Aug

J&A Report: Coffee Processing: How Washing Affects Taste

The process of washing coffee consists of removing its fruit layers before drying. Coffee is washed with water to remove the mucilage after the beans have been fermented. Mucilage is the soft, sticky layer that is responsible for sweetness.

Washing coffee beans results in a clean flavor profile. It is an ideal processing method for mild and bright brews. Removing as much mucilage as possible produces coffees with a light body and a bright, clean cup. The result is a fruiter, acidic flavor, while unwashed methods yield a heavy, smoother, and sweeter bean.

Washing Coffee Process

Before starting the process, weighing raw coffee cherries is necessary to calculate the yield in volume and weight. Then the pulp is removed using mechanical pulping machines. Inside the machinery, a blade cuts the cherry open, extracts the seeds, and discards the empty cherries. The coffee beans are set aside for mucilage removal.

The mucilage is composed of different sugars and alcohols that affect the flavor of the bean. Leaving this layer entirely or partially intact produces sweeter flavors. After the removal of the mucilage layer, coffee dries to prepare for the roasting process.

FIGURE 1: Coffee Washing Process

Washed Versus Unwashed Coffee Taste

Washed Coffee

Washed coffee has a cleaner taste than unwashed coffee. After the removal of the mucilage layer, the focus is drawn to the actual bean’s flavor. The result is a fruity-tasting coffee with a slight, fresh acidity. Specialty coffee experts prefer clean coffee because its flavor reflects that of the real bean. Properly washed coffee develops fundamental flavors, which vary based on the origin of the coffee bean.

Unwashed Coffee

In unwashed coffee, processing methods alter the taste of the bean. Unwashed coffee has a heavier body; it produces complex and smooth-tasting coffee. Due to its dense body and sweet characteristics, the taste often has hints of berries or tropical fruit.

Other Processing Methods

Honey Process

Central America is known for the use of the honey process. Beans are left with some mucilage when drying. Honeyed coffees taste naturally sweet and bright—a combination of unwashed and washed coffees.

FIGURE 2: Classification of Honey-Processed Coffee

Unwashed Coffee

Anaerobic

Anaerobic means without oxygen. Anaerobic coffees are renowned high-end coffees that undergo a process similar to the washed process, but the fermentation happens in sealed tanks. Anaerobic-processed coffees have wild, unexpected, and complex flavor profiles.

Carbonic Maceration

This is similar to the wine-making process; the fermentation of the cherries happens during the harvest in carbonic maceration. The process breaks down the cell walls of the fruit flesh from inside out. Beans get soaked in all the flavors from the mucilage during the fermentation. Carbonic maceration yields varying flavor profiles and aromas like red wine, whisky, banana, and bubblegum.

Giling Basah

The Giling Basah method is typical of Indonesia. Giling Basah is a similar process to the washed process, but the beans are dried partially only. After 35 – 40% drying and elimination of the mucilage, the coffee beans need to be dried again. Giling Basah yields earthy flavors like wood, mustiness, spice, and tobacco.

Washing Coffee Beans to Improve Taste

A variety of flavors result from minor alterations in the duration of each step. Sorting and pulping remain the same for the various methods of the washing process. It is during the fermentation phase when flavor profiles develop, depending on the amount of mucilage left to react on the bean and the duration of fermentation, and form new flavor compounds. After being washed, the coffee beans now have distinct tastes based on these stages, their origin, and their variety.

Sources: Coffee Cartel, Coffee Wiki, Paulig

Jul

Global Trade Analysis: MENA Imports and Exports (Part 1 of 5)

This is the beginning of J&A’s five-part series on global trade in the Middle East and North Africa (MENA). The following articles focus on imports and exports for the MENA region as they relate to other major economies, the role of the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) in the region, the region’s fuel dependency, the region’s growing focus on food independence, and finally the Gulf Cooperation Council’s (GCC) role for the MENA region and across the world.

The data and analysis contained within these articles is taken from the World Bank, World Customs Organization nomenclature, sector classifications for the harmonized system, the International Monetary Fund, the United Nations, the Food and Agricultural Organization of the United Nations, and J&A’s own market intelligence.

The MENA Region Competes With China and the USA on Gross Import and Export Volume

The MENA region’s imports and exports are approximately half the volume of the USA and China.
The MENA region imports approximately 50% as many goods as China.
The MENA region exports approximately 60% as many goods as the USA.

