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M.R. Subramani

CHENNAI, Sept. 18

THE International Coffee Organisation (ICO) plans to launch a promotion fund again to encourage coffee consumption in new markets such as China and Russia.

A concrete proposal for the re-launch of the promotion fund will be discussed at the ICO council meeting during September 24-27 in London, according to Mr Nestor Osorio, Executive Director of ICO.

"We believe that re-establishing a promotion fund is an essential step in securing a long-term, stable and balanced market... It is up to the member-countries to decide how this fund should be implemented as well as the modalities under which contributions will be sought," Mr Osorio told Business Line in a written reply.

The inclusion of the private sector was also being considered, he said.

The plan to re-launch the fund is significant since raising consumption across the globe is seen as the best way to lift the current low prices of coffee. It is also seen as a long-term solution since production far outstrips demand. India could benefit from this since its growers are currently facing crisis due to low prices and poor returns.

The London-based ICO is an inter-governmental body comprising coffee-producing and importing countries. Promotion of coffee is an important function of ICO. The first promotion fund was established in 1964. This financed a number of generic campaigns, studies and public relations exercises. The fund was liquidated in 1973 after $50 million was spent.

Again in 1976, another promotion fund was set up with an outlay of $100 million. This existed for over a decade and a number of initiatives such as creation of national and regional centres in the US, France, Norway and the UK were accomplished using this.

The development of the specialty coffee sector in the US, and the establishment of mechanisms in Europe to deal with scientific and health-related questions regarding coffee, can be attributed to initiatives financed by the promotion fund in the early 80s.

Mr Osorio said: "Given that mature markets such as those of Western Europe, Japan and North America experience a very moderate rate of consumption growth, we are aware that the way forward is to look for new markets with huge potential benefits. China and Russia are, of course, the two most interesting ones."

With coffee consumption being relatively low in these two countries and this combined with large population living under harsh weather condition offered the ideal ground for a boost in consumption, he said.

"China's market is currently increasing by more than 20 per cent per annum and Russia has already manifested its interest in joining ICO, a very important step," Mr Osorio said.

Already, ICO had spent considerable amount to promote coffee in China and Russia. During 1998-2002, it spent $3.6 million conducting coffee festivals in Beijing, Shanghai, St. Petersburg and Moscow.

On ICO plans to ensure fair prices for growers, Mr Osorio ruled out market intervention. "ICO is no longer engaged in any attempt to control markets as those schemes put into place under economic clauses of past Coffee Agreements. This, however, does not mean that it is not taking initiatives to alleviate the growers from the current situation they are facing," he said.

"In the first place, ICO is starting its coffee quality improvement programme from October 1 setting minimum grading standards and maximum moisture content for coffee exports. The consumer will benefit from higher overall quality standards and producers from reduction in current surplus," Mr Osorio said.

The quality programme will also be discussed during the London council meeting.

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