Leading Dormans Group to coffee giant in East Africa
The name Jeremy Block is synonymous with the coffee industry in Kenya, Africa and beyond, and when put together with Dormans Group, he has spent nearly 40 years to grow the company to be the leading coffee growers, processors and exporters in East Africa. As the company celebrates its 70th anniversary, Africa Inc.magazine had a discussion with Jeremy as he eases off his responsibilities and hands over daily management of the Group to a new set of leaders.
Please take us back to 70 years ago when the company was founded, how you joined the company and how you’ve seen it grow.
The company was founded in 1950 by Charles Dorman, but he was in the coffee business before the war (World War II) in the mid-1930s.
The actual company, C. Dorman however, was founded in 1950. Dorman died prematurely in 1960 and his wife Eileen, who came to Kenya in 1939, took over from where he had left at his death and carried on with the business.
I got involved in 1986 in partnership with an English multinational and it was just by luck, being at the right place at the right time. I knew nothing about coffee. Initially they had one of their employees running the business, who after about 3 months thought he couldn’t make it work and opted to sell. I called him and offered to try to run it.
They wanted me to commit for at least one year, which I thought was fine and so I started.
I fell in love with the business and began learning it from the bottom up. Initially I didn’t think I needed to learn how to taste (liquor) coffee, but after 3-4 months I knew that I needed to know what was going on here and so I started learning how to taste.
Mrs. Dorman was adamant that it would take at least 3 years to acquire a liquoring license, but I guess it wasn’t to be because I managed to get it within one year. That was just the license; one has to continually learn about tasting coffee. That’s how it really began.
You talk of luck and being at the right place at the right time, but tell us how you made sure the business succeeded from the start
I had a drive and a need to succeed. I worked from 6am to 10pm at night for those early years, while loving what I was doing; that was a big thing. When I took over the business the turnover was 12,000 bags a year.
The good thing was that the company had a good reputation and I tried to leverage on that. By the mid 1990s we had expanded into Tanzania and Uganda and our turnover had increased to half a million bags a year.
I had great financial support and the trust of my partners. We controlled our costs and I think we understood the market better than most.
There is this saying that for someone to succeed in the coffee industry, you must fall in love with coffee. Do you think it is a pertinent requirement to succeed in the sector?
The love for coffee is imperative. Coffee is a very complicated business. It’s a commodity but not like wheat, corn or rice. It’s not a homogeneous sort of commodity.
Arabica coffee, particularly in East Africa, has such an incredible range of qualities that one must really, really understand the business to be successful. I believe that to do that one must love the industry.
Dormans has been part of the coffee sector from very early on and has seen itself through the turbulence in the sector over the decades. However, it is one of the few players to have survived and grown substantially.
What is the DNA in Dormans that has enabled it to succeed and grow to its current stature as the leading coffee company in the region?
It is something to do with my philosophy of doing business – which is to give and take in equal proportion. I believe you should do to others what you would like to be done to yourself.
The farmer is the key to the industry; if the farmer didn’t produce the coffee, there wouldn’t be an industry. So one has to support the farmer. The main ‘raison d’etre’ in business is to make a profit, but if we do that at the expense of the farmer, there wouldn’t be any business down the road. We work very hard to help all the farmers that we work with to produce the best quality coffee and hence to get the very best prices basis the current world market.
Kenya is a tiny producer of coffee globally. Today the world’s production is over 160 million 60-kg bags of coffee. Kenya produces around 600,000 bags, Brazil 60-65 million, Vietnam 33 million and Colombia 16 million.
So, we cannot compete in that regard (volume), but we are very lucky that we are able to produce the very best coffee in the world. Kenyan coffee, compared to these other countries, receives and achieves by far the highest price of any coffee in the world.
There is nowhere in the world you can sell container loads of coffee at the prices we get here in Kenya. For me it has been incredibly important to attempt to maintain the heart of Kenya’s competitive advantage.
That is why I was opposed to the hybrid Ruiru 11 variety. It was developed with the right idea in mind, to try and produce a variety of coffee plant which would be resistant to “Coffee Berry Disease” (CBD).
You need copper-based fungicides to prevent CBD, which are very expensive. The idea of producing a hybrid which would be resistant to the disease was brilliant. But the way it was produced to have a resistance was by incorporating genes from basically the Robusta types of coffee.
This was at the expense of what gives Kenya its competitive advantage, the taste of the coffee. I believe we must keep our uniqueness, which is our superior flavour which comes from our traditional varieties.
You talked about 600,000 bags but Kenya at the late 1980s had much greater numbers, did Kenya just give up on growing the numbers?
