"It's not easy to get their coffee!"
After 8.5 years of involvement and 3 project phases (initialisation, expansion and business development), our project in Peru will come to an end in September 2011. From a humble start in 2003 with a handful of Farmer Field Schools (FFS), the project has helped to build a fully-fledged cooperative that operates independently in the upper segments of the international coffee market. In this article we will look at the journey of the producers and the project team.
Back in 2003, the situation in the project area was marked by apprehension among farmers to cooperate. In a study at the onset of the project farmers identified a lack of social cohesion and distrust within the community as major social problems. When the DE Foundation started its project, helping to rebuild trust within the community was one of the highest priorities.
Besides social issues, inadequate coffee cultivation and processing techniques in combination with limited market access were holding producers back from realising the potential quality (and price!) of their coffee. During the first 2 years of the project FFSs were implemented. Within these, farmers had an opportunity to learn better techniques, but also get to know each other better. A major side-effect of this was that trust among producers was gradually returned. In 2004 this culminated in the request by a number of farmers for the project to help establish a commercially oriented cooperative. The Cooperative Agraria Cafetalera Sostenible Valle de Ubiriki (CACSVU) was officially founded in November 2004 with 99 members. Currently 270 farmers are member of the cooperative.
|
"It's not easy to get their coffee!" During a DE Foundation board meeting, Mr Rob Johnson of Decotrade AG and one of our board members, epxlained that the role Decotrade initially played in the project, helping CACSVU establish a foothold in the export market was reduced now that CACSVU had build up a solid reputation and had ample buyers for its coffee. They won't sell to us anymore was how he summarised the situation. A pity perhaps for Decotrade, but a great success for the farmers of CACSVU and that is what we aim to achieve with our projects. |
From the establishment onwards CACSVU and its members have worked hard and seen tremendous growth in terms of volume, quality and revenues. This is a great success as new cooperatives generally have difficulty to enter the market. Without an established reputation importing companies are hesitant to business with new sellers in general and, for various reasons, cooperatives in particular. From 2005 to 2007 Decotrade AG, the buying company of SaraLee, provided a pivotal role by buying significant volumes of CACSVU coffee. The year 2008 marked a turning point. Coffee volumes more than doubled from 4,000 bags in 2007 to 10,000 bags and CACSVU sold large volumes to the higher end of the market, with companies such as Starbucks and Panamerican Coffee. All together CACSVU sells regularly to 8 different EU and US-based coffee companies.
All CACSVU coffee is certified. The project supported the certification under Utz Certified. Applying the experience gained in that process, the cooperative moved quickly on its own to obtain Fairtrade, Rainforest Alliance, Organic and Starbux CAFE Practices. Price differentials have changed significantly during project implementation. In 2003 coffee from the area was trading at 66USD/Mt below NY-C (the world market indicator price for Arabica coffee), in 2008 the cooperative coffee was trading at 661USD/Mt over. Three main reasons explain this vast improvement. Quality improvement, better access to the higher end of the market and lastly certification premiums.
An interesting indicator of CACSVUs reliability is the broad base of international lenders that finance its operations. Initial trade finance came from Solidaridad in 2005 and 2006. Also here the year 2008 proved pivotal. Larger lenders such as Root Capital and the Progresso Fund became involved. In the years thereafter established lenders such as Rabobank and and Oiko Credit also contributed. For crop year 2011 CACSVU expects to mobilise close to 2 million USD in working capital, whereas projected sales for this season amount to 3 million (see figure for volume and sales).
Working with such sums of money requires transparency and able management. A number of former project staff have gradually shifted to the payroll of the cooperative and it is thanks to the dedication of people like Mr Martin Garcia and his team that CACSVU continues to thrive.
Needless to say there have been hiccups along the road. A notable event took place last year when the newly elected president of the cooperative on one of his first days in office arbitrarily cancelled all payments and fired the manager of the cooperative. Luckily constitutional measures and pressure from outside, not in the least from the lenders, made him resign and ensured fairly quick resumption of business. The membership realised what was going on and elected a new cooperative directorate. This episode taught CACSVU as well as the DE Foundation the importance of constitutional safe guards, an empowered membership that can effectively control its board and management using those safeguards and the effectiveness of strong relations with financing and support institutions.
From our side we would like to thank everyone involved in this project for making it a success. A special mention goes out to Mr Martin Garcia, Mrs Eefje den Belder, Giovanni Curinaupa and Alexs Gomez. We wish CACSVU all the best and expect to stay in touch!