Between Value Chain and Industry 4.0

 In Edisi 6

The coffee industry in Indonesia is developing so rapidly. Jokowi has declared coffee as one of the five priority commodities in Indonesia, along with all its supporting programs. Last year, for the first time ever domestic demand for premium coffee eclipses that for exports and this year, Indonesia is among the top four World Barista Championshs in Boston. But underneath the surge of this third and fourth coffee wave in Indonesia, what are the problems that are still often overlooked?

Radiv Annaba, coffee academic who is studying the intricacies of the value chain, invites us to think critically about government programs that often lack in implementation. In his discussion with Indah Febryyani, he also explored the importance of finding ways to obtain comprehensive data that could be utilized by various coffee prof in the hulu. With Industry 4.0 coming into our daily lives, is digital technology a solution to balance out this value chain ?

Let’s look at the two essays below by Radiv Annaba and Indah Febryyani on value chain, data, and Industry 4.0!

The Politics of Coffee: Jokowi’s Political Speeches on Coffee and How It Results Policy and Impact Towards Coffee Value Chain in Indonesia

Radiv Annaba

 

This is my fourth year as a coffee individual in the industry. Why do I identify myself as a coffee individual? It is because I have been involved in different roles in the coffee business, starting as a barista and (hopefully) ended up as a coffee farmer, while I was finishing my undergraduate thesis as an International Relations student.

In 2016, I started to enlighten my coffee experience by founding a student barista community, and the following year, I started to conduct a research on coffee farmers in Java. It has been a really fun adventure in the coffee industry. As a matter of fact, I’ve learned a lot from the breakthrough, difficulties, and failures that I encountered within these three years. In other words, Indonesia has so many potentials in the coffee industry. However, there are a lot of work to do for everyone in the value chain so we can progress and make this industry sustainable to create a better business environment in the future.

According to what I have encountered in the industry, I believe that the coffee industry in Indonesia should take a look more at the community that relies on coffee i.e. farmers, processors, roasters, traders, and coffee shop owners, especially for farmers who live in rural areas far away from the city that has more consumerism and development. In a country like Indonesia, where democracy is still developing and the government is trying to find the best political and governmental system for the people, we still need more roles from the government to advance many sectors of the country’s development.

For instance, coffee farmers are battling with the pressure of global capitalism in coffee industry. The global coffee consumption growth rate increases 1.3% per year and coffee producing countries, such as Indonesia, should keep up with high demands on coffee production and supply, especially knowing that Indonesia is at the 4th for top coffee producing countries behind Brazil, Vietnam, and Colombia. Yes, Vietnam. Our ASEAN neighbor has successfully increased its coffee production over the years despite its considerably smaller lot than Indonesia’s. We can say how their politics is less developed than Indonesia, but through the government and its policy, their blueprint in the coffee sector is clear: to produce as much coffee as they can.

Our ASEAN neighbor has successfully increased its coffee production over the years despite its considerably smaller lot than Indonesia’s.

I really admire Vietnamese government’s move. There must have been a well-structured policy that focuses on the coffee production. With much smaller areas, Vietnamese government can produce more coffee than Indonesia, as shown by their production of 1,650,000 metric tons in 2016, while Indonesia produced “only” 660,000 metric tons in 2016. As a coffee enthusiast, I see this as a problem, as well as a motivational inspiration.

The Indonesian government under Jokowi’s administration put concern on our potential commodities, including coffee. For instance, the ministry of trade has stated that coffee is one of the top 5 priorities of Indonesian commodity market, and by 2020, the government will focus more on those top 5 prioritized commodities.

What about it then? Will that policy affect those who have worked hard in the coffee industry? How is the coffee value chain impacted?

For over a year, I observed how Jokowi has begun to give special “interest” in the coffee sector. Since August 2017, Jokowi started to speak about coffee and its potentials. Two months later, Jokowi invited coffee individuals to a “Coffee Time with the President” session on the International Coffee Day.

He gave an interesting speech during the coffee time. There were coffee shop owners, baristas, farmers, and traders attended the meeting at President’s Palace. Jokowi spoke  about how Indonesia is still behind Vietnam in coffee production. He also stated that Indonesia has the potential, as the green bean price is increasing over the years, and it should be followed by more innovations in the coffee business. Jokowi gave example on how Tuku can successfully be a local game changer coffee shop as the President once attended the coffee shop down in Cipete, South Jakarta. He motivated the audience to be more creative, brave, and innovative in the coffee business.

I like the President’s enthusiasm. But at this moment, our coffee industry is struggling with value chain problems. Yes, true that the green bean price is increasing, considering that Indonesia’s coffee price is also among the highest in the world. But do producers and farmers get the best out of this good price?

My research on coffee farmers in 2017 found that Indonesian coffee small holders are still struggling in keeping up with the tight market and competition. The pressure from global market and capitalism is obvious. Not to mention, knowledge on how coffee plants should be methodologically processed is not understood very well. Government’s policy doesn’t help farmers’ conditions to improve. For instance, 8 out of 10 farmers who became my respondents were still struggling economically since the production and living costs increase every year.

Yes, true that the green bean price is increasing, considering that Indonesia’s coffee price is also among the highest in the world. But do producers and farmers get the best out of this good price?

