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Crisis of the Indian and Global Coffee Industry

An article attributed to Com Rajeshwari, wife of Com Saketh Rajan and published in Peoplesmarch Volume 4, No. 12, December 2003 is given below:


Crisis of the Indian and Global Coffee Industry

— Raji


The global coffee economy is caught in a deep crisis. It has directly affected more than 25 million coffee producers in about 50 countries across the world. Some Latin American governments have preferred to call it "the worst coffee crisis of the last 100 years".

In June 2003 Nestor Osorio, Executive Director of the International Coffee Organisation (ICO), the apex global body of coffee producing, trading, processing and consuming countries, said that the crisis which affected the coffee sector for more than four years "was far from over".

At one end, the crisis is typified by overproduction of coffee beans. Unsold coffee has been hovering at 10% of total global production these last four years. The cumulative stock of unsold coffee beans since 1998 stood at 40 million bags in June this year. In other words, nearly 40% of all the coffee that will be consumed in one year remains as accumulated idle stock. If coffee production has been growing 3.6% annually, its consumption has been growing only 1.8%.

Consequently, the purchase price of coffee has fallen by half when compared to rates in 1997. These have been the lowest rates offered to producers in the past 30 years. The ICO and World Bank have themselves said that in real terms this is the lowest rate that coffee producers have got in the past 100 years. Current rates of bean coffee on the global market cover only 60% of the cost of production.

The crisis has been sustained. It has been sweeping. And it has been severe.

It has already taken its toll on the global coffee peasantry and proletariat of the poor coffee producing countries of Asia, Africa and Latin America. Karnataka produces about 3.5% of world coffee and about 70% of India’s coffee. About 10 lakh workers and peasants produce coffee in India.

The crisis does not yet show signs of abating. It has meanwhile ravaged the lives of millions and threatens to push the masses to greater hardship and misery. As Osorio admitted this June, "It’s a crisis with a social dimension that is politically explosive".

Agony of the Oppressed

40% of the population of the world drinks coffee. It is the most widely traded primary commodity on the international market after petroleum. In 1999-2000 global coffee trade was valued at $ 9 billion. There is little mechanization involved in the cultivation and harvesting of coffee. Close to 70% of the crop is produced by small holders. It continues to be labour intensive, engaging 25 million peasants and workers across 5 million farms in the world.

Brazil continued as the unchallenged leader in world coffee production. In 2003 it produced close to 30% of global coffee. Vietnam displaced Columbia for the second position, producing 11.5%. Columbia stood third, producing 10.5%. India ranked seventh after Guatemala, Indonesia and Uganda. Latin America produced 60% of world coffee, followed by Asia which produced close to 25% and the rest came from Africa.

Coffee is truly a third world crop. A crop of Asia, Africa and Latin America. None of the imperialist countries grow coffee. At the same time, up to 80% of world coffee is consumed in imperialist countries. Western Europe guzzles 40%, USA drinks 24% and Japan consumes 10% of world coffee.

Coffee was a plantation crop introduced during the middle of the nineteenth century by European colonizers. Despite one-and-a-half centuries of its cultivation and popular consumption, it continues to reflect, in every sense of the term, the division of the world between the oppressing rich and oppressed poor. Herein lies the systemic source of today’s coffee crisis.

As a continent, Africa stands third, contributing to a little less than 15% of world coffee production. But this does not reduce the problems that the coffee growing countries of Africa have faced due to the current crisis. The specific countries that produce coffee in Africa are absolutely tied to the coffee economy. This is what typifies coffee production in most of Africa. Many of the 17 coffee producing countries whose export earnings from coffee contribute to more than 10% of total export earnings, are situated in Africa. These countries also happen to be amongst the poorest nations of the world.

For example, coffee is the principal export of Ethiopia and more than 7 lakh households cultivate it. In Ethiopia, torn by famine and war for decades, millions of peasants who depend on it for their income have been ground by the coffee crisis.  Uganda and Burundi are two countries which depend on more than 70% of their export earnings from the sale of coffee alone. Their economies have been further devastated in these last few years.

The case of neighbouring Rwanda has been more agonizing. Rwanda depends on 50% of its export earnings from coffee. 70% of the rural households of this country cultivate coffee. In the last decade owing to the collapse of production quotas or the International Coffee Agreement (ICA) due to the unilateral withdrawal of USA from it, subsequent IMF imposed structural adjustment programme of its economy and due to the devaluation of the Rwandan currency in 1992, the production of coffee fell by 25% affecting the broad masses of the countryside.

The civil war between the Hutus and Tutsis coincided with this crisis and led to the massacre of nearly 10 lakh Rwandans and the displacement of millions from their villages and farms. The skeletons unearthed from the mass graves of Rwanda point their white bony fingers at the coffee crisis authored by imperialist globalisation. The persistence of the global coffee crisis has laid the economic basis for the continuation of an unsettled state of affairs despite the general cessation of social violence and strife.

Most of world coffee is grown in Latin America. And it is here that the largest numbers of workers and peasants have been affected by the crisis. Ivan Castro reports that the crisis is "particularly pronounced in Central America and Mexico"

Nicaragua is one such Central American country which is heavily dependent on coffee for its external earnings. Nicaragua saw the Sandinista revolution take power in 1978. But it compromised with imperialism afterwards and the counter-revolution was ushered in with the collaboration of the Sandinistas themselves in the course of a decade. However, during the brief period of Sandinista rule, Nicaragua’s agriculture was restructured, the plantation empire owned by its former hated President Somoza was seized. Land reform was undertaken and peasant cooperatives were formed.

But the current crisis, which has come in the aftermath of the Nicaraguan counter-revolution, has blown away the remnants of former cooperatives. The global coffee collapse has left more than 2,50,000 people jobless in the country. Nicaragua is a small country with a population of about 50 lakhs.  Hence the unemployment caused by the coffee crisis has a telling impact on the lives of the people.

35% of rural employment is generated by coffee in Columbia which was the second largest producer of coffee in the world till recently. The Columbian government has announced that 2 lakh jobs were lost in 2002 as a result of the crisis.  The Columbian government has been facing the unstoppable expansion of the anti-feudal anti-imperialist armed struggle. The coffee crisis, which has generated a large mass of unemployed, will, in the final analysis, help organizations like FARC to recruit more fighters for their guerrilla war and gain wider sympathy for their cause.

