The Nestlé coffee report Faces of coffee

Contentsii

Page 2ii The changing world of coffee

Page 10ii From cherry to cup

Page 50ii The future of the coffee world Faces Faces of coffee 1 2 Faces of coffee world of coffee The changing 3 Faces of coffee The changing world of coffeeii

Take any morning in London, Brussels or Paris. Millions Coffee price 1900–2003

of people start their day with a cup of coffee. For some, US cents/lb a day without coffee is worse than a day filled with rain. 300 From Western Europe to the Middle East, from Asia to Latin America, in busy urban cultures and in remote rural villages, this ritual is repeated throughout the day, 250 providing enjoyment and sustenance. Today’s international coffee culture transcends the globe, transforming an ancient commodity into a 200 phenomenon of the consumer age. Coffee brands, including the number one brand, Nescafé, are 150 becoming global icons. Meanwhile in Africa, Latin America and Asia, many

coffee farmers wake up to a starker reality. Green coffee 100 prices have plummeted so steadily over the past years that what used to represent hope for a better life has turned, for some, into a living nightmare. The slump in 50 coffee prices has plunged many farmers into poverty. For some, the blow is partially shielded by income 1950 1995 1975 1980 1985 1990 1920 1925 1930 1970 1900 1945 1955 1960 1915 1935 1940 1910 1965 1905 2000 from other crops. Some may work on large, modern,

efficient farms, or may be making a decent living Real price 50-year trend Post -ICA trend selling high quality speciality coffee to the coffee boutiques and companies like Nestlé Nespresso. Source: McKinsey/Technoserve Study, 2004 But today, they are the minority. Why are so many coffee farmers in such a situation Worldwide Arabica production which is not of their making? Millions of bags Rest of 70 the world 40.2 Price volatility Until the late 1980s, the green coffee market was Rest of 60 the world protected from wide price swings by the International 44.3 Coffee Agreement (ICA), through which consuming and producing countries agreed on export quotas and 50 price bands for coffee. It had been established in the 1970s after wide swings in prices. However, the economic clauses of the ICA collapsed in 1989 due 40 to systemic shortcomings, mainly as a result of the Brazil withdrawal of support by the United States. The 30 32.4 consequence was a more volatile market, in which prices, after initially collapsing, reached levels 20 well above production costs by the mid-1990s. Brazil This was worsened by severe frost and drought 19 damage to the Brazilian coffee crop in 1994, and the 10 resulting shortage of supply pushed Arabica prices to over USD 3 per pound by 1997.

But by the end of the decade, export earnings had 1992-1993 2002-2003

Faces Faces of coffee begun to slide – from USD 12.9 billion in 1997 to just Source: Nestlé Purchasing Department 4

Coffee production vs consumption

Worldwide Robusta production 1900 100 US cents/lb 120 Source: McKinsey/Technoserve Study,Source: McKinsey/Technoserve 2004 60 80 Source: NestléPurchasing Department Coffee production Millions ofbags 30 40 50 10 40 60 20 70

