Monday, February 22, 2021

102. Rainforest Alliance' Living Wage Benchmarks Report

 Feb. 22, 2021

"Read the fine print and you might find a gold mine!"

Those were my thoughts last week after receiving a seemingly administrative email from Rainforest Alliance to Partners, (my company Artisan Coffee Imports is one of them). The email was sharing updates to the Rainforest/UTZ license agreement. As I skimmed through the long text with fine print, the words "Living Income" caught my eye, then a link to this version 1.1 document, "Annex S10: Living Wage Benchmarks Per Country."  A goldmine!

I checked with some Rainforest contacts, and indeed, this report is the end result of years of collaboration with the Global Living Wage Coalition (GLWC). Rainforest has also worked with the Living Income Community of Practice (LICP), two pre-competitive groups focused on improving living wages for smallholder farmers of commodities, including coffee farmers.

The GLWC and LICP both utilize a seminal 2017 Manual by Richard Anker & Martha Anker on living wage reference values, "Living wages around the world: Manual for measurement." The manual is an open-access document with 20 chapters, and each chapter can be downloaded as a .pdf. To do this for 29 countries is clearly a ton of work, and Rainforest and the GLWC coalition have done this for us - that is the goldmine!

As the image to the left shows, the Rainforest document gives partners a simple table with 52 countries listed alphabetically, (we only show the first 25 lines here). For many of these countries, it only says "applicable wage", which means they don't have the benchmark for this country calculated yet. But for 29 countries on the list, including many of the prominent coffee producing countries, a benchmark monthly gross wage in local currency is given. If such a list exists elsewhere, I haven't seen it.

How can this be used? Now as a coffee buyer, I can ask my supplier what is the price the farmer is paid in local currency for his/her coffee product (parchment or cherry), and I will understand a lot more about how much coffee is really helping this individual and their family achieve a sustainable livelihood. Or I can ask how much the workers at the washing station, or the pickers on the estate are paid, and again, understand whether they have a shot at living off of those wages. For example, the living wage benchmark for Rwanda in the table is RWF 147,111 p. month. I know that in some areas rural workers are paid RWF 1,000 or 1,500 per day. Clearly, even working 30 days a month is not going to get this rural worker even close to a living wage. Something has got to change.

Of course, there are limitations to these numbers, and in the document Rainforest directs one to details on the methodology, (click here) and how to use the Reference Values (click here). The biggest cautions I note to myself are:
  • these are national averages. Even small countries like Rwanda, can have vast differences between what is a living wage in one area vs. another, especially rural vs. urban wages span a wide spectrum. In large countries, like Kenya or Ethiopia, even rural wages will have a broad range.
  • these are not commodity specific. Groups like LICP are working on commodity specific living income estimates, so that eventually we can understand what is relevant for a coffee farmer vs. a cocoa or rice farmer.
Regarding the use of these benchmarks within the Rainforest standard, there are important things to note also:
  • To uphold the standard, a buyer must assess wages against the living wage and make improvements towards the living wage, but it doesn’t require that you pay the living wage. 
  • The Rainforest standard, as it is today, applies to workers on individual estates, workers on large farms within a group, and workers in group management facilities (the office secretary and maybe the workers at a group-operated wet mill), but not the smallholders themselves nor the workers that they hire. 

Tuesday, February 2, 2021

101. ICO's Coffee Development Report 2020: The Value of Coffee

Feb. 2, 2021

The International Coffee Organization’s new 2020 development report, “The Value of Coffee,” is now available to download as a .pdf from ICO’s website! 

Second in a series, it focuses on the international trade of coffee. The first report, "Growing for Prosperity", was published in November 2019. With that edition, the ICO launched this flagship economic publication to provide an analytical underpinning to the on-going Structured Sector-Wide Dialogue, a process initiated by the ICO as part of the implementation of Resolution 465. The 2019 document presents an in-depth analysis of the root causes and impact of the coffee price levels and volatility. A paper co-authored by Ruth Ann Church is one of the citations in this report, drawing on research conducted by Michigan State University and local partners in Rwanda in 2015.

