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by Rick Peyser
Green Mountain Coffee Roasters

Myanmar And Specialty Coffee: Critical Crossroads

Categories: 2013, DecemberTags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Author:

When I received an invi­ta­tion from Winrock International to vol­un­teer in USAID’s Farmer-to-Farmer Program in Myanmar’s nascent spe­cialty cof­fee sec­tor, I had only one ques­tion: “Myanmar and Specialty Coffee?” The two con­cepts just didn’t seem to fit together. I looked at the nicely framed SCAA “Coffees of the World” map in my office and Myanmar (or Burma) was not even iden­ti­fied as a cof­fee pro­duc­ing coun­try – Arabica or Robusta. I did a quick Internet search and found very few ref­er­ences to cof­fee in Myanmar. So, I accepted Winrock’s invi­ta­tion immediately.

I knew that Myanmar had gained inde­pen­dence from Great Britain in 1948 and had been under mil­i­tary rule from 1962 until 2010. Just recently the coun­try has started to open up to the world and to more global trade. President Obama was in Myanmar just over a year ago to encour­age lead­ers to con­tinue on their paths toward democ­racy and par­tic­i­pa­tion in the global com­mu­nity. The coun­try is still recov­er­ing from Cyclone Nargis, that took more than 130,000 lives in 2008. Today it remains one of the planet’s least devel­oped nations by many mea­sures. Yet, things are changing.

I arrived in Yangon in mid-November, and I was met at the air­port by Dr. Ai Thanda Kyaw, a Country Director for Winrock International who trav­eled with me my entire stay, and patiently trans­lated all of my inter­ac­tions with farm­ers and oth­ers. As the first vol­un­teer to work in Myanmar’s cof­fee sec­tor, I had been asked to pro­vide some train­ing on how cof­fee is farmed, processed, roasted, eval­u­ated, and mar­keted in more mature cof­fee ori­gins around the world, and to ulti­mately rec­om­mend how the entire sec­tor could be strength­ened to help the coun­try take advan­tage of this high-value agri­cul­tural prod­uct. In short, my role was to explore, to lis­ten, to train, and to make rec­om­men­da­tions for the future devel­op­ment of Myanmar’s cof­fee sector.

Before leav­ing Yangon, we met with USAID and with the 3,000-member Myanmar Fruit, Flower, and Vegetable Producer and Exporter Association (MFVP) that was a host orga­ni­za­tion for my trip. The MFVP sup­ports its mem­bers with a vari­ety of ser­vices includ­ing exportation.

Our first stop was the Shwe Pu Zun cof­fee estate in Yet Sauk, located in Shan State near the cen­ter of the coun­try. Shwe Pu Zun is a large ver­ti­cally inte­grated busi­ness that has 1,000 employ­ees who work on cof­fee farms in Yet Sauk and Pyin Oo Lwin, or at a 200-head dairy farm, a bak­ery oper­a­tion, a café and retail bak­ery, all in Yangon.

Shortly after our arrival, we met to dis­cuss our agenda over lunch, which like all meals dur­ing the two weeks, always included rice at the cen­ter of the plate, with a vari­ety of smaller dishes to sam­ple and mix with the rice. These dishes were pri­mar­ily veg­eta­bles, dark leafy greens, beans, baby bees, and deep-fried small fish, with many dishes hav­ing some “heat.” All meals were accom­pa­nied by a soup broth, green tea, and finally coffee.

Eighty per­cent of the farm’s 300 acres is planted in cati­mor, grow­ing organ­i­cally under a shade canopy of care­fully planted sil­ver oak, mango, rub­ber, and macadamia trees. The farm also has test plots of SL 34, #795, and yel­low caturra, and expects to have over 1,000 acres in cof­fee pro­duc­tion by 2018.

The Shwe Pu Zun farm in Yet Sauk (alti­tude: 3,000–3,300 ft.) is one of the best mod­els of sus­tain­abil­ity and diver­si­fi­ca­tion I have seen any­where in my cof­fee trav­els. The entire farm is pow­ered by its hydro-electric gen­er­a­tor, which also has an inge­nious sys­tem to pump water uphill to pro­vide drip irri­ga­tion for cof­fee, macadamia nut, and mango pro­duc­tion. It cap­tures and uses methane from a bio-digester; has its own large organic com­post facil­ity that uses rice husks, molasses, and other local ingre­di­ents to pro­duce a very clean “black gold;” it treats water from milling, and sun dries its cof­fee on screened beds that are neatly placed on the well-marked cement patio.