1905

1910 1915

1992-1993

6.5 Brazil 17 the world Rest of Vietnam 2.4 1920

Coffee consumption

1925

1930

1935

1940 1945

Invention ofsolublecoffee by Nestlé

1950

1955

1960 1965

2002-2003

9.3 Brazil 18.8 the world Rest of 11 Vietnam 1970

1975

1980

1985

1990

1995 2000 twenty years ago. Prices reflect the balance of supply coffee market are the same now as ten or even To a significant extent, the forces which weigh on the crisis – but it is a difficult argument to sustain. recurring feature of campaigns highlighting the coffee companies for the predicament of poor farmers is a growing countries is difficult to trace. Blaming big retailers of the developed world to the catastrophe in dependence on the international coffee market. disparate players linked in most cases only by their contrasting aspects of the same global industry – made headlines around the world. These are companies and the rising poverty among farmers has The contrast between the flourishing profits of coffee The role of large coffee companies to compete in the coffee marketplace. as to whether many small coffee farmers will be able fundamentals of coffee growing. This raises doubts at lower prices may have altered the economic other new entrants such as Vietnam, to grow coffee trading families, hurt by tumbling prices. century Brazil was the collapse of its dynastic coffee harvests. The catalyst for industrialisation in nineteenth the 1820s, which offered cash prizes to reward bumper foreign exchange as the Guatemalan government of encourage coffee farming in Vietnam are as eager for wide swings in coffee prices. The policy makers who counterparts in much of Central America and Africa. appear to be able to produce at lower cost than their had proved to be correct. Even its small cooperatives that Vietnam could become a mass exporter of coffee heavy toll on its rivals, the World Bank’s earlier forecasts of less than ten years. While oversupply had taken a world’s second biggest coffee producer, all in the space itself from a new entrant in the coffee market into the was taking place. In the 1990s, Vietnam transformed late 1990s the supply of coffee had greatly increased. below those of many small coffee farmers, and by the methods of agriculture, producing at costs significantly sector had already begun to innovate with modern USD 5 billion in 2002. Large parts of the Brazilian coffee Yet the precise relationship between the booming However, the ability of large Brazilian farms, and This is by no means the first time the world has seen On the other side of the world, another major change

5 Faces of coffee The changing world of coffeeii

and demand, adjusted for variations in quality and Production costs for Arabica coffee climate, the estimated size of stockpiles and the impact Average production cost (US cents/lb) 1996 -2001 of regulation. Companies have realised that they are 100 sitting with a commodities crisis and there is only so much that they can do. As a positive step, producer countries are being encouraged to add value by processing green beans at home. Better still, some soluble coffee makers are manufacturing at source – highlighting the divergent interests of countries with the potential to export and those dependent solely 80 on primary crops. For example, Nestlé currently produces about 55% of its soluble coffee in developing countries despite escalating tariffs in industrialised countries, thus contributing to the industrialisation of local economies. This is the most valuable economic contribution a multinational can make in developing countries, whatever the 60 coffee price. But the most direct positive impact of coffee companies is to promote consumption. In particular, a combination of new technology and innovative marketing has fostered a vast diversity of soluble coffees. Over the past decade, industry-wide sales of soluble coffee have risen 35% – twice the rate 40 for other coffee types. Nescafé alone has increased sales by 40%, with over 128 varieties.

Eliminating trade barriers for other commodities The increase in consumption of coffee provides some good news for the farmers, but it is not enough to solve the crisis. Some 111 million bags of green coffee were produced in 2002/2003 but only 109 million 20 bags were consumed. Existing stockpiles already correspond to half a year’s production and something clearly needs to be done at production level. Coffee has a good claim to be the world’s second most important agricultural commodity. Up to 25 million people depend on it, the vast majority being smallholders in developing countries. Export 2002-2003 production earnings play a vital part in servicing foreign debt: (millions of bags)

ia 3.0 m co 3.9 m on the International Monetary Fund’s list of Highly p ica 2.0 m R India 1.7Peru m 2.8 m io h vador 1.4 m Brazil 32.4 m Indebted Poor Countries, 24 are significant coffee Mexi ombia 11.3 m Et Honduras 2.7 m osta producers. Because these exports go to middle Guatemala 4.1 m Col C El Sal or high-income countries, coffee facilitates the transfer

Faces Faces of coffee of wealth. Source: Nestlé Purchasing Department and McKinsey/Technoserve Study, 2004 6 Production costs for Robusta coffee Average productioncost(UScents/lb)1996 100 Source: NestléPurchasing DepartmentandMcKinsey/Technoserve Study, 2004 80 (millions ofbags) 2002 60 40 20 -2003 production - 2001