MENA Exports Are Steadily Expanding Across All Categories

Fuel represents approximately 50% of MENA’s exports, concentrated regionally in just a few countries. This will be discussed in part three of this series.
Fuel exports have been steadily increasing from the MENA region since 2015.
Only miscellaneous categories of exports have decreased since 2015, suggesting a focusing of MENA economies. Miscellaneous exports include items like watch pieces.

MENA Imports Raw Materials More Than Any Other Category, Suggesting a Focus on Regional Manufacturing

The steady decrease of MENA imports coupled with the steady increase of exports is good news for MENA countries seeking self-sufficient economies.
Raw materials are a large portion of MENA’s imports, suggesting a focus on refinement and manufacturing for the region.
The year 2018 showed the lowest total imports since 2015.

The chart below identifies the type of products associated with each import and export category based on World Bank nomenclature.

The MENA Region Plays an Important Role in Global Trade Due to Its Geographic Position

MENA’s trade position is unique when compared to China and the USA. MENA’s dominance is driven by the presence of oil, a natural resource. The USA and China’s imports and exports are not driven by a natural resource and are therefore easier to replicate. If MENA countries successfully diversify their economies, the region can become an increasingly powerful player by building on this natural resource foundation and then competing with other regions on services, technology, and other high-growth sectors. Due to current reforms in major MENA countries, the region is actively accomplishing this.

Lastly, the MENA region is a gateway between the growing economies of Africa and Southeast Asia and more stabilized regions like North America and Europe. This gives the region a strong value-added position when participating in trade between these other parts of the world.

In the next newsletter, J&A will take a deeper dive into the imports and exports of UAE and KSA. We will compare the UAE and KSA’s imports and exports to each other and the MENA region while investigating what each country must do to maintain its competitive advantage.

Jul

Part 5: The Rise of Saudi Arabia: Framework for Success in the Region

The Rise of Saudi Arabia: Framework for Success in the Region

Part 5 of 5

The market in Saudi Arabia is large and can generate significant rewards for companies that successfully capture its value. There are three fundamentals to creating success in the KSA market: finding the right local partner, using a clear sales process, and creating tailored marketing for the region. The KSA market is unique. Businesses seeking to enter the region should acknowledge this through their operations and business strategy.

A Local Partner is Essential

Because the KSA market is so unique, a local partner is essential. Businesses should have criteria and strategies to utilize local partners effectively. Those may include the following:

Clearly defined roles and responsibilities that rely on the local partner to develop new
relationships in the region.
A clear sales process will ensure satisfaction on both ends and facilitate a fast and effective capital or commercial transaction.
Rights such as exclusivity, rights of first refusal, rights of first notification, franchising rights, licensing rights, distribution rights, or reseller rights.
Minimum order quantities needed to maintain or achieve certain rights.
Ability and experience in localization to make sure key marketing messages can be tailored.
State-level contacts for any compliance or regulatory hurdles in the future.

Customize Business Operations for KSA

Business operations should be customized for KSA. Deciding which operations to customize greatly depends on the business model. J&A recommends companies utilize the typical categories of market entry, sales and marketing, operations and support, and scaling and exiting. Market entry and sales and marketing are tactical while operations, support, scaling, and exiting are categorically strategic.

Market Entry

During market entry, the first month should be spent selecting and clarifying the role of a local partner, who can assist in developing a regional pricing strategy and investing in start-up infrastructure.

Clarify the role of the local partner and assign KPIs to the relationship.
Invest in setup infrastructure based on the business model.
Develop a regional pricing strategy.

Sales and Marketing

The next two to four months will be spent setting the groundwork for sales and marketing operations that are tailored for the region. Operations and support are ongoing and businesses should localize only what is necessary, such as sales, customer service, and office functions.

Identify customer personas and lead generation; always focus on top-level decision-makers.
Develop a plan to continue building sales leads.
Understand the consensus-driven decision-making associated with GCC culture.

Operations and Support

Localize only the necessary business operations based on an HQ and subsidiary strategy.
Maintain centralized hubs of product development, service development, innovation, and back-office functions.
The most common localized operations are sales, account management, and customer service.

Scaling and Exiting

After the first two years, businesses can focus on scaling and exiting. Accurate reporting, leveraging the GCC presence, and showcasing a global business will help increase brand awareness for an exit or continued growth.

