Part 11 (2/2)

The new agreement, a stopgap measure, at least was a start. In 1960 the British African coffee colonies of Kenya, Tanganyika, and Uganda joined the agreement, which was extended for another year. ”The biggest question,” wrote Brazilian Joo Oliveira Santos early in 1961, ”is how and when the major coffee-consuming countries such as the United States will decide to partic.i.p.ate in a long-term agreement.” He was optimistic, noting that ”the ideological and political security of the Western World is directly dependent on its collective economic security.” Clearly Santos was relying on the Communist menace to scare the United States into the agreement. As if to underline the threat, in 1960 the Brazilians sent a delegation to the Soviet Union to arrange to trade coffee for Russian oil, wheat, airplanes, and drilling equipment.

In 1959 Fidel Castro's rebels had overthrown the Batista dictators.h.i.+p in Cuba. In 1960 Castro aligned himself with the Soviets and began nationalizing American companies, throwing the United States into a panic over Communist influence in Latin America and further propelling the United States toward support for the coffee agreement.

The U.S. fear of communism focused not only on Latin America but also Africa. In 1960 the trickle toward inevitable African decolonization turned into a flood of newly independent countries, many relying primarily on coffee just when prices were nosediving. One coffee writer worried that the African nations might ”become mere p.a.w.ns in the economic warfare currently being fought by the mighty nations of the East and West”-in other words, would they be ripped apart by the cold war?

When Charles de Gaulle offered French African colonies a choice of independence or continued ”interdependence,” French Sudan (renamed Mali) and Madagascar (renamed the Malagasy Republic) chose independence while remaining in the French commonwealth. Their example prompted the Ivory Coast, which had first opted to remain a colony, to choose independence in August 1960. The French continued to provide aid money and advisers to their former colonies. ”Coffee is a political problem as much as an economic one,” a French importer wrote. France had a duty, he said, to keep ”millions of people within this side of the Liberty Curtain.”

Though the transition to independence proceeded smoothly in the Ivory Coast, it was disastrous in the Belgian Congo. Some seventy-five years earlier, when Africa had been artificially sliced up by the European powers, the countries' imposed national boundaries hid smoldering tribal rivalries that frequently erupted with independence. Nowhere was this more evident than in the Congo.95 Within a week of the Congo's June 30, 1960, independence, the native army mutinied, looting, raping, and killing at random. The province of Katanga attempted to secede, and the Belgian government sent troops. In the mounting chaos Prime Minister Patrice Lumumba, a former postal worker, appealed simultaneously to the United Nations and to the Soviet Union for help. Within a week of the Congo's June 30, 1960, independence, the native army mutinied, looting, raping, and killing at random. The province of Katanga attempted to secede, and the Belgian government sent troops. In the mounting chaos Prime Minister Patrice Lumumba, a former postal worker, appealed simultaneously to the United Nations and to the Soviet Union for help.

By approaching the Communists, Lumumba sealed his fate. The United States ordained not only his overthrow but his death. With CIA air support, Lumumba was captured by Mobutu Sese Seko and was a.s.sa.s.sinated on January 17, 1961. The following years brought internecine warfare, attempted revolution, American intervention, and the long-term despotic rule of Mobutu, who renamed the country Zaire. ”Production is declining,” a Congo coffee man reported in 1965. ”One of our merchant friends reports that 25 percent of his planter-clients have been killed. Others have left their plantations. On one shamba shamba, the entire labor force of a hundred men was slaughtered.”

Three days after Patrice Lumumba's a.s.sa.s.sination, John F. Kennedy became the new president of the United States. Along with Cuba and the Congo, he worried about Angola. Determined to stymie Communist influence in Africa, Kennedy encouraged the Portuguese dictators.h.i.+p to crush an Angolan rebellion rather than to allow independence. When unpaid coffee workers demanded back wages, planters panicked and fired on them. In the ensuing ma.s.sacre, hundreds of whites and thousands of blacks were killed in the coffee plantations. Finally, with American weapons, the Portuguese restored order and coffee cultivation.