  • A smart mix of public-private dialogue and timely information is needed to maximize economic benefits for farmers.
  • Social and environmental sustainability are all addressed — as they must be, since all three: economic, social and environmental — are inexorably intertwined.
  • Empirical analysis of the coffee Global Value Chain (GVC) shows that:
    • the value of annual coffee exports has more than quadrupled from US$8.4 billion in 1991 to US$35.6 billion in 2018, with non-producing countries having played a significant role.
    • higher-income regions such as Europe and North America accounted for 96% of roasted coffee exports and 53% of soluble coffee exports in 2018
  • contributions of the coffee GVCs to the UN Sustainable Development Goals are discussed
  • resilience (a favorite topic on this blog!) of the coffee GVC to stressors such as climate change and the current global pandemic are also addressed.
The full report was officially launched on 28 January 2021. It will be followed by a roadshow that will include presentations of the key messages in Member countries, at development institutions and in political forums with the aim of mobilizing resources and support for the implementation of the main recommendations.

Friday, January 15, 2021

100. New Sustainability Reports - Specialty and Total Market

100th post - woo hoo!                                                             15. January 2021

As a fitting 100th post on this blog, we are excited to share about the 2020 Specialty Coffee Transaction Guide , which was released two days ago, 13 January, 2021. You can click here to download the report. Artisan Coffee Imports is proud to be a data contributor this year. 

Download the Transaction Guide:  

Another useful coffee industry report, covering both specialty and commodity, is being released today: the 2020 Coffee Barometer. Download this report here:
"The coffee supply chain is closely tied to the top ten multinational roasters that represent over 35 percent of global trade in green coffee and engages millions of smallholders and workers." ~ 2020 Coffee Barometer
The two reports are synergistic, because the Coffee Barometer strongly urges more pre-competitive collaboration between importers and roasters on behalf of farmers. The "Transaction Guide" is a good example of what that kind of collaboration looks like. Indeed, on page 38, the Barometer discusses the value of Transaction Guide and its transparent price sharing as an alternative to pricing based on the C market. 

For the most part, the Specialty Coffee Transaction Guide, as it's name implies, focuses on the low-volume, but high dollars-per-pound part of the coffee world -- the high-quality specialty coffee market. Meanwhile the Barometer will teach you more about the largest roasters and importer multinationals and the high-volume, low-quality, low price-per-pound commercial grade coffee trade.

It was interesting to join a promotional webinar for the Coffee Barometer today. It was hosted by a media group in Amsterdam named CIRCL. Below are some highlights and a summary of a few of the comments from their high-powered panel of guests.

Moderator: Bahram Sadeghi, journalist

Sjoerd Panhuysen, Director of Research at Ethos Agriculture and editor of the Coffee Barometer. 
Kaitlin Cordes, Researcher at Columbia Center on Sustainability in New York City. She discussed the recommendations of the Jeffery Sachs report to the World Producers' Forum.
Vanusia Nogueira, Director, the Brazil Specialty Coffee Association (BSCA).
Mario Cerutti, Chief Sustainability Officer, Lavazza
Juan Antonio Rivas, Senior Vice President, Olam International.

I found Cordes' summary of the three recommendations of the Jeffrey Sachs report useful. They are:
1. Support each producing country to create a National Coffee Sustainability Plans, 
2. Create an international Coffee Fund of about 10 billion USD to support producer prices when they fall below a certain level.
3. Increase Domestic Consumption of coffee.

Key comments:
Less than $.005 additional price paid by consumers, for every cup of coffee sold, would make the 10 billion coffee fund possible. The criticism of this is that it is charity instead of fundamental structural change. The counter to that criticism is to think of it as the "user" side of the industry as shouldering some of the risk that currently is borne by farmers alone -- especially price and climate change risk.
A minimum farm size is needed in most countries. Diversification of income is a only a hedge and productivity improvement is only one step among many. 
According to Mario Cerutti, the "coffee crisis" is more than a crisis. It's not going away after a short time. He also commented that paying 10% of coffee exports per year into a coffee fund is not realistic. He says it will put roasters like Lavazza out of business.

Wednesday, January 13, 2021

99. Babies and Research on Better Informed Husbands

 Jan. 13, 2021         Excerpt from a World Bank Blog               

At Artisan Coffee Imports, we are regular readers of the World Bank Blog, "Development Impact." We especially appreciate posts by Markus Goldstein, and this week's post was no exception. He starts with the intriguing title, "Is an informed husband a better husband?"

