With the possible exception of sugar, coffee has historically created more suffering per acre than any other global commodity. Even with the gradual end of slavery and the colonial contracts that underwrote plantation brutality, the quest to grow enough coffee to keep the world caffeinated remained an agricultural endeavor marked by economic marginalization and chronic exploitation. Today, the legacy endures.
… Whereas the Fair Trade model is more like an insurance policy—farmers sell raw beans through a co-op and are promised a floor price per pound in return—the Thrive model takes the farmer’s beans on consignment and provides growers a platform to track the commodity as it moves upstream. In this arrangement (unlike with Fair Trade), farmers are invested in the substantial value that’s added after harvesting, because, as the commodity travels to the end user, they retain ownership.
Rather than release raw beans into a moving commodity market, where other interests will add value and reap the rewards, Thrive hangs onto the beans for the growers while overseeing the roasting, packaging, exporting, marketing, distribution, and sale of the consigned product through a vertically integrated and relatively short supply chain. At the point of sale, if roasted coffee is sold for, say, $7.50/lb. the grower will get $3.75.
Fair, but Not Fair Enough: Beyond Fair Trade Coffee
Kenneth Lander believes he has found a better way to put farmers first.
by James McWilliams
http://www.psmag.com/business-economics/fair-fair-enough-beyond-fair-trade-coffee-farming-agriculture-65987/
With the possible exception of sugar, coffee has historically created more suffering per acre than any other global commodity. Even with the gradual end of slavery and the colonial contracts that underwrote plantation brutality, the quest to grow enough coffee to keep the world caffeinated remained an agricultural endeavor marked by economic marginalization and chronic exploitation. Today, the legacy endures.
Few grasp this reality as well as Kenneth Lander. In 2005, Lander quit his job as an attorney and land developer in Monroe, Georgia, and moved with his wife and five (now seven) kids to San Rafael de Abangares, Costa Rica. The family settled in a cozy house on a 12-acre coffee farm, a bucolic patch of land where Lander cultivated coffee as a hobby. His lucrative real estate investments sustained the dream, one he compares to the Swiss Family Robinson.
Three years later, the dream turned into a nightmare. The wheels came off the U.S. real estate market and Lander’s investments shriveled. “All my assets were gone,” he told me recently. Not long after uprooting his family and moving to Costa Rica, Lander’s coffee hobby had morphed into his livelihood.
The learning curve for growing commercial coffee turned out to be treacherous. It was, for starters, personally demoralizing—not to mention economically devastating—for Lander to work himself ragged growing a high-quality and heavily demanded product only to collect about 10 cents on the dollar. As matters then stood, he explained, “being a small coffee farmer was no way to make a living.” He reached this conclusion despite having sold his beans through a Fair Trade coffee co-op. Lander quickly acknowledges that the Fair Trade program “set the tone for socially sustainable coffee.” Still, he decided that there had to be a better way to put farmers first. Fair Trade was fair. But, evidently, not fair enough.
Lander’s solution—a company called Thrive Farmers—is a for-profit experiment that suggests a radically more hopeful future for small-scale growers of specialty coffee. The idea behind Thrive germinated when Lander met a fifth-generation Costa Rican coffee farmer named Alejandro Garcia. With his own farm on the brink of collapse in the early 2000s, Garcia had moved to Pennsylvania to work in a buffet-style restaurant. He saved $40,000, stored it in a shoebox, and returned to Costa Rica determined to rescue his farm. It was then that he had a chance meeting with Lander, who was witnessing the demise of his own operation. The two men shared their frustration, combined their expertise, and brought in Atlanta entrepreneur (and friend of Lander’s) Michael Jones, who had recently revolutionized the distribution of medical implants. Together, the men forged a business model that would return 50 percent of coffee sales to the growers (75 percent if the beans are sold green) while giving them control over the supply chain. They began with 400 coffee farmers in 2011. Today they have over 800. “We’re about to explode,” said Lander, seemingly unaware that he already has.
The company’s signature innovation centers on what Lander calls “value chain modification.” Whereas the Fair Trade model is more like an insurance policy—farmers sell raw beans through a co-op and are promised a floor price per pound in return—the Thrive model takes the farmer’s beans on consignment and provides growers a platform to track the commodity as it moves upstream. In this arrangement (unlike with Fair Trade), farmers are invested in the substantial value that’s added after harvesting, because, as the commodity travels to the end user, they retain ownership.
Rather than release raw beans into a moving commodity market, where other interests will add value and reap the rewards, Thrive hangs onto the beans for the growers while overseeing the roasting, packaging, exporting, marketing, distribution, and sale of the consigned product through a vertically integrated and relatively short supply chain. At the point of sale, if roasted coffee is sold for, say, $7.50/lb. the grower will get $3.75. “That’s huge,” says Lander. By any standard, he’s right.
There’s another, less obvious, factor that distinguishes Thrive from the Fair Trade approach. Because Fair Trade promises farmers a floor price, the appeal of price support spikes when the commodity price of coffee drops, thus luring more and more growers into Fair Trade co-ops as the conventional market sinks. As a result, the supply of Fair Trade coffee, which is marked by an inflated price (because of the imposed floor), rises and, because it won’t sell, has to be dumped back into the commodity market. This big bean dump drives down the price of conventional coffee even further, thereby harming poor farmers who are growing for the conventional market. Thrive escapes this downward cycle altogether because its supply chain bypasses the shifting commodity market, prices are negotiated directly with consumers, and farmers are left with higher returns rather than those provided by a market getting worse as a result (in part) of the Fair Trade floor.
What’s perhaps most interesting about the Thrive venture is that it brings the ethics of localism to the heady world of global commerce. In this respect it joins a select but growing trend of streamlining long-distance trade with the intention of enjoining access to specialty goods with equitable and personal relationships. Whether it’s the vegetable trade connecting Chinatown with Honduras or the cocoa trade connecting London and Ghana, producers and consumers, through companies such as Thrive, are realizing that it’s possible to localize the global, and to do so while sipping a cup of virtuous brew that honors those who worked the hardest to make it possible.