The British delayed granting independence to Uganda, Kenya, and Tanganyika, hoping to provide a smooth transition. Late in 1960 Alan Bowler, a British coffee exporter, wrote from Nairobi, Kenya: ”To millions in this Continent, coffee means the difference between too little to eat or enough.” With tiny farms predominating, he doubted the efficacy of any scheme to reduce the surplus coffee harvest. ”To any smallholder having three acres,” he wrote, ”it would take a great deal of filtered economics, plus a gun, to begin to persuade him to cut production.” By this point 80 percent of African coffee was grown by Africans.

The new coffee agreement thus was born out of economic despair and political tension. In the United States in January 1961, John McKiernan of the National Coffee a.s.sociation warned that in Africa the Soviet Union could ”exploit nationalism to ensnare emerging nations into Communist slavery.” He concluded that, although the NCA traditionally had opposed quota schemes as limits on free trade, he now would support the International Coffee Agreement in this ”atmosphere of international hypertension.”

In 1961 President Kennedy sponsored the Alliance for Progress, designed to improve relations with Latin America through aid programs. In his March 13 speech introducing the Alliance, Kennedy acknowledged that ”no program of economic development can be effected unless something is done to stabilize commodity prices.”

Treasury Secretary Douglas Dillon reiterated U.S. support for a coffee agreement. On July 9, 1962, the United Nations convened a UN Coffee Conference in New York City to negotiate a long-term agreement. The meetings ran virtually around the clock. ”For me,” U.S. delegate Michael Blumenthal later recalled, ”the most amusing moment came at 4 A.M. one morning when I was still rus.h.i.+ng around . . . the U.N., trying to break a deadlock. Two other members of the U.S. team were holding on to my coat-tails, begging me to maintain the dignity of my office. I think I replied that if I had any dignity, I would be home in bed.”

The partic.i.p.ants finally reached a tentative quota agreement. The International Coffee Agreement (ICA) would come into full force, however, only when ratified by most of the importing and exporting countries. The deadline for ratification was set for December 30, 1963. In the meantime, the five-year agreement would go into effect informally.

The basic quota was based on world exports of 45.6 million bags. Of that amount, Brazil was allowed 18 million bags, Colombia just over 6 million, the Ivory Coast 2.3 million, and Angola just over 2 million bags. The agreement called for quarterly quota adjustments requiring approval by two-thirds of both importing and exporting countries. Furthermore, every coffee s.h.i.+pment was to be accompanied by a ”certificate of origin,” or re-export certificate. Countries with low coffee consumption, such as j.a.pan, China, and the Soviet Union, were exempted from the quota system. Exporters therefore could s.h.i.+p as much coffee as they wished behind the Iron Curtain or to j.a.pan. The agreement gave lip service to promotional efforts to increase worldwide consumption and to limit overproduction, but the provisions were all voluntary. Any country could withdraw from the agreement with ninety days' notice.

Stumbling Toward Ratification The path toward U.S. ratification of the International Coffee Agreement did not run smoothly. In March 1963 hearings were held before the Committee on Foreign Relations to discuss the agreement. Kansas Senator Frank Carlson asked, ”Is it not a fact that what you actually are doing is placing a burden on the coffee consumers of the United States to maintain a price level in a foreign country?” Another senator asked whether it were not really ”an international cartel.” In May the Senate ultimately ratified the agreement knowing that it still would have to pa.s.s ”implementing” legislation that would allow U.S. Customs to reject coffee without a proper certificate of origin.

Then nature intervened in Parana, first with an early August frost, then a devastating September fire, all in the midst of a prolonged drought. With Brazil's prospective crop severely damaged, coffee prices once again began to climb. After tortuous debate, the House of Representatives nonetheless voted for implementing legislation on November 14, sending it back to the Senate for a final vote.

Eight days later, just after noon on November 22, 1963, President Kennedy was a.s.sa.s.sinated in Dallas. The coffee politics were so intense that the members of the ICA, engaged in a bitter debate over quotas at London headquarters, continued their all-day arguments late into the night, even after hearing of the U.S. president's murder. In the end, at 2:00 A.M. on November 23, they failed to increase quotas in response to rising prices.

To keep the ICA alive, the United States deposited its instrument of ratification on December 27, four days before the deadline, still without implementing legislation. Coffee prices continued their steady climb, from 34 cents a pound up to 50 cents for Santos #4. On February 12, 1964, knowing that American politicians were likely to kill the agreement unless more coffee were released and prices moderated, the ICA Council voted overwhelmingly to increase quotas just over 3 percent, releasing another 2.3 million bags.