The paper Goldstein reviews deserves attention because it shows that we must take issues like intra-household gender dynamics seriously if we want to tackle issues like fertility. In this study, a relatively simple intervention is observed as making meaningful progress in not only reducing the chance of pregnancy, but also shifting preferences, improving communication, and making folks happier in their marriage. 

I give you the setting of the paper here -- you will need to click and read the above link to learn the details of the intervention and results.

The setting is Lusaka, Zambia. National fertility rates are on the high side, with 5.3 children per woman aged 15-49. In this context, as in many others, men would prefer, on average, to have more children than women (in Ashraf and co’s sample, men would like 4.43, women 4.19). Maternal mortality is high: 1 in 59 Zambian women die giving birth. And men are less aware of the factors that contribute to maternal mortality than women. For example, 84.6 percent of women identify advanced maternal age as a risk factor, but only 74.3 percent of men do.

So, this adds up to a situation where men are less informed about a risk they want their wife to take. And she can’t effectively communicate this risk to him. 

(Quoted from Markus Goldstein, Development Impact Blog)

As Ashraf and co-authors argue, we still have some ways to go to understand these things better, but for now the results of this study help us get a handle on how asymmetric information and differing preferences at an intra-household level is impacting decisions about child-bearing.

Tuesday, January 5, 2021

98. New Year 2021: Inspiration from Nobel Prize Laureates

 Jan. 5, 2021    

Happy New Year! Yesterday the American Economic Association hosted a wonderful, international webinar allowing fans of the 2020 Nobel Prize in Economics laureates to get to know the people and their work a little better.

Click here to view the recording on youtube:

The beauty of Zoom recordings allows you to feel as if you are in the room with Abhijit Banerjee, Esther Duflo and Michael Kremer, the Nobel Laureates, and people who have worked with them closely. All of the individuals speak candidly and  share the highlights of why their work has been so impactful in the world of development economics.

For any reader who has not been in the coffee industry very long, please note that at Artisan Coffee Imports we consider ourselves as participants in field of development economics, albeit at a very applied and microscopic level. 

Thursday, July 2, 2020

97. 'Cooperative Advantage' article in Roast Magazine

Cooperatives like TUK in Rwanda offer farmers many benefits
(Photo credit: Clay Enos and Sustainable Growers)
"Cooperative Advantage: What Do Cooperatives Mean for Farmers, Roasters and Consumers?" appears in the new July/August issue of Roast Magazine.

In this blogpost we'll share the highlights, but we hope you'll consider hopping over to Roast's website to purchase the issue - either digital or hard-copy. $7 for the single issue or $35 for 1 year subscription.

Co-authors Ruth Ann Church and Dr. David L. Ortega review the growing interest in coffee produced by cooperatives, including two papers published in peer-reviewed journals by Michigan State University research teams. The first paper offers quantitative results on farmer productivity and household welfare from a study from Rwanda and the Feed the Future Africa Great Lakes Coffee support program. The second paper shares results from a coffee shop field experiment with consumers of pour-over coffee. It captures willingness-to-pay for coffee based on the organization of the producers, namely coffee that is labeled 'grown by farmers belonging to a cooperative'.

Insights from these quantitative studies bring credibility to qualitative work that has been popping up across the specialty coffee industry over the past year. The Specialty Coffee Association's Kim Elena Ionescu interviewed Merling Preza of PRODECOOP at Re:Co 2019 in Boston. The non-profit TWIN published a 2019 report on producer organizations that gleaned insights from 31 producer organizations in nine countries. The common theme is that the farmer cooperative can be a valuable node in coffee value chain, providing benefits to farmers that altruistic consumers, especially millennials, are expecting in their specialty food choices.  

Cooperative members in Rwanda mitigate
soil erosion for their coffee plot.
Quantitative Results
After reviewing the context of today's consumer demand for transparency and a history of problems that come with cooperative leadership, key quantitative results are shared. First, the authors of the Food Security article find that farmers who are cooperative memberin Rwanda score significantly higher on an “adoption of best practices” index than coffee farmers who are not co-op members. The farmers belonging to cooperatives also receive more income from their workapproximately 18 percent higher revenue per coffee tree. These elevated metrics, the researchers conclude, begin a virtuous cycle for farmers who belong to a cooperative. They are more likely to have healthy soil and plants, which leads to higher productivity per tree, which then lowers cost of production per kilogram cherry, and in turn improves net income per tree. Indeed, productivity (kilos of cherry per tree) of cooperative members is 20 percent higher than that of non-members, and cost of production (Rwandan Franc/kilo cherry) is 24 percent lower than farmers who are not cooperative members. 
Courtney Gates at Espresso Elevado
in Plymouth, MI prepares a pour-over.
(Photo credit: Teresa Pilarz)

