Source: NCBA Cooperative Business Journal

A New Twist On Purchasing
Fair Trade Co-op Unites Peasant Growers to Development-minded Roasters

We are a wired nation. Americans drink some 431 million cups of coffee a day and the 29 million coffee drinkers who quaff gourmet coffee each day account for the fastest growing segment of the coffee market. They are also, perhaps unknowingly, creating new economic opportunities for peasant coffee growers around the world.

That’s the market that has made business possible for small specialty coffee bean roasters like Dean’s Beans, based in Massachusetts, and Café Campesino based in Georgia, and 12 others that make up the membership of Cooperative Coffees, a new green coffee importing co-op.

But these aren’t average roasters and this is not a typical purchasing cooperative. It’s goal is not to pay less for the coffee that its members buy. Instead, the co-op tries to pay coffee sellers more than what they would otherwise receive from the marketplace.

Though individually each member is trying to run a successful specialty roasting business, as a cooperative, they have other goals as well. They’re committed to paying a fair price to the small-scale, peasant growers who produce coffee on small plots of land throughout the developing world and reducing the environmental impact of coffee production. The co-op’s mission is to help them do all those things simultaneously.

Headquartered in Americus, Georgia, the co-op is part of what has become known as the “fair-trade movement.” Fair trade is based on seven principles, such as paying fair wages to growers and working with cooperatives and other democratically run producer associations. For coffee, fair trade means paying a minimum of $1.26 per pound for regular coffee and $1.41 for organic, according to the requirements of Transfair USA, an independent fair-trade certifier that Cooperative Coffees work with.

Coffee is one of the most labor-intensive crops in the world. A grower must hand pick 2,000 coffee cherries individually, at their peak of ripeness, just to produce one pound of coffee. Each coffee plant produces one to two pounds of coffee annually. The return for this effort? Right now, about 25 cents per pound in local markets, according to Bill Harris, founder of Cooperative Coffees and the owner of Café Campesino.

Harris got involved in the coffee business after doing volunteer work with Habitat for Humanity in Guatemala. When they were clearing land for a new house for a coffee grower and his family, they had to bury two coffee plants, something that troubled the small grower. The plants represented only about $2 in income in a good year. But to the grower, that was significant. That’s when Harris began his education in the coffee production system. He found that “it works for everyone but the farmer.”

Unless growers are organized into local or federated cooperatives, they have absolutely no bargaining power and are forced to accept whatever price they’re offered. Harris said that, contrary to the image many Americans have about huge, well-organized coffee plantations run by Juan Valdez, most coffee in the world is sold by growers on the roadside to “coyotes”—local independent buyers who drive through coffee growing territories, often dividing routes to reduce competition.

“There’s nothing you can do but sell to the middlemen, and the middlemen know that and take advantage of that,” said Monika Furl who spent five years working with MutVitz an organic coffee cooperative in Chiapas, Mexico and now consults with Cooperative Coffees. The 700 co-op members grow coffee on small plots of land ranging in size from a half-acre to five acres. She said the local buyers often misrepresent market and quality issues in order to pay the growers less for their coffee. The middlemen also serve as lenders in some regions. “In a good year, the growers can get by” until August when they have to borrow from the coyotes at high interest rates, Furl said. “It becomes a vicious cycle.”

Last year, the members of MutVitz had an alternative. The co-op sold nearly half of the coffee it exported to Cooperative Coffees for $1.26 per pound. “Cooperative Coffees is a very important contact for MutVitz.” Furl said that fair trade does more than just return a higher price to farmers. “It presents a hope for viability that helps people stay together and work cooperatively.”

So how does Cooperative Coffees pay growers more than four times the price farmers are receiving from others and keep its members in business? They buy directly from the farmer co-ops and cut out all the middlemen. Though fair trade coffee makes up only a small portion of the current gourmet market, it has become mainstream enough that roasters can buy directly from conventional coffee importers. But through the co-op, “we’re paying about what we’d pay any importer for fair trade coffee,” said Harris.

So if the co-op isn’t providing lower input costs than the members could get from other suppliers, what is the benefit?

Cooperative Coffees gives the member-roasters an opportunity to develop relationships with the farmers they buy from, something that many of the roasters value. And by buying directly, the roasters are assured that they’re getting what they paid for: sustainably grown coffee that helps farmers stay on the land and earn a living wage. The co-op requires financial transparency from the farmer co-ops it buys from to assure that producers are getting the appropriate financial return.

“I was always too small to buy directly from growers,” said Dean Cycon, owner of Dean’s Beans and member of Cooperative Coffees, who has helped start five other roasting businesses and intends to keep his business small. “I don’t want to be the Ben & Jerry’s of coffee.” Cooperative Coffees allows Cycon to stay committed to his personal business philosophy and still know whom he is buying from. “It’s all about eye-ball to eye-ball respect between people doing business.”

For the last eight years, he’s been buying organic coffee exclusively from cooperatives, including those in East Timor and Nicaragua that NCBA’s international development program helped coffee growers develop. “I only deal with firms where there is a respect for the earth and respect for labor, and that means co-ops,” Cycon said. Cycon also distributes directly to food cooperatives in the Northeast and to Whole Foods markets across the eastern seaboard. Though he still buys much of his coffee through importers, he hopes to be able to buy all of his green coffee beans from Cooperative Coffees in the future.

And in addition to direct fair trade coffee purchases, the co-op has already added a coffee equipment-purchasing component. The co-op intends to cautiously grow its membership and gradually expand its buying area from Central America and Indonesia to Africa. And ultimately, the co-op hopes to do its own development work with coffee growers.

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