SEI students visiting fair trade cooperatives in coffee country, Nicaragua

Doing Something That Changes Lives Every Morning, One Cup at a Time….

by Dennis Shaughnessy

If you are one of the mil­lions of peo­ple who drink cof­fee every morn­ing, con­sider drink­ing Green Moun­tain Cof­fee, or using one of their Keurig machines.  Here’s one rea­son why.

I was walk­ing up a steep hill in 100 degree heat in North­ern Nicaragua ear­lier this month, with 25 of our social enter­prise stu­dents, as part of our senior cap­stone class.  We were in the sec­ond poor­est coun­try in the West­ern Hemi­sphere, and in one of its poor­est regions, when we came upon a sign say­ing that Green Moun­tain Cof­fee, through its cor­po­rate social respon­si­bil­ity pro­gram, had sup­ported a poor small­holder farmer coop­er­a­tive with com­mu­nity invest­ments.  A “biodi­gester” was among those invest­ments, which allows the farm­ing com­mu­nity to pro­tect its remark­able nat­ural habi­tat by pro­cess­ing the waste from cof­fee pick­ing and clean­ing in an envi­ron­men­tally friendly way. As we walked around the com­mu­nity and talked to its poor but indus­tri­ous peo­ple, we could imme­di­ately see the impact of Green Mountain’s enlight­ened sup­ply chain poli­cies on their daily lives.

More than 25 mil­lion small farm­ers, 90% of whom are poor and live in devel­op­ing coun­tries, pro­vide the world’s cof­fee.  Cof­fee is the world’s sec­ond largest com­mod­ity prod­uct (oil is the largest), and is a $20 bil­lion agri­cul­tural export mar­ket, dri­ven by the 500 bil­lion cups of cof­fee con­sumed each year.  For many years, small­holder cof­fee farm­ers or so-called “grow­ers” were finan­cially abused by local inter­me­di­aries often called “coy­otes”, who buy at rock bot­tom prices (often less than $1 a pound) and resell at much higher prices to roast­ers and retail­ers like Nes­tle and Dunkin Donuts. These often preda­tory middle-men add lit­tle value but cap­ture much of the mar­gin right­fully belong­ing to the pro­duc­ers.  To address this inequitable allo­ca­tion of mar­gin in the sup­ply chain, farm­ers orga­nized into coop­er­a­tives, and with the help of inno­v­a­tive finance orga­ni­za­tions like Root Cap­i­tal of Cam­bridge, they began to sell directly to the big cof­fee com­pa­nies, bypass­ing the inter­me­di­aries and secur­ing bet­ter prices and more profit margin. 

Root Cap­i­tal is a world class social enter­prise that pro­vides inno­v­a­tive financ­ing solu­tions and tools to the world’s poor farm­ers, includ­ing cof­fee farm­ers in Nicaragua.  By mak­ing uniquely struc­tured loans to farm­ing coop­er­a­tives in part­ner­ship with the multi­na­tional buy­ers like Green Moun­tain and Star­bucks, Root Cap­i­tal enables poor farm­ers to max­i­mize the poten­tial of their tiny farms, pro­duc­ing con­sis­tently higher qual­ity cof­fee that draws pre­mium prices from the best com­pa­nies in the marketplace.

Today, “fair trade” rules allow coop­er­a­tives to ben­e­fit from the secu­rity of a floor or min­i­mum price for their cof­fee, as well as a pre­mium to be rein­vested in improv­ing their com­mu­ni­ties.  As of this writ­ing, fair trade Ara­bica cof­fee (the pre­mium qual­ity bean that is most often grown in higher ele­va­tions like the Nicaraguan high­lands) sells for about $1.45 to $1.50 per pound, with a fair trade floor price of $1.40 per pound and a pre­mium for com­mu­nity invest­ment of 20 cents per pound (30 cents if its cer­ti­fied organic).  Ten years ago, when fair trade was not yet a devel­oped mar­ket, pro­ducer prices for cof­fee were as low as 45 cents per pound, far below the cost of oper­at­ing their small farms.  How­ever, only about 2% of the cof­fee mar­ket today is fair trade.  In a $100 bil­lion retail cof­fee mar­ket, $2 bil­lion is cer­tainly a mean­ing­ful amount but there remains a very long way to go before an equi­table sup­ply chain is fully secured.

The Nicaragua cof­fee farmer coop­er­a­tive we vis­ited that day called “Danilo Gon­za­lez”, named after a boy killed in the San­din­ista war and a mem­ber of the coop­er­a­tive union known as CECOCAFEN, now sells their har­vested cof­fee beans directly to com­pa­nies like Green Moun­tain Cof­fee, mostly as fair trade cer­ti­fied.  The com­mu­nity, includ­ing strug­gling fam­i­lies headed by enter­pris­ing women in des­per­ate search for oppor­tu­nity, have ben­e­fit­ted from this busi­ness part­ner­ship by way of invest­ments of their fair trade pre­mium in local projects designed and approved by the coop­er­a­tive in areas like edu­ca­tion, clean water and sanitation. 

How­ever, despite this progress, the farm­ing fam­i­lies of Danilo Gon­za­lez will suf­fer this year, as a plant dis­ease or blight called “roya” has infested cof­fee plants through­out Nicaragua and else­where in Cen­tral Amer­ica.  Farm­ers are los­ing half or more of their har­vest to the dis­ease, with­out any crop insur­ance to off­set the losses.  Social enter­prises like Tech­noserve are work­ing dili­gently in pro­vid­ing tech­ni­cal and man­age­r­ial con­sult­ing assis­tance to enable poor farm­ers to address this prob­lem in the near-term and plan longer term for a recov­ery.  This cof­fee dis­ease would have a dev­as­tat­ing impact across the Amer­i­cas, where 2/3 of all cof­fee is grown, with­out the work of Tech­noserve and oth­ers who are ded­i­cated to improv­ing the lives of poor farmers.

Our stu­dents, with the help of The Barker Foun­da­tion and David and Denise Johst, will be pro­vid­ing grants to poor cof­fee farm­ers and other dis­ad­van­taged groups in Nicaragua to help them find self-reliant, enter­prise solu­tions to the chal­lenges they face.  This grant pro­gram is one of sev­eral we offer to under­grad­u­ates so that they can apply what they learn first in the class­room and later in the field, to address­ing real-world prob­lems through enter­prise solutions.

Not every­one can write a check or offer an oppor­tu­nity to some­one in need in a dis­tant place, like Nicaragua.  But most peo­ple can make an informed choice to buy prod­ucts that are pro­duced by com­pa­nies com­mit­ted to improv­ing the lives of poor peo­ple and com­mu­ni­ties in their sup­ply chain.  Socially respon­si­ble and well man­aged busi­nesses like Green Moun­tain Cof­fee and lead­ing social enter­prises like Root Cap­i­tal and Tech­noserve can and do lead mean­ing­ful change in the world. 

In this case, one cup of cof­fee at a time. 


Dis­claimer: This arti­cle was not pro­duced, approved or endorsed by the three ref­er­enced companies.