The article focusing on consumer willingness-to-pay (WTP) in Food Research International finds that when personality traits are used to segment consumers, a strong willingness-to-pay for coffee from farmers organized cooperatively can be identified. The results indicate:
  • An average WTP of an additional $1.31 per 12-ounce cup of pour-over coffee, in a specialty coffee shop setting, when the cup descriptor is “coffee grown by farmers belonging to a cooperative.”
  • Consumers with higher subjective knowledge (consumer’s self-evaluated knowledge of coffee) had lower premiums for cooperative-grown coffee, suggesting that these consumers may base their product valuation on sensory characteristics more than descriptive information of production structure.
  • The personality traits of “conscientiousness” and “extraversion” increase WTP and a higher level of the personality trait of “agency” or “outspokenness” decreases WTP (For more on the Big Six personality traits, see Bazzani, 2017, in Food Quality and Preference).
  • Age was the only statistically significant sociodemographic determinant of WTP, with older consumers being willing to pay slightly more on average.
Tough Questions Arise
These results bring up complex topics long debated in the specialty coffee industry. For example, how do consumers value basic knowledge of the producer organization type (e.g. cooperative) vs. a voluntary sustainability standard such as Fairtrade? What role does the flavor and taste in the cup play in developing consumer WTP and repeat purchases? If a cup of coffee supplied by a farmer cooperative earns a premium over other coffee at a cafe, for example the $1.31 extra measured in the experiment, what portion of these funds makes it back to the coffee grower? These are all good questions which are recommended for further research.
Lee Harrison with Joe Coffee in
New York City 
(Photo credit: Joe Coffee)

What Should Roasters Do With the Info?
The “personality traits” study raises the question of whether psychometric data on coffee consumers is already in use at roasting companies. One specialty roaster, Joe Coffee in New York City, updated its overall brand strategy a few years ago with market research ensuring employee values and brand values were aligned. The next step in brand development, according to Lee Harrison, Joe Coffee’s senior director of coffee and roasting, is to invest in consumer research to better align the brand with customers. “It’s important to get data about what people want so that we can refine our assumptions and connect with consumers in a relevant way,” he says.

Would research that identifies willingness to pay based on personality traits be of interest at Joe Coffee? Harrison replies affirmatively. “Not just for sales and profitability here in New York, but for relationships at origin, too. If farmers had this information, they could better market themselves, and it would make our job of marketing their coffee more efficient,” he says.

Recognizing that the results of this consumer study are limited by its setting, the findings still have important implications for many stakeholders in specialty coffee. It helps us to consider the diversity of coffee consumers beyond sociodemographic segmentation and instead make marketing and supply decisions with long-lasting intrinsic characteristics in mind. Combining these consumer insights with confirmation from the other studies on cooperatives’ positive impacts can encourage all who work with cooperatives and strive to make coffee better.
Sunset at Kopakama cooperative near Lake Kivu, Rwanda
Leaders of the Ejo Heza women's group appreciate one
of the roaster customers, Victrola Coffee, who pays a premium.
The Feed the Future Africa Great Lakes Coffee support program launched in August 2016 with
a workshop in Kigali, Rwanda. (Photo credit: Michigan State University)

Wednesday, May 6, 2020

96. Coronavirus and Coffee: Interviews with Ten Coffee Farmers in Rwanda

May 6, 2020
Ejo Heza members harvesting in April 2017
Artisan Coffee Imports builds relationships with coffee farmers by listening to them. Harder than one might think, but it is truly powerful when it happens. Two weeks ago we arranged for a short survey-style interview with ten of the Ejo Heza farmers who produce Artisan's flagship imported coffee. Ejo Heza is a group of female farmers formed in 2011 with the support of their parent cooperative, Kopakama, in the Rutsiro district of Rwanda's Western Province. Over the years, the group has grown from 200 to 400 members. They have two community plots which they cultivate together, and each member also has coffee trees at home.

In nine of the ten interviews, the farmers said that labor was an issue, either paying for it, or finding it, or both. This is the main "finding" related to Coronavirus. To skim the actual farmer comments, see below.

