Saturday, September 5, 2015

35. Farm management, Daterra and quality levels

Sept. 5, 2015

I had the chance to talk with Linda Smithers of Daterra Estate in Brazil last weekend. For those that aren't familiar with Daterra Estate, if you are familiar with the auto industry, Daterra is like the Toyota or the Mercedes of coffee. They produce some of the industry's highest quality coffees consistently, sustainably and in high volumes. Measuring and documenting processes and quality thresholds is down to a science. There are high levels of investment in worker training, working conditions, and environmental protections. They have ISO 14000, Rainforest Alliance, UTZ and other certifications. I could go on. Daterra does so much right, one could write a book on it.

In this blog we'll just focus on Daterra as an example of the fact that poor quality happens in agriculture. You cannot avoid it, even if you are Daterra Estate. You can only manage it. At Daterra they have five (count 'em five) electronic sorts on coffee beans after harvest to make sure only the highest quality gets the Daterra brand. Which means, of course, poor quality cherry was picked and low quality beans were produced. And according to Linda, you can even have as your strategy, that "commercial grade" (low grade) coffee pays your bills. This means revenue from premium, high-priced (but low volume) coffee is then used to cover the "non-essentials", which may be innovation, and 'extras' in the area of R&D, marketing and training. (Some marketing, research and worker training is essential, of course, but not all of it.)

According to Linda, Daterra's specialty grade coffee is 85% of production. I didn't ask her to confirm this, but I'm assuming this means that a relatively low level of costs are considered "essential", since they are covering their essential costs from only the "low price point" 15% of their production. By the way, Daterra's "low price point" coffees are not branded "Daterra". They know that would dilute the Daterra brand.

This all relates to countries like Rwanda and Burundi and their national debate over "what level of total coffee production should be specialty?" And the other side of that "coin", what level is OK to leave as commodity, low grade coffee? Specialty can't be 100%. But should it be 85%? Or 60%? Linda Smither's response to this question (thanks, Linda!) was there is no correct level. What matters is your starting point, and how fast you grow that level of high-quality from where ever you're starting. I asked her about a country like Rwanda, where specialty grades are just about at 40% of the country's total exported production in volume (not value). (Here we assume fully-washed coffee equals specialty coffee, which it doesn't, but for reasons we won't go into, it's a good proxy.) Linda said that once you're at 40% of volume, the ramp upward is not so steep. A realistic goal might be 2.5 - 5% annual volume growth for specialty.

Taking this to the farm level, Linda says that many coffee farmers she meets are starting with only 5% of their crop being even close to specialty. She tells them that they could double that percentage (i.e. achieve 10% specialty grade) in 3 years. And then, of course, she works with them to help them have the tools and know-how to achieve that growth. That is another amazing product Daterra offers the world of coffee -- training and inspiration.

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