When the Senate Committee on Finance met two weeks later for three days of hearings, Averell Harriman of the State Department pointed out that the purpose of the ICA was to prevent the bankruptcy of producing countries. Delaware senator John Williams asked, ”But it was a one-way protection, was it not? There was nothing in there that would protect the price of coffee from going to a dollar a pound.”

The producing countries clearly had voted for a quota increase largely to placate U.S. politicians. ”And once this implementing legislation has been approved by Congress and signed by the President,” a senator observed, ”they will not have the Senate to fear.”

Even liberal Democratic Senator Paul Douglas objected to the ICA implementation, on the grounds that higher coffee prices would not ”trickle down” to peasant laborers. What had happened during the price spike in 1954? ”Elaborate houses and plantation houses were built by the planters,” Douglas observed, ”and they sent abroad capital anonymously to be deposited in Swiss banks in numbered accounts. . . . Money was not used for the improvement of the condition of the people.” If they did pa.s.s the legislation, Douglas noted, ”we will be acclaimed for following out the good neighbor policy, but this is the superficial crust of Latin American life. The real volcano is underneath.”

Wendell Rollason, who testified for a Miami anti-Castro organization, shared Douglas's concerns but drew a different conclusion: The campesinos of Latin America needed help. ”They seek a piece of land, a steady job, a full belly, a child's education. . . . It is going to be us or the Russians. It's that simple.”

Averell Harriman told Senator Douglas that, at least in Brazil, the government was attempting ”social reform and social progress, improvements of the condition of the people.” In Brazil huge fazendas fazendas still predominated, with 1.6 percent of the farms holding over half of the cultivated land. still predominated, with 1.6 percent of the farms holding over half of the cultivated land.96 The Senate pa.s.sed the implementing legislation on July 31, 1964, but only after Republican Senator Everett Dirksen tacked on an amendment specifying that the United States would withdraw from the ICA upon a joint resolution of Congress. Although the House already had approved the legislation, it now had to approve the amended version. By a narrow margin, in August, the House rejected rejected it. it.

After the elections, in which Lyndon Johnson won a landslide victory, the Senate pa.s.sed the amended bill on February 2, 1965, and the House once more held hearings in April, then finally pa.s.sed the implementing legislation, and the International Coffee Agreement went into full effect, with the United States monitoring certificates of origin.

Boomer Bust The U.S. coffee industry continued to experience its own crisis. From a ”peak” of 3.1 cups a day for U.S. consumers age ten or over in 1962, per-capita coffee consumption by 1964 averaged 2.9 cups a day.

To appeal to the baby boomers, the Pan American Coffee Bureau introduced a series of campaigns such as ”Mugmates,” asking adolescents to decorate coffee mugs. ”I go for coffee, you go for coffee, let's go for coffee together,” a slogan urged. But these lame attempts did not woo teens. A survey revealed that ”teenagers do not like the taste of coffee at all, and in many instances find it repulsive.” Coffee was not considered refres.h.i.+ng or beneficial in any way. At least there was some tiny solace: teens identified coffee as an adult beverage signaling a rite of pa.s.sage into the world of the businessman and housewife. ”While the youngster is consuming hundreds and hundreds of bottles of pop, he is doing so with the full cognizance that in not too many years he will be a coffee drinker.”

Just when additional coffee promotion appeared to be absolutely vital, even the small amount of support from the Pan American Coffee Bureau fizzled in antic.i.p.ation that the London-based International Coffee Organization would take over. But the ICO members failed to appropriate promotional funds for three crucial years, from 1963 until 1966. At the same time, the Coffee Brewing Inst.i.tute, which for over a decade had made valiant but ineffectual attempts to improve American brewing habits, lost its funding.97 Coca-Cola and Pepsi mounted ever-more sophisticated campaigns to entice youth. ”Things go better with Coca-Cola,” sang a cheerful folk group. ”Food goes better with, Fun goes better with, You go better with c.o.ke.” Pepsi countered with a brilliant attempt to snare-and even label-an entire generation. As television commercials showed frenetically active, happy young people on motorcycles or roller coasters, a woman sang, ”Come alive! Come alive! You're in the Pepsi Generation.” In 1965 soft drink firms spent nearly $100 million on ads-twice the outlay for coffee. the outlay for coffee.