In El Salvador the drop in coffee prices, combined with the destruction caused by the January 2001 earthquake, left more than 30,000 coffee workers unemployed.

In Guatemala coffee growers are faced with bankruptcy. They have started selling low-grade coffee to burn as industrial fuel in the hope that it can fetch a higher price.

Mexico is another major producer of coffee. It has been one of its chief exports. Mexican coffee has been selling at nearly a third of its former price. As a result income from coffee exports fell from $800 million to $250 million between 1999 and 2002. Coffee is cultivated in Mexico in states like Chiapas where indegenous populations reside. The armed struggle started in 1994 by the Zapatistas or EZLN is also based among the native Indian population in the crisis-ridden coffee growing regions of Mexico. In addition to the global crisis, the coffee growing regions of Mexico were affected by a severe drought last year, massive cornfield blazes that set coffee plantations on fire and three devastating hurricanes. The worst of them was Mitch. These calamities contributed to the destruction of 80% of last year’s coffee crop. As the combined result of all these factors, coffee cultivation has been discontinued in 7 lakh acres of Mexico devastating lakhs of families. It has been estimated that last year alone 3 lakh coffee farmers and workers have been forced to leave to other places in search of work.

The leading Asian coffee producers have been Vietnam and Indonesia apart from India. Let us look at the facets of the crisis in Vietnam.

The Workers Party of Vietnam led the masses of that country in a glorious peoples war to seize power from the French and then the US imperialists in 1975. But the party took a centrist position in the ideological struggle with Soviet revisionism led by the Chinese Communist Party. This led it to compromise the socialist road for the capitalist road.

Gerard Greenfield writes that since 1989 the Vietnamese government embraced key elements of neoliberal ideology, imposing far-reaching de-regulation and privatisation programs and enforced the commercialisation and export-oriented expansion of agriculture.

A decade ago Vietnam was a country which grew little coffee. It was encouraged by imperialist countries like France and USA, coffee TNCs such as Nestle and imperialist multilateral banks such as the World Bank, the French Development Fund (FDF) and Asian Development Bank (ADB) to undertake the rapid expansion of coffee. The FDF issued a $ 40 million loan to Vietnam as late as in 1998 to create 40,000 acres of coffee plantation by stripping pristine forest.

Within a decade, by 2001, Vietnam became the second largest producer of coffee in the world and the largest producer of the cheaper Robusta variety. Most of this growth occurred between 1995 and 2001. The harvested area expanded from 1.5 lakh hectares in 1995 to 5.5 lakh hectares in 2001. Exports rose in this period from 4 million to 14 million bags. This meant that Vietnam produced 12.3% of the world’s 114 million bags of coffee. Only 4% of coffee grown is consumed domestically. The rest is exported to Singapore, Japan and the West.

Vietnam has perhaps witnessed the most rapid destruction of rain forests for any country in the 1990s. Since 1996 more than 4 lakh people migrated to Dak Lak. 1.2 lakh hectares of forest was burned and cleared for coffee here during the same time.

In August 2000 Kinh coffee plantations were burnt. Then in February 2001 thousands of indigenous peoples belonging to the Edeh and Jarai communities confronted the Vietnamese army as they blockaded the national highway for two weeks. They demanded for an end to coffee plantations which destroyed their forest and for a return of all their ancestral lands.

Due to a crash in prices since 2000, peasants started burning their coffee trees. In Dak Lak alone over 10,000 hectares of coffee was cut down, burned or abandoned. At the same time the government announced plans to reduce total coffee output and raise prices by cutting down 1.5 lakh to 1.8 lakh hectares of coffee trees, including 70,000 hectares in Dak Lak and 40,000 hectares in Lam Dong provinces. The ICO Overview of August 2003 stated that the impact of low international price was "even harder in case of Vietnam" where production of coffee declined by 32.23% in 2002-03 to stand at 8.90 million bags compared with 13.1 million bags in 2001-02.

What a peasant woman of Dak Lak said authenticates the agony of the crisis for the 2.5 million coffee producers of the world: "We live with coffee, we die with coffee".

Catching the Culprit

Who has led the toiling millions into this crisis? Is it Vietnam, as some convolutedly say?

After World War II coffee prices rose. They peaked in 1955. Then prices crashed. This created instability in the poor coffee-exporting world. This could affect US political fortunes at a time when the socialist camp was expanding and national liberation struggles continued to lay their claim for self-determination on the African continent. The US government showed initiative in the creation of an International Coffee Agreement (ICA). Third World countries favoured it since it provided price stability and appeared as the only insurance against price collapse.

The ICA, fixed export quotas each year for each country based on estimates of the global coffee market. The ICO, established in 1963, was given the task of implementing it. For the next 25 years international coffee prices remained stable. But towards the end of the 1980s the ICA began to crack and it eventually collapsed. The US on its part walked out from the ICA unilaterally. Then Canada followed suit. In the wake of the coffee agreement’s collapse, the World Bank and IMF have pressured African and Asia countries to liberalize their coffee industry and eliminate state agencies such as, for instance, the Coffee Board of India that bought beans for guaranteed prices.

Some coffee producing countries tried to create a cartel in order to stem the disruption to production that would ensue from the collapse of the ICA. An Association of Coffee Producing Countries (ACPC) was formed by 14 governments in 1993 under Brazilian initiative. India was a hesitant member. The ACPC was to operate as a coffee cartel similar to the OPEC (Organisation for Petroleum Exporting Countries). Five global coffee TNCs—Proctor & Gamble, Philip Morris, Sara Lee, Nestle and Tchibo dominate the world coffee market. Between them they purchase 50% of the world’s bean coffee.  While they continued to purchase green bean coffee from poor coffee exporting countries, they refused to have anything to do with ACPC strictures. Over-production and an ensuing decline in rates were to their profitable advantage.

Vietnam was encouraged to remain out of the ACPC. "TNCs such as Nestle started sourcing from Vietnam to drive down prices, forcing its traditional suppliers in Mexico and Central America to in turn lower their prices." Viewing the rise in global coffee production beyond the capacity of the consumption market, the ACPC decided that each member country should hold back 10% of its coffee stock from the global market. But in October 2002, less than one-and-a-half years since its agreement, the ACPC came out with a statement saying that its plans had failed.

Coffee ran amok on the market.

Manipulated by imperialist TNCs, the ACPC met death. It was another of the ‘fake encounters’ that regularly happen on the world market.

