Tuesday, June 1, 2021

104. Executive Education for Producer Groups in East Africa

Can formal education be an effective vehicle to improve the management practices of firms? Existing literature on the impact of financial education and business training offers mixed evidence of its effectiveness, depending on the educational settings and targeted population (McKenzie and Woodruff 2012). However, here we posit that there is growing evidence of effective executive education courses on the African continent which the coffee sector should be recognizing, promoting and integrating into all efforts to improve the coffee value chain.

According to VoxDev, a development economics platform:

"Low-cost interventions such as executive education courses can improve firms’ financial practices and decision making, and trigger economic development."

In a recent paper (Custodio et al. 2020), a randomised controlled trial (RCT) was used to estimate the impact of a financial education program for top executives at medium-sized and large firms in Mozambique. The authors find that this intervention leads to significant changes in short-term financial policies and investment. They show that upon receiving financial education, managers reduce accounts receivable and inventories, which generates an increase in free cash flows used to finance long-term investments. These changes improve the performance of the treated firms. 

Artisan Coffee Imports has been bringing executive education style courses in Lean management principles to producer organizations since 2016. The "Lean at Origin" curriculum was piloted with cooperatives in Rwanda and Burundi in 2016-2017 as part of an Export Promotion grant from Trademark East Africa. From there, founder Ruth Ann Church continued to roll out the program to private producing companies in Rwanda and Burundi. In 2019, to two cooperatives on the island of Idjwi in D.R. Congo received the training thanks to a grant from the Polus Foundation.

Adoption of the principles was high, as most participants readily saw the application of tools for the elimination of waste to their work in coffee and also to their every day lives. During the leadership training at Kopakama, Terese UWIMANA, president of the Ejo Heza women's group stated, "the way of making things clean and organized is going to help us at home and in the community, too!"


Lean at Origin curriculum typically starts with a two-day training for the organizations' leadership. In groups not larger than 18 at a time, participants engage primarily in learning through in hands-on activities and group discussion. Lectures with powerpoint slides (given through simultaneous English-Kinyarwanda translation) are kept brief and limited. Principles of delegation, the importance of metrics and customer focus are emphasized with leadership.

Supervisors are included in the second two days of instruction, where the emphasis is on quality improvement projects called "Kaizen" projects. The goal is to give the participants a basic understanding of how to visualize and improve a process utilizing teamwork and brainstorming.

A key finale event is the "Lean Celebration Day" where community leaders and family members are invited to the cooperative to hear brief presentations by each of the Kaizen groups about the improvements they have made. After the presentations, food, music including drums, drinks and traditional dancing are part of the "Lean Party"!

Impact - the story of Gervias KAYITARE:

With each training a "Lean Champion" is identified. The criteria to be selected is an ease of understanding and communicating the lean principles. In 2016, by the end of four days of training at Kopakama, it was clear that Gervais KAYITARE comprehended the opportunities Lean was offering his cooperative - especially KAIZEN. In 2017 Gervais embraced advanced sessions on Value Stream Mapping and allowed deeper sessions for the team at the dry mill on Lean tools for production scheduling. In 2018, Gervais helped the farmer organization implement the largest change in quality control in its history with the introduction of a floating requirement at all 35 collection sites. In 2019, Gervais had moved into the Executive Director role at the coop. In that role he encouraged new processes to improve soil rejuvenation and the floatation process at collection sites.

In 2020, Gervais was again at the cutting edge, implementing a third cherry price in addition to the government-mandated two prices. This was in keeping with the Lean principle to eliminate waste and defects at the point of purchasing raw material. They would pay a "special" price for "special" coffee that met strict and well-communicated quality criteria: delivery before 12 noon to the collection site and no-compromises hand-sorting. Those were the "special" criteria to get only the reddest coffee cherry, after which the now conventional practice of floatation in water occurred. 

This step into new territory of paying a quality premium at the time of the farmgate transaction brought unwanted attention and stress for Gervais and his cooperative. Neighboring cooperatives called the "special price" unfair and unlawful. Gervais courageously held his ground, convincing the cooperative president and the board, that their position was indisputably beneficial to the farmers and the cooperative, and could benefit the entire country if allowed to continue.