This is the problem I stated earlier. Jokowi and Co. should start investigating the main problems in the value chain, from the farmers to local coffee shops, more extensively. I understand that BEKRAF (Indonesia’s Creative-Economy Body) becomes a tool for Jokowi to execute programs through coffee individuals. This is a good move with BEKRAF. But I think with such heavy duty, BEKRAF can only produce programs for selected coffee individuals, and in my opinion, it will not give an impactful, long-term change to the coffee industry and the value chain as a whole. This is only one example at the highest level of government.

Another example and problem is the innovation and market expansion (export, etc) the President was aiming to reach. While we are struggling to fix the value chain problems, Jokowi wanted the coffee individuals to innovate. At the same time, research and development (RnD) is underrated in this country. In the coffee sector, we only have private coffee research institutes. This is a big problem too. Jokowi’s administration has to consider using the state’s budget for researchers to solve problems and develop solutions in a methodological way.

If we do not have adequate database and information about our own coffee, how are we able to strive in this industry? I understand that we have a lot of problems to solve. Thus, coffee individuals nationwide should gather and work together, expand the knowledge and tirelessly innovate for a better and more sustainable coffee industry. The government should do more detailed agenda to fix the problems in the coffee value chain, starting from the very bottom.

As coffee individuals, my friends, if it’s not us to take actions, then who?

 

Radiv Annaba: Coffee, Data, and Value Chain

Indah Febryyani

 

We often hear the slogan “Long live Indonesian farmers!” But is it true that only farmers have to live long? Hmm …

Welcome to Nusantara’s turbulent coffee value chain.

..

Saturday, July 13, 2019. I came to SMITH Duren Tiga to attend a presentation by Radiv Annaba, who spoke during World Of Coffee Berlin 2019. After listening to Radiv’s elaboration of government programs that are theoretically good, but not implemented well, there is one question that continues to emerge from the audience who were mostly coffee practitioners: what about the data?

Why farmers are mostly confused about marketing their product is due to lack of data. Our coffee industry does not have reliable and concrete data as a reference for good business practices. Yes there are surveys on the cost of coffee per cup, coffee shop’s growth index, or coffee production per capita. But according to Radiv, there is no transparent, collective data about the real demands for specialty beans, data on farmers who are specifically involved in the field, and so on. The truth is – not many people have taken on the role of researchers in the Indonesian coffee value chain.

Data impacts all levels of business and development strategies. Without it, campaigns are just speculative cradles. If the distribution of data about coffee is made as transparent as possible as practiced in Scandinavia, of course adjustment of prices would be more reasonable than what is happening now; when the price of coffee continues to rise without us (hilir) knowing exactly why. The power of buying and selling can be projected more optimally with accurate data so that farmers do not need to fear miss management when conducting direct trade.

The second problem: Without data, there will be chaos in the value chain. If the farm is prosperous and well, but the supply flow is stalled due to skyrocketing prices, where will the coffee beans go? Or, a case such as surplus yield that cannot be maximized because the farmers are not literate with technology, even though they can utilize the marketplace platform.

Again, the role of the government is needed to become a regulator by involving many parties so that they don’t just make use of the federal budget.

Third problem: Direct trade is not the only practical method. Radiv does not say direct trade is koentji (the key). He also does not suggest direct trade for every scale of the plantations because, of course, larger plantations demand more elaborate managements. However, direct trade is considered more practical if there’s an agreement between small holder farmers and hilir buyers, especially because there are still many farmers in Indonesia who are categorized as small garden holders.

The next question arises in my mind,

How important is it for farmers to adopt to the Industrial 4.0 practices while doing direct trade?

In today’s era, technologies play such an integral role. Direct trade, sooner or later will become the entryway for Industry 4.0 technologies to flourish.

Several platforms already make use of 4.0 technologies for direct trading or agricultural investments, such as SayurBox, TaniHub, Kecipir, and Harvest. SayurBox itself is a marketplace that connects farmers with customers, whereas TaniHub provides soft loans for farmers through the TaniFund program. Among all of the start-up applications that I explored, unfortunately, there is none that focuses on coffee.

“In the long run, we can have a platform that is comprehensive enough to accommodate various range of data. I myself am ready, if anyone invites me to contribute developing the idea. Because from what can be seen from the Indonesian coffee industry, it’s so important to collect data.”

Radiv further explains that digital platforms can facilitate data exchanges between hulu and hilir. Its role, according to Radiv, won’t be to diminish the concept of direct trading itself, but rather as a vessel for information, such as the ideal target market, how much yield the market needs, who are the suppliers, and so on. Because such digital platform, just like Google and Facebook, stores critical information and can see trading patterns that might not be obvious even to us the users.

Its role, according to Radiv, won’t be to diminish the concept of direct trading itself, but rather as a vessel for information, such as the ideal target market, how much yield the market needs, who are the suppliers, and so on.

With data that is archived online and publicly accessible, it’s possible to utilize this as a Research and Development project for both hulu and hilir and allow them to experiment more with various coffee commodities. Farmers no longer need to fear non-payments and can easily look for business loans. And coffee shops can create brand exclusivity from the beans they buy directly from farmers. All through one platform – just click click click!

Well … think of it like the application of tinder in the agricultural sector.

Isn’t this our hope with all the conveniences and transparency? So everyone in the coffee value chain can experience longevity, not just the farmers and not just the capitalists.

 

This article has been summarized. To see this article in its entirety, please click here (in Indonesian).

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