Fine African Coffee

Stephen DeAngelis

May 11, 2009

When one hears the term “sub-Saharan Africa,” the first things that normally jump into one’s mind are poverty, corruption, and conflict. Probably the last thing that one thinks about is upscale food products. McDonald’s demonstrated that reputations can change. Historically, McDonalds was a food chain known for its hamburgers and chicken nuggets. Recently, it boosted its reputation and its profits by serving upscale coffee. Sub-Saharan Africa is hoping that it can boost its reputation by producing gourmet coffee beans for global consumption. A California-based company, Peet’s Coffee & Tea, is trying to help “develop a vibrant coffee industry in sub-Saharan Africa” [“Into Africa: Capitalism from the Ground Up,” by Steve Hamm, BusinessWeek, 4 May 2009 print issue]. Peet’s is partnering with TechnoServe, a Norwalk, Connecticut, non-profit organization, to further The Coffee Initiative, a program that receives funding from the Bill & Melinda Gates Foundation. The goal of the Initiative is “to double the income of poor coffee farmers in Kenya, Rwanda, Tanzania, and Uganda by linking their products with coffee lovers in the developed world.” Hamm writes:

“TechnoServe helps farmers improve the cultivation, processing, and marketing of gourmet coffee. Peet’s is working to develop a special blend of these coffees that will be sold online and in its 191 cafés starting this summer. Moayyad says the motivation is to nurture new sources of great coffee and help farmers. ‘If they produce a high-quality product,’ she says, ‘we’ll pay more for it.’ The company, which recorded $284 million in sales last year, hopes its efforts in Africa will be a brand-burnisher, too.”

The Coffee Initiative is part of the social enterprise movement that involves companies that want to make a profit while concomitantly doing good.

“Peet’s initiative underscores the difficulties in getting them off the ground. In Rwanda, which has 450,000 family coffee farms, Peet’s has had to contend with a frayed infrastructure, a shortage of money to pay for fertilizer, and suppliers who have little experience in dealing with quality control. ‘You have to be willing to plant some seeds and wait a few years,’ says Chief Executive Patrick J. O’Dea. The Rwanda project differs from the company’s usual purchasing efforts in several respects. Instead of dealing with sophisticated suppliers, it’s setting up shop in a war-ravaged nation that exported just $47 million worth of coffee last year. While U.S. companies have long bought food from poor countries, few have made it a stated goal to boost the economic fortunes of producers in those markets. If Peet’s is going to make the positive impact of its coffee a key selling point, it has to make sure the impact is real. TechnoServe, which is working with other roasters such as Starbucks and Green Mountain Coffee Roasters, expects 5 million farmers and family members will eventually benefit from its program.”

The Initiative uses many of the principles embodied in Enterra Solutions’ Development-in-a-Box™ framework. It is based on standards (the coffee beans have to meet a certain level of quality) and it is taking a holistic view of the coffee industry (from planting the right seeds to getting the product efficiently to market). Farmers will benefit from the Initiative, but so will everyone who uses the infrastructure that is developed to support the coffee supply chain. Some studies have shown that for every job one creates in the agricultural sector, another job is created in a supporting sector (like transportation or food processing). That’s important because jobs are needed to foster a middle class and a middle class is essential for ensuring sustainable economic growth. Without a stable middle class, no developing country can hope to diversify its economy. Hamm describes the “perilous journey” that Peet’s Coffee & Tea has had to make in order to pursue its part of The Coffee Initiative.

“Doing business with African farmer cooperatives hasn’t been easy. To start, there’s no local market for coffee, as few Rwandans drink it. … Some farmers had never tasted coffee and reacted as if they had bitten into a lemon [when they tried it]. He had to teach them the hallmarks of a top bean. … Because of bad roads and delays at border crossings, it took 12 days for a truck with a container full of green coffee beans to travel 1,000 miles to the Kenyan port of Mombasa. The sea journey from Mombasa took nearly two months. Worse, when the shipment arrived in Oakland, Calif., in late February, a portion of the coffee was slightly damaged. … Coffee companies have run into trouble in Africa in the past. Starbucks wrestled with Ethiopia over the use of the country’s name on its products. But fair trade advocates say TechnoServe’s partners are on the right track. ‘It’s good corporate citizenship, but it’s also enlightened self-interest. They have to bring the farmers along so they have enough quality coffee,’ says Seth Petchers, who ran a campaign against Starbucks for Oxfam International. For the efforts in Rwanda to pay off, Peet’s needs to see more high-quality coffee produced. Last year’s purchase amounted to just 8 metric tons of beans, a mere drop in its annual consumption of beans.”

Profits can’t be made when dealing with a small amount of product that takes nearly three months to travel thousands of miles to the manufacturer. More product means more jobs. More efficient supply lines mean better infrastructure. More jobs and better infrastructure result in a better quality of life as well as improved chances of attracting additional foreign direct investment. It’s a virtuous cycle and it’s the reason that the Bill & Melinda Gates Foundation is willing to fund the Initiative. The governments of the targeted nations must also do their part. Kenya, Rwanda, Tanzania, and Uganda aren’t normally pointed to as examples of good governance — although Rwanda has made some noted improvements (see my post entitled Update on Rwanda’s Women). Economic growth requires close cooperation (even partnership) between the government and private sectors. The Coffee Initiative is just getting off the ground. It will take some years before we know whether its goal has been achieved. Who knows? In the future, you might just be waking up to coffee grown on the lush hillsides of Rwanda and be willing to pay a premium for it.