Then there were some attempts at forming regional producer groupings. In January 2002, the Asian giants, Vietnam, Indonesia and India met in Hanoi to form a body of the three leading Robusta coffee producing countries of the world in order to regulate Robusta sales so that global prices could be manipulated to their advantage. But such regional initiatives proved poor starters.

The reasons for imperialist reluctance are not hard to discover. In the ten year period between the collapse of the ICA agreement and now, there has been a glaring disproportion in the accumulation of profit. The following facts demonstrate the accumulation of capital in the coffee industry on a global scale during the last one decade of imperialist globalisation. In 1992 one-third of the total value of the world coffee market accumulated at the hands of the producing countries. But in 2002 they were left with only one tenth.

In real money terms the coffee producing Third World earned $ 10 billion by selling coffee to the TNCs in 1992. In that year the TNCs who processed coffee and sold it to consumers earned $30 billion. In 2002 while TNC retail sales exceeded $ 70 billion, coffee producing countries could earn only $5.5 billion.

In the chain of the coffee economy there are different players. There is the worker who toils on the land of an owner. The owner sells bean coffee to the exporter. The exporter sells it in turn to the TNC. The TNC does the roasting, grinding and packaging. He then sells it to the retailer. He in turn sells it to the consumer.

Of the money the consumer pays for coffee, the worker gets 8 %, the owner gets 5%, the TNC gets 67% and the retailer gets 11%.  Evidently the share of the TNC grows in direct proportion to the persistence of a glut in the market. Small wonder that George Bush who warms the imperialist throne would not like to sit with those who seek a status quo let alone reverse this trend of things.

The annual report of Nestle in 2000 underscored this fact when it said: "Trading profits increased…and margins improved, thanks to favourable commodity prices." 3,900 cups of Nestle’s instant coffee are drunk every second in the world. An investment analyst described it as the "commercial equivalent of heaven"

But the analyst failed to see its social opposite, hell.

At a time when millions of people producing coffee were pushed to starvation and death, at a time when families were broken and the cultivators of coffee migrated from one corner of continents to another in search of livelihood, companies like Nestle recorded an annual profit of 22% in 2000. In 2001 its profits rose to 26%. Starbucks, of USA announced that its net earnings increased by 40% over 2000. Sara Lee experienced 17% profits for 2001.

The crisis of overproduction fetched these imperialist monsters windfall profits. Greenfiled made a precise summing up when he said: "Not only do these TNCs profit from the crisis faced by coffee growers and workers, but their manipulation of prices and world coffee demand contributed to the current crisis."

Indian Coffee in a Broken Cup

Indian coffee has also been caught in the global crisis.

Indian coffee comes from 1.57 lakh holdings. 70% of these are less than 2 hectares in size. In government parlance, they are categorized as "small holdings". The poor and middle peasantry fit into this bracket. Small holdings of less than 2 hectares size constitute 42% of the total planted area of coffee in India.

"Large holdings" are those which are more than 10 hectares in size. Holdings between 10 hectares and 100 hectares may be generally classed as those belonging to semifeudal landlords. They constitute 1.6% of all holdings and carve up 23.5% of all land under coffee.

Holding size above 100 hectares are generally called as "company estates" by the masses. The comprador bureaucratic bourgeoisie most often owns these estates. There are only 0.1% or 105 such holdings. Yet they own 11.3% of the total area under coffee.

1.54 lakh holders that have holdings below 10 hectares produce 60% of all coffee. They form 98% of all holdings. 65% of all the coffee areas are under them. However 40% of coffee is produced by 2,600 holdings that are above 10 hectares in size. They constitute just 1.7% of the total holdings and yet control 35% of all land under coffee.

The total number of permanent and casual labour that works on these lands is estimated at 5.35 lakhs. This estimate made by the Coffee Board does not include the contribution of family labour, which is significant. However institutions such as UPASI (United Planters Association of South India), which represents the comprador crème, estimate the total labour force that toils to produce India’s coffee at 10 lakhs.

The above data establishes that coffee is produced in a social environment which is deeply divided along class lines. The working class constitutes the most numerous population. The labour of the landless and poor peasantry is significant. The middle peasantry puts in its modest share of work. The landlords and compradors gorge on the toil of the working class and peasantry.

Hence while the on-going coffee crisis has affected production as a whole, the specific nature of impact on the different classes varies. The working class, poor and middle peasantry are the underdogs and they face the brunt.

The impact of the coffee crisis is also confined to certain states in India. Karnataka accounts for 70% of the country’s total production of coffee. Kerala comes next with 22% and Tamil Nadu follows with 7%. Andhra Pradesh and the North East contribute 1%.  The crisis is therefore focused on Karnataka.

In Karnataka coffee is grown basically in three districts—Chikmagalur, Hassan and Kodagu. These districts are adjacent to one another in a linear direction. In Kerala most coffee is grown in Wynad. And in TN the second largest coffee growing district is the Nilgiris. These five districts fall in the Western Ghats and are contiguous. Close to 80% of the Indian coffee area is concentrated here. Hence this has been the focal region of the crisis.

In 2003, India produced 4.5% of world coffee. 80% of the coffee that was produced in the country is exported. The internal market has remained stagnant since 1985. Consumption is basically confined to the South Indian market. Any increase in coffee production has perforce to be sold in the external market. India’s export volume has thereby risen from 70% to 80% of its production in less than a decade. The relatively small domestic market and its stagnant intake have placed Indian coffee in a predicament.

From the time of its colonial past Indian coffee production has basically served imperialism. 70% of its coffee is exported to Europe. This has left Indian coffee wide open to imperialist regulation and manipulation. It has exposed Indian coffee to the vagaries and whims of the rulers of the world.

In 2000 India exported 2.53 lakh tones of coffee. This dropped to 2.19 lakh tones in 2001. In value terms it was down from Rs 1,685 crores to Rs 1,113 crores. In other words nearly one-third of its foreign earnings from coffee had been wiped off. The decline continued for the next two years. Coffee exports fell from 2.14 lakh tones in 2002 to just 1.86 lakh tones in 2003. In other words, the volume of Indian exports fell by 37% in the period between 2000 and 2003. The fall was significant.

Taking 1997 as the benchmark, India registered a massive growth in production from 2.64 million bags then to 3.40 million bags in 2002. Yet, over the same period export earnings "nosedived" 51% from close to Rs 2,000 crore to Rs 972 crore.

