Indonesian millennials and zoomers love coffee. The archipelago’s growth in production, twice as big as it was a decade ago and rising at a higher pace than other countries, is being absorbed by booming internal consumption. The number of coffee shops tripled from 2016 to 2019. The country’s coffee retail market is expected to grow faster than any in Europe and is flooded with cash.
In 2019, rapper Jay-Z and tennis player Serena Williams invested millions of dollars in an Indonesian coffee chain. All this is having an impact on production. These very millennials and zoomers are bringing their passion from the coffee shop to their families’ farms and changing how coffee is produced and processed in the country.
Country overview
Indonesia's coffee is grown across several islands: Sumatra, Sulawesi, Central Java, West Java, Bali, and Flores. These areas produce a mix of Arabica and Robusta beans, with the average farm size being just 1 to 1.5 hectares. Despite the small scale, there are over 1.5 million coffee farms in the country. Coffee farms in Indonesia are typically found at altitudes between 900 and 1,800 meters, yielding around 11 million bags per season. The split between Arabica and Robusta production is about 25% to 75%.
Challenges faced by the Indonesian supply chain
Indonesia's coffee supply chain is pretty complex, with poor infrastructure, limited extension services, and tough access to credit making things difficult. Even though production and exports are on the rise, coffee still plays second fiddle to palm oil and tobacco, which get more government support. Over 90% of the country's coffee growers are smallholders with just about 1 hectare of coffee, often mixed with other crops like rice, cocoa, fruits, pepper, and tobacco. For many, coffee is just one of many subsistence crops.
The Wet-Hulled Effect
Farmers also have to deal with heavy rains and winds that knock the developing fruit off the trees, messing with yields. The output is also low because of old plantations that need replanting, lack of inputs, and poor farming practices. The traditional wet-hulling method, known locally as giling basah, can lead to many defects and has gotten a bad rap among high-end buyers.
However, wet-hulled coffee has a solid place in the selection of traditional and commercial roasters that need a variety of origins. Troy Kiper from Bright Java Coffee, one of Algrano’s verified sellers in Central Java, says the demand for wet-hulled coffee drives internal prices up, no matter the quality, and adds a premium to commodity coffee. Big exporters go to Lake Toba to collect wet parchment (gabah). When they need to fulfil big orders, they buy from any island and sell it as Sumatra.
Youth to the Rescue
Despite these challenges, young Indonesians and small businesses are leading the push towards better quality coffee. There's a lot of potential to make Indonesian coffee more valuable, and during the Covid lockdowns, more young people went back to their family homes and got involved in farming, speeding up this trend.
Right now, there's not much diversification, with almost 70% of all coffee coming from Sumatra. Few farms are organised into co-operatives or groups, and only 7% of production is certified. But most coffee is grown in agroforestry systems with minimal chemical inputs, and farmers already get about 80% of the export value.
Indonesia is also seeing a shift in its buying markets from Europe to nearby emerging markets like Malaysia and Thailand, and bigger regional economies like Egypt and Russia, where demand is growing, and specialty coffee is becoming more popular. A fully liberalised country, Indonesia is setting itself up for direct trade thanks to local businesses. They’re the ones driving new processing methods and improving quality, and they’re the ones on Algrano’s marketplace.