A 1965 editorial in the Tea & Coffee Trade Journal Tea & Coffee Trade Journal summed up the problem: ”Coffee has been engaged in a tough compet.i.tive struggle for a great many years and it has been losing that fight for at least a decade. Now, for the first time, the extent of the loss is becoming measurable and there is no reason to believe that the tide of battle is about to turn.” summed up the problem: ”Coffee has been engaged in a tough compet.i.tive struggle for a great many years and it has been losing that fight for at least a decade. Now, for the first time, the extent of the loss is becoming measurable and there is no reason to believe that the tide of battle is about to turn.”

Merger Mania Instead of mounting a truly effective campaign to attract baby boomers, coffee roasters continued to battle one another for dwindling market share. As profit margins tightened, the process of industry concentration accelerated, with mergers and bankruptcies narrowing the field to just 240 roasters by 1965. Of those, the top eight companies accounted for 75 percent of sales.

The most momentous merger was announced in September 1963. Consumer food conglomerate Procter & Gamble was buying Folger's, the oldest coffee firm in the West. Up to that point Folger's and Hills Brothers had battled for coffee supremacy primarily in the West and Midwest. By the time Procter & Gamble paid $126 million for the company, Folger's had attained a slim lead over Hills Brothers in most of its markets. With roasting plants in San Francisco, Kansas City, New Orleans, Houston, Los Angeles, and Portland, it employed 1,300 people and held 11 percent of the U.S. coffee market.

The b.u.t.toned-down Procter & Gamble men, who had turned soap sales into a science, shook up the genteel coffee world. Everything now had to be doc.u.mented with endless reports and memos. Sophisticated television ads now reached many more consumers, playing on their fears and desires. Mrs. Olson, an omniscient Swedish busybody, magically appeared at the back door with a can of Folgers Coffee (Procter & Gamble dropped the apostrophe), just in time to save a marriage and restore true love. The ads reinforced s.e.xist images of petulant husbands incapable of making their own coffee and frantic wives whose worth was measured out in coffee spoons. Within Procter & Gamble it was known as the ”There, There” campaign. The company conducted research to determine ”how ugly and aggressive we could get,” as one adman put it. They discovered that housewives would accept ”all sorts of abuse” as reasonable, since they actually experienced it much of the time in their daily lives.

Only months after Procter & Gamble bought Folgers, Coca-Cola jumped into the coffee fray, announcing a merger with Duncan Foods in February 1964. c.o.ke already owned Tenco, the New Jersey instant-coffee cooperative, which it got as a bonus when it bought Minute Maid orange juice in 1960. Now c.o.ke suddenly was the fifth largest roaster in the United States, with brands such as Admiration, b.u.t.ter-Nut, Fleet-wood, Maryland Club, Huggins Young, and Blue Ridge, along with a healthy private label and inst.i.tutional business. Just why the soft-drink t.i.tan would want to sell coffee remained a puzzle, since colas offered a much higher profit margin. Many suspected that c.o.ke was more interested in acquiring aggressive managers such as Charles Duncan Jr. and Don Keough, who had come onboard with b.u.t.ter-Nut. Both men would rise to the top at c.o.ke.

The Maxwell Housewife With the acquisition of Duncan Foods, Coca-Cola commanded a mere 5 percent of the regular coffee market and 1 percent of the instant. General Foods remained the coffee behemoth, with a 22 percent share of regular coffee and 51 percent of instant. It owned Maxwell House, Sanka, and Yuban, and it practiced the most sophisticated, high-powered coffee marketing, appealing to slightly different segments of the market with each brand.

In the early 1960s General Foods bought French, German, Swedish, Spanish, and Mexican roasters. Following liberalization of j.a.panese coffee imports, the company formed a joint venture with a local brewery and mineral water company in 1961 to produce instant coffee for the j.a.panese market. To solidify its new international image, General Foods paid for Maxwell House to become the official coffee at the 1964 New York World's Fair, where it reminded visitors that it was good to the last drop on soaring sixty-foot-high archways.