After I spent a full day train­ing the staff of Shwe Pu Zun, we drove over four hours to Ywar Ngan Township (alti­tude: 4,300–4,500 ft.) where we worked with 60 unor­ga­nized, small-scale farm­ers, some of whom had trav­eled over 20 miles to attend the train­ing and dis­cus­sion. Here, the cof­fee is shade grown organic cat­uai that is grad­u­ally replac­ing older vari­eties. The well-diversified farm­ers have no out­let for their cof­fee other than Chinese traders who offer one price, regard­less of qual­ity. This “take it or leave it” approach leaves farm­ers lit­tle or no incen­tive to improve qual­ity and no oppor­tu­nity to nego­ti­ate the price. During my time with the farm­ers, I encour­aged them to orga­nize them­selves so that they could nego­ti­ate together, enjoy economies of scale, share tech­ni­cal infor­ma­tion, and join the pro­posed Myanmar Coffee Farmers and Exporters Association.

Our final stop was the Shwe Pu Zun farm in Pyin Oo Lwin (alti­tude: 3,500–3,800 ft.), which was a near replica of the farm in Yet Sauk in terms of vari­eties, sus­tain­able farm prac­tices, and over­all excel­lent farm man­age­ment. Nearby, we vis­ited the impres­sive Coffee Research, Information, Extension & Training Centre in Pyin Oo Lwin that, with proper resources, could be the hub of cof­fee tech­ni­cal assis­tance in Myanmar.

Once I returned to Yangon I had meet­ings with the Managing Director of Shwe Pu Zun oper­a­tions, with USAID, with farm man­agers, and the lead­er­ship of the Myanmar Fruit, Flower, and Vegetable Producer and Exporter Association (MFVP). I shared my view that there are three crit­i­cal needs to be met to fur­ther develop the cof­fee sec­tor in Myanmar:

1) Organizational devel­op­ment at the com­mu­nity level (i.e., the devel­op­ment of small farmer asso­ci­a­tions or cooperatives)

2) Organizational devel­op­ment of the sec­tor at the national level (I pro­posed the estab­lish­ment of a Myanmar Coffee Farmers and Exporters Association – MCFEA)

3) Better resourced tech­ni­cal assis­tance and farm exten­sion services.

When I pre­sented the con­cept, the Myanmar Coffee Farmers and Exporters Association each endorsed this con­cept. Better yet, the MFVP said that they would wel­come and pro­vide it with needed incu­ba­tor space and guidance.

Much like Myanmar, the cof­fee sec­tor needs sup­port as it opens up. Being out of global cir­cu­la­tion for decades has its draw­backs; how­ever, it also presents sig­nif­i­cant oppor­tu­ni­ties, per­haps the largest being to learn from oth­ers’ mis­takes. The work I started needs follow-up, and Winrock International is com­mit­ted to con­tin­u­ing its sup­port of Myanmar’s cof­fee sec­tor by pro­vid­ing addi­tional vol­un­teers to cre­ate a thriv­ing industry.

I believe that the “secret” of Myanmar’s spe­cialty cof­fee will soon emerge, first per­haps as a bou­tique offer­ing, and before long as a more main­stream cof­fee ori­gin. The poten­tial for a con­sis­tent sup­ply of high qual­ity, sus­tain­ably pro­duced cof­fee from Myanmar will be real­ized; it is just a mat­ter of time. Best of all, it is grown by some of the kind­est, most gen­tle peo­ple anywhere.

