01 Sep 2017

A Jolt for the African Coffee Industry

The challenges of creating a café culture in Nigeria
by Sasha Issenberg


Illustration by Jonathan Bartlett

In an era of artisanal coffee bars blossoming in neighborhoods worldwide, how could a producer of award-winning beans be struggling to stay afloat?

That was the puzzle confronting Chijioke Dozie (MBA 2008) when he cofounded Kaizen Venture Partners in 2008. The private equity fund invests in distressed businesses across sub-Saharan Africa, and Dozie soon found himself responsible for a coffee cherry washing station in the volcanic hills of western Rwanda. Up until that point, Dozie’s only sense of distress around the region’s coffee scene stemmed from his inability to get one of the espresso-based drinks to which he had grown attached during his years working in finance in New York.

Dozie hopes to solve both the supply and the demand problems with Café Neo, a coffeehouse chain he and his older brother, Ngozi, started in their native Nigeria to meet the African coffee supply with African coffee demand. Now five years old, Neo has nine locations around Lagos, its own branded capsules for Nespresso machines, and plans to grow. To do that, the Dozies will have to nurture a coffee-sipping culture in a part of the world where, to the extent anyone drinks the stuff, it is powdered Nescafé bought from streetside trolleys.

Photo by Pius Utomi Ekpei/AFP/Getty Images

Africa remains by and large the last part of the world to resist coffee, with tea and chocolate drinks the go-to hot beverages. (Exceptions are in the Francophone countries along the Mediterranean and the old Italian colonies on the Horn of Africa.) “Kenya” adorns bags of single-origin beans shipped around the world, but that country’s residents drink less than 1 percent as much coffee per capita as world-leading Finland’s, according to statistics collected by the International Coffee Organization. “Farmers always saw coffee as a cash crop, so they tended not to drink it,” says Chijioke Dozie.

In Rwanda, Dozie saved the washing station by banding it together with two others, generating the volume necessary to justify further investment. But the new scale only magnified an underlying riddle of geography that vexes African coffee economics. Coffee cherries have to be washed near where they are grown, ideally within 24 hours of being harvested, but most of their value is generated close to where they are brewed and consumed. “Starbucks would buy these, roast them, and create value” elsewhere, Dozie says of the cherries grown by KZ Noir, the Kaizen affiliate that acquired the Rwandan washing stations.

Now instead of being shipped to Europe, East Asia, or North America, some of those bags are traveling a shorter distance to Nigeria. Dozie’s Café Neo sources all its beans from the African continent, about one-third of them from Rwanda. A local Nigerian factory, Kaldi Africa, roasts the beans to produce a stronger brew than what Starbucks pours.

Many of the other barriers to developing a coffeehouse culture that Dozie has encountered are simple retail challenges. Landlords require three years’ rent up front for properties in Lagos’s well-to-do neighborhoods, but even there the power grid is so unreliable that tenants need to supply their own generators. Local suppliers were limited, so Dozie and his brother had furniture made to order and imported paper cups from China. Despite significantly lower labor costs, Dozie notes that “two years ago it was cheaper to put a store in London than on Victoria Island in Lagos.” That has led Café Neo to prioritize co-locations in offices: Counters inside businesses such as banks and insurance companies reduce overhead costs, require less staff to manage, and guarantee a reliable base of customers during the workday, he says.

In the stand-alone locations, Dozie is in the unusual position of teaching his customers to linger. “In Nigeria, people don’t have a lot of places to go outside of a restaurant or hotel lobby,” he says. “There are not a lot of places to sit down, work, use Wi-Fi.” He unabashedly cites a “Starbucks-like feel” as the objective, although some essential parts of that experience may take even longer to develop than a taste for coffee. It’s unusual in Nigeria to offer only counter service in a place with seating and to be asked for payment before receiving one’s order. In a hierarchical culture, customers remain surprised that the clerk demands a first name so it can be scrawled on a cup. “The idea of a barista writing your name down and calling it out was new,” Dozie says of one of the unexpected challenges he encountered. “Normally you’d say ‘sir’ or ‘mister.’ ”

From Baker Library:

Although coffee culture in many African countries is nascent, the Financial Times reports that demand is on the rise, fueled in part by a growing urban middle class in countries like Cameroon and Kenya. Rising demand for African beans may help offset a decades-long slump in output. BCG finds that consumer preferences in different countries shape different purchasing habits: Kenyans prefer to purchase coffee and tea at supermarkets, while Ethiopians prefer kiosks. Learn more about hot drink markets in Africa through Euromonitor’s Research Monitor platform, available through eBaker.

Featured Alumni

Featured Alumni

Class of MBA 2008, Section I
follow @ChijiokeD

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