In 1960 viewers first saw the now-cla.s.sic Maxwell House percolator ad, created by famed adman David Ogilvy and destined to run off and on for years as it entered the subconscious of a generation. As coffee began to spurt sporadically into the gla.s.s k.n.o.b at the top of a percolator, a syncopated beat accompanied it, then as the percolator settled into full boil the tune broke into a sprightly melody to signify the cheerful warmth of morning coffee preparation. It was a brilliant, evocative commercial, even though it celebrated a dreadful way to brew coffee.

In the first sn.o.b appeal to instant users, General Foods introduced instant Yuban the same year, with door-to-door sampling, advertising, and extensive sales promotion. Because it used all-arabica beans, this soluble product indeed was superior to other instants, although mediocre compared to regular coffee. Along with other coffee roasters General Foods switched to nonkey cans with plastic resealable lids. It coordinated a television campaign on The Andy Griffith Show The Andy Griffith Show with four-cup samples of Sanka bound into with four-cup samples of Sanka bound into Family Circle Family Circle and and TV Guide TV Guide magazines. magazines.

In 1964 the company introduced Maxim, the first freeze-dried coffee, a technological advance over spray-dried solubles that offered better flavor. ”You are looking at something you've never seen before-the power to turn every cup in your house into a percolator,” Maxim ads promised.

In 1965 the company launched ”the most powerful advertising ad promotion program in ground coffee history” for Maxwell House, featuring its first color-TV spots. Simultaneous print ads offered a 7-cents-off coupon and a free record, ”12,000 Girl Scouts Sing America's National Favorites.” The television minidramas, aimed at young married couples, urged women to ”Be a Maxwell Housewife.” A typical ad showed a pert young woman surrounded by packing boxes in a new apartment. ”Wife,” says the condescending husband in a voice-over, ”pay attention, because I'm going to teach you to make coffee.” The ad never shows the husband, only his hands, as he makes coffee. He orders her only to use Maxwell House coffee. ”Smell it. Now taste it. See? Always good to the last drop. So-no experimenting with my coffee. Be a good little Maxwell Housewife and I think I'll keep you around.” He pats her on the head and musses her hair. Intended to tap the insecurities of young wives, this spot also undoubtedly offended budding feminists.

The Decline of Hills Brothers In the brave new world of coffee conglomerates, Hills Brothers stubbornly held out as a traditional family firm. A 1958 opinion survey conducted for the firm showed that Hills Brothers suffered from an ”old-fas.h.i.+oned” image, while Folgers was considered ”modern and up-to-date.” Worse, the survey found that ”the belief that its quality has deteriorated is given as a reason for deserting Hills Brothers.” The charge was true. Under immense compet.i.tive pressure, Hills Brothers compromised the quality of the blend.

In 1960 consumer interviews revealed that the Hills Brothers Arab was perceived as a tired, old-fas.h.i.+oned patriarch. Marketing consultants concluded that ”the figure is seen as hopelessly out-of-date.” The report infuriated sixty-three-year-old Leslie Hills, R.W.'s son. ”They throw the Arab off the label as though it were an old shoe.” He refused to budge.

Although the Arab remained on the cans, the firm made valiant efforts to maintain market share, including the now-standard coupons and special deals. It offered free coffee urns to churches and clubs that sent in a sufficient number of coffee labels. Hills Brothers cosponsored the 1960 Squaw Valley Winter Olympics, but with a total annual ad budget of $5 million, their TV spots appeared only in San Francisco, Los Angeles, Portland, and Chicago. At the same time, they sponsored local ads on s.h.i.+rley Temple's Storybook s.h.i.+rley Temple's Storybook, Bat Masterson Bat Masterson, and Walt Disney Walt Disney.

A new ad campaign urged consumers to ”Head for the Hills!” a.s.serting that the coffee was ”just slightly richer, now-about 10 percent richer than other leading coffees.” It also introduced the absurd slogan, ”Flavor so unbeatable, it's reheatable!” Television spots showed an auto-body shop worker reheating his coffee over a blowtorch.