Rick Peyser is Director of Social Advocacy and Supply Chain Community Outreach for Green Mountain Coffee Roasters where he has worked for over 24 years. He is a past President of the Specialty Coffee Association of America, the world’s largest cof­fee trade asso­ci­a­tion, and served six years on the Board of Directors of the Fair Trade Labeling Organizations International (FLO) which sets the stan­dards for Fair Trade that ben­e­fit over 1,500,000 small-scale farm­ers around the world. Currently Rick serves on the Coffee Kids Board of Directors, the Food For Farmers Board of Directors, and the Board of Directors of Fundacion Ixil which is work­ing to improve the qual­ity of life in Ixil cof­fee com­mu­ni­ties in El Quiche, Guatemala.

There Are Not So Many Bad Guys in the Supply Chain

Categories: 2013, OctoberTags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Author:

There are not so many bad guys in the sup­ply chain; just a bad process.How many times have you heard some­one, well inten­tioned, look at a retail cof­fee drink and accuse the café owner of exploit­ing the farm worker by charg­ing so much and not shar­ing the prof­its? Frankly, it is sad­den­ing to see the shal­low­ness of thought that some are capa­ble of achiev­ing before point­ing a fin­ger and call­ing some­one “not fair.” A thought­ful response for the café owner might be to offer their accuser $10,000 if they can track down the farmer and deliver the money. It is a safe bet because 9.9 times out of 10 it sim­ply can’t hap­pen due to lot mix­ing and the labyrinth of trans­ac­tions it takes to get cof­fee from the farm to the roaster. One step deeper into the pool of thought would show that the sup­ply chain is dys­func­tional and needs an overhaul.

One com­pany has dis­cov­ered a way to change every­thing and reward the farmer up front. It is a sys­tem that will make us in the indus­try rethink the way we do busi­ness. It also puts the con­sumer in con­tact with the farmer of the cof­fee they are drink­ing. They will be able to hold us account­able. The shift has begun…

Logistics Latin America has looked at the sup­ply chain model and turned it on its head. In order to see the bril­liance of their solu­tion we must clearly define the prob­lem to solve and the cur­rent system.

Problem: Exploitation and worker con­di­tions of the aver­age cof­fee farmer cre­ate an unsus­tain­able sit­u­a­tion. They need to make more for their crop. Every trans­ac­tion in the sup­ply chain needs a profit com­po­nent when in some cases the value is not that high.

Current System: The farmer is paid for his cof­fee based off of the C mar­ket pric­ing. Here is a hypo­thet­i­cal trace of a pound of cof­fee from farm to cup:

Table 1

1)    It costs a farmer about $1.65 in Colombia to pro­duce the cof­fee. Farmer is going out of business

2)    Intermediaries per­form an essen­tial role, but raise the price of the cof­fee 63 per­cent over costs in this example

3)    Roasters in the US whole­sale roasted cof­fee to oth­ers who will brew it. A well run roaster will oper­ate at about 15–20 per­cent margin

4)    If the retailer can sell the pound of cof­fee for $2 a cup it seems like a great deal, but a well-run store will oper­ate at about 10–15 per­cent Margin

THESE ARE NOT BAD PEOPLE! THEY OPERATE INBAD SYSTEM!

Logistics Latin America (LLA) is think­ing out­side the sup­ply chain and has devel­oped a new model with another fund­ing com­po­nent. It pays the farmer right up front and then tells the con­sumer about it so they can share in the suc­cess. The solu­tion has two parts: A) Change the sys­tem  and B) Reward qual­ity even more.

Solution Part A: Change the sys­tem
Buy the farm and save it from fore­clo­sure or at the very least a slow death. Hire back the res­i­dent farmer and pay them a nice salary with health benefits.

Partition the farm into ½ acre, deed-able lots. Sell these lots to for­eign investors look­ing for agri­cul­tural land out­side of the U.S.

If the owner ‘Opts in’ then the prop­erty will be man­aged by a pro­fes­sional team that will increase the pro­duc­tion of the farm by invest­ing in the plant­ing of non-producing areas with high value vari­etals. Hire agron­o­mists and pro­duc­tion staff, and build needed infra­struc­ture such as pulp­ing sta­tions, fer­men­ta­tion tanks and dry­ing patios. All of this invest­ment  will be in an effort to improve both yield and qual­ity of the coffee.

Create and own the inter­me­di­aries such as dry miller, exporter, and importer.

Add tech­nol­ogy to the mix which can bond the con­sumer to the farm directly with a sys­tem known as Virtual Direct Trade TM.

