Everyone wins in Tata coffee deal
Oct 25, 2006
UGANDA is set to start producing instant coffee, following the signing of an agreement with a multinational company. Tata of India will produce instant coffee at a plant to be built in Jinja, with the government providing the land, tax incentives and other utilities.
UGANDA is set to start producing instant coffee, following the signing of an agreement with a multinational company. Tata of India will produce instant coffee at a plant to be built in Jinja, with the government providing the land, tax incentives and other utilities.
This is a major deal. Tata is one of the biggest corporate players in India, which in turn is one of the world’s most promising emerging economies.
Just last week, the conglomerate’s steel division, Tata Steel, took over the Anglo-Dutch firm Corus in a $8.1b deal that created the world’s fifth-biggest steel firm.
Last year the firm bought Incat, the British car and aviation engineering and design firm, and it has also tabled a $170m bid for a major UK hotel. It already has a presence in beverages, owning Britain’s Tetley Tea, so Ugandan coffee should not be strange.
This is why Ugandans should sit up and take notice. The production of instant coffee is long overdue. Uganda has been one of the world’s largest producers of coffee, but the benefits have been limited by wild fluctuations of world commodity prices.
It is the very nature of the world market for the price of primary products to swing either way, owing to supply that in turn tends to be affected by factors as varied as weather and political (in) stability.
On the other hand, the prices of finished consumer goods derived from these products are much more stable, as demand is either constant or growing.
This is where the Tata deal becomes beneficial. Buying coffee beans locally should guarantee farm prices, and local processing should give greater value to exports.
Even though initial processing will take only a small fraction of locally grown beans, the growth potential is enormous. A key challenge, though, is going to be in marketing.
But Tata’s multi-faceted, multinational status should give it some headway. Their very presence in beverages should give them a platform.
This is a very good deal in which everyone – farmer, investor, government, country – is a winner.
This is a major deal. Tata is one of the biggest corporate players in India, which in turn is one of the world’s most promising emerging economies.
Just last week, the conglomerate’s steel division, Tata Steel, took over the Anglo-Dutch firm Corus in a $8.1b deal that created the world’s fifth-biggest steel firm.
Last year the firm bought Incat, the British car and aviation engineering and design firm, and it has also tabled a $170m bid for a major UK hotel. It already has a presence in beverages, owning Britain’s Tetley Tea, so Ugandan coffee should not be strange.
This is why Ugandans should sit up and take notice. The production of instant coffee is long overdue. Uganda has been one of the world’s largest producers of coffee, but the benefits have been limited by wild fluctuations of world commodity prices.
It is the very nature of the world market for the price of primary products to swing either way, owing to supply that in turn tends to be affected by factors as varied as weather and political (in) stability.
On the other hand, the prices of finished consumer goods derived from these products are much more stable, as demand is either constant or growing.
This is where the Tata deal becomes beneficial. Buying coffee beans locally should guarantee farm prices, and local processing should give greater value to exports.
Even though initial processing will take only a small fraction of locally grown beans, the growth potential is enormous. A key challenge, though, is going to be in marketing.
But Tata’s multi-faceted, multinational status should give it some headway. Their very presence in beverages should give them a platform.
This is a very good deal in which everyone – farmer, investor, government, country – is a winner.