Brazil 9.3 m

Vi etnam 11 .0 m

Indonesia 5.8 m

Thailand 0.9 m

CameroonIndia 2.91.0 m

Côte Ugandad’Ivoire 2.72.5 m

m mainstream. In the industry, the largest direct buyer mechanisms, and is therefore applicable to the has the advantage of not distorting the market coffee companies pay for green coffee. This solution farmers, who can then retain more of the price those supply chain is for roasters to buy directly from the pushing commercial prices lower. the market. This would lead to increased production, counterproductive effect of drawing farmers back into such guaranteed minimum prices could have the in the developed world. However, over the longer term, solidarity between small farmers and coffee drinkers for the farmers’ cooperatives while encouraging social criteria and secures a guaranteed minimum price coffee farmers. Fair trade coffee, for example, sets the problem, not tinker with its symptoms. to the farmers. It is necessary to tackle the cause of Such a mechanism would give the wrong message destructions will be needed over following years. produce more as the prices are higher – and more stock keep producing too much coffee – and will even without improving the market balance. Farmers will stocks will certainly drive prices up. But it will do so artificial approach lacks a long-term view. Destroying short-term stimulus in a sinking market. Such an destroyed low-grade coffees, hoping to create a Several Latin American countries have already advocate the destruction of existing coffee stocks. Some non-governmental organisations (NGO) Proposed alternative mechanisms to make decent incomes. that sector is urgently needed if farmers are to be able costs, even for developing countries. Liberalisation in prices on the world markets are way below production viable for farmers to produce sugar or soya bean: the been entrenched. trade policies in the United States and Europe have coffee would matter less. Instead, protectionist as sugar or manufactured items, were removed, subsidies, which distort trade in other goods such been acquired by default. If tariff barriers and In fact, the most efficient way of shortening the Shortening the supply chain is a way of helping Given these subsidies, it is not economically Much of this geo-political significance has

7 Faces of coffee The changing world of coffeeii

of green coffee is Nestlé. With 110 000 tonnes bought developed world. International organisations, via this channel, it covers 14% of Nestlé’s needs. companies and NGOs must work together to help But it is unrealistic to believe that this model could governments and politicians understand that the be applied to a significantly larger proportion of brunt of famine and poverty will fall most heavily on a roaster’s purchases, as it is only possible in coffee those who depend most on growing low-grade crops growing countries where there are already large unless, and until, a more liberalised system of world processing plants. trade allows them a viable alternative.

Quality improvement is an efficient approach One reform strongly advocated by the International Coffee Organisation and by a number of roasters including Nestlé is to drive up prices by improving quality. The ICO has passed a resolution (407) to this effect. It sets quality levels below which green coffee should not be exported. Carefully and well prepared coffee that is presented for purchasing with the defective beans removed, and free of foreign material, will result in a higher price for the farmer due to its superior quality. It is a good first step, but further work on quality should be done. Farmers sometimes need support to improve quality. This is an area in which governments, international organisations, companies and NGOs can collaborate. Initiatives are already in place, in particular among industry members and development agencies. But more work needs to be done on that level, in particular by governments in producing countries which should uniformly adopt the same methodology and process when determining these quality standards. This is also an area in which companies can play a positive role through technical assistance to the farmers.

The future Today, producers are grappling with the rigours of a new coffee growing revolution. More aggressive management has transformed traditional estates into large scale, low cost agribusinesses. These have a role to play in alleviating poverty and creating new kinds of jobs – many of them in offices and distribution, rather than fields. The trend cannot be reversed. New industry means new opportunities for some, but not for all. The modernising coffee business will no longer support 25 million small farmers. In the main, they have relied on coffee for so long only because many are barred from finding livelihoods elsewhere

Faces Faces of coffee by tariff barriers and agricultural subsidies in the 8 9 Faces of coffee 10 Faces of coffee From cherry to cup 11 Faces of coffee From cherry to cupii From cherry to cup: the process

1 2 3 4

8 9 10 11

16 17 18

(1) In order to get a good bought by or given to farmers. by hand. (5) Inside each the sun on the ground or on quality coffee, it is important to (3) It takes on average three to cherry are two coffee beans. tables. (7) In wet processing, grow the appropriate varieties. four years for a coffee tree to Once harvested, the beans the skin and the pulp of the Researchers around the globe reach maturity and bear fruit. must be separated from the cherries are removed by a are working on improving the (4) The cherries develop slowly, skin, pulp and parchment that succession of mechanical characteristics of coffee turning light green to bright surround them. This is done and watery treatments, varieties. (2) Seedlings of red as they ripen over a by one of two alternative producing parchment coffee.

