November 2019
Kigali, Rwanda - The International Cooperative Alliance holds a yearly conference bringing together the minds of cooperative leaders around the world to discuss hot topics and ways to reimagine the ways we structure our economy and do better business. CEO and co-founder of Pachamama Coffee, Thaleon Tremain, was invited to speak at the 2019 ICA Conference in Rwanda to discuss cooperatives strategic positioning in value chains.
Below we have Tremain’s key points made from his speech and you can watch the full video here starting at the 16 minute mark to the 27 minute mark.
To start, Tremain introduced the idea behind starting Pachamama Coffee:
“Our strategy, simply put, is to sell directly to consumers. We organize farmers downstream, closer to the consumer in order to capture more value and more profits for coffee farmers”
And then the conversation shifted. Tremain explains why farmers need to organize and own their own coffee business and maintain control of the supply chain from seed to cup.
“Just for a moment, I would like to talk about coffee and development. Coffee may be the world’s most important agricultural product for economic development and environmental sustainability. I cannot think of a product that is more important.
There are 100 million cups of coffee consumed every day. That's a staggering number. This is a global market worth over $200 billion and 100 million people at origin rely on coffee income. Women own over 25% of the world's coffee farms. And the world's poorest countries rely heavily on coffee."
"Yet with all this value in the coffee world with over $200 billion, less than 10% of that remains at origin. And what's worse, less than 2% of the actual profit made on coffee remains at origin. These are big problems."
A common visualization of the earning inequalities between producers and roasters is the diagram of how much money from the cup of coffee you purchase actually returns to the hands of the farmer.
"The challenge: is clear that we need to get a larger portion of coffee’s true retail value and get it back to the producing country and the farmer as well.”
Tremain states, “It's really difficult to imagine that only 10 cents of that $5 can make it back to the farmer, but that's the reality in today's coffee markets. For a lot of coffee farmers, in fact they're probably only getting about one, two or three pennies for every cup of coffee sold. Not every cup of coffee sells for $5. But the point is, there is enormous value in coffee."
"So, while the story is pretty dire for coffee farmers I think it is still optimistic at the same time because there’s a great deal of value in coffee.”
"With the enormous value in coffee, there is immense opportunity to alter the way we imagine supply chains. By capturing more of the value for farmers and producing nations, we can invest in a better future for coffee. Cooperatives are a way to produce this means and can be duplicated for many other commodity supply chains not just coffee."
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"Pachamama Coffee is owned by participating cooperatives, and its board of representatives is composed of cooperative representatives. This gives the cooperatives control of company strategy, and a path towards financial independence. There are five member cooperatives within Pachamama, based in Ethiopia, Guatemala, Mexico, Nicaragua, and Peru. All the cooperatives specialize in producing certified organic coffee. Farmers are paid above the market price for green coffee. The cooperatives then are allocated a share of the profits, based on how much they sell. The board votes on how to allocate profits, which may be retained to invest in Pachamama projects. Pachamama offers online subscriptions direct to consumers, runs two cafés in California, and has retail and wholesale relationships with other companies. This farmer-owned and farmer-governed model shifts some new business risks onto farmers, but also moves farmers from price-takers to price-setters, who control value addition and who thus capture significantly more of the profits than in most coffee value chains."
- Jeffrey D. Sachs, Et al. Columbia Center on Sustainable Investment's Ensuring Economic Viability and Sustainability of Coffee Production