For the cultivator, these figures translate into the following terms. Of the two major types of coffee grown in India, Robusta is more widely produced. It constitutes 64% of Indian coffee production.  Between 1998 and 2002, Robusta rates fell from Rs 71.90 to Rs 28.70 per kg. The other variety, Arabica dropped from Rs 96.80 to Rs 36.7 per kg during the same span. The sharper fall in Robusta rates, which is more widely grown, has only meant that the impact has been wider.

Former UPASI President IJJ Rebello estimated that coffee plantations in South India faced a revenue loss of Rs 1,960 crores.  He said that the status of the plantation sector was "precarious and, unless prices improve, the entire industry will close down." Then he spoke on behalf of his class by saying: "Some estates are not able to pay wages and PF dues or meet the payments due to their suppliers."

In Kerala, estates were reported to be "on the verge of closure". Planters had deferred payment of bonus to workers.

The Karnataka Planters Association (KPA), affiliated to UPASI and dominated by compradors and big landlords, held a press conference in November 2002. Its Chairman, AS Muthanna said that between 1998 and 2002 the coffee industry had lost up to Rs 2,000 crore. A KPA survey had demonstrated that plantations were facing losses. Muthanna went on to warn that the coffee industry was "on the verge of collapse."

The raised axe of the coffee crisis was directed at the heads of workers.

Many reports appeared in the media at this time of workers being laid off and plantations remaining unattended. Oxfam estimated that between 2000 and 2002 there was a 20% fall in the number of coffee plantation workers in Karnataka.  This means the loss of at least 1.5 lakh jobs in the coffee sector during this period.

In Malnad, the coffee growing peasantry is seriously indebted. Thammaiah of Sakleshpura taluk in Hassan district had built a concrete-roofed house when the going was good. He owns one acre of coffee. Now with prices hitting rock bottom, he finds himself working as a casual labourer at wages that are 35% less than normal. His declass profession has kept him going. But it has been of no help in clearing the debts he has accumulated.

Most peasants are not able to repay debts. They have tried to sell their lands. But land rates have fallen to Rs 1.15 lakhs per acre from Rs 4.5 lakhs before the crisis began.  Often this is inadequate to pay off loans.

Social investigation teams of CPI (ML) (Peoples War) undertook rural survey in some of the coffee growing villages of Chikmagalur district in late 2001. The coffee crisis had had its impact. Rural indebtedness stood at an average of Rs 14,687 for each peasant household. Only 30% of these were from institutional sources. The rest were from the landlords.

Hence government measures to coffee producers such as debt rescheduling and temporary downscaling of interest are not as helpful to the peasantry as they are to the big landlords and compradors who draw all their loans from banks.

Suicide deaths have emerged as an annual trend in the rural scene in Karnataka. To date more than 200 peasants have killed themselves, unable to grapple with the crisis. Suicides have generally haunted the dry rain-fed plains areas of Karnataka. However, the first case of distress-led peasant suicide was reported in 2002 from Mudigere taluk in Chikmagalur district. The victim was a small coffee cultivator. A coffee grower in Koppa taluk of Chikmagalur district inaugurated the string of suicides for this agricultural year. Do these forebode a competition on peasant suicides between the lush Malnad and the semi-arid plains in the coming days?

Apocalyptic? Yes. Scare-mongering? Not quite. With the prices of coffee the world over at record lows, there is the real concern of an impending ecological disaster in the western ghats, should the coffee industry go into terminal decline."  

Globalisation and Restructuring of Indian Coffee Industry

Today’s coffee crisis is directly linked to the process of imperialist globalisation that has been underway since the early 1990s in India. The signing of the WTO agreement by the Indian government has been a major turning point in precipitating matters.

Even before the time the ICA came into effect in 1963, Indian coffee was compulsorily pooled with the Coffee Board by all growers. The Board would sell its coffee stock on international and domestic markets when prices were favourable. It then deducted working costs distributed the rest to growers according to the quality and quantity they had sold to the Board. The Board served as a monopoly trading institution and was directly regulated by the central government.

Not withstanding graft, the Coffee Board basically acted as an insurance against short-term swings and manipulations in the global market.

The US government was unhappy with ICA protocol since it provided relatively stable terms of trade to the producer and slowed the extent of accumulation by TNC purchasers of coffee beans. In 1989 the ICA was liquidated. This set off the rat race. It led to unbridled competition, undercutting and underbidding among the poor producing countries, particularly as and when production outstripped potential consumption.

However, the existence of centralised coffee procurement and regulating agencies such as the Indian Coffee Board served as an instrument denying the TNCs full sway over the global market. The US was particularly keen on demolishing the Coffee Board. World Bank-IMF loans were issued to India in 1991 under the added condition that it totally dismantled the Board’s procurement monopoly on Indian coffee. The Indian ruling classes acceded to this.

In 1992 the central government amended the Coffee Act of 1942 and announced that 30% of coffee that was produced could be retained by growers for sale under the Free Sale Quota (FSQ). In 1994 it made yet another amendment and raised FSQ to 50%. In 1996 pooling of coffee with the Coffee Board was totally abolished. What remained was free sale without any quotas. The market was totally deregulated and the Coffee Board was reduced to an advisory body.

In the period between 1992 and 1998 global coffee rates appreciated each year. But this had nothing to do with the FSQ. Spot sales and spot cash became the order of the day. The central government and comprador-landlord institutions such as UPASI and KPA, which regularly pressured the government for the early dismantling of the Coffee Board, generated the impression that FSQ and globalisation were the magic solution and that the corrupt Coffee Board had been the culprit all along. One section of coffee producers, swayed temporarily by the surge in coffee rates, supported the restructuring of the coffee industry. They developed illusions about imperialist globalisation without knowing of the real danger that lurked before them.

No sooner than the passage of the Coffee Amendment Bill of 1998, the over-production crisis in global coffee took hold. Every year since then, workers and peasants have had a real taste of the havoc wrought by imperialist globalisation under the WTO regime.

Under pressure, organizations like UPASI and KPA have not missed an opportunity to raise the question before the media in press conferences they have addressed since then. There are umpteen numbers of news stories in the English and Kannada print media with demands for the government to act in defense of the "coffee producers" a euphemism for the compradors and big landlords.

These organizations have opposed militant mass protest by coffee growers. The KPA, for instance was on its toes to condemn a spontaneous gherao of the Chairperson of the Coffee Board when she was in Sakleshpur last year.

