When the bus arrived at ICAFE for the first of two coffee tours planned for today, I expected to see a typical for-profit business like the other companies that our group has visited. Soon, I realized that I was wrong. ICAFE is a public coffee research institution that does not receive aid from the government and is not necessarily a private sector company either. Rather, by taking a small portion of revenues from every coffee company in Costa Rica, ICAFE is able to provide cutting-edge research and solutions to the companies from which it receives support.
Regardless of the type of company who will benefit from ICAFE’s work, ICAFE conducts a variety of research methods to improve overall coffee production in Costa Rica. To measure the quality of coffee, ICAFE runs chemical tests on coffee beans to record the amount of caffeine, sugar, and oils in each bean. This helps coffee companies meet the governmental standards set by the Ministry of Health which coffee farms must comply with in order to operate. Coffee cup tests are also performed for quality control to make sure that the coffee’s taste is up to par. Also, ICAFE explores the effectiveness of hybrid plants by cross-pollinating different types of coffee plants. Cross-pollination can occur both within or between species of coffee. This means that cross-pollination can be implemented, for example, within the Arabica coffee species or between the Arabica and Robusta species of coffee. Of course, cross-pollinating between species is more difficult, but possible at ICAFE. Additionally, when studying coffee plants, resistance to multiple factors such as fungi, altitude, and soil diseases are all recorded to determine the most productive types of coffee species and strains.
For small companies, ICAFE provides great value. Most small coffee companies do not have the economies of scale to be able to squeeze research and development costs into their budgets. However, with the help of ICAFE, they agree to relinquish 1.5% of their revenue for the benefit of innovative, thoroughly researched production methods. ICAFE can help smaller coffee companies to determine why coffee production yield may be low, how to get rid of detrimental fungi, and how to improve overall coffee quality. For larger producers, though, ICAFE may be less of an aid and more of a burden. With greater economies of scale, larger producers may be able to perform their own research and development and even create techniques that compete with those of ICAFE to improve their coffee. Although, even if a larger company does not want the help of ICAFE, ICAFE receives 1.5% of each company’s harvest and export revenue, meaning that the large company would have to pay 1.5% of their profits for research that they could conduct themselves. Plus, the privacy of the larger company’s new and developing techniques may be more easily spread to competing companies through reportage to ICAFE. In other words, rather than being able to develop a competitive advantage that competitors do not yet possess, a larger company which develops an innovative coffee technique would almost be forced to share it with ICAFE before that company can earn the benefits of their innovation. This depletes the larger company’s profits, but clearly not to a significant degree or else there would likely be an intense legal battle between large producers who want to keep their techniques secret and ICAFE who wants to share innovative techniques with all Costa Rican coffee companies.
Whether or not ICAFE is beneficial to each and every coffee company in Costa Rica, I believe that it is a beneficial institution as a whole. Considering that about 92% of Costa Rica’s coffee companies are small coffee businesses, there are certainly more companies benefitting from ICAFE’s efforts than those who do not. Also, there are surely some instances when even the large companies benefit from research that ICAFE conducts because they had not thought to do a particular type of research themselves. Though this specific type of research and development company likely would not work for all types of industries, it appears to have an overall positive impact on Costa Rica’s coffee industry.