Keep reporting precise and accurate to enable spinoffs and divestitures.
Leverage GCC presence for cost and revenue synergies as much as possible.
Capitalize on the relative strengths of the markets in which you operate based on growth or exit strategies.

KSA Pricing and Market Adoption Is Unique

Price elasticity is higher in KSA than in the USA. Because of this, companies entering the market must be prepared to negotiate.

KSA Pricing and Market Adoption

Companies should not overprice their products or services in KSA, but they should give the buyer an opportunity to negotiate for value.

Companies should understand market critical mass timing. Initial sales are difficult to achieve but adoption rates are faster than in markets like North America and Europe.
The KSA market is significantly smaller than North America and Europe; companies should have an expansion strategy into other GCC and MENA markets after initial sales are created in KSA.

We hope you’ve enjoyed this series on the rise of Saudi Arabia. We reviewed the kingdom’s history, unique competitive advantages, anticipated economic changes through its Vision 2030 program, and a framework for utilizing this information to generate success in the region as a foreign company. KSA faces competition in the global top 20 economies, but there is no doubt the country will continue to expand and become an increasingly powerful player, both in MENA and across the globe.

Jul

Part 4: The Rise of Saudi Arabia: Manufacturing and Healthcare

The Rise of Saudi Arabia: Manufacturing and Healthcare

Part 4 of 4

Manufacturing and healthcare are expected to account for 24% of Saudi Arabia’s GDP compound annual growth rate into 2030. This part of the series will provide an analysis of these two industries and their expected changes as part of the country’s evolution.

KSA’s GDP is as Large as All Other GCC Countries Combined

Saudi Arabia has the largest GDP in the Gulf Cooperation Council (GCC) and the Middle East and North Africa (MENA) region. The chart below compares the kingdom’s GDP to its GCC counterparts.

Advanced manufacturing is a major focus for KSA’s into 2030. The region’s strong position in industrials and large-scale manufacturing can become compounded as its trade position and openness increases to levels similar to the UAE and Bahrain. Manufacturing is expected to be the greatest driver of the economy into 2030.

Healthcare is another major driver of government spending. Projects in healthcare equipment, medical devices, pharmaceuticals, and services are on the rise and generally sponsored, in whole or in part, by the government.

KSA Manufacturing is on the Rise

Saudi Arabia manufactures a range of goods. Some private companies are using the country to produce locally already, including international firms such as Isuzu, which opened a truck assembly plant in the kingdom in 2012. Continued competitiveness requires a skilled and more productive workforce, stronger legal and investment protection, and the removal of a range of obstacles that hinder business, including high-import duties, lengthy customs and visa procedures, and gaps in local supply chains.

Saudi Arabia has made value-added manufacturing services a priority since 1995.
This growth has slowed in recent years as the country tries to balance supply and demand with its capabilities.
KSA can be a manufacturing hub in the MENA region if it builds the infrastructure, competes on price, and develops the necessary capabilities to meet consumer demand.

KSA Health Expenditures are Focused on Programs and Wages

Healthcare was one of the greatest beneficiaries of public spending during the oil boom, and there was a large-scale buildup of healthcare infrastructure including 81 new hospitals. The kingdom will need to continue spending heavily on healthcare to care for its aging population.

KSA needs more healthcare workers. Just one in three healthcare professionals is a Saudi national, and there are not enough healthcare graduates to replace professionals who retire or leave their jobs. To reverse this trend, several initiatives are being implemented to improve the perception of the healthcare professions and to provide educational capacity at colleges, universities, and appropriately equipped teaching hospitals.

The final part of this five-part series will combine this into a cohesive, actionable framework that gives businesses from outside KSA steps for achieving success inside the country.

Jul

Part 3: The Rise of Saudi Arabia: Trade and Finance

The Rise of Saudi Arabia: Trade and Finance

Part 3 of 3

Finance and trade are expected to make up 13% of the kingdom’s GDP compound annual growth rate into 2030. This part of the series will provide analysis on these two industries and their expected changes as part of the country’s evolution.

KSA’s GDP is as Large as All Other GCC Countries Combined

Saudi Arabia - estimated GDP trade and finance sector growth 2014-2030

Saudi Arabia has the largest GDP in the Gulf Cooperation Council (GCC) and the Middle East and Northern Africa (MENA) region. The chart below compares KSA’s GDP to its GCC counterparts.