Faces Faces of coffee new improved varieties are period of about nine months. methods. (6) In dry processing, (8) After the coffee is dried,

12 then mass-produced to be The coffee is usually picked the cherries are first dried by the parchment which remains control of the green coffee green coffee. (9) matter, and defective beans. remove stones or other foreign sorted by hand or machine to hulled coffee beans are a hulling machine. Finally,the on the bean is removed by 19 12 5 This results in what is called (10) A strict and (11) of the exported beans. helps to monitor the quality markets. process for roast and ground (15) (14) it is shipped to the factory. 13 20 (12) The coffee is then stored That is the end of the There it is roasted. traded in futures (13) Once purchased, njr and in jars control, (18) (17) to obtain drying process involves an extraction and manufacturing process of soluble coffees, a longer coffees. 14 21 6 After a final quality soluble coffee powder. (19) (16) (20) the coffee is filled In the case distributed the world. millions of people around can be consumed by retailers. to 15 22 7 (21) coffee shops and (22) Then only, it

13 Faces of coffee From cherry to cupii What can be done to help coffee farmers improve their incomes?

Nestlé’s coffees are sourced ini Coffee is enjoyed all around the world. The “daily most growing-countriesi cup” is a ritual for many, the first thing we do Coffee – the world’s second most every morning. In fact, it would be hard to find a important agricultural commodity – has its origins in Africa. home or an office that doesn’t own a jar of It grows best in the “coffee belt”, coffee. Drinking coffee is a truly global pastime. a region of the world that straddles the equator between the tropics of But how much do you know about this Cancer and Capricorn. most important drink? Have you ever wondered For many of the countries in the belt, coffee is a valuable export. how the coffee in your cup came to be there? For some of the communities within This is the story of the chain of events these countries, producing coffee is the primary economic activity. that turns coffee cherries into a beverage that The vast majority of coffee is enjoyed by millions of people throughout farmers – some 80% – are smallholders owning a few hectares the world. of land or less. For many of these It is also the story of the people – and the farmers, growing coffee represents their only source of income. communities – behind that process, and how Nestlé is a regular buyer of coffee Nestlé works with them to improve their results. produced in most of the coffee- Around the world an estimated 25 million growing countries. farmers make all or part of their income from growing coffee. In addition to them, millions of other people depend on the global coffee industry for their livelihoods. These are the individuals who link the coffee chain together. Faces Faces of coffee 14 15 Faces of coffee From cherry to cupii Improving the quality of coffee trees through research

