Lots going on lately around the coffee industry — but when is that ever not the case? We are Barista Magazine are busily—and happily— putting together our sixth anniversary issue, which we’ll be giving away at the SCAA show in Houston, and the United States Barista Championship, which it’s hard to believe is just around the corner.
But though many of us are focused on these upcoming events, a lot’s going on right in this moment, concerning companies and organizations we’re familiar with. Let’s catch up on what’s going on:
FOUNDERS OF TAYLOR MAID FARMS RESTRUCTURE OWNERSHIP
The co-founders of Taylor Maid Farms Coffee & Tea, Chris Martin and Mark Inman, have announced they are restructuring ownership of the company. Martin has assumed sole ownership of the company and its operations. Inman will now focus his entrepreneurial skills on growing TruBruTM, a manufacturer of high quality pour-over stations for handmade drip coffee. Inman will also bring his considerable experience to consulting for coffee companies, including Taylor Maid.
Inman says, “I may have been more visible in terms of day-to-day management, but Chris has been as much a part of our success as anyone and the keeper of our vision. The company will only benefit from the full effect of his wisdom and leadership.”
Martin and Inman started the coffee roasting company in 1993, the first 100% organic coffee roaster in Northern California and one of the first in the country. Taylor Maid is an innovator and pioneer in operating a green business and a leader in sustainable practices within the coffee industry, from their coffee purchasing to the community-based economics behind their retail stores.
“The history of Taylor Maid is a study in change and innovation,” says Martin. “We have always been willing to try something new and we refuse to become complacent or rest on our laurels. This change is very much in the spirit of our commitment to always be innovating and exploring. At the same time, our values, which have been the key to our success and have brought us so many passionate, likeminded customers, will not change. We remain dedicated to sustainable agriculture, environmental stewardship, social justice, green entrepreneurship and a local focus.”
STANFORD SOCIAL INNOVATION REVIEW FOCUSES ON SUSTAINABLE HARVEST
More than Beans
Sustainable Harvest grows a new supply chain.
By Brandon Keim Spring 2011
Until several years ago, the experience of Tanzaniaʼs Kanyovu farming collective was typical of most developing world coffee growers. They took samples of their harvests to a regional buyer, who offered the farmers a price after tasting and grading their beans. If the coffeeʼs quality was poor—as often was claimed—the farmers had no way of knowing why, or even if that was true. Buyers didnʼt need to explain. Nor did farmers know what price their beans fetched from larger buyers or coffee roasting companies. Despite representing the primary link in the global coffee supply chain, Kanyovuʼs farmers were effectively isolated and powerless.
Two decades ago, a young business student named David Griswold witnessed a similar phenomenon in Mexico, as a volunteer at the National Coordinating Body for Coffee Farmer Cooperatives. He saw that after this government office, which provided agronomical training and price stability for Mexicoʼs 250,000 coffee farmers, was eliminated as part of a push to deregulate coffee and other industries, farmers were plunged unprepared into global competition. They became subject to commodity market swings and a food industry that annually produced 400 billion cups of coffee while paying pauperʼs wages to the people growing the beans.
Other industry reformers founded nonprofits to help farmers, or devised consumer-targeted certification systems—fair trade, organic, Rainforest Alliance—to be overlaid on the existing industry. Griswold decided to join the industry. In 1997, he founded Sustainable Harvest Coffee Importers, in Portland, Ore. “Weʼre analogous to the multinational traders. We do everything they do— and weʼre profitable,” says Griswold. “But we use our profits to improve the livelihood of our farmers.”
As of 2010, Sustainable Harvest had worked with nearly 200,000 farmers in 14 countries. The company enables farmers and roasters to negotiate directly; once the roasters agree to purchase beans and the contracts are finalized, Sustainable Harvest helps farmers secure financing through nonprofit social investment funds. When the crop is ready, Sustainable Harvest also handles logistics and international shipments, ultimately charging roasters between 7 percent and 8 percent of purchase price. Last year the company oversaw $34 million in sales to roasters in North America, Europe, and South Africa, of which $31.5 million went straight to growers. Of Sustainable Harvestʼs $2.5 million share, the company spent more than half on development-related projects and overhead: nine employees in Portland and 21 at four field offices in Latin America and East Africa, who train farmers in sustainable—and profitable—agronomic techniques. The remaining share went to support Sustainable Harvestʼs six-person staff in Portland and to rent warehouse space in Oakland, Calif., and Kearny, N.J.
Such a business model may seem more charitable than profitable, but itʼs proved a bottom-line success: Sales are expected to reach $40 million in 2011 and $100 million by 2014. And in Tanzania, where Sustainable Harvest started working in 2007, the Kanyovu collective no longer depends on arbitrary local buyers for their income. They grade their own coffee. Last year, the collective won the prestigious African Taste of Harvest competition. Farmers received $1.80 per pound, three times what they were paid before.
A TRANSPARENT SUPPLY CHAIN
Business was not always bountiful for Sustainable Harvest. When Griswold started the company, he was confronted by the race-to- the-bottom logic of commodity markets, which made only rough distinctions between coffee grades. Good arabica beans were generally lumped with the bad, and all prices were pulled down by competition with low-grade robusto beans grown in deforested fields and doused with pesticides and herbicides. So long as farmersʼ earnings were linked to these markets, theyʼd be stuck.