Saudi Arabia’s GDP is almost as large as all other GCC countries combined.
All GCC GDPs follow similar cycles of highs and lows.
GDPs in 2020 are expected to contract globally due to the COVID-19 pandemic, but J&A expects the kingdom’s GDP to continually climb as government spending increases in 2021 and beyond.

International Trade: KSA Makes up Nearly 30% of GCC Imports and Exports

Imports and Exports by Country and GCC region 2015-2018

Saudi Arabia alone accounts for almost 20% and 25% of MENA’s imports and exports, respectively. There are 19 countries in MENA. Exports out of the KSA consist mostly of raw materials, transportation, and machinery. Due to the kingdom’s size, it can increase its regional exports apart from fuel. KSA has the ability to import more tourism, hospitality, and leisure services and technology once these industries are more developed.

Investments in finance and trading infrastructure are expected to grow KSA’s GDP by $150 billion through 2030. This growth will be challenging, as fundamental legal frameworks need to be established for effective small and medium (SME) lending and capital markets. KSA’s investment in trading infrastructure will become a more powerful driver as the manufacturing capacity of the country also begins to increase and the state grows as a distribution hub in the region.

Small and Medium Business Lending Lags Behind Comparable Economies

Small and medium lending and trade finance are essential elements to grow any economy. It is estimated that nearly 40% of (or 100 million) global jobs are a result of small and medium businesses. GCC countries’ average lending to SMEs is far behind other MENA countries. KSA and the UAE lend less than 5% of total funds to SMEs, whereas non-GCC countries place 15% of total lending into SME businesses.

J&A completed a deep dive of KSA imports and exports in its Global Trade newsletter. The entire series can be located here. In the kingdom, 60% of exports are fuel; imports and raw materials make up approximately 80% of the state’s imports. KSA holds the second most oil reserves in the world next to Venezuela.

Lending to Small and Medium-Sized Enterprises as a Share of Total Lending

Small and medium business lending is key to development of GDP growth. Globally, SMEs account for 23% of GDP.

KSA is behind its regional counterparts in SME lending and financing.
To successfully implement more advanced SME lending, KSA will need to privatize several industries and implement a legal framework that can apply to international business owners as well as domestic ones.

SME lending is an essential activity to enable economic growth in the private sector. There is significant room for growth in lending to small and medium-sized business, as well as in better provision of financial services to households, including mortgages and investment products in GCC countries. Households play an important role in growing the KSA economy through savings.

KSA Monthly Household Earnings from 2006 to 2017

Monthly incomes are adjusted for income tax, reserve assets plus government stock market equity, and interest payments.
Monthly incomes have steadily increased since 2005, and are expected to continue increasing into 2030.
Saudi Arabia is less dependent on international workers compared to its GCC counterparts such as the UAE. This allows the kingdom to invest in its citizens on a larger scale.

The next part of our series will take a deeper look at manufacturing and healthcare within the context of KSA’s 2030 vision growth.

Jul

Part 2: The Rise of Saudi Arabia: Travel, Tourism, and Hospitality

The Rise of Saudi Arabia: Travel, Tourism, and Hospitality

Part 2 of 2

There are eight sectors that are expected to account for the majority of KSA’s economic growth into 2030. The travel, tourism, and hospitality industries are expected to account for 11% of total GDP growth in that time period. This part of the series will take a closer look at these sectors and their expected changes over time. The sectors’ growth will slow due to the COVID-19 pandemic, but they will likely remain a key growth area well into 2030. Even during the pandemic, domestic tourism is on the rise while international tourism has slowed.

Saudi Arabia - estimated GDP sector growth 2014-2030

Saudi Arabia is home to Makkah, the holiest Islamic religious site, in addition to several natural tourist locations such as beaches, mountains, and valleys. The kingdom is taking active steps to make tourism and hospitality more accessible. This includes the privatization of certain tourism services and the preservation of important cultural and historic sites.

Rising International Tourism in the Kingdom

International tourists have more than doubled in KSA since 2005; this is largely due to the easing of restrictions for tourist visas to enter the country.
About 10 to 13 million Muslims visit the holy sites of Makkah and Medina every year, including more than two million during the annual Hajj pilgrimage period.
The kingdom possesses a wealth of archaeological sites such as UNESCO world heritage site Mada’in Saleh and areas of natural beauty like coasts and mountains; therefore, J&A sees an opportunity for thriving profit-driven tourism.