A high yield of quality coffee Nestlé supports researchi Dr. Alfredo Zamarripai cherries depends on having disease on coffeei INIFAP Institutei resistant, healthy coffee plants. The Nestlé Research Centre Chiapas, Mexicoi Scientific research into the in Tours, France, has pioneered Alfredo Zamarripa is responsible improvement of these plants is research to improve coffee for industrial crops at the INIFAP helping farmers to secure a greater cultivation around the world. Institute in Chiapas, Mexico. yield and a higher quality crop, Working alongside partner “I carried out practical research which means they can earn more institutes in coffee producing for my PhD in France with the from growing coffee. countries, it has developed Nestlé Research Centre. It was Research has developed techniques to cultivate coffee plants my supervisor who suggested that multiplication techniques – such that are adapted to particular we might start a project based on as somatic embryogenesis – that environments and soils. my research here in Mexico. We enable specific high quality coffee It also conducts studies to control had a meeting and very quickly we varieties to be reproduced in bulk. the diseases and pests that destroy agreed on the different areas of farmers’ crops and livelihoods. research for this project. Working in collaboration with “The result of those years of several coffee producing countries, collaboration is that we obtained Nestlé has established a collection eight selected clones that have of 250 proven high quality coffee a very high industrial quality, are varieties from around the world. resistant to disease, and have the These are offered free of charge ability to produce a yield four times to the countries that have partici- in excess of normal production. pated in the project, enabling them “It makes me very happy to be to conduct plant improvement involved in this line of work. I know The improvement programmes using the best varieties that this project is going to be an of coffee plants for their climate and conditions. important contribution to helping helps farmers to produce better In Mexico, for example, INIFAP, the coffee farmers of Mexico quality coffee an agency of the Mexican govern- overcome the current crisis. The ment specialised in agricultural techniques we have developed here development and partly funded by will enable farmers to produce a Nestlé, has set up a multiplication higher quality crop and earn more. programme for the large scale “I am a coffee farmer myself. production of high quality and I think this is important. If you are productive Robusta coffee plants. just a scientist, it’s possible to lose These are supplied free of charge track of the full picture of the to Mexican coffee farmers, helping coffee cycle. But when you are a them to become more competitive farmer yourself, and you know the and to produce coffees that problems they experience, it’s correspond to Nestlé’s factory much, much easier to understand needs. This guarantees a buyer just what the farmer needs and for their harvest. how technology can support him.” Faces Faces of coffee 16 “When you are a farmer Dr. Alfredo Zamarripa can support him.” needs and how technology to understand what the farmer yourself, it is much, much easier

17 Faces of coffee From cherry to cupii Developing disease resistant and productive coffee trees

Bayetta Bellachewi Coffee needs to be adapted to its Coffee and Tea Researchi environment, and this needs to be Programme Co-ordinatori taken into account in the research Jimma Research Centrei carried out by the research centre. Ethiopiai “A variety that performs well in Bayetta Bellachew has been Harar might be less productive in working at the Jimma Research Sidamo or here in Jimma. That is Centre for 23 years. He obtained why we have opened sub-centres his PhD in Plant Breeding at elsewhere in the country in order to Imperial College at Wye, University test the coffee varieties in other The Jimma of London. He developed the environments. That way, the Research Centre focuses on promising Aba Buna coffee variety adaptability, productivity and quality developing high at the Jimma Research Centre. at each location can be monitored.” quality coffee “Here, at the research centre, The Jimma Research Centre has plants we have launched a programme achieved a number of scientific aimed at gathering and describing successes over time. One of them is the various Ethiopian coffee types the development, over the past and develop improved varieties. twenty years, of the Aba Buna Arabica coffee comes from Ethiopia coffee variety, a hybrid obtained and grows wild in our forests. What from two Ethiopian varieties. we aim at doing is to identify the “Aba Buna is a very productive varieties that are best for cultivation. coffee that also has a good “Ethiopian growers cannot afford resistance to coffee diseases and pesticides and fungicides. It is today the multiplication process will therefore vital for them that we begin as soon as the appropriate provide them with coffee varieties technology is put in place, in order that are pest and disease resistant. to supply it to the Ethiopian Another crucial aspect for our growers. farmers is productivity. As they are “Now that we have started a all smallholders, they need to have collaboration with Nestlé’s research high yielding plants that will enable centre in Tours, we believe that we them to have a sufficient income. will be able to perform better in our “But with the low coffee prices, research. Their experience in that we have realised how important it is field, as well as their financial that we put an emphasis on the contribution will be a great support quality of the coffee that is for us. By improving the Ethiopian produced. A high quality coffee will farmers’ planting material and have a better market value and processing practices, we will help will enable farmers to improve their them to perform better in the world revenue. So we are now also market.” focussing our research on this aspect.” Faces Faces of coffee 18 “By improving the Ethiopian Bayetta Bellachew in the world market.” help them to perform better processing practices, we will farmers’ planting material and

