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.

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!

Coffee and Stress

I have found the perfect reason to drink more coffee although I am not sure whether I have to be a rat to benefit. A South Korean trial has uncovered that just the smell of coffee triggers action in a number of genes that produce proteins with anti-oxidants that are good for you. It must be pointed out that these responses were measured in rats and not humans (picture was found here).

Nevertheless, anyone who knows even a little bit about scientific testing knows that the rats get it first! The results of the trial have been published in the "Journal of Agricultural and Food Chemistry". The report indicates that generally just smelling coffee alleviates the stress levels of the sleep-deprived rats.

So, I am going to drink more coffee today or at least go to Starbucks, Gloria Jeans, or the Coffee Bean and buy some fresh roasted beans to sniff because I am sleep-deprived after having watched the US Open Golf. As it turns out I could have stayed asleep as Tiger Woods and Rocco Mediate have to go at it again today in a playoff!

It seems like catch-22 to me as the drinking of the coffee keeps you awake and causes stress increases but the aroma of the beans reduces that stress, weird! Apparently, previously studies have shown that coffee consumption reduces depression and the risk of suicide. All this time I just thought these big coffee drinkers were just wired on the excess caffeine but in fact they were not wired but enjoying levels of reduced stress.

In any event if you want to learn more about current coffee research you should go here, The Coffee Science Information Center or CoSIC.