Domestic Tourism Is a Large Opportunity for Growth

Domestic Recreational Travelers in Saudi Arabia

Domestic tourism presents a significant opportunity for economic growth, as locals prefer to vacation and travel outside the region.
The Ministry of Tourism launched the Saudi Summer campaign to encourage domestic tourism during the COVID-19 pandemic.
The Saudi Summer led to a $1.6 billion consumer spend, 26% more than the same period in 2019.
As tourism sites become more developed, J&A expects domestic tourism spending to increase and compete with locations such as Dubai, UAE.

In the next part of our series we will review steps the KSA government is taking to grow business lending and trade.

Jun

J&A Report – Coffee Processing: How Roasting Affects Taste

Coffee roasting is an industry forecasted to generate $320 billion in revenue in 2021. The market will grow with a compound annual growth rate of 8% in the forecast period of 2021 to 2025. Coffee roasting is the process of preparing green coffee beans for grinding and consumption. Different roasting methods affect the overall flavor. J&A has outlined the most relevant considerations for coffee roasters and the impact on the final product.

The United State is the world’s largest coffee roasting nation and is forecasted to generate $67 billion in 2021.
The volume of roasted coffee is forecasted to increase by 4% in 2022 and is set to total over 6 billion tons by 2025.
There are three main phases in coffee roasting: drying, browning, and development. The type of roast (light, medium, and dark) affects the color, flavor, and caffeine content of a coffee bean.

FIGURE 1: Coffee Roasting Process

Common Roast Coffee Types and Their Flavors

Roasting beans converts flavorless green beans into a tasty cup of coffee. The accomplishment of these profiles comes through the various roast types. Light roast styles result in a sweet, fruity, acidic cup of coffee. Aggressive roasts yield dark, bitter, and strong cups of coffee.

The total roast period and duration of each stage are relevant factors for the final taste. Faster roasts yield more aroma compounds, but the beans are more prone to burn this way. Shorter roasts produce more aroma compounds.

Light Roast: Half-City Roasts

Light roast coffees do not reach their first crack, which usually happens in the development stage. Lightly roasted beans typically hold fruity, floral, and acidic flavor.

Medium Roast: City Roasts

Medium-roast coffees have been roasted between the first crack, at a temperature of approximately 400°F, and before the second crack at 428°F. Medium-roast coffee has a smoother, more-balanced flavor with a slight bitterness when compared to a light roast.

Medium-Dark Roast: Full-City Roasts

During and after the second crack, medium-dark roasted beans reach an internal temperature of 437 – 446°F. This temperature brings out the oils on the beans’ surface. These roasts have a richer, fuller flavor, more body, and less acidity.

Dark Roast: French or Italian Roasts

Dark-roast coffees are roasted past the second crack to an internal temperature of 464°F, which is the highest possible without ruining the bean’s flavor. The temperature and time on the roasting process pulls oils from inside the coffee bean to the outside, giving them an oily shine. Dark-roast coffees taste smoky, bitter, and burnt.

FIGURE 2: Roast Types

Roast Coffee Segment Overview and Forecasts

Many factors contribute to the flavor experienced with a cup, and roasting is one of the most important elements. Roasting can produce varying bean color and taste, oil or not surfaces, and different amounts of caffeine depending on the roast time or temperature reached during any of its stages. The process to achieve certain flavors in a cup of coffee is specific. Expert roasters achieve natural flavor profiles through the production process. Light roasts present zesty and acidic flavors. On the other hand, dark roasts present bitter and smoky flavors. J&A expects the USA will keep on leading the roasting market share for the coming years. Strong growth in coffee consumption and volume produced ensure that income generated from roasting will increase in the coming years.

Sources: TeaCoffeeCup

Jun

J&A Cross-Border Private Capital Markets Report: Latin American Investors and Media Investments

Forecasts show that media and entertainment industries are growing at a compound annual growth rate of 9% between 2020 and 2025, reaching a market value of $3 billion. Hispanic media will rise proportionally to this percentage. In 2020, over 10% of all media was translated to Spanish. In this report, Jahani and Associates cover the most notable developments in this sector, including the trends for Hispanic media, the investment deals in the space, and forecasts moving forward.

