How a 214-year-old coffee company is changing what it means to be in the business of coffee.
The majority of coffee producers worldwide go hungry for months each year. Can a plan involving 11 coffee origins, more than 250 field technicians and 20,000-plus farmers finally make specialty coffee sustainable and profitable for the people who produce it? Meet Volcafe Way.
In September 2014, the heads of seven Volcafe Farmer Support Organizations (FSO) met for three days in Turrialba, Costa Rica — a town with a population of 35,000 and an active volcano — to discuss the future of coffee and Volcafe’s changing role at coffee origins.
They came from Uganda, Brazil, Colombia, Guatemala, Honduras, Peru and Indonesia. Not executives and number crunchers, but people whose everyday work entailed traveling to remote farms, walking dry and muddy hillsides and fields to examine coffee trees, and listening to the concerns of coffee growers.
They came from different continents and cultures and had different experiences and educations. But they all had come to understand one thing: Coffee production needed to truly become both sustainable and profitable.
Coffee farming has always been exhausting and complicated. And today, farmers face new challenges in urbanization, financial market swings and climate change. Many are second- and third-generation farmers who run their farms more like the inheritances they are, than as true businesses. Many don’t keep records, don’t have business plans and have no emergency savings.
It’s extremely common, and has been for decades, that the lump-sum payments farmers receive post-harvest aren’t enough to last them through the full year, resulting in what is tidily referred to in the coffee industry as “food insecurity” or “seasonal hunger,” but more simply means that the majority of smallholder farmers — 69 percent in Nicaragua alone, according to an SCAA white paper — are unable to feed themselves and their families for months at a time. Often, these are referred to as “the thin months,” or los meses flacos.
In 2013, the governments of Honduras, Costa Rica and Guatemala declared states of emergency after their coffee industries were devastated by coffee leaf rust, a fungus encouraged by warming climates. Farmers were left without crops to sell — in most cases, their sole sources of income — while still owing debts for the year’s fertilizer and labor costs.
This August, The Climate Institute released a report that forecast more devastation ahead. The global areas suitable for coffee production, it said, will likely be cut in half by 2050, impacting more than 120 million of the world’s poorest people whose livelihoods are tied to coffee production.
By 2020, the report continued, Mexico may cease to be an origin for coffee production, and by 2050, Nicaragua will lose the majority of its coffee-growing areas. As the current suitable growing areas shrink, coffee producers are expected to look to higher ground, potentially at the expense of tropical forests, which could exacerbate the warming. And further, rising temperatures and erratic rainfalls can encourage insect-borne diseases, while drought is associated with anxiety and depression among farmers.
“Unrelenting price volatility hurts farmers, making it hard to plan ahead,” the report added. “As global warming stirs up climatic volatility, it will exacerbate the price volatility that already plagues coffee farmers more than most.”
Plainly, the world has a limited supply of good washed Arabica, and it’s expected to become increasingly more limited — and still more stressful for growers.
“Producing good, washed Arabica coffee is very complex. You cannot replicate the efficiencies and economies of scale that you have in Brazil, or with Robusta in general,” says Fernando Barzuna, director of North and Central America at Volcafe. “Mountain-grown coffee cannot be mechanized, and terrain conditions can vary drastically within very small distances. Even small farmers must deal with different soil composition, luminosity, slope and microclimates.”
Barzuna began his career at Volcafe 30 years ago, after the company decided it should be also training local people, not only Europeans, to run its origin operations. He was part of the very first trainee group at a mill in Costa Rica.
Now, says Barzuna, on top of the traditional farming challenges, is climate change.
“We see it — this is not theoretical. The precipitation patterns, the flowering, when the rains end and begin, the types of fungus and pests. What used to be predictable isn’t predictable anymore.”
The company that in 1869 changed its name to ED&F Man, began trading coffee in 1802 and became a major player in the industry by operating as the middle link between green coffee beans at origin and the world’s largest coffee retailers. In 2004 in acquired Volcafe, which made it one of the largest coffee merchants in the world and connected it with a new type of clientele with an interest in specialty grade beans.
As a traditional supply chain, Volcafe has had no public face, though its business is based on hundreds of thousands of face-to-face relationships. At origins around the world, Volcafe field teams crisscross large, remote regions, meeting with vast networks of farmers, in order to secure coffee purchases. While caring about the fair treatment of farmers makes for a nice sound bite, these teams have been uniquely positioned to witness what it means for a farming family to enjoy a good crop—or to suffer a meager one.
That unique position grew Volcafe’s sense of responsibility and clarified an understanding: More so than roasters or importers without origin networks, it was in a position to finally, truly change the status quo of sustainable coffee sourcing.
“There’s too much cynicism in all of business, in every industry, when it comes to sustainable sourcing,” says Barzuna. “There’s so much, ‘How can we comply, doing as little as possible, spending the least resources, and still look good?’ It’s so rare that anyone says, ‘What can we actuallydo to generate meaningful impact? What would it really cost to do the right thing?’”
For Volcafe, which already had enormous resources, assets and people at origin, says Barzuna, “It was a matter of redirecting those resources and internalizing those efforts into a sourcing philosophy that is completely our own, independent from any funding by roaster clients or NGOs.”
In 2013, Volcafe decided to extensively research its then 10 origin operations. To consider what it might change, it needed to better understand what currently was being done by hundreds of people— exactly what steps were being taken in each region, what the best practices were and where there were opportunities to not simply help but fortify communities.
“After seven months of listening and observing and asking hundreds of questions, we learned that we needed to focus on three things: productivity, quality and the cost of production. Those are the areas where producers most need help,” says Shauna Alexander Mohr, sustainability manager at Volcafe, who conducted the research in seven of the 10 origins.
