by Nestlé from different parts of the country goes straight to the company's Nescafe plant in Cagayan de Oro.

As of now, Nestlé buys approximately 65 percent of the country's total Robusta annual production.

"In terms of volume, our procurement is going to be better than last year because of the good weather. And because it is hot in here farmers can easily dry their produce and are encouraged to sell," Ella, who handles all the buying operations of Nestlé in the country, said in an interview here.

Nestlé Philippines SVP and Head of Corporate Affairs Ernesto Mascenon said the company was able to buy 8,000 to 10,000 metric tons (MT) of coffee beans last crop year. This should go up by 20 percent for this crop year, he said.
Nestlé doesn't have fixed contract agreements with particular traders and allows farmers to sell any amount of coffee beans that they have produced.

Through text messaging, the company gives regular price updates to farmers who sell their yield to the company. And according to Ella, Nestlé always buy at price levels that are aligned with global prices.

Farmers are then paid within eight banking days, while the company is also now moving towards mobile payment.

Ella said that at the maximum, a certain farmer would sell as much as 15 bags of 60 kilos of coffee beans, while some farmers could sell as low as 8 kilos.
"There's no discrimination in the volume," Ella said, pointing out, however, that Nestlé only accepts coffee beans with 12 percent moisture content and below.

If a farmer could sell beans with 11 percent moisture and below, it would receive P1 per kilo incentive from the company.

The buying season for Nestlé starts in October and ends in April.

Philippines is currently one of the top coffee consuming countries in the world. Based on a data from the US Department of Agriculture (USDA), which was cited by Mascenon, Filipino coffee drinkers consume 8 million cups of coffee every day.

Masceron said that because of this, there is still a lot of opportunity for coffee production in the Philippines.

Right now, Nestlé is the only company in the Philippines that manufactures locally produced coffee, while other simply imports from other countries like Indonesia.

Masceron said there is a need for the country to expand its coffee production since its output could not yet meet the local demand.

In an earlier report, Mascenon said that Nestlé Philippines is currently challenged by high cost of sugar, which is twice the cost in the international market, high cost of power, fuel, transport cost, among others.