In 2021, Rwanda began to see coffee processing organizations across the country paying "special" prices. Thousands of farmers have benefited from the new appreciation for the value they bring now that "elimination of waste" is beginning to take hold in Rwanda's coffee value stream.

Research on the value of executive education:

Differences in productivity and profitability across firms can be large and persistent (Syverson 2004, Syverson 2011, Foster et al. 2008). Management practices as well as development levels across countries contribute to explaining these differences (e.g. Bloom and Van Reenen 2007, Bloom and Van Reenen 2011, Bloom et al. 2013). Analyses of the role of management practices in explaining firm-level productivity and profitability focus on a variety of topics including operational management practices and financial management practices. Corporate policies in these areas might be particularly important in contexts where financial and operational frictions are severe, such as in developing economies. 

Watch a video 'Introduction to Lean' on Youtube with Ruth Ann Church presenting basic Lean principles to groups of coffee producers across several continents. Click here.

Read about a 2015 Lean training for a Kenyan peanutbutter firm sponsored by the United Nations International Trade Centre (ITC): Click here.

Read about a team of European students who taught Lean courses in the East African Community, 2019-2020, via an ITC program called MARKUP.

Read more about executive education in Lean offered throughout the African continent: https://www.lean.org.za/

Read more about research on interventions focused on financial management practices:  https://voxdev.org/topic/firms-trade/how-financial-education-managers-can-help-improve-firm-practices-evidence-mozambique









Tuesday, May 25, 2021

103. Biosphere Coffee in Ethiopia Helps Protect the Planet


Since we typically hear about how devastating the effects of climate change are on coffee farms and on coffee farmers, it was exciting to learn about the opposite case - a coffee farm that is helping to reduce carbon emissions, while adapting to on-going changes in the environment. In an area called a "biosphere" in Ethiopia, several coffee farms, including those owned by Diamond Enterprises, are located in the core and buffer zones of the Kaffa Forest UNESCO biosphere.

What is a Biosphere and why are they so cool? Biosphere reserves are like special national parks. In some ways they are international parks because they are created/certified by the United Nations Educational Scientific and Cultural Organization (UNESCO). They are designed to be 'learning places for sustainable development.' They are sites for testing interdisciplinary approaches to understanding and managing changes and interactions between social and ecological systems, including climate change and management of biodiversity. 

Map of the Kaffa Forest Biosphere in Ethiopia

Dehab Mesfin Bitewlign
has been the managing director of Diamond since 2014, exporting her natural and washed fine Ethiopian coffee first to Germany, then elsewhere in Europe, and now, for the first time, her fantastic naturals (Gr. 1 and 2) will be entering the USA via Artisan Coffee Imports. Artisan was excited, like every buyer, first by the taste in the cup. It scored 87.5, offering classic Kaffa Forest natural fruit-forward, blueberry, sugar, almond flavors and a clean, crisp finish. Click here to go to Artisan's website and get more info on the coffee. 

Dehab Bitewlign (right) at the IWCA Cupping, Expo 2019 in Boston.

The story of the farm's special location became clearer as conversations on the coffee's details continued. Turns out her coffee has an environmental triple benefit! We know from other research that coffee, as a tree crop, brings environmental advantages that other crops can't offer. Dehab's farm, like many farms in Ethiopia, magnifies coffee's carbon-reduction benefits because it is grown under a canopy of large trees. Dehab confirmed with government offices that her farms are within the Kaffa Forest protected area, which means her carefully regulated environmental practices create a third benefit of supporting the biosphere!

Entering a forest coffee plantation in Ethiopia

The triple environmental benefit of Dehab's Diamond coffee:

  1. Environmental benefits of coffee as a tree crop 
  2. Ecological advantages of forest coffee in Ethiopia
  3. Climate change and biodiversity benefits of operating within a biosphere

To learn more about the Kaffa Forest biosphere, click here.

To learn more about the 714 biosphere reserves in 129 countries - all of which belong to the World Network of Biosphere Reserves, click here.


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: www.transactionguide.coffee.  

Another useful coffee industry report, covering both specialty and commodity, is being released today: the 2020 Coffee Barometer. Download this report here: https://coffeebarometer.org/
"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
Speakers:

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: https://www.youtube.com/watch?v=jvnojrkrRDU

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.