19 Faces of coffee From cherry to cupii Providing farmers with better coffee plants

Two main types of coffee are grown Nestlé provides best qualityi Micaela Sanchez Floresi commercially: Robusta, which coffee plantsi Farmeri originates from Central and Western Nestlé provides high quality coffee La Victoria, Mexicoi Africa, is now mainly grown in plants free of charge or at cost Micaela Sanchez Flores is a farmer Vietnam, Brazil, Indonesia, Uganda, to coffee growers through projects at La Victoria communal coffee tree Côte d’Ivoire and India. in a number of countries. nursery in the Tezonapa region of Arabica, which derives from This allows farmers to grow Mexico, where Nestlé has initiated Ethiopia, is today principally grown varieties adapted to their a number of projects to support in Brazil, Colombia, Mexico, Central environments and soils. It helps coffee farmers. America, Peru and East Africa. them improve the quality and yield At the nursery, Micaela Sanchez World supply is currently about of their coffee. Flores and other local coffee farmers 60% Arabica and 40% Robusta. Somjade are tending Robusta coffee saplings The different varieties of coffee Simchaluen is to prepare them for transfer to their one of the Nestlé are each suited to certain climatic agronomists who fields. The saplings were grown and soil conditions. Even within a provide seedlings from seeds from the INIFAP Institute particular country or region, certain to coffee farmers in Chiapas, Mexico, and were coffee plants will produce greater in Thailand specially selected for planting in the quality and yields than others. Tezonapa region. Nestlé funded the construction of La Victoria nursery. In return for their work in tending the coffee saplings, the farmers receive the mature plants free of charge. They are also paid a small salary by the municipal authority. “I have already replaced half a hectare of my coffee plantation with plants from this nursery. I understand that these plants are expected to produce better quality coffee cherries. Obviously, that will be a help to us during these difficult times. “I am optimistic about this project. It’s a positive thing for us right now.” Faces Faces of coffee 20 “We hope to see an increase Micaela Sanchez Flores and therefore a higher price.” in the quality of the cherries

21 Faces of coffee From cherry to cupii Offering free assistance to coffee farmers

For many coffee farmers, the Nestlé works closely withi agricultural techniques they use coffee farmers to help themi have been passed on from improve their cropsi generation to generation. These Nestlé runs three Experimental and farmers may not have had an Demonstration Farms, in China, opportunity to benefit from the Philippines and Thailand. instruction in more advanced On each of these farms, farming skills. agronomists from Nestlé’s By learning new harvesting and Agricultural Services Department processing techniques, farmers can provide technical assistance and improve the quality of their coffee. advice to farmers. Their advice One example is the use of water helps the farmers to farm more flotation to separate good and bad productively, and it helps Nestlé quality cherries. This leaves farmers to secure a future supply of high Using compost with a crop of a consistently high quality coffee for its factories is an efficient way to reduce costs quality, which can then be sold for around the world. a higher price. Nestlé also supports a Coffee Farmers can also benefit from Training Centre in Ethiopia. instruction in the use of compost to Advice provided by Nestlé replace fertiliser. This reduces their agronomists is free and there is costs whilst protecting their no obligation on the farmer to then land and promoting sustainable sell his coffee to Nestlé. agriculture. Faces Faces of coffee 22 “Coffee farmers can derive more Mheuyhi Abegoo more comfortable life.” income from coffee and have a a more comfortable life.” more income from coffee and have cultivation. This way, they can derive opportunity to improve their coffee tribes of northern Thailand an Farm, it gives people from the hill each year. training and tuition at the Farm 600 coffee growers receive practical for growing Arabica coffee. Up to farmers to improve their techniques coffee more productively.” knowledge of how to grow my lychee farm. she gets from her coffee and way of supplementing the income her, working at the Farm is a good coffee plantation and garden. For years ago. She looks after the Farm’s Farm) since its creation fourteen and Demonstration Farm (E&D in Nestlé’s Doi Tung Experimental Mheuyhi Abegoo has been working Doi Tung, Thailand Farm Demonstration Nestlé Experimental and Mheuyhi Abegoo “I really like the concept of this The Doi Tung E&D Farm assists “By working here, I also gain i i i i