A log­i­cal exten­sion of this process would be to own a roaster and retail shops, but that is not cur­rently the model.

Using our exam­ple from above the sup­ply chain will now look like this:

Table 2

At $2/lb the dynam­ics shift a lot. The import com­pany will pay a ‘price point that mat­ters’ no less than $2 and then just tack on the actual costs of busi­ness to the price.

Anything the import com­pany can sell the cof­fee for above the $2 + Costs gets split in a profit shar­ing between the investors and the res­i­dent farm staff.

Solution Part B: Reward qual­ity even more
By mak­ing smart deci­sions on the farm, the qual­ity of the cof­fee could raise as much as 10 points or more on the CQI scale. Roasters will be asked to pay more for higher scor­ing cof­fees and his­tory proves they will do it.

In addi­tion, LLA is adding tech­nol­ogy to the sup­ply chain so con­sumers can reach out directly and in a mean­ing­ful way to the farmer. The can see a live stream­ing video as well as par­tic­i­pate in farmer chat tex­ting. They can even take a vir­tual tour of the farm while they are enjoy­ing a cup of cof­fee from that farm. A roaster and or retailer would pay more for a cof­fee that comes with this tech­nol­ogy and a fan­tas­tic story to tell.

Disclosure
I was skep­ti­cal if LLA and their inde­pen­dent com­pa­nies: Cima Land Sales, Tierra Cafetera Farm Management, and Coffee LatinAmerica could pull this off. Not only have they bought three farms, they have sold out two of them. The money has been invested in qual­ity improve­ments and their entire 2013 crop has been sold to a roaster at a pre­mium. Plans are to have 10,000 acres under man­age­ment in 13 coun­tries through­out Latin America and other sig­nif­i­cant grow­ing parts of the world within five years. I am so excited about the dif­fer­ence they will make in our indus­try that I joined the com­pany as CEO of the US based entity Coffee LatinAmerica. If you know me, you will con­firm that I would not do this for just any com­pany. I believe in what these guys are doing. The model is changing!

Rocky can be reached at rocky@INTLcoffeeConsulting.com as well as
RockR@CoffeeLatinAmerica.com

If Coffee People Ruled the Country…

Categories: 2011, SeptemberTags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , Author:
Ask not what the cof­fee indus­try can do for you; ask what you can do for the cof­fee indus­try
John F. Reinhart

Have you ever pon­dered what it would be like if we ruled the coun­try? If you sim­ply put peo­ple from our indus­try, with our val­ues, in charge of con­gress and the White House, all of the right stuff would get done. (We should not be in charge of the Judiciary branch. We just shouldn’t!) The value sys­tem of most peo­ple I know from the indus­try pro­vides a basis for what would be a great plat­form as a polit­i­cal party. I pro­pose the fol­low­ing Planks for the Coffee Party platform:

1) Treat your con­stituents (cus­tomers) as if they have the abil­ity to make good deci­sions for them­selves and give them all the infor­ma­tion you can to help them. In the end it is their choice.
No one likes to be lec­tured to and no one likes to be treated like an idiot. In our indus­try we sup­ply a ton of infor­ma­tion and options so peo­ple can choose what is best for them. Educating our cus­tomers with facts about ori­gin, cer­ti­fi­ca­tions, envi­ron­men­tal impact, and trade prac­tices shed light on impor­tant top­ics to us. Your con­stituents will decide if it is impor­tant to them and thereby drive your busi­ness in a direc­tion set by them.

2) A thriv­ing Supply Chain equals a thriv­ing econ­omy.
Perhaps in no other indus­try will you find the rela­tion­ship from the con­sumer to the orig­i­nal raw mate­r­ial man­u­fac­turer more openly real­ized. We under­stand the impor­tance of build­ing rela­tion­ships with our trad­ing part­ners and ensur­ing that every­one in the sup­ply chain suc­ceeds. If we look for short-term gains at the expense of oth­ers we ulti­mately fail. A good rela­tion­ship is one where the hard work of all par­ties is cel­e­brated with higher con­sump­tion and even higher profit mar­gin. With that in play, economies not only here, but abroad ben­e­fit from the mature sup­ply chain relationship.