It's important to note the context of these interviews. They were conducted:
Grace Izerwe - Quality Control Intern
  • By phone by Grace Izerwe, Kopakama's Quality Control Intern, who is also a trained researcher, trained coffee cupper, roaster and barista, and holds a B.S. in Rural Development and Agribusiness from the University of Rwanda.
  • During peak season, meaning the height of the harvest, when farmers are likely going to the coffee plots several times a week or daily to harvest cherry. Most likely they are using every able-bodied person in their household to help with the harvest, and hiring 'daily workers'.
Of further note:
  • There tends to be a "going rate" for daily labor in rural areas of Rwanda. Today the average daily rate is 1000 Rwf per day, (around $1.10) for someone to work from about 7am to 5pm.
  • The short survey was gathering feedback on two topics, the new "300 Club" started this year by Kopakama and the impact of Coronavirus on the farmers themselves. Here we will share about the coronavirus impacts and a future blog will discuss the 300 Club.
  • Labor is the most important component of cost of production probably in all coffee producing countries, but even more than some in Rwanda. Labor was estimated to be 75% of total cost of production in a study with data collected in 2015. (Click here for the study by Ruth Ann Church.) Of total labor, harvesting accounts for 36% of costs. 
Take-away: don't be fooled by what may seem like low-cost labor. It is a huge part of the farmer's budget and therefore doubling it, as appears to be the case for Rwanda's farmers, is going to have a likewise dramatic impact.
Ejo Heza farmer checks the quality of a coffee tree.

(Names have been changed to maintain anonymity.)
1. Epiphanie: "The stay home period is preventing us from harvesting as usual.  Since we are respecting the distancing (1m) between workers, I hire less workers than needed." (245 trees; 9 years as a member of Ejo Heza; 4 children.)

2. Floride: "The stay home period is affecting me in ways of hiring more workers because I have to pay workers the same daily salary as if they have worked the whole day." (1800 trees; 2 years as a member of Ejo Heza; 3 children.)

3. Perpetue: "The stay home period is affecting me in harvesting because before I would use 4 workers and now I am using 2 workers because you cannot find those casual laborers to help you. People are staying at home. This means those 2 available workers spend much time in harvesting. Sometimes they do not even finish the harvest of the good cherries before the delivery time set by the buyers." (660 trees; 3 years as a member of Ejo Heza; 0 children.)

4. Clementine: "It is not easy with the distancing instructions of allowing only 2 people harvesting on 1 coffee tree at the same time." (1008 trees; 6 years as a member of Ejo Heza; 3 children.)
Ejo Heza members sort cherry at the washing
station - April 2017

5. Adele: "The challenge is that I can’t afford to protect my workers with masks or hand sanitizers." (670 trees; 9 years as a member of Ejo Heza; 6 children.)

6. Seraphine: "I used to sell banana wines in bars, but now now they are closed. So it is not easy to get money to pay workers for the harvest during this lockdown." (500 trees; 4 years as a member of Ejo Heza; 5 children.)

7. Julienne: "The distancing and use of less workers is affecting me particularly as a site collector. Due to the distancing requirement, I am not allowed to get close to the farmers to work together with them on checking the cherries which they have delivered.  This takes me more time and makes some losses when I am sorting alone with workers while farmers have already gone back home. The other challenge is the sanitary and hygiene requirements. I have to always buy hand sanitizers, soaps and water to make sure everyone arriving at the site is safe from the coronavirus." (1030 trees; 4 years as a member of Ejo Heza; 4 children.)

8. Beatrice: "As many businesses closed, we are not able to invest in harvesting because we lack money to pay workers in this period of lockdown." (315 trees; 4 years as a member of Ejo Heza; 2 children.)

9. Peruth: "This lockdown is challenging me in hiring workers. Many are staying home and the available ones cost much money for harvesting." (1500 trees; 3 years as a member of Ejo Heza; 0 children.)

Those are the comments about the labor challenge. A comment during the interview from our tenth participant references a challenge unrelated to COVID:

10. Dorthee: "It is really hard in this period of rain sometimes. You can’t harvest due to heavy rains and you have to go the following day to pick the specialty coffee." (800 trees; 3 years as a member of Ejo Heza; 2 children.)

To learn more about how Rwanda's coffee sector is faring in during the pandemic, head over to our other blog, Artisan Coffee in N. America, by clicking here.