23 Faces of coffee From cherry to cupii Informing farmers on better coffee cultivation

Orn-lamai Siriporni For the last six years, the Freelance Journalisti programme has been broadcast Chumphon, Thailandi on two radio channels, reaching Orn-lamai Siriporn is 35 years old. some 5000 farmers. However, She is a freelance radio presenter in June 2003, a third radio station and journalist. agreed to broadcast the show Once a week on the Chumphon and it now reaches all of Nestlé’s Meteorological Radio Station 16 000 suppliers and other farmers she presents a radio programme in the region. providing technical assistance “The great thing about this Somjade Simchaluen to the area’s coffee farmers. programme is the response it is a Nestlé agronomist who provides “It’s a real challenge for me to generates from farmers. Every week technical advice present this programme, but farmers call the radio stations to on the Chumphon I accepted the job because I know get advice, or simply to inquire Meteorological Radio that it helps the farmers in my about something we discussed Station region. If they apply the advice on the show. Some farmers just call given in my programme, they can to thank us.” improve the quality of their coffee and earn more.” Nestlé founded and funds this radio programme. The company’s agronomists help Orn-lamai Siriporn to prepare the broadcasts and are regularly interviewed on the show. “Every week we broadcast a discussion interspersed with music. The combination of music and Once a week discussion makes the programme a programme on coffee growing entertaining and informative. is broadcast on Our one-hour long programme radios in southern is broadcast weekly throughout Thailand the year.” Faces Faces of coffee 24 “Every week, farmers call the radio Orn-lamai Siriporn on coffee cultivation.” station to get more information

25 Faces of coffee From cherry to cupii Improving post-harvest processes

Coffee needs to go through a Nestlé encourages farmersi Women outside buying centrei number of post-harvest processes to invest in better processingi Gagnoa, Côte d’Ivoirei to convert it from fresh coffee Nestlé supports projects that give “During the buying season, which cherries to green coffee beans. financial support to farming usually begins in December and Each coffee cherry contains two communities and enables them to finishes in May, I clean coffee beans that must be separated from acquire the equipment that is outside the Nestlé Buying Centre in the skin, pulp and parchment that needed to process coffee cherries. Gagnoa. I work in a team with other surround them. This means that the farmers women. We are friends. In dry processing, the cherries are retain more of the value of the coffee “Sometimes there are up to first dried by the sun. This can also beans they grow. 250 women cleaning coffee be done in special machines. Once outside the buying centre. It is very dry, the cherries are fed into hulling animated and very busy. machines to remove the husk and “I can clean about ten 90 kg bags leave just the bean. of coffee in a day, depending on how In wet processing, the skin and dirty the coffee is. I sift the coffee the pulp of the cherries are removed with a wicker pan to separate any by abrasive disks as the cherries stones, dust and dirt from the green move past in running water. The coffee beans. remaining sticky pulp on the beans, “It is hard work, but I am in still surrounded by a fine layer of good company. We earn between parchment, is removed either by CFA 200-300 for each bag of coffee fermentation or by mechanical we clean.” In Côte d’Ivoire, farm means. When the coffee is dried, workers earn CFA 90 000-120 000 the parchment is removed by per year plus food and housing. a hulling machine. This results in what is called green coffee. Dry processing is easier and more economical than wet processing. However, wet processing produces better quality coffee. Finally, the hulled coffee beans are sorted by hand or machine to remove stones or other foreign matter, and defective beans. The presence of these reduces the quality of coffee and, consequently, the price for which it can be sold. Depending on the resources available to them, coffee farmers will be able to carry out some of these processes themselves. The more they do, the higher the price they can command for their crop. Faces Faces of coffee 26 “I sift the coffee with a wicker coffee beans.“ dust and dirt from the pan to separate any stones,