Instead they have had regular parleys with the union Commerce Minister, the Finance Minister and even the Prime Minister. MPs and MLAs—sitting and unseated—and Chief Ministers and Law Ministers have accompanied them in these trips to Delhi and back. The Prime Minister, Finance’s Yashwanth then and Jaswanth now, the Commerce Minister and even the Defence Minister, George, have all been sympathetic to their demands. Every central budget in these last three years has responded by providing these rich planters the necessary sops.

The thrust of their demands has been to hike import tariff from 30% to 150% on imported coffee. This has been acceded and implemented in phases. They have sought the rescheduling of bank loans. This has been acceded. They have sought an interest holiday on loans from banks. This has been conceded. And they have asked for the creation of a fund of up to Rs 500 crore for the purchase of surplus stock at times of over-production. This last is a matter the imperialists are not keen about and so the government has not agreed to it. It would obviously spell the resurrection of Coffee Board raj.

Despite all the noise made about WTO and the imposition of tariffs, UPASI and KPA have consistently made it clear that they are in favour of the WTO and want the imposition of only those import tariffs on coffee that are permissible within the WTO ambit. They have argued for implementing what WTO has technically called the ‘bound rate’. They have been choosy about keeping a Vietnam or Sri Lanka out. By contrast they have been on the best of terms with institutions like the WTO and the imperialist bourgeoisie.

Most important, the demands and political thrust of the UPASI and KPA leave the real social forces that have caused the devastating crisis absolutely free to raid the Indian market. In fact they have collaborated to set the stage for the free play of imperialist TNCs and their compradors in restructuring India’s coffee industry.

Comprador and Imperialist Gains

"Let us agree on one thing: The WTO regime is more an opportunity than a threat. Seize the moment! And seize it right!"

These concluding words of a long article could have been dismissed if somebody less important than Harish Bijoor had written them. He is one of those young articulate management yuppies in the biggest business house of the land—the Tatas. He is Vice President of the Marketing Division of Tata Coffee. And Tata Coffee is, according to its own claim, Asia’s biggest coffee conglomerate.

Tata Coffee has been in the lead in demanding for the removal of controls exercised by the Coffee Board, the implementation of FSQ and promotion of private trade in coffee. As a sponsored article in the Tata website states, "It was the untiring efforts of Tata Coffee that led to the dismantling of controls in the industry…"

In fact this single-minded pursuit of Tata Coffee has not been without its own good reasons. The WTO regime has created wide "opportunity" for the Tatas and this company and other compradors have indeed "seized" it.

The origin of today’s Tata Coffee may be traced to Consolidated Coffee Estates (CCE), which had vast plantations in Karnataka’s Kodagu district. This company was formed in 1922 at Edinburgh in Great Britain. British colonial planters wholly owned it. On the transfer of power in 1947, CCE and many other similar estates were sold to Indian compradors. Tata Tea acquired Consolidated Coffee in 1967.  It lorded over 10,000 acres of coffee estate and the coffee curing works at Kudli, Kodagu district. Thus India’s foremost comprador house became heir to the wealth of its former colonial master.

However, slave generations of the old master have continued to slog for the new. In this sense, the deep freeze of the colonial past has persisted into the period of imperialist globalisation unmindful of the tri-colour fluttering in the breeze.

With the introduction of imperialist globalisation policies and the deregulation of coffee, Tata ventured into the domestic marketing of coffee from 1993 under an assortment of brand names. However, the company made the biggest strides during the coffee crisis that set in from 1998.

In early 2000 the Tatas purchased the 1,300-acre Coovercolly estate from the Kotharis. The Kotharis are a Marwari comprador house based in Chennai. MA Bopanna Managing Director of Tata Coffee (Conscofe then) declared that the company had become the owner of 20,000 acres of coffee, "reinforcing its status as Asia’s biggest coffee conglomerate." Bopanna spoke of "feelers" from other plantation owners in Karnataka to throw up their estates to the Tatas, thus betraying the company’s "aggressive plans to expand further."

But the Tatas have not confined their killer instinct to Indian frontiers alone. True to the expansionist traits of the Indian big bourgeoisie, and in fact, leading the pack, the company has taken over plantations in Indonesia, Africa and lately in Sri Lanka too. Basking in the imperialist sun and referring to expansion through future acquisition, Bopanna said "we are a Tata company and the sky is the limit"

Raghu Krishnan made an appropriate summing up of the Tata "strategy" when he said that it was "one of maintaining profitability while expanding through acquisitions from those who had second thoughts on remaining in coffee."   In other words it was precisely due to the coffee crisis, which made coffee business unprofitable for lesser companies, that the Tatas could envisage an expansion drive not just in India but across Asia and Africa as well.

While the foraging for estates is on, the Tatas amalgamated with companies that also had coffee curing and brand retailing capacities. It merged with Asian Coffee Ltd and Coffee Lands Ltd. It also went in to list its shares on the Mumbai, Hyderabad and National Stock Exchange in order to rake in enough liquidity after the amalgamation.

The Tatas have a coffee curing capacity of over 32,000 tonnes per annum. Tata Coffee cures one-eighth of all coffee produced in India. In addition to the coffee it produces on its estates, it also roasts and grinds coffee in three plants in different locations in South India. Following the merger with ACL, it has now acquired an instant coffee manufacturing plant in Hyderabad.

Early this year, Tata Coffee along with the imperialist company Turner Morrison, purchased equity worth Rs 50 crore in the Mauritius based Barista Coffee International. Barista Coffee International is in fact the subsidiary of the New Delhi based Barista Coffee Company. With this Tata Coffee obtained a 34.3% stake in Barista. Barista sells coffee at kiosks to high income customers. The Mauritius connection comes handy for tax evasion. More important, it is the launching pad for global sale of Tata Coffee and Tata Tetley Tea brands in countries of South Asia, China, Malaysia, Singapore, Hong Kong and UAE. It has already made a franchise agreement with all the Gulf Cooperation Council (GCC) countries of the Middle East. In future it plans to sell coffee through Barista in Europe and Africa as well.

Barista will also expand inland operations. With the infusion of Tata money it plans to set up 300 retail coffee outlets in India by 2005-06, upping its present position from 150. Barista retail sales are slated to touch Rs 800 crores by then.

