The need for a good retirement savings plan would not be the first thing most people would think of as they considered the plight of coffee farmers in remote mountain communities in Colombia, one of the world’s leading producers of high-quality arabica coffee beans.
Surviving as a coffee farmer can hard enough on a short-term, daily basis. Not only does the best coffee grow at over 2,000 metres and is thus often difficult to access, but its production is very labour-intensive. Coffee crops are sensitive to climate change with yields often cut by intense rainfall, temperature change and pests. In addition, prices that the farmers receive from buyers can fluctuate wildly, dependent on world supply dictated by climate change and production levels across the globe.
However, when Nespresso, together with Fairtrade International, looked at new ways of helping smallholder farmers overcome their difficulties, it was a long-term goal that emerged as a high priority – retirement planning.
Harriet Lamb, CEO of Fairtrade International, says when she met Colombian farmers: “Pensions came up time and time again. You see really old people working on coffee farms, lots of men with missing teeth, and yet many of them visionary people who helped found their cooperatives. If they stopped working, where would they get their income from?”
One farmer, 38-year old Luz Modene Betancor, told her: “I have aunts and uncles who have spent all their lives in the countryside and now they have nothing - no money, no protection, nothing.”
One thing many can’t expect is for their children to take over the traditional family smallholding and support them in their old age. With young people increasingly turning their backs on coffee to seek more reliable employment in the towns, the average age of a Colombian coffee farmer is around 55.
The need to provide coffee farmers with financial security is behind a unique partnership between the Colombian government, Fairtrade International, portioned coffee brand Nespresso, and Expocafé, a leading national umbrella body for coffee farmer cooperatives.
The Farmer Future programme is an extension of the Nespresso AAA Sustainable QualityTM Program, which it had established in 2003 to secure a sustainable supply of the world’s highest quality coffee (only1%-2% of coffee beans grown globally are of sufficient quality to meet the company’s taste and aroma requirements).
The Swiss coffee giant began sourcing quality coffee direct from smallholder farmers rather than world coffee markets, paying an average premium of between 30% and 40% above the standard market price and 10%-15% above prices for coffee of similar quality. Through the company’s AAA Program, Nespresso also worked with them to improve their production processes, providing training and technical support.
But improved incomes alone were not enough to secure farmers’ futures; the potential for accidents and the inevitability of old age were still a concern.
That’s where the initiative has broken new ground – by arranging for retirement savers to receive up to 20% matched funding from the Colombian government. Other ideas proposed to the farmers within the Farmer Future initiative include health, accident and crop insurance, covering events such as mudslides.
So far, more than 860 farmers have signed up to a pilot for the scheme, run by the Aguadas Cooperative in the Caldas region of west Colombia. “This has been a relief to many,” says Juan Carlos Ardila of Expocafé. “The people who will benefit will be the middle-aged and younger farmers. We have half a million farmers and every time an old farmer dies, the property is split. We now have steelworkers aged 17 to 50 taking over plantations. We’re trying to get more educated youngsters into the business, supporting them with technical input and cost accounting.”
Colombia is not the only country where such sustainability initiatives are being piloted. A similar initiative within the AAA Program aimed at enhancing farmer welfare has been running in the coffee-producing Huehuetenango region of Guatemala since 2010, and has been replicated in Costa Rica. In those countries the focus has been on helping farmers with financial planning and accounting, so that in addition to cultivating exceptional coffee, they can better understand the revenues and costs associated with running their farms and develop financially successful coffee businesses.
“They are seen as elite producers of arabica coffee. It tastes great, customers like it, and they get good prices for it,” says Lawrence Pratt, a senior lecturer on sustainable development at INCAE Business School, Costa Rica, which works with Nespresso. “So why [were they] so poor?”
The answer was surprising: “Two thirds didn’t keep written records of anything. They were not getting the best prices on fertiliser, and not necessarily using best practice.”
Out with the old
Long-held traditional practices (and some more modern models) were out of date and a lack of financial knowledge meant that even simple microcredit schemes to improve coffee production could not be accessed.
Nespresso called on Root Capital, a US-based, non-profit social investment fund for poor rural communities, to provide financial training in tailored workshops and in one-on-one coaching sessions.
Root Capital’s Tyler Clark, global director of advisory services, says the farmers were quite positive. “It was a light-bulb moment for some, understanding how to run things. The more sophisticated Farmers have a good grasp of their cost structure, but many did not.”
By helping the farmers to improve the financial management of their farms, access credit and acquire new business skills, the project has helped all the farmers in the coffee cooperatives run more profitable businesses.”
Jérôme Perez, Nespresso’s head of sustainability, says one of the biggest goals of the Farmer Future programme is to increase the capacity of farmers to invest in their own futures by saving. “We have found just over 7% of farmers save. We need our farmers to be happy, healthy and wealthy. If we are not involved in ensuring that coffee farming provides a profitable livelihood, security into old age and attracts young farmers, it will endanger the future of our business.”
