(Yicai) May 30 -- China’s Yunnan province, a region known as a supplier of instant coffee to Nestle, is moving up the value chain by starting to process coffee beans, sold at a higher margin to boutique cafes in big cities.

A brand manager in charge of a coffee estate in the southwestern province said to Yicai that the farm used to sell unprocessed beans to Nestle but now it has little left to sell to the Swiss conglomerate due to its domestic processing business.

Most local coffee farmers have been planting Catimor, a variety suitable for instant coffee, since the late 1980s when they started cooperating with international food and drink giants such as Nestle. However, prices have been falling since early 2000 so suppliers have been forced to reconsider their strategies.

Wholesale prices dropped to extremely low levels around 2018, a business manager told Yicai. Sometimes the selling price of all the fresh coffee cherries one worker picked per day could not even cover the person's pay. This is why many farmers switched to other crops or made other fundamental changes, the source added.

Yunnan is a world-class coffee production area, according to Beaton Coffee Industrial Culture Park, a large coffee estate in Baoshan. However, it used to be mainly known as a base for raw materials, paying no attention to quality for years. Now the direction is changing toward specialty coffee. The farm, which also offers tourism experiences, has an annual output of about 600 tons of specialty coffee, accounting for 60 percent of its annual total.

Almost 23 percent of all the coffee coming from Yunnan was premium beans last year, up from 8 percent in 2021, based on public data. Nearly 60 percent of the beans were deep-processed, rising from 20 percent.

China’s growing coffee consumption has pushed farmers to grow coffee of higher quality, said Lao Li, a manager at Xiao-Wa-Zi Coffee Plantation in Pu’er, Yunnan. More than half of the beans are considered premium, which boosts income year by year. Xiao-Wa-Zi has no raw materials to supply to Nestle as in recent years, it set up a coffee study and experience fair on the grounds, selling almost all of its production to tourists.

Despite their high quality of products, many coffee farms have a hard time gaining brand recognition and finding buyers in big cities.

The Beaton Coffee Industrial Culture Park has established the Zhi Zi Luo brand for specialty coffee and opened a store in Shanghai, a worker said, adding that as a Yunnan-based firm it has no marketing expertise in big cities such as Shanghai.

Many coffee farmers in Yunnan still lack marketing and sales channels, said Wu Dapeng, a manager at Torch Coffee.

Editor: Emmi Laine