Now you can drink Tata frappe at Rs 44 a cup, standard Tata cappuccino coffee at Rs 40 a cup and Tata cold coffee at Rs 30 a cup — all these are quotations of slashed rates, mind you—in any of the Barista outlets in India without forgetting to thank the Tatas for making the best use of a human crisis which has devastated the life of lakhs of Asian and African workers and peasants for the sole purpose of making multicrore profits.

Earnings of Tata Coffee have continued to rise over the years. From Rs 24 crore in 1995-96, it rose to Rs 26 crore in 1996-97. Then profits doubled to Rs 53 crore in 2000. Latest figures will surely show a further sumptuous rise.

Tata Coffee has thus been making super profits at a time of acute crisis. Taking advantage of the lashing globalisation storm, it has rummaged to gather the dispersed pieces and consolidated itself as the biggest owner of coffee plantations. It has become the largest processor of coffee in the country. It has become a leading seller of coffee in India and abroad. It has achieved backward and forward integration in the coffee sector making it the foremost conglomerate of the Afro-Asian coffee world. It has thereby earned itself name as the biggest exploiter of the masses producing, processing and retailing coffee in India and its immediate environs.

Surely, the broad masses owe the company their ire.

A Barista cup of coffee is about a day’s wage for a worker in an estate owned by the Tatas.

If the Tatas are so near, can the Birlas be far behind?

Manjushree Plantations is owned by the BK Birla group. It takes pride in its colonial past. Its website is jubilant about a Lord Lytton who inaugurated a processing plant in the former British estate in 1877. Manjushree holds 22,000 acres of coffee and tea producing 5,000 tonnes of coffee, tea and cardamom each year. Its core interest however lies in tea.

There have been other players too who have begun to accumulate filthy sums with the brewing crisis. Amalgamated Bean Company Ltd (ABCL), with what seems like a white comet-tail on its logo, Coffee Day, is the rising star. From big landlord to not-so-small comprador has been the trajectory for its young owner VG Siddhartha. He could never have had it so good in his lifetime. On the one hand was the coffee decontrol that proffered him. But on the other hand he has been blessed by a large-hearted father-in-law who is the Chief Minister of Karnataka, SM Krishna.

VG Siddhartha hails from a family of big coffee landlords in Chikmagalur district. He formed a brokerage with dough his dad gave him. Then he gambled on stocks. With that money he "kept buying" coffee plantations in Chikmagalur.By the time he was married in 1989 he was the proud owner of vast plantations of coffee. His success must obviously have charmed the hearts of the Krishnas.

But his love for coffee plantations did not stop with his marriage. It continued. Last year ABC owned 2,500 acres of coffee plantation. This year Siddharth is the owner of 5,000 acres of coffee estate. According to reports in the press this year, Naresh Malhotra Director of ABC Trading Co said, "plans to expand the land under coffee plantation were being pursued by the company".

Same crass logic as the Tatas: Grab when the crisis compels small fish to cough up.

According to Siddharth’s own admission, he "actually facilitated" the process of privatization of the coffee trade by "lobbying actively" for the removal of restrictions. As soon as the central government implemented the first measures of decontrol in 1992, VG Siddhartha led the scramble for a king’s share in the purchase and later, export of FSQ coffee. ABC was formed in 1993. It soon acquired coffee curing units. By 2001 ABC cured 75,000 tonnes of coffee, becoming the largest curer of coffee in the country. In the same year it exported 28,000 tonnes of coffee. In 2002-03 ABC earned Rs 100 crore merely from the export of coffee to the imperialist world.

In less than a decade of imperialist globalisation Siddharth became famous as Karnataka’s "coffee king".

Then he went into the retail selling of coffee. By 2001 he sold a tonne of coffee a day through more than 200 franchised outlets. In 2003 Café Coffee Day alone had a turn over of Rs 250 crore in locations across 27 cities in the country. By 2004 the number of kiosks are to go up to 300 and the turnover to Rs 330 crore. Coffee Day plans to do business in China and Singapore too after 2004.

Siddharth is also a dreamer. And he dreams expansionist comprador ones. He said: "I would like my chain to become like Starbuck of Asia." In September 2002 ABC announced that it had tied up with the government-owned Bharath Petroleum Corporation Ltd to open Café Coffee Day outlets in select petrol pumps. He also got similar foothold to set up shop in all the airports of Karnataka. The nuptial knot had obviously helped in both these instances.  With political largesse, the star could sit back and count his bucks.

The Rs 250 crore worth ABC has grown into a comprador company. The American Insurance Group has stakes in ABC. Its Asia Opportunity Fund has invested Rs 70 crore in the company’s Café Coffee Day venture.

Despite his love for coffee Siddharth is not confined to the coffee business. His securities business Sivan has an equity partnership with the Bank of America which provides 20% of the capital. Also Global Technology Ventures (GTV) floated with this money has a software technology incubator park in its name on a 59-acre plot in Bangalore. GTV has been valued at Rs 470 crore by the Bank of America.

ABCL has risen to the heights. Today Siddharth presides over capital worth close to Rs 1,000 crore. No mean achievement for an entrepreneur. Had the coffee crisis been more ferocious than what it has, pauperizing more of the broad masses than what it has, Siddharth would have been much richer. Not just estates, even coffee grown by the peasantry could have been bought for a song.

Companies such as Tata Coffee and ABCL, which retail coffee in their brand names, are advantageously placed to reap tremendous profit. The drastic fall in coffee rates has impacted the grower. In fact neither in the international retail market where the TNCs dominate, nor in the Indian retail market where TNCs like Nestle and Hindustan Lever Limited (HLL) and compradors like Tata Coffee and ABCL dominate, have rates of coffee powder or instant coffee been reduced by a paisa.

The producer is fleeced on the one hand by reducing wage rates of workers or increasing workload with few workers, or by purchasing coffee from the peasantry at extortionately low prices. On the other hand, the consumer is swindled by maintaining or in fact raising former rates of coffee powder and instant coffee. The coffee crisis has led to a rise in fortunes of these and other similar companies because they grab in both directions; with both hands.

Restructuring of the Indian coffee industry has witnessed the further monopolization of land. This is to be viewed at two different levels.

First, has there been a paupersation of the small coffee-cultivating peasants with less than 2 hectare holdings? Instead of the pauperisation and elimination of the class of poor and middle peasants, the crisis has basically assumed the form of generational land fragmentation and partial encroachment of degraded forest thereby multiplying the number of the toiling peasantry. In 1980-81 there were 17,894 coffee holdings of less than 2 hectare size in Karnataka.  By 2000-2001 it nearly doubled to 30,836. Proletarianisation is dormant and it does not describe a trend, notwithstanding the agonizing crisis. The peasantry has continued to clutch onto his piece of land against all odds from the hands of these sharks. Semifeudal property relations continue to dominate this domain.

