Coffee Growers Access Global Markets

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 MAKING A DIFFERENCE

Group of women selecting coffee

Workers discard inferior beans in a process known as European preparation, used with specialty coffees. 
 



Background
 

A little over a decade ago, Sociedad de Pequeños Productores Exportadores y Compradores de Café (SOPPEXCCA), a network of coffee cooperatives in Jinotega, Nicaragua, was struggling with debt. Coffee prices had plummeted to a 30-year low and the farmers depended on contractors to process their crop, missing out on the opportunity to add value to it.

Yet, there was hope between SOPPEXCCA’s new general manager, Fatima Ismael, and her staff that if they themselves could process, store, transport and market the members’ coffee, promoting its sale in Nicaragua and abroad, they could improve the lives of 450 farmers and their families.

In 2003, SOPPEXCCA submitted a proposal to the Inter-American Foundation (IAF) for funding to train its members in techniques that would improve harvesting and milling, and to build a wet mill so that coffee could be properly soaked, fermented, washed and dried. Runoff from inadequate wet-milling had been contaminating nearby water sources, a problem SOPPEXCCA needed to address. The proposal also called for improving a laboratory where quality was controlled and launching a new brand of fair-trade coffee that met standards for export to Europe and the U.S.

In 2004, the IAF awarded SOPPEXCCA $151,500 to be disbursed over two years. SOPPEXCCA contributed $52,000 of its own resources, $5,000 more than it originally committed and it mobilized another $6,000 from other sources.

Findings

 Before IAF funding

End Of funding, 2006 

 five years after

SOPPEXCCA’s members produced 1,650 tons of coffee classified as oro or green bean (dried coffee beans ready to be exported),

Quality was uneven and productivity was extremely low, just 1,300 pounds of parchment coffee per manzana, or 1.7 acres, while the national average was 4,850 pounds. The low yield was attributed to old trees, low-density plantings and limited technical assistance.

Wet-processing on farms did not include proper disposal of pulp and runoff, which contaminated surface and groundwaters.

Coffee yield increased by 266 percent as a result of new cropping techniques, integrated pest management, organic fertilizer, soil conservation and replacement of old trees.

SOPPEXCCA’s first wet mill processed coffee consistent with environmental standards. It was constructed in the community of La Perla to serve 80 producers who dismantled 40 primitive processing units, reducing water consumption and contamination. The mill operated with less manpower, six, as compared to 100 workers in the 40 artisan units. The excess labor was shifted to the coffee fields.

SOPPEXCCA acquired a truck to transport coffee. Proper handling of beans during transport reduces the chance that they will absorb contaminants that could distort flavor and reduce its value.

SOPPEXCCA opened a coffee shop in Jinotega, pioneering a culture of quality coffee consumption.

At the time of the evaluation, SOPPEXCCA had built three additional wet mills similar to the one funded by the IAF. The first, funded by Christian Aid and located in Datanlí-Los Robles, a protected area, can process up to 1,650 tons per season, directly benefiting 60 families in addition to hundreds of others consuming water from the Jigüina River and Lake Apanás. The second mill, built in the community of Corinto Finca, can process 385 tons and serves 27 growers. The third, in the community of Las Cuchillas, can process between 770 and 880 tons.

In 2009, the IAF and other donors contributed a total of $798,000 to build a dry-processing facility and warehouses near Matagalpa.* 

SOPPEXCCA’s transition to specialty coffee was crucial to its expansion into global markets. Before the start of the IAF-funded project, only 5 percent of its members’ land was dedicated to specialty coffees.** By 2012, 80 percent, of their land was dedicated to it.

SOPPEXCCA has continued to supply customers in Germany, Holland and Italy while acquiring new clients in Canada, Ireland, Sweden and the United States through trade fairs and tours. European clients buy about 55 percent of SOPPEXCCA’s specialty coffee; the rest is exported to the U.S. and Canada.

* The IAF awarded SOPPEXCCA a second grant for $243,770, of which $60,000 was used for construction of two drying patios and a coffee storage facility.
** Coffee which scores 80 points or above on a 100-point scale is graded "specialty.”

 

Impacts

By selling through SOPPEXCCA, cooperative members have obtained better prices for their coffee. In 2006, SOPPEXCCA paid $12 more than other buyers per quintal (220.46 pounds). In 2012, this premium increased to $18. SOPPEXCCA’s members used the additional income to improve their homes, educate their children or consume more nutritious meals. Beef consumption, for example, tripled in one farmer’s household. Delapidated wood structures are being replaced by houses made of brick and mortar. In 2003, Azucena Romero and her husband owned 4.5 manzanas (7.6 acres); by 2012, they owned 18.5 manzanas (31.5 acres), which provided income sufficient to build a brick house for themselves and their seven children. 

Coffee export graph
Exports of SOPPEXCCA’s high-quality café oro grew from 1,038 tons in 2006 to 2,447 tons in 2012. Revenues have increased fourfold, from $1.2 million to almost $5.3 million.