Hispanic Marketing Trends

Mobile aggregators facilitate the implementation of fractional vehicle ownership by creating on-demand access to transportation services.
Most mobile aggregators, such as Uber, do not own the vehicles within their fleet and consequently, have been able to scale quickly without significant capital expenditure.
Large mobile aggregators are vertically integrated into fleet and data management. Uber’s engineering and data department¹ has deployed thousands of micro servers to process the requests and data behind the millions of rides globally every day.

The Rise of Shared Mobility

Latin American investors were active in 2020 and invested consistently through all quarters in media companies.

FIGURE 1: Investments Over Time

Latin American investors contributed $7 billion for deals in media companies in 2020, with 80% of the deals being venture capital investments.
Kaszek, an Argentinian venture capital firm, had the highest deal count. This firm invested in 10 different media companies.
A total of 81 Latin American private equity and VC firms invested in 102 media companies from all over the world.
Capital raised in Q4 exceeded $4 billion, with over $700 million raised by VC firms and more than $3 billion in M&A transactions.

Geographic Trends in 2020 for Latin American Investors in Media

Latin American investors have been involved in cross-border activities in the capital market for media companies. Most of the deals they have been involved with are in North American or European deals. The capital markets and expenditure in media and marketing firms prove how influential the ties are with these geographies. Below is a breakdown of the investments by Latin American sources by region.

FIGURE 2: Company Count Breakdown by Geography

*© Australian Bureau of Statistics, GeoNames, Microsoft, Navinfo, TomTom, Wikipedia*

Over 50 media companies within the USA and Canada completed capital market transactions with Latin American investors in 2020.
Of these deals, 76% were with North American companies. California received capital for 20 companies, New York for seven companies, Texas for six, and Florida for five.
Over 66% of the 161 European media deals with Latin American investors were with Spanish companies. The United Kingdom holds 18 media deals as well.
Asia and the Middle East only had six deals with Latin American investors in media companies—China had two companies and the United Arab Emirates had two also.

Expected Trends for Hispanic Media

FIGURE 3

In the United States, 17% of the population is Hispanic. It is expected this number will rise. With internet penetration increasing, so will Hispanic use of devices in the region.
Each year, more Latin American investors are involved in capital markets worldwide. J&A forecasts that over 190 Hispanic investors will be active in private placements for media companies in 2021.

Over 80% of the Hispanic population actively use devices connected to the internet. Hispanic inhabitants in the USA are expected to grow faster than any other population. With media being targeted more towards this population, companies can increase their sales and media coverage online.

Sources: Statista, Pitchbook.com, Colibri, Nahrep, and Hispanic Unity

Jun

J&A Industry Report: Coffee Value Chain: From Crop to Cup

Jahani and Associates Industry Report

Coffee Value Chain: From Crop to Cup

The coffee production process can be broken into three key phases: farming, processing, and retailing. Within these phases, the coffee product is harvested in its original form (a cherry-like fruit), then processed, dried, roasted, ground, and finally turned into the final product we drink every day. This article breaks down the coffee value chain within these phases from crop to cup. Lastly, we review the price of a coffee bean from its original cherry form to the final cup, analyzing its evolution, and the justification for a 10,000% price increase across the chain.

FIGURE 1

Farming

Cherries: coffee is grown in trees approximately two to four meters in height. The trees flower two to three years after being planted. After the tree flowers, green fruits appear on the branches. The green fruits ripen to a deep red color after four to eight months and are then ready to harvest.

Processing

Green beans to roasted beans: After the fruit is harvested and taken to a processing plant, the fruit undergoes refining and drying steps to turn it into a green bean. These green beans are then roasted to become the beans consumers are familiar with from stores and coffee shops. This roasting step is what creates a light or dark roasted coffee. Prior to roasting, there is no difference between light and dark roasts. Additional steps in this process include wet processes such as pulping, demuxing, washing, sorting, coffee parchment drying, storage, threshing, sorting, cupping, and packing. Dry processes include storage, threshing, and sorting.

Retailing

Once the coffee is harvested, dried, processed, and roasted, it is distributed to the end consumer or retail store where it is then ground and brewed. Roasted coffee can be modified into a variety of products such as soluble coffee, decaffeinated coffee, coffee liqueur, extracts and essences, or pure caffeine.