The number of "large holders" or generally semifeudal landlords, having from 10 hectares to 100 hectares of estate in Karnataka was 1,429 in 1980-81.  Their number increased to 1,878 by 2000-2001 in the state.62  This only means that the landlords have consolidated and expanded their position under imperialist globa-lisation. Growth in the size of the landlords is not a necessary reflection of the concentration of capital due to the working of the laws of capitalist accumulation. The consolidation and expansion of the landlord class has not been necessarily achieved by the acquisition of the lands of the pauperised peasantry. In fact the peasantry has clung to its land against blazing storms. The source of the numerical growth of the landlords is basically due to expansion of coffee cultivation by the encroachment of adjoining forest lands.

However, at the second level, in that area of coffee production which takes place under the sphere of capitalist relations, basically involving comprador coffee companies, there is a distinct trend. Their number has decreased acutely. In 1980-81 there were 123 holders with coffee estates above 100 hectares in Karnataka. But in 2000-2001, their numbers had shrunk by two-thirds to 40. And since then it has reduced further, what with estate-grazing by companies like Tata Coffee or ABCL. At the same time the acreage of existing large holders has been expanding through the process of acquisitions and mergers.

Hence the crisis of semifeudal agriculture has become all the more preponderant and acute on the one hand and it coexists with a rapidly growing comprador monopoly that exploits workers in lakhs. All the contradictions in the coffee sector have become more intense and have further solidified

A handful of companies do most coffee curing. ABCL and the Tatas cure one-third of the total Indian coffee crop. Here again the trend is towards monopoly.

In the sphere of exports, few huge companies handle most of the coffee cargo that goes outside the country. Ramesh Exports Ltd of Ramesh P Rajah, Madhu Jayanthi International of Ashwin Shah, Allana and Sons Ltd of Nallamuthu, ABCL of VG Siddharth and Karnataka Coffee Brokers Pvt Ltd of B Arun Biddappa have a near total control of all the coffee that is exported from India.  There is a distinct monopoly here too.

In the sphere of coffee retailing, the monopolists are yet to dominate. However the lurking hyenas can be seen making their forays. Trends in the consumer market describe such a possibility in the coming days. Within the coffee industry the conglomerates such as Tata Coffee and ABCL describe backward and forward integration. They seem to be most advantageously poised to rule as kings.

The restructuring has been ultimately reflected in the changed composition of the Coffee Board which had been the lair of bureaucrats for 61 years since its formation. The Board has been sized down and its active business operations have been carved up among the comprador companies. The board has been reduced to advisory capacity. Early this year, the final restructuring of the Coffee Board was completed.

Now the monopolists, Nestle India, HLL, Tata Coffee and Barista have their respective Managing Directors on the Coffee Board. The Board has been widened to include choice MPs from the coffee growing tracts and the semi-feudal landlords from the non-corporate world.

In one decade of pro-imperialist reform, the Coffee Board has not only been liquidated, the imperialists and their compradors have pocketed its last remaining fragment. It is indicative of the fact that the coffee industry of India has turned one full circle.

But a circle is always a circle. You only begin where you end. The first circle concludes the first generation of reforms. The second describes the second generation. And what will this, in the main constitute?

Bleak days for the workers and peasantry. That is a constant with a now rising and now dipping period of turbulence. But if the rampaging downswing persists and there is an infusion of radicalization, the new circle can inaugurate a new tendency in the history of the coffee sector of India. One cannot after all forget so easily that the Naxalbari uprising brew among tea workers of Darjeling.

But this prospect does not provide ingredients for the dreams of compradors.

Harish Bijoor who is ideally placed to feel the pulse of imperialist coffee transnationals said: "The WTO regime will in the long-term mean…an increased flow of foreign capital. Maybe even an increased probability of takeovers, buyouts and joint ventures flourishing in this hitherto insulated industry."

That is going to be the focus then under the second generation of reform. The Western Ghats will transform into idyllic terrain for savage transnational foragers of America and Europe. Compradors may be subjected to friendly "takeovers", or they may be a little rudely "bought out", or if the compradors position themselves as reckonable monopolists, the TNCs might even think of "joint ventures" with them.

The `truly Indian’, will no longer remain `truly Indian’"   wrote Harish. They are the authentic words of an ‘untrue’ Indian. They perfectly reflect the comprador dilemma.

The possibility of the forfeiture of Indian coffee to the imperialists is not remote. It is as stark as it is harsh.

In July this year the central government announced that it was reviewing its policy on foreign direct investment (FDI) in the plantation sector with a view to allowing foreign equity in coffee and rubber. FDI had been permitted so far only in tea, while coffee and rubber had been closed to it all along.

Economic Times reported "The move on the FDI policy review for plantation crops comes in the backdrop of the ongoing negotiations at the World Trade Organisation (WTO) on liberalization of trade in agriculture." This seems to be held as a swap for the apparent continuation of certain agricultural tariffs and subsidies by the Indian government. A concrete proposal for foreign acquisition of 74% in Kerala based Manar Estates is pending before the central government.

Scavenging imperialists are banging on the massive teak and oak doors of the British styled bungalows of comprador company plantations.

The WTO and ICO recently discussed the global coffee crisis. The matter has also done the rounds in the June 2003 G-8 summit of the richest imperialist countries in the world. The ICO has come up with a new proposal for India as part of global imperialist strategy. Executive Director Nestor Osorio said that the ICO was ready to work with "Indian coffee authorities including the private sector" to set up a project to increase domestic coffee consumption. 

The second generation of reform in India and its specific pursuit in the coffee sector through the second cycle of restructuring has commenced. It has been inaugurated in the midst of a massive crisis for coffee producers across the globe. The crisis has been instrumental in the accumulation of vast surpluses by the big five coffee TNC retailers of the world. In the wake there have been other coffee traders and exporters from imperialist shores and countries like Singapore and its Olam, which have made it big in this period.