3) Stupid bureau­cracy is stu­pid: So Change It!
The neat thing about being a cof­fee per­son is the inher­ent need to spend as lit­tle time doing inane men­tal exer­cises over stuff that does not mat­ter in the long run, and get­ting back to run­ning our busi­nesses and mak­ing cof­fee a bet­ter prod­uct. When gov­ern­ment and NGO’s try to tell us what is best for the indus­try by mak­ing rules and reg­u­la­tions that ham­per a good sup­ply chain rela­tion­ship we are quick to push back. (If I were pres­i­dent I would elim­i­nate the need to do purge roasts before run­ning organic cof­fee because that is stu­pid. But that may just be me!)

4) Bring your pas­sion to the party but check your ego at the cloak­room.

With the excep­tion of trade shows, when we get together we focus on our com­mon goal of bet­ter­ing our prod­ucts, part­ners and our planet. We don’t sell and don’t want to be sold. We don’t allow lob­by­ists at our events. Very few logos are seen. What we do have is a deep pas­sion for rais­ing the tide for all ships. Sometimes those of us that have strong opin­ions on a topic get louder than may be needed but it comes from the heart. There are a few that enter the indus­try think­ing ‘they know it all and should tell us how to do things’ but they are usu­ally pulled aside and have the ‘your approach is not going to work’ talk.

5) We can always do bet­ter but that won’t stop us from act­ing now in the best way we can.

The major­ity of peo­ple in the cof­fee indus­try have ‘the entre­pre­neur­ial spirit’ whether they have started their own busi­ness yet or not. Even the mid-level exec­u­tives of our larger part­ners treat their depart­ments as cre­ative and thriv­ing busi­nesses. As entre­pre­neurs we know that stag­na­tion is death, as are fool­ish risks. We are more apt to be “Ready, Fire, Reload” than “Ready, Aim, Fire.” We have learned that small com­mit­tees made up of the cream of that topic will move things faster than try­ing to put as many opin­ions in the room as pos­si­ble for ‘thought diver­sity’. I would love to tell a con­gress­man that if you don’t have exper­tise in the topic, go away and do some­thing else where your tal­ents are needed.

6) A weak link breaks the chain. Support those that need it with edu­ca­tion.

We have all seen the signs for ‘GOURMET SPECIALTY COFFEE’ over a pot of macadamia nut fla­vored cof­fee that has been left on the burner of the gas sta­tion cof­feemaker for six hours. This is a tough beast to bat­tle. We have decided as a party to share indus­try knowl­edge through­out the entire sup­ply chain so that infor­ma­tion can make its way to our con­sumers as to why that gas sta­tions cof­fee actu­ally sucks. We under­stand that qual­ity is a truly sus­tain­able model for all. We will invite the owner of that gas sta­tion to one of our events so they can under­stand the error of their ways. If they do not choose to change we will com­pete against them until they have to make bet­ter cof­fee. This real­ity check applies to each mem­ber of the chain includ­ing farm labor, barista and each step in between.

7) We empha­size respon­si­bil­i­ties over rights and improve what needs to be improved.

We don’t need a gov­ern­ment agency to tell us that we should treat our cus­tomers, ven­dors, and employ­ees with dig­nity and respect. We trade fairly with­out hav­ing to be told. If one of us does not act in this appro­pri­ate man­ner we will call them out rather than cover them up. It just takes one idiot to tar­nish our party’s name so we will throw them under the bus if they won’t change. If we all take respon­si­bil­ity for our own actions we will be acknowl­edg­ing and sup­port­ing the rights of oth­ers. We as a party need to tell this story bet­ter to our con­sumers so we won’t need a ‘mark’ to prove our good works.

This is a fun con­cept and could go on and on. The bot­tom line is this: Our indus­try (party) is made up of bril­liant, kind, entre­pre­neur­ial, thought­ful busi­ness peo­ple. We would run the gov­ern­ment effi­ciently and treat each other with respect. We would get the impor­tant stuff done as quickly as needed and do it for the bet­ter­ment of all, not just our­selves. And we would have fun doing it, as we are all friends in this com­mon cause.