Opportunities to Increase Quality

Each step in the process brings opportunities to increase quality, and are summarized below.

Farming: Altitude and Shade

Shade-grown coffee and coffee grown at high altitudes create higher quality beans compared to those grown in direct sunlight.
Fertilization techniques can also affect quality by impacting the soil.

Processing: Wetness, Temperature, and Fermentation

The wet process produces higher quality coffee with a cleaner and more consistent flavor than other methods.
The fermentation process within the wet phase makes flavor profiles more intense or sweet.
The best way to store green beans during the dry phase is in a contamination-free warehouse with average relative humidity of 10.5-12% and a temperature of 26°C.
Roasting green beans at a lower heat produces coffee that releases more distinct scents, aroma, and volatile oils. These roasting differences are mostly appreciated by specialty coffee consumers.

Pricing: Increasing Value by Over 10,000%

FIGURE 2

Farming ($2 – $3 per kilogram)

Farming raw fruits is the least expensive step in the coffee value chain. This is driven by many factors, including a high amount of supply, low labor costs, some unfair practices against farmers to maximize profits, and pricing wars among farmers themselves. It is not within the scope of this report to analyze the political and economic dynamics the coffee industry has on less wealthy nations.

Processing ($3 – $30 per kilogram)

Processing to generate the green bean is usually done near the farm. Green beans have a stable shelf life of nearly a year. Roasting green beans can be done anywhere in the world, and usually takes place nearer to the end consumer. Throughout the world local roasteries order green bean coffee from a variety of international locations and then sell that coffee to regional shops, stores, and consumers.

Retailing ($150 – $200 per kilogram)

Retailing is the phase of the coffee value chain that is most sensitive to marketing and consumer behavior. Companies like Blue Bottle Coffee have built large enterprises on high-quality coffee, careful marketing, and premium retail locations to command a price premium in the market. Blue Bottle Coffee was purchased by Nespresso in 2017.

FIGURE 3: Differentiators by Region

From Crop to Cup: An Evolution of Price and Product

The coffee value chain can be broken into three steps to promote high-quality products across the world. America and Asia use the wet processing method, compared to Africa, which uses the natural drying method. The use of different processing techniques determines coffee’s quality, aroma, and flavor. These characteristics add value and set the final cost in the global market. Coffee pricing increases dramatically as it moves away from the raw product and into the consumer’s cup.

Sources:

https://cafesabora.com/es/proceso-del-caf%C3%A9-c%C3%B3mo-se-procesa-el-caf%C3%A9-que-llega-tu-taza
https://www.ncausa.org/About-Coffee/10-Steps-from-Seed-to-Cup
https://patriotcraftcoffee.com/processing-methods/#:~:text=In%20the%20wet%20process%2C%20water,is%20still%20on%20the%20bean.
http://www.fao.org/3/X6939E/X6939e03.htm#:~:text=In%20most%20of%20the%20African,to%20a%20better%20quality%20coffee.
https://theexoticbean.com/blog/how-is-se-asian-coffee-grown-and-processed/
https://www.alibaba.com/showroom/robusta-cherry-coffee-price.html
https://www.statista.com/statistics/675807/average-prices-arabica-and-robusta-coffee-worldwide/
https://perfectdailygrind.com/es/2018/08/08/esto-es-lo-que-cuesta-producir-cafe-en-latino-america/
https://es.dailyforex.com/forex-articles/2017/12/precio-del-caf%C3%A9-invierta-en-caf%C3%A9-3-de-diciembre-2017/87665
https://mycoffeebox.com/taza-de-cafe-el-costo-y-su-impacto-en-la-economia/
https://www.ico.org/prices/pr-prices.pdf
https://es.investing.com/commodities/us-coffee-c-historical-data
https://www.usnews.com/news/blogs/data-mine/2015/09/29/americans-pay-an-average-270-for-coffee-while-tipping-20-percent#:~:text=A%20cafe%20mocha%20is%20the,an%20average%20price%20of%20%242.62.
https://www.amazon.com/-/es/Lavazza-Super-Crema-Espresso-embalaje/dp/B000SDKDM4/ref=sr_1_1?_encoding=UTF8&c=ts&dchild=1&keywords=roasted+coffee+beans&qid=1621020490&s=grocery&sr=1-1&ts_id=2251592011
https://www.amazon.com/-/es/Ethiopian-Yirgacheffe-Oromia-entero-tostado/dp/B07ZJRW57X/ref=sr_1_13?_encoding=UTF8&c=ts&dchild=1&keywords=roasted+coffee+beans&qid=1621020490&s=grocery&sr=1-13&ts_id=2251592011