They are geared to take over with gargantuan capital, technology and Genetically Modified (GM) coffee. Gerard Greenfield says: "The expansion of GM coffee beans by TNCs treatens to further reduce coffee prices and undermine the livelihood of the small farmers. The advance of GM coffee will facilitate increased concentration of coffee growing in agro-industrial plantations and TNC-based contract growing." It is the same story in Vietnam, in Indonesia, in Africa and Latinam. Aggressive recolonisation of the coffee economy of the Third World is on.

Super profits for the super rich. Bitterness and misery for the poor and the bewitched. This encapsulates the historic direction of an apparently footloose coffee dynamic.

Mass Unrest and Social Revolution

The response of the trade unions and peasant organizations to the crisis has been sedate if not poor.

On 11 December 2000 forty trade unions in the plantation sector organized a day’s "token" strike. The demands were the same as those UPASI, the organization of the comprador coffee capitalists, had been pressing from the government all along. In addition, the unions raised the question of the cutting of wages.  It wasn’t just a "token" strike. It was tokenism all along.

Managements had booted out workers, cut wage rates, raised workload, put off bonus and PF allocations and even deferred regular wage payments. Yet the Financial Express reported that "the ire of workers is not directed against plantation owners"  Workers have been told to care more for the welfare of their owners than about themselves.

The leadership of plantation labour unions in general and coffee labour unions in particular continued to represent the political interests of the ruling classes among the workers. Despite the crisis, plantation labour in southern India was not properly or adequately mobilized. There has been utterly inadequate effort to educate workers about the causes, the impact and the need for struggle against the coffee crisis.

Two years after the December 2000 strike, the All India Plantation Workers Federation, organized by the CPI (M), held its national conference in Chikmagalur.  But apart from conference festivities and routine resolutions, it failed to make headway in broadening or improving working class political activity.

The coffee growing peasantry has no independent organization of standing. Although there have been a few attempts to rally peasants by landlords, they have been pretty weak in airing anything different from what the KPA and UPASI have dinned.

In other words, given the serious nature of the crisis and the dangers of imperialist globalisation on the workers and peasants, attempts at mobilizing workers and peasants have been pathetic.

The mood in Karnataka, Kerala and Tamil Nadu may be contrasted to the rising anger of workers in Assam in recent days.

Udayon Misra has reported that on May 30 last year, irate workers of the Sapoi tea estate under the Kanoi group of gardens in Assam’s Sonitpur district hacked and burnt to death two senior management officers.

The incident was the direct fallout of the management’s decision to hand over to the police some workers who had been involved in directly securing power connections to their quarters owing to the long drawn neglect of the management to workers’ demands. When the police arrested nine young men for alleged power theft, several hundred tea workers gheraoed the two deputy managers and demanded for the immediate release of the arrested. When their demands were turned down, the agitated workers lynched them. They then burnt the two bodies within the tea estate itself. According to some reports, workers allegedly poured kerosene on the unconscious officials and set fire to them.

The estate’s Tea Protection Force unit, got the shock of their life, entered their barracks and bolted their doors. When the police went, workers attacked them. In the subsequent lathi-charge and firing, one worker, Thomas Thangari, was killed and several injured. One police officer was also injured.

Within a fortnight of the Sapoi incident, yet another garden official was waylaid and killed by a group of workers in the Nandan Ban tea estate in Dibrugarh district. The officer had refused to take back a few retrenched casual workers. He was attacked with sharp weapons as he was returning from one of his morning rounds in the tea estate.

Udayon Misra says that "unnerving" for the tea management is the attitude of the assailants who were quickly picked up by the police. These labourers, all in their early twenties seemed least repentant about their action and said they had protested against the "colonial" attitude of the management. One of them said: "I do not regret what I did. This will be a lesson for the oppressors, who treat us like dogs."  

"Naturally", tea garden unions were unanimous in condemning workers.

The anger of the plantation workers of Assam is a direct result of deteriorating condition of labour caused by severe exploitation and social oppression by comprador managements.

It is true that these have been spontaneous acts of anger of young workers who have had enough drudgery on their hands. It is also self-evident that such steam-letting by the workers cannot get them far. But over and above everything it indicates the cleavage between the trade union leadership and the mass of workers. It illustrates the terrain on which genuine trade unions and a militant workers movement can be built.

When Bardhan, the General Secretary of the CPI, presented his party’s memorandum to the Prime Minister last year, it said that a social unrest "had started" among the plantation workers of Karnataka, Kerala and Tamil Nadu.

Although the manifestations of the "unrest" are still hazy, let us hope that the CPI’s evaluation is correct. It is not fond hope alone. Given the social milieu, it must be expected.

Already, Hindu communal forces, particularly the Bhajrang Dal has tried to dievert this anger caused by imperialist globalisation, against Muslims. Another Rwanda with Indian characteristics in the making. A controversy has been raked up on the Baba Budangiri darga in Chikmagalur district since 1999. The darga is on a peak, which rises into the misty sky from the midst of coffee plantations located in the heart of the coffee growing district of Chikmagalur.

Though the working class has remained inert to Hindutva appeals, the Bhajrang Dal has rallied upper caste peasant youth, who are declassing and are distressed by the prolonged coffee and arecanut price crisis.

But what a choice for an issue by the Bhajrangis!

Baba Budan was a Sufi mendicant of the seventeenth century who carried the first coffee seeds to India. He sowed them and tended the first plants of Chikmagalur that yielded crimson coffee berries. It is a historic satire of tragic proportions that his darga is today targeted by Hindutva zealots riding on the back of a coffee crisis caused by semifeudal landlords, compradors and imperialists.

The loud-mouthed Bhajrangis have not even been discreet. They have maintained conniving silence on the havoc caused by the compradors and imperialists. Brazen fascism sans social demagogy. That is what it is for now.

But at the same time, from the midst of forests adjoining the coffee estates, from the hovels of the workers, adivasis, dalits and oppressed peasantry, Naxalite revolutionaries have also commenced their activity. They carry the universal aspirations of the Nicaraguan, Mexican and Columbian coffee proletariat and peasantry. Only, they nurse it with Maoist ideology.

If they are consistent, creative and patient in organizing the oppressed masses, build their organizations, set up their unions, and join hands with all the struggling forces that can be united, they can succeed. The coffee crisis can be converted to liberate the millions of hands and souls, the social dregs, which drudge without redemption for the domestic and global coffee autocracy under the sweltering sun and in pouring rain.

26 August 2003

Source : http://www.bannedthought.net/India/PeoplesMarch/PM1999-2006/archives/2003/dec2k3/coffee.htm