This report examines Indonesia’s participation in the global value chain (GVC) for coffee and outlines the barriers that Indonesian firms face to expanding the overall value generated by the country’s coffee sector. Combining information from a wide-ranging examination of Indonesia’s coffee sector (including an in-depth supply-chain analysis) with feedback from several in-person interviews and surveys with Indonesian firms, this report also provides evidence-based recommendations for how strategic public policy can alleviate the identified barriers to the export competitiveness of Indonesian coffee exporters.

Coffee is one of the most highly tradeable commodities in the world, and Indonesia is a prominent player in the global market. It accounts for roughly 7 per cent of total global coffee production, and around 6 per cent of global exports. Over the past decade, Indonesia’s coffee production has grown at about double the pace of global coffee production, fueled by growth in both domestic and foreign demand. Despite this fact, stakeholders along Indonesia’s value chain for coffee face several obstacles to expanding the overall value generated by the sector. Most notably, the coffee sector is hindered by weak and stagnant farm-level productivity; it remains geared towards lower-value Robusta coffee; and it faces significant slack in its supply-chain structure, largely due to its geographical circumstances.

In the absence of capacity expansion across the globe, growth in global coffee demand is set to outpace growth in supply in the future. Against this backdrop, Indonesia has significant opportunities to expand its footprint in the global coffee market, especially if it can address the unique challenges that inhibit success for firms along the coffee value chain. Key recommendations for addressing the sector’s identified barriers to competitiveness include promoting the diffusion of good agricultural practices (GAP) throughout the sector, facilitating more widespread certification of coffee, and continued commitment to better road and port development.