Sustainable coffee activists believed that a new market needed to be created, one in which origin and quality would be used to differentiate beans. In the traditional supply chain, roasters are ignorant of coffeeʼs origins; that is sometimes true of fair trade or organic coffees, which can be sold by importers who promise sustainability but provide only general information about geographic origin. Griswoldʼs vision was to enable buyers to reward quality and to know exactly where coffee came from. It was an innovative, idealistic plan—except Griswold promptly took the company into bankruptcy.
Banking on the burgeoning appeal of shade-grown coffee, he bought 50 tons at $2 per pound. Before he could find a roaster to purchase it, the price dropped by half. Griswold became victim to the market volatility he hoped to fix. He spent the next two years working 15-hour days, clawing the company back to solvency. “It was a lonely time,” he says. “When I started working with farmers in 2000 and 2001, when prices had gone down to 50 cents [per pound], I would say, ʻI know what it feels like to be bankrupt, to not want to face your parents or your wife.ʼ We had a connection over that.”
Those farmers also had a message for Griswold, who hid his problems. “They said: ʻYou should have told us. We could have helped out.ʼ It occurred to me that maybe I wasnʼt alone. Maybe I could collaborate,” says Griswold. “So I started being more transparent about what was going on, what I was trying, and what the prices were. And once I employed transparency, I found out that the business accelerated because of it.”
Transparency is now part of a suite of practices that Sustainable Harvest calls its Relationship Coffee model. An alliterative list of mandates, the model includes training, trade credit, traceability, and technology, but transparency is the unifying theme. Sustainable Harvestʼs books are always open, as are the relationships it forges among farmers and roasters. The company introduces the two parties and then largely removes itself from negotiations. “Most of the intermediaries in coffee want to keep that wall between grower and buyer,” says Laura Tilghman, Sustainable Harvestʼs communications director, because keeping those parties in the dark helps buyers maximize their own profits. “Our model says: Take the wall out of the way, and put everyone at the table.”
Tilghman is not speaking figuratively. Since 2002, Sustainable Harvest has held annual conferences, called “Letʼs Talk Coffee,” at which roasters and farmers talk shop and do business. New deals are struck and existing partnerships strengthened, making the events—one annual global meeting, held in Central or South America, and thrice-yearly regional gatherings held in those regions or in East Africa—essential to establishing prices through direct roaster-farmer dialogues, rather than through commodity market calculations.
“There are long-term relationships,” says Rick Peyser, director of social advocacy and coffee community outreach at Green Mountain Coffee Roasters, a publicly traded company that purchases much of its organic and fair trade beans from Sustainable Harvest. “Itʼs not just buying coffee because the price is best from this group in one year, and a different group the next.”
Though buyers pay above-commodity prices, they recover the costs in various ways, from the ethical rewards of participating in a decent system to bean quality to efficiencies introduced by product stability and transparency. Green Mountainʼs partnership with a Vera Cruz, Mexico, farmer cooperative has lasted 14 years; over that time, says Peyser, the cooperative tailored its beans to the companyʼs specifications, enabling them to charge more while providing Green Mountain with a consistency difficult to find elsewhere.
Personal relationships also provide buffers against price fluctuation, preventing farmers from abandoning sustainable practices to take advantage of coffee price spikes. Farmers directly engaged with roasters that want chemical-free coffee are reluctant to jeopardize that relationship, says Griswold. Instead, farmers can raise their prices—and roasters are willing to accede. Other farmers might sell cheaper beans, but roasters would need to spend more to ensure a consistent supply. Trust has value.
EXPANSION DURING GLOBAL RECESSION
Even as the global economy dipped and stagnated, the fortunes of Sustainable Harvest and its partners rose. For the last five years, sales grew by an average of 30 percent annually; from $25 million in 2009, sales are expected to hit $40 million in 2011 and account for approximately one-eighth of all fair trade coffee imported into the United States. Expansion to Indonesia is planned, and a Colombian office may follow. Griswold has succeeded in his original mission.
It remains to be seen, however, whether Sustainable Harvestʼs model can scale up. Global coffee demand is booming, as developing countries—especially China—adopt Western habits of coffee consumption. Unless Sustainable Harvestʼs model can serve the marketʼs vast middle, and not just its high end, its effectiveness will be limited.
According to coffee expert Daniele Giovannucci, a World Bank consultant and founder of the Committee on Sustainability Assessment, the modelʼs prospects are good. Corporate behemoths like Walmart, Sara Lee, and Kraft are demanding responsibly sourced coffee, and direct negotiations with Sustainable Harvestʼs 200,000 farmers could benefit them no less than they have benefited Green Mountain. Sustainable Harvest will never serve the marketʼs bottom, as those coffees are priced below the point where economic sufficiency and environmental safety are possible. But the middle is a reasonable target.
Giovanucci believes Sustainable Harvestʼs model would work even if replicated by other, more profit-focused entrepreneurs. Griswoldʼs company has shown that transparency and farmer development are not charity, but long-term investments. “The work they do is by definition applicable in other areas. It works through a business model, and clearly the business model is successful,” he says.
Tilghman named cocoa, salt, and flour as commodities where the Sustainable Harvest model could create new markets. Peyser mentioned cocoa and bananas. “Everyone is at the table and connected,” says Griswold. “I believe weʼre creating the future of global supply chains.”
Brandon Keim is a freelance science and environment writer. He has written for SSIR on environmental advocacy in India, earthquake-resistant housing, and the future of green building certification.
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