 Market ready coffee
Coffee ready for the market
 Soppexcca instalations

SOPPEXCCA plant near Matagalpa, Nicaragua

IAF-funded training in coffee tasting reached 22 young Nicaraguans; 10 are now working with SOPPEXCCA’s technicians to improve bean quality. Two young men, Marvin Raúl Talavera and Manuel Pavón, became “master tasters” in SOPPEXCCA’s cupping laboratory, where they measure body, sweetness, acidity and flavor. Pavón, who is also a barista, has been selected for seven consecutive years (2005-2012) as the official coffee roaster of the international Cup of Excellence competition and is one of two Nicaraguans on the international panel of 22 judges.

 

The IAF’s grant allowed SOPPEXCCA to acquire experience and take control of most post-harvest activities, including wet-processing, storage, marketing and transport to port, and it even launched its own coffee brand, “Flor de Jinotega.” SOPPEXCCA used a second IAF grant and funds from other donors to develop a dry-milling center; bypassing intermediaries and taking control of that link in the value chain.

In 2012, SOPPEXCCA ranked 22nd among the 84 largest coffee exporter in Nicaragua. It sells coffee to purchasers in seven European countries, Canada, Venezuela and the U.S. U.S. clients buy 50 percent of SOPPEXCCA’s export. Nicaraguan markets account for 20 percent of SOPPEXCCA’s total sales.

SOPPEXCCA’s membership increased nearly tenfold from 66 producers in 1999 to 650 in 2012. SOPPEXCCA currently employs six agricultural technicians and 42 assistants. The services provided not only help farmers improve their yield but ensure quality.
 
In the community of La Perla, growers used the wet-mill facility to separate beans from pulp, residual water and parchment. By processing coffee in a responsible manner, growers reduced contamination and water used, benefiting everyone in La Perla.

In the community of Yankee, members of cooperative Erasmo Pineda expressed satisfaction with training in the treatment of waste from processing. “We did not know the damage we were doing; now we know how to avoid contaminating the river,” one farmer said.

As SOPPEXCCA expanded its control of the value chain, benefits accrued to nonmembers. Opening the dry mill created 182 seasonal jobs and 90 percent were filled by women. An offshoot of the grant was a plant producing organic fertilizer operated by Cooperativa Chirinahualt whose 58 members are all children of SOPPEXCCA’s farmers. The cooperative employs five young people. Production has risen from 286 tons in 2009 to 882 in 2012. The profit margin is 24 percent.

 GDF levels in pyramid graphic

SOPPEXCCA’s project were collected and analyzed using the Grassroots Development Framework (GDF). The GDF measures results on three levels: the individual or family level; the organization or grantee level, and the community or society level. At the lower level of the cone, the project positively impacted the lives of 650 families as measured by the indicators on training acquisition and application. At the mid-level, SOPPEXCCA reported on resource mobilization and partnerships. At the upper or community level, SOPPEXCCA reported on its efforts to disseminate information about its coffee through brochures, CDs and participation in local and international trade fairs. SOPPEXCCA also reported on conservation given its goal to reduce contamination from processing.

 

Sustainability

A key to SOPPEXCCA’s growth has been its manager, who guided organic production and the process to qualify for fair-trade certification. Expanding to control other phases of the value chain helped raise quality and increase revenues.

Despite its steady growth, SOPPEXCCA remains dependent on external funding to finance operations and technical assistance for its farmers. SOPPEXCCA has used 60 percent of its fair-trade premium to pay debts incurred during the construction of the dry-milling facility. 
 
Lessons

What worked: Investment in human capital proved a cornerstone of SOPPEXCCA’s business model. Much of its success is attributable to its team of trained young volunteers and technical staff who assisted growers and others across the entire production chain.

Use of the wet-processing techniques, including multiple reservoirs to treat wastewater before its discharge from the processing facility, reduces the level of pollutants entering the waterways. The result is a cleaner process that yields better coffee than traditional methods. Other responsible practices that worked well were the production of organic fertilizer and the cultivation of timber and fruit trees offering the appropriate environment for shade coffee.

Control over the value chain enabled SOPPEXCCA take on tasks that had been performed by contractors, such as wet- and dry-processing and transport to point of export. The strategy of keeping the most profitable operations in-house gave SOPPEXCCA access to markets that paid better. 

What did not work: Branding did not work as expected in foreign markets. Although significant progress has been made promoting “Flor de Jinotega” in Nicaragua, internationally the brand has not gained traction. Sales of “Flor de Jinotega” totaled only 300 pounds in Germany; sales in the U.K. were negligible. A robust publicity campaign might require a larger investment for the brand to catch on abroad.

Conclusions: Emphasis on product quality as a strategy to increase profitability proved entirely successful. Exports grew more than 1,000 percent between 2002 and 2012, which resulted in more income for SOPPEXCCA’s members and social benefits for participating communities. SOPPEXCCA is moving toward self-sufficiency for all its operations.

SOPPEXCCA demonstrated that international markets are not forbidden territory for producers who farm on a small scale. The key to accessing these markets is joining forces and pooling resources to compete with the big players. It is also important to identify the niches that offer the possibility of a comparative advantage. Organic and specialty coffee is SOPPEXCCA’s niche and fair-trade certification offers a foothold in the global marketplace.


To request the full evaluation (only in Spanish), email inquiries@iaf.gov