In 1964 Gray Hills, A.H.'s son, died at age seventy. The next year an internal Brand Image Study Brand Image Study stated, ”Throughout the Western Zone, Hills Bros. was seen as a poor quality coffee or a brand that was declining in popularity.” Folgers, with Procter & Gamble's marketing clout behind it, was seen as ” stated, ”Throughout the Western Zone, Hills Bros. was seen as a poor quality coffee or a brand that was declining in popularity.” Folgers, with Procter & Gamble's marketing clout behind it, was seen as ”the good quality coffee.” Chicago, where Hills Brothers long had dominated, and the East, where it was newly introduced, provided the only bright spots, with a relatively favorable image. good quality coffee.” Chicago, where Hills Brothers long had dominated, and the East, where it was newly introduced, provided the only bright spots, with a relatively favorable image.

The Creation of Juan Valdez In 1960 the National Federation of Coffee Growers of Colombia invented Juan Valdez, a friendly, mustachioed coffee grower who, with his mule, trundled his handpicked beans down from the Colombian mountains. Played by actor Jose Duval, dressed in traditional peasant garb and wearing a sombrero, the proud-yet-humble Juan Valdez captured the American imagination. For once advertising hype matched reality; most Colombian coffee indeed was produced on small mountainside fincas fincas by some 200,000 families headed by men such as Juan Valdez. Although railroads rushed coffee to freighters on the coast, the beans often did take the initial trip down the mountain on muleback. The Colombian beans really did make a fine cup of coffee, superior to most U.S. blends. by some 200,000 families headed by men such as Juan Valdez. Although railroads rushed coffee to freighters on the coast, the beans often did take the initial trip down the mountain on muleback. The Colombian beans really did make a fine cup of coffee, superior to most U.S. blends.

The initial ad campaign broke in January 1960 in ten major U.S. markets, using full-page newspaper spreads. ”We don't know who's more stubborn-Juan Valdez or his mule,” read the caption underneath a picture of the coffee grower, arms folded, in front of his pack animal. ”Juan has a finca (coffee grove) 5,000 feet up in the Colombian Andes. The soil there is rich. The air is moist. Two reasons for the extraordinary coffee of Colombia. The third is stubbornness of growers like Juan.” The copy went on to explain the importance of shade trees and hand harvesting. As a trade journal editor observed, the ads made consumers aware of the ”costly care and effort poured into a good cup of coffee.”

The Juan Valdez campaign carved out a quality image for Colombian coffee and blends that contained it. Spending over $1 million the first year, the federation brought Valdez to television viewers, who could actually see him picking the beans and leading his mule down the mountainside. Five months after the campaign began, there was a 300 percent increase in the number of consumers who identified Colombian coffee as the world's finest. By 1962 the federation had taken the campaign to Canada and Europe. The campaign was so successful that many roasters not only bragged that their blends contained Colombian beans but also began marketing 100 percent Colombian cans. By creating a value-added product, the Colombian beans could command a premium price. In addition, the federation provided free advertising support and the Juan Valdez logo on each can. A 1963 trade ad showed all-Colombian blends from around the world. ”They're bringing in markkaa, francs, kroner, guilders . . . and good old dollars too!” the copy bragged.

By the end of 1963 the television campaign had gone national, and Valdez now had a son. ”See, Ramon,” Valdez said, ”we always shade our coffee trees from the sun-so the beans will ripen slowly. And we pick the coffee beans one by one.” In 1964 General Foods switched its high-end Yuban brand to 100 percent Colombian coffee, proving that the campaign had triumphed even in Maxwell House country. Five years after the creation of the mythical Colombian coffee grower, over forty U.S. brands and over twenty European roasters featured all-Colombian brands.

In a Vortex Aside from the Juan Valdez phenomenon, however, coffee had entered the vortex of a downward spiral. To stay in business you had to cut prices. To cut prices you had to narrow profit margins. To maintain profitability you had to cut quality.

In 1963 one green coffee broker a.n.a.lyzed the contents of ”one of the finest blends,” probably Folgers. It contained 20 percent Brazilian beans, 40 percent Colombian, 30 percent Central American-and 10 percent African robusta. Only a decade earlier, no self-respecting blend would have contained any any robusta beans. In such a ma.s.s-market, bottom-line, loss-leader, robusta-blended world, was there any hope for decent coffee in the United States? robusta beans. In such a ma.s.s-market, bottom-line, loss-leader, robusta-blended world, was there any hope for decent coffee in the United States?

Surprisingly enough, the answer was yes. But America's coffee savior would not be a General Foods or Procter & Gamble man, but a disgruntled Dutchman running away from his father.

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