Sponsor Content by the World Bank Group
Instant coffee packed in a tin can has the pesky tendency to become a solid chunk when aerated. But that’s a lesser worry compared to the can rusting – as they sometimes do – which then raises health concerns for consumers. If you are the manufacturer, you risk making people sick or turning them away from your product altogether.
Star Café Limited, the coffee processor and roaster, was until 2016 using tin cans for its instant coffee. By its own account, the company has a 60% share of the instant coffee market in Uganda. Better packaging, it decided, would help it compete more favourably.
The company was started after the 1990s-coffee crisis, which led to lower prices for green coffee, to add value through roasting, blending and packaging. Its core business was ground coffee, but the three instant coffee brands – Star Coffee, Star Café Premium and Star Café Gold Blend – have since become the company’s most popular product.
Instant coffee, company documents show, accounted for 35% of total sales volume in 2014. The company exported 65% of their product in the same year.
Star Café started exporting coffee circa 2012 after receiving support from Private Sector Foundation Uganda through its Business Uganda Development Scheme. In 2011, it got matching grants to prepare for the export market and used the money for a brand study, brand plates, and setting up point of sale systems.
Today, the company exports to DR Congo, Sudan, Liberia, Ivory Coast, Rwanda, and Mali, and is looking at more markets, according to Esther Kamiza, its chief executive.
To further improve their sales, the company carried out a survey that found 48% of sales were based on product packaging, with other purchase decisions influenced by brand name and trust. Their powder soluble coffee packaged in 50gms, 100gms and 250gms amounts, could sell better if they replaced the tin cans with the healthier glass jars, which were easier for storage.
To actualise the survey, Star Café again sought out PSFU. This time the funding came from the Matching Grant Facility – financed by the International Development Association of the World Bank Group – which the company applied for at the beginning of 2016. The coffee company was awarded a $35, 250 grant in April 2016.
The Matching Grant Facility is one of five projects under the Competitiveness and Effectiveness Project, which is also funded by the World Bank. The $3 million-worth facility provides matching grants of up to 50% to micro, small and medium-sized enterprises to raise their competitiveness. The enterprises must use the grants for “sub-sector specific business development services, skills development, and increasing productivity through raising standards at the firm level.”
The facility specifically targets seven “high potential” sub-sectors: tourism, coffee, grains and pulses, horticulture, edible oils, fisheries, and IT services/business process outsourcing. The goal of the project is to support capacity development of enterprises in the sectors and foster investment climate reforms.
To date, 92% of the available $3 million has been committed with a total of $1.25m already disbursed to grantees.
With this money and their own 50% contribution, Star Café hired two service providers in Uganda and Egypt – where it produces its instant coffee – and tasked them to develop a premium glass mould for 50g coffee, glass caps for 100g, and aluminium foils for 200g.
The contractors were also in charge of all art work and the development of point of sale materials.
It is too soon to tell the effect of the new branding on total sales, but company estimates show an expected 44.5% increase in sales (both export and domestic) in 2016 from 2012.
Sales figures have shown a decrease in export sales starting in 2014, even as domestic sales have grown. Ms Kamiza attributes the first trend to the closure of UN missions in the region which the company had been supplying.
The increase in domestic sales is partly due to campaigns to get more Ugandans drinking coffee. “We placed vending machines at most Total Petrol Stations so people could enjoy a hot cup of coffee on the go,” Ms Kamiza said.
Star Café also “encouraged people to serve coffee at functions like weddings” using a mobile cart from the company, she added. “This has turned out so well.”
Star Café was one of 81 successful applicants from a pool of 152 proposals PSFU received during the second call for proposals in 2016. John Marie Kyewalabye, the CEDP Project Coordinator, said the grant has reached 241,014 direct and indirect beneficiaries under the agribusiness and fisheries subsectors alone.
“To date, 170 enterprises with completed activities across all the seven subsectors have been supported by the Matching Grant Facility,” Mr Kyewalabye said.
Coffee, one of the facility’s main focuses, is Uganda’s most valuable export, and accounted for 12.62% ($371.51 million) of total export earnings ($2,942.91 million) in 2016. Still, most of Uganda’s coffee is exported in an unprocessed state, and the preceding figures are for bags of coffee beans.
Only 3% of the coffee grown in Uganda is consumed domestically, which makes the matching facility and Star Café’s efforts even more essential.
Uganda is Africa’s biggest coffee exporter, even though it is second to Ethiopia in coffee production. The Ethiopians, with their rich coffee culture stretching back centuries, happen to consume more than half of the coffee they produce.