“Exactly because of the extent of Volcafe’s on-the-ground operations at origin, and its importing operations, we realized we were in a position to fundamentally disrupt the sourcing model for green coffee,” says Mohr. “We could make the whole process more transparent, remove a lot of the risk for farmers, simplify things at both ends of the chain and connect customers who really, really care about what’s going on at origin with producers who are doing amazing work. It’s the dream scenario.”
While the research produced critical ideas and the outline of a strategy, still missing was a way to implement it. Which is how Volcafe’s FSO leaders found themselves in Costa Rica.
Carlos Ortiz has a warm, easy smile and a contagious energy. He grew up in Costa Rica and attended that country’s prestigious Earth University, which accepts standout students from developing nations and trains them in sustainable agriculture, in hopes that they’ll return to their countries and apply what they’ve learned. After graduating, he was hired by Volcafe as a field technician and helped farmers in Costa Rica to develop environmental practices that would qualify them for sustainable coffee certifications.
“We all started talking about how we shouldn’t be aiming for just the status quo sustainable model we had before, which was: Go to a farm, help them achieve a certification, buy the coffee, sell the coffee and that’s it. Everyone knew we needed to start doing things differently,” says Ortiz, the origins sustainability coordinator for Volcafe, recalling the meeting in Turrialba.
“It was the field experts,” he continues, “the people who have boots on the ground and dirty hands, saying, ‘There has to be sustainability andprofitability. … We have to show the people how to be profitable. It’s going to be hard, but we have to do it somehow.’”
Mohr says the idea was building when a senior agronomist, Alvaro Llobet, who had worked for years with Volcafe as a consultant, got up and presented a structure for how it might work. “And then everyone — I mean, everyone, everyone — said yes, that’s it. Let’s do that immediately.”
Ortiz’s face lights up, remembering. “I was sopleased to hear our teams thinking and caring so much for the producers that they work with. That was the moment where I said, ‘Yes, whatever it takes, we’re going to make this happen.’ Because we didn’t have to convince anybody on the team … It was a collective mindset. Everybody said: Yes, that’s the way!”
The plan that came together in Turrialba is today called Volcafe Way. As a brand, it represents a new approach to sourcing coffee and working with producers. And as a plan, it means working with every single coffee farmer who wants to work with Volcafe Way and helping that person to make his or her business profitable. Assistance is offered absolutely free, and the farmers can sell their coffees to any coffee buyer they’d like. They’re under no obligation to Volcafe.
“This has never been done before because it’s a massive, massive task,” says Ortiz. “We’re working with growers who sometimes don’t know how to read or write and haven’t kept track of a single detail or cost on their farms. How can you show a person they’re not profitable, if they can’t show you a single record to establish their cost of production?”
While challenging work, it’s also highly rewarding.
“We train them on how to financially plan for the long term, to create a sustainable business, and this is such an eye-opener for so many of them,” says Ortiz. “They’re like, ‘This makes total sense! Why haven’t I kept track of these costs?’ … And immediately they start to stratify their farms and create a different business plan for each type of plot that they have.”
Volcafe Way just passed its second birthday. Much of its first year was spent hiring and training local agronomists and technicians and turning them into field teams who work with the farmers on everything from expenses and labor practices to agricultural decisions. With the farmer, a team will perform a baseline analysis of a farm and then create a plan — to ensure the farm’s success in 20 years, and to create impact immediately.
The plans can include suggestions like pruning or mulching, or taking note of which plots are the least productive and maybe better suited to an alternative crop that can provide the family with an additional income on a more regular basis.
“It’s very practical and cost-aware advice, and we take it very, very seriously,” says Mohr. “We’re generally making recommendations to smallholder farmers. This is their livelihood. It’s critical that any information we offer them can only ever benefit that farm and ideally enhance that farmer’s resiliency to climate change.”
One cost that Volcafe Way assumes on behalf of the farmers is a lab-based soil analysis.
“They can buy fertilizer from whomever they’d like, just like they can take or leave any of the advice or information that’s offered,” says Mohr. “But they get to see a scientific analysis showing exactly what their soil needs and what they should be using.”
On a recent trip, Mohr twice saw instances in which farmers’ fertilizer costs were cut by 30 percent, because using the right kind meant they could use far less.
“Now, is that going to revolutionize that farm in year one? No,” says Mohr. “But is it going to make a difference right away to those farmers and their families? Absolutely.”
Volcafe Way is now being implemented at 11 origins (Kenya is the new addition), works with more than 30,000 coffee producers and in addition to in-the-field activities includes community-facing efforts. It has built eight schools in the last few years, and it hopes to build one to two more schools each year going forward. And where there’s a need, it hosts services like pop-up health clinics and on-going English classes for the farmers’ children.
Barzuna describes Volcafe Way as a “long-term vision for people and the planet, paired with a sound business strategy.” He also likens it to a tapped domino that has set off a chain reaction. An early proponent, he’s been stunned and thrilled by how quickly everyone, from the board of directors to the assistants in the field, bought into the idea, and how earnestly they’re working to make it succeed.
“I’ve been in this business a long time, taken on many roles at origin and destination, traded many different coffees, and lived in five countries in Europe and the Americas,” says Barzuna. “And this just makes the most sense to me, from a business perspective and personally. It’s the most fulfilling work I’ve ever done.”
Mohr and Ortiz echo his sentiment.
“I’m always saying that I’m not a teacher, and there are so many things I’m probably mis-communicating,” says Ortiz. “But at the end of the day, you go to bed very happy, knowing that there’s a little, tiny improvement somewhere in the world, happening with your team.” •