Jun

Part 1: The Rise of Saudi Arabia: Competitive Advantages

The Rise of Saudi Arabia: Competitive Advantages

Part 1 of 1

This is the first part of our series on the rise of Saudi Arabia. This five-part series will review the kingdom’s competitive advantages, its vision to grow and diversify its economy, and outline a framework to create successful business and trade relationships with the country.

The Kingdom of Saudi Arabia (KSA) has the 19th largest GDP in the world and is the 13th largest country by landmass. KSA holds the second-largest amount of oil reserves in the world at 16%, second only to Venezuela’s 18%. In 2018, KSA was ranked the No. 21 exporter in the world; fuel comprises over 62% of those exports.

Key Facts About the Kingdom

Economic

As of October 2020, KSA was the largest economy in the Middle East and the 19th largest in the world.
KSA produces 40% of the world’s oil supply.
By landmass alone, Saudi Arabia is the 13th largest country in the world.

Demographic

As of 2013, 50% of the population was under 25 years of age.
The country is home to more than 34 million people.
Over 30% of the country’s inhabitants are from outside the country.

Cultural

Home to Makkah, the holy city of Islam.
Islam is the state religion of Saudi Arabia.
Cultural changes of the 2010s included women’s suffrage and allowing non-religious tourism.

KSA’s Competitive Advantages

Oil Is Not the Only Determinant of KSA’s Economic Power

Saudi Arabia has already started to diversify outside of oil production. The figure below shows resilient growth despite volatility in oil prices. This is a result both of diversification efforts and the high volume of oil available in the state.

KSA’s GDP continues to grow despite oil price fluctuations. This is due to the volume of oil the country produces, which makes it less price sensitive. KSA has been steadily diversifying its economy and will continue to do so into 2030. Energy prices are historically volatile; KSA’s ability to grow through these cycles is an indication of the kingdom’s successful economic diversification.

A Low Debt-to-GDP Ratio Creates Liquidity for Government Spending on Growth

KSA’s debt-to-GDP ratio is lower than countries similar in size. It is approximately 20% compared to nearly 100% for economies like the USA and the UK, or 40% for China. This gives the KSA government liquidity to invest in public and private initiatives in the foreseeable future.

Government Debt as Percentage of GDP (Saudi Arabia, USA, China, UAE, Brazil, Singapore, UK, Malaysia)

Brazil, Yemen, and Malaysia all have ratios nearly twice as high as KSA’s. Only the UAE matches KSA’s low debt-to-GDP ratio, though not its size. Based on KSA’s Vision 2030, the following industries are expected to experience the most growth:

Travel, tourism, and hospitality
Retail and trade
Mining and metals
Advanced manufacturing

Banking and finance
Construction
Petrochemicals
Healthcare

A Vision to Diversify

The Saudi Vision 2030 is a framework to reduce Saudi Arabia’s dependence on oil and diversify its economy. The framework’s goals include reinforcing investment activities, increasing non-oil trade, promoting a more secular image of the kingdom, and increasing military spending. The goals are expected to create alternative sources of revenue for the government, such as taxes, fees, and income for the sovereign wealth fund. Another major component of KSA’s Vision 2030 is to increase private sector participation and provide more employment opportunities.

Several Gulf Cooperation Council (GCC) countries have similar plans, such as the Kuwait Vision 2035, UAE Vision 2030, and the Qatar National Vision 2030. Since KSA has only recently become a more accessible economy, J&A expects it will propel into a boom of economic growth beyond its GCC counterparts.

KSA is uniquely positioned among all Arab countries to become an increasingly dominant player in the geopolitical scene. Its liquidity, GDP size, young population, and commitment to economic diversification are all evidence of this. The next three parts of this series will analyze the country’s Vision 2030 plan and how it will impact its economy and therefore business opportunities.

In the next article of our series on the competitive advantages of the kingdom, J&A will analyze a vision for 2030, reviewing trends and changes in Saudi Arabia’s travel, tourism, and hospitality industries.

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