27 Faces of coffee From cherry to cupii Supporting co-operatives

Nestlé Nespresso paysi Ildiberto Escobar Valdiviai premium prices for the qualityi Association of Tezonapai coffee it buysi Coffee Growersi The quality premiums paid Tezonapa, Mexicoi by Nestlé Nespresso, the fast Ildiberto Escobar Valdivia is growing portioned coffee business, President of the Tezonapa reward farmers for the high quality Association of Coffee Farmers. products they produce to meet There are 8000 coffee farmers the expectations of Nespresso in this region of Mexico. consumers. “Local farmers united to form At the same time, Nestlé the Tezonapa Association of Coffee Nespresso is committed to the Farmers and established their own progressive implementation of mill in Limonestitla in 1997. sustainable quality coffee practices. “Most of our coffee is sold directly This will not only ensure that the to Nestlé, and what remains is green coffee Nestlé Nespresso used for local consumption. buys meets its premium quality “Proprietorship of a mill standards, but also that its enables us to carry out nearly all of production conforms to the long- AAA coffee the processing of green coffee term economic, environmental and programmes ourselves. will soon begin social principles required for in Colombia “We feel more secure nowadays, sustainable development in the and Ethiopia because we are an association and coffee producing countries. because of our relationship with Through its AAA coffee Nestlé. Our farmers are guaranteed programme initiated in Costa Rica, payment on time by Nestlé. They Nestlé Nespresso seeks to establish also benefit from advice from Jesús and promote high quality to assure and Martín, Nestlé agronomists that its AAA system is properly who visit the mill regularly. implemented. The AAA programme “Our culture here is coffee. It’s aims at building capacity for something we have inherited professional assessments of from our parents. These are hard sustainable high quality at the farm times, it is true, and we know that or mill level and to improve the success will only come through traceability of its coffee origins. hard work and organisation. That is why we are working collaboratively. “Our farmers greatly welcome Nestlé’s involvement.” Faces Faces of coffee 28 ”The farmers established Ildiberto Escobar Valdivia coffee at a higher price.” enabled them to sell their their own mill and this has

29 Faces of coffee From cherry to cupii Ensuring quality post-harvest treatments

Post-harvest treatments form Nestlé considers that the milli Jorge Varelai an important link between coffee plays a key role for qualityi Exportadora de Granos yi farmers and roasters, turning For washed coffee, the mill plays Oleaginosas del Surestei coffee cherries into coffee beans. a key role in the quality of the coffee. Mexicoi Their quality is critical in determining This is why, in some countries, Jorge Varela is the manager of the price that the green coffee Nestlé has close relationships Exportadora de Granos y can be sold for. with the mills that supply its Oleaginosas del Sureste, a coffee In a minority of cases, farmers or Nescafé factories. mill in Tapachula, Mexico. For the their associations will own the In Mexico, for example, Nestlé past twelve years, this mill has milling machinery. In most cases, agronomists will regularly visit the supplied the Toluca Nescafé factory however, farmers will rely on small mills to ensure that high standards outside Mexico City. contractors to hull their dried of food safety are applied. They also “When buying coffee from the cherries or on large mills in their inspect the financial records of the farmers, we are in daily contact with local town or village. mills to check that farmers have Nestlé by phone. Based on the real The mills charge a fee to process been paid according to the price that time prices of coffee, we place the coffee. They then pack it and Nestlé paid when it purchased from contracts with Nestlé. The price arrange delivery to the roaster. the mill. the farmer receives is the price on the international market that day. “The reality is that the farmers already know which price to expect when they bring their coffee to the mill. They have access to this information through their associations, newspapers, radio, and the internet of course. “What we are doing is giving an added value to the coffee. In doing so, we are helping the farmers to sell their coffee. “We regularly receive advance contracts from Nestlé. The prices may go down between the contract being made and Nestlé taking possession of the coffee, but Nestlé always gives us the price that was agreed at the time. Of course, it couldn’t be any other way as we will have already paid the farmers at that price. “I’ve had this job for 12 years now. I like the fact that I deal directly with the farmers. We try hard to give them an excellent service and to help them to sell their product.” Faces Faces of coffee 30 “The farmers already know Jorge Varela bring their coffee to the mill.” what price to expect when they

31 Faces of coffee From cherry to cupii Buying coffee directly from farmers

In many countries, middlemen Tatrit Kunasoli “As soon as the farmers bring feature in the coffee supply Nestlé Agronomisti their coffee, the first thing we do is chