Due to the corona crisis, Nairobi Coffee Exchange (NCE) was forced to close the physical auction room. As the auction could not fall back on a remote buying system, the sale of coffee became problematic. That is why their decision to apply KOSMOS, the real-time auction system in the cloud, was only accelerated.
Last summer, they made the switch to an online auction. We spoke to Mr. Daniel Mbithi, Executive Officer at NCE, for a first evaluation.
In the first place, he is relieved that the coffee sale can be continued smoothly. “Using KOSMOS, the Covid-19 guidelines are met without stopping the trading. Initially, buyers were a bit sceptical about the online system, but we note a tremendous increase in confidence once they are trained on how to use it. Buyers are also enthusiastic because they do not have to face the Nairobi traffic jams anymore to come to the auction.”
Mr. Mbithi explains that all parties concerned benefit from the implementation of KOSMOS. “After only a few weeks of using KOSMOS, we can already state that more participants are attracted, which increases the competitiveness. This results into higher prices for the product and a better income for the farmer! We expect the prices to improve even more once we start marketing KOSMOS outside of Kenya as well.”
Mr. Mbithi states that the online sale of coffee by means of a clock system is “a unique experience for Africa”. He concludes: “As it is also our intention to increase the international accessibility of the KOSMOS platform, we are confident that the coffee sale will grow exponentially over the years to come.”
Key advantages of KOSMOS according to Mr. Mbithi
Easy connection and use for the buyers
Fair competition and cost-savings for NCE
Better prices for the farmers
Transparency for all parties involved
Functioning of KOSMOS
NCE imports the sales catalogue in KOSMOS, and the remote buyers log in on their standard PC to buy in real time on the clock. Stakeholders and growers can also follow the live sale in the cloud.
Obviously, growers and buyers can still retrieve individual reports via the information portal. In KOSMOS, the possibilities regarding personal and general reports for the different user groups are even considerably extended in comparison with the previous system. Mr. Mbithi adds: “Thanks to the fact that buyers can print their own reports, high printing costs for NCE are saved.”
‘Falling / rising’ – price mechanism
As NCE is the first coffee auction in the world using KOSMOS, Aucxis was faced with an important software change necessary for rolling out the project. Previously, KOSMOS only supported the ‘falling price’ mechanism, which is used as standard for the sale of agricultural products such as flowers, fruit and vegetables.
Coffee auctions, however, apply the ‘falling/rising’ principle: the price on the clock counts down at a set speed until someone pushes the button. In contrast to the Dutch auction, no transaction is closed at that moment, but a time bar - visualised by 3 dots - starts running during a set time. This is the “last call” to make a higher bid. If one or several other buyers also push their buy button before the time bar runs out, the price will go up at a set time interval. Depending on the auction, the transaction is reached, or – in the case of NCE – there is a new last call for a higher bid, again via the time bar. This process will be repeated until one bidder remains.
Auction System Automation
In April 1998 the coffee bidding process was automated and it changed from the commonly known open-outcry to the push buttons, which has continued until now. This first phase of automating the auction process of the Nairobi Coffee Exchange has served for 20 years to-date! This is commendable system performance as an instrument for the price discovery of the country’s coffee sales.
The upgraded system
The upgraded auction system was successfully taken into service at the beginning of May 2018. The system has a state-of-the-art software and the latest LED technology. This whole development offers coffee growers and buyers the necessary guarantee for a transparent, accurate and reliable sales platform which can stimulate growth in the entire coffee sub-sector.
A trader evaluating the green beans at the trade sample room situated at the 2nd floor, Wakulima Hse