To put it in perspective, yes Kenya did produce at its best about 2 million bags of coffee in 1987/8 but 2 million versus 65 million bags is still a drop in the ocean. Where we are here (the company’s headquarters, storage and processing facility) was a coffee estate before.
There is huge urbanization around Nairobi. No matter how good the agriculture industry is, we are not going to be able to compete with urbanization. We are certainly not going to get back to the acreage of production of coffee that we had in Kenya in 1987/8.
Productivity can certainly increase and that’s one of the major value additions that the farmer can achieve, with better husbandry, to produce more kilos of cherry per tree.
Unfortunately, the weather also has a say in this and no matter how good your husbandry is, you’re not going to get your top production if the weather is against you. At the same time, you have to be realistic.
Many coffee farmers are limited in education and financial ability and hence a limit to the amount of production they can achieve. We try to help the farmers to achieve as much production as possible.
Last year with the drought, it was a very uphill battle; we produced less than 50% of what we had produced the previous year despite our ability in the coffee farming sector being as good as anyone in the world.
Looking at the growth in the industry, despite all the challenges, you recently opened a bigger facility in Ruiru to increase your storage and processing capacity. How important is this investment, especially when looking at how it impacts local processing and consumption of coffee?
What I inherited was a factory in the Industrial Area of Nairobi, an office in the center of town and then we had at one point a business of coffee shops. We then developed a business in the agri-sector at a farm in Ruiru.
Logistically that made things difficult. Getting from the CBD to Industrial Area could take half an hour or three hours. I can remember a couple of our senior traders taking 5 hours to get home after the auction; leaving at 6.00pm and getting home at 11.00pm. I have always wanted to be out of that chaos and to be in this part of the country.
I bought this land ten years ago but there were all sorts of problems between the owners and some other people. So it took longer than I had hoped to get the place built. It is expensive but I would like to think that this is here for the future.
It’s a lovely place and environment; very efficient, very effective. It’s a nice place for all employees to work and by being all under one roof there are already some cost savings.
We have had a lot to do with local consumption of coffee, but I think there is a lot of misunderstanding. We have a product in Kenya, which is the most expensive coffee product in the World.
Unfortunately, our population is not the richest in the world. So, one of the competitive advantages is that we can actually sell our coffee to the richer countries in the world where they pay those huge prices for our coffee. This is not to say we don’t sell excellent coffee here in Kenya, we do, but the market for that is very small.
One of the things I am extremely proud of is developing certain blends for the local market which are the very best that Kenya can provide. However, the market for that is tiny on the World scale.
A big specialty coffee shop in New York would sell in a day what we would probably sell in a year, so one has to put that into perspective. Yes, it will grow, but it will only grow at the level of Kenyan’s disposable incomes. If you earn US$500 a month, you’re not going to spend US$10 of that on a single cup of coffee; it is just logic.
In time it will grow, but slowly. So, when someone says we have to roast all our coffee and sell it roasted, they don’t really know what they are talking about.
What has changed in the marketing and consumption of coffee across the World since you entered the business?
Well, in the 1980s when I started, there was no internet and there were no mobile phones. We used to communicate with our buyers via telex. Most coffee that was drunk in the World was brewed as a full-size cup of coffee through a percolator.
Of course, the French press or cafetière was trying to come in, but basically this was regular coffee. There was of course espresso in Italy and France but very little elsewhere.
I think Starbucks was probably key to the expansion of coffee consumption in the World and coffee really started getting on the map in the early 1990s.
There has been a lot of changes in the method of consumption since then. The largest consumer of coffee back in the 1980s was the sink. You could make a big pot of coffee, have a cup and your wife another and dash to the office. What was left went down the sink.
Now we have pods and drive through coffee shops at petrol stations. The sink as a leading consumer has reduced enormously. So huge changes in marketing and consumption of coffee.
Consumption far from home has increased drastically, but are we far off in the coffee culture compared to the rest of the World? What is the prospect for the coffee chains in Kenya and the region?
We are still a long way from that. Travel to Muranga, Machakos or say Kisii, tell me how many people are in any food establishment drinking coffee; 1% may be? It is still a very expensive drink.
What does a traditional cup of tea cost versus the cheapest cup of coffee? The cheapest cup of coffee you’re going to get I would say is Kshs 20. In the towns yes, it is an aspirational commodity but once again the people who are going to afford that are certainly not numerous enough to encourage a Starbucks by a long way.
It will probably come in time, but to see any substantive growth the disposable incomes must grow too.
What do you have to say about the role and progress of women in the coffee business in Kenya?
I don’t have any favoritism as far as gender goes. Our previous Managing Director was a woman and our head of our the roasting company is a woman. I bought the company from Mrs. Dorman. Women definitely have ‘equal opportunity’ at Dormans.