After the Non-Fatwa, Kopi Luwak Farming...

Simple economics would suggest that the best way of keeping a price high is to ensure that there is limited supply. So, the decision to move towards mass production of Kopi Luwak by farming the civets that eat the coffee beans and excrete them partially digested appears to be a recipe for market disaster.

I am not an economist. However, in my mind, it is pretty simple. If you increase supply without a commensurate increase in demand then it will not be too long before there is oversupply and downward pressure on the price of the product.

Anyways, the idea is that civets are going to be bred in captivity and then force-fed the coffee beans. This is supposedly a sure-fire money spinner as collectors of the valuable civet dung need go no further than scampering up and down under the civet cages. The image that comes to mind is egg farming; the rows upon rows of caged chickens popping out eggs.

It is interesting that the decision to start small-scale farming comes on the heels of the recent decision by the Indonesian Ulema Council (MUI) not to issue a fatwa prohibiting Muslims from drinking the coffee. According to the MUI, Kopi Luwak is halal (permitted for consumption) if it has been thoroughly and properly washed. I wonder what the quality assurance procedure is on this "thorough" cleaning arrangement? After all, the whole point of Civet Coffee is that the beans are partially digested by the stomach enzymes of the civet.

The non-fatwa has inspired PT Perkebunan Nusantara XII to see an opportunity to ramp up production and presumably ratchet up profits into the bargain.

The current price range for a cup of the Kopi Luwak in Jakarta is somewhere between IDR 90,000 and IDR 110,000, so it is not cheap. Or for those that drink their coffee at the franchise havens of Gloria Jeans or Starbucks, it is the equivalent of a couple of the biggest and most expensive brews on offer at those franchises.

Kopi Luwak is an acquired taste, kind of like Durien (Duren), some people love it and some people hate it. Kopi Luwak is a nice coffee, but I have never been convinced that it was ever worth the price charged.

MUI, Fatwas, and Kopi Luwak...

Each passing day further highlights the fact that the Indonesian Ulema Council (MUI) has way too much time on its hands. Unfortunately, rather than doing something useful like marshalling their considerable resources and self-confessed moral authority to rid Indonesia of poverty, they instead focus their considerable energies on really useful world-changing matters such as the prohibition of drinking kopi luwak.

Kopi luwak is the world's most expensive coffee. What makes this coffee so unique, and apparently worth up to USD 600 a kilo is that the coffee beans are eaten by the civet and then passed through their intestinal tract and excreted in their feces. Then the feces are collected, the beans washed, and the coffee ground. All pretty simple really.

It is likely that there are many people who would turn up their nose at the prospect of paying top dollar for a recycled coffee bean, particularly so for a coffee bean recycled in this way. Yet, there are those who believe that kopi luwak is one of the world's great coffees, exquisite, and so worthy of the high price tag. Then there are others, probably not to be classed as connoisseurs of the little black beans, who think it to be just another cup of coffee, no better or no worse than you might get from a McDonalds McCafe.

Funnily enough, the Indonesian president, Susilo Bambang Yudhoyono (SBY) decided that it was exquisite enough to give a bag to Kevin Rudd (former Australian Prime Minister) when Rudd visited Indonesia. That led to the inevitable, and somewhat lame jokes, of "crappacino" and "dung diplomacy".

However, when one thinks about it, it was pretty prophetic of the Indonesian president because it was not all that far into the future after that the then Australian PM found himself in a world of crap and was deposed as PM by his deputy.

The interest from the MUI (and according to the MUI, the NU) stems from concerns that kopi luwak is najis. Najis means ritually unclean, and unclean foods are forbidden in Islam. There is no doubting that najis exists in Islam and there are very specific provisions in place relating to things that are najis. It remains to be seen as to whether kopi luwak is one of those things.

However, no matter what the outcome, it remains a truism that there are so many far more important and pressing matters facing Indonesia and Indonesians that the MUI would be better served thinking about those and directing their collective energies to the successful resolution of those problems first before worrying about the najis or lack of najis-ness of kopi luwak.

Ho hum...

Starbucks

Now is probably not a good time to be a Starbucks employee in the US. Starbucks are reporting that they are to close 600 of their coffee shops in the US and this will eliminate some 12,000 jobs. Strangely enough the market reacted pretty well to the news and put on as much as 7.2% in Nasdaq trade. The shares eventually closed up 4.7% in after hours Nasdaq trading at USD 16.35.

Starbucks had more than doubled in size in the last three years but despite store growth the company had seen declining earnings. Perhaps if there is a case to be made for a company growing too fast then this might be it. Almost 70% of the stores to be closed are less than three years old. However, the company maintains that it is going to stick to its plan of opening another 200 stores through September 2009.

Analysts are suggesting that Starbucks has fallen victim to surging world oil prices where consumers are less likely to spend income on luxuries such as cafe lattes and caramel machiatto.

I was in Starbucks in Plaza Senayan last night and it was doing a roaring trade for a Tuesday evening at 21.00. It was full and more people were lining up to get their gourmet coffee fix. I would be surprised if the franchise holder in Indonesia was looking at consolidating or closing stores, in fact I would be more surprised if an expansion in the number of stores was not being contemplated. However, I am not privy to the financial books and my observations are completely anecdotal based on drinking coffee in various Starbucks stores and them always being full.

Come to think of it, it is time for a coffee!

But it ain't gonna be no Starbucks but rather it is going to be a Kapal Api!