Negotiator: Ethiopian Coffee Trademark Victory To Reap Millions

By Paul Garwood
Ethiopia’s victory to trademark its major coffee brands could earn the east African country more than US$100 million annually and increase incomes for hundreds of thousands involved in the industry, a negotiator for the Ethiopian government said Tuesday.

Ron Layton, chief executive of the Light Years IP non-governmental organisation, told a luncheon in Geneva that agreements ground out between Ethiopia and companies like Starbucks will allow the poverty-stricken country to benefit more from the speciality coffees it produces. There are still some who doubt that Ethiopia got the best deal, however.

Ethiopia’s coffee is famous for being among the world’s best, with multinational companies turning its sale into a US$400 million a year business, said Layton, a businessman from New Zealand. While Ethiopian brands were being sold for US$26 a pound on the world market, Ethiopia was getting just US$1 a pound in return. But under the new deals, Ethiopia is earning at least US$2 a pound, which could rise to US$3 in two to three years.

“This will result in a $100 million a year increase (in export revenue) for a project that has not yet cost $1 million,” Layton said during the roundtable, which was organised by the George Washington University Law School’s Creative and Innovative Economy Center. “It has been a huge return on their investment.”

In June 2007, Ethiopia concluded a protracted agreement with Starbucks allowing the Seattle-based company to use and promote the Harrar, Sidamo and Yirgacheffe types of coffee in markets where trademarks exist for these types and where they may not. The agreement gives Ethiopia name-brand recognition by associating it with select specialty coffees to, in turn, allow it to demand a premium market price for its coffee beans and promote the product in a way it sees fit.

Ethiopia, regarded as the birthplace of coffee and Africa’s largest coffee producer, established its Ethiopian Coffee Trademarking and Licensing Initiative in 2004 to bridge the vast gap in the little amount the country was receiving for its premium coffees that commanded exorbitant prices on international markets.

The initiative is led by the Ethiopian Fine Coffee Stakeholder Committee, which comprises cooperatives, private exporters, the Ethiopian Intellectual Property Office and other government bodies responsible for developing the country’s coffee industry, which accounts for 60 percent of the country’s total export earnings and about 10 percent of GDP.

Layton said Starbucks took a belligerent approach in the negotiations to start with, with executives refusing to acknowledge that Ethiopia owned the Harrar, Sidamo and Yirgacheffe brands that are sold in the chain’s 14,000 stores worldwide.

But intense lobbying of Starbucks executives and the negative fallout over a corporate giant making huge profits off the back of a developing country led company chairman Howard Schultz to agree to the Ethiopian deal.

Addis Ababa has since signed deals with companies such as Planet Bean and has secured trademarks in at least 28 countries. It is building a global network of licensed distributors by inviting coffee companies to sign licensing agreements and collaborate directly with Ethiopia in long-term business plans geared toward increasing profits for the local industry. It has also established a fledgling association of producers and exporters in a bid to ensure supplies and manage prices.

“Ethiopia had to take control of the brand,” said Layton, who worked as a consultant for four years assisting Ethiopian authorities with its coffee campaign. “It is now in a joint-venture with Starbucks to help in the licensing and branding of its products.”

But some critics still pour scorn on Ethiopia’s new controls over its coffee. Wondwossen Mezlekia, an Ethiopian blogger living in Seattle, argues that Ethiopian farmers have lost out in their country’s negotiations with coffee companies, saying they have been short-changed.

Mezlekia, in a recent article, claimed Starbucks was not expected to pay royalty fees to Ethiopia on the coffee it sells, has declined to establish a farmers support centre and not increased its coffee exports from the African country.

“The outcome should serve third-world countries as a reminder of the harsh reality that they have a long way to go to get control of their intellectual property rights,” Mezlekia wrote in an article entitled ‘Ethiopia’s loss in the Starbucks affair.’

Michael Ryan, director of the Creative and Innovative Economy Center, cited Colombia’s success in the coffee sector as an example countries like Ethiopia could follow in brand marketing and governance.

The powerful Colombian Coffee Federation (CCF), which includes 375,000 of the South American country’s 500,000 growers as members, had ensured premium prices and returns for coffee, particularly through its invention almost half a century ago of the Juan Valdez brand. Just 15 percent of Ethiopian farmers, in comparison, belong to their country’s cooperative, Layton said.

The CCF played a key role in ensuring high international prices for its coffee and strong returns to producers, as well as acting as the government’s negotiator in high-level forums involving the industry, Ryan said.

Paul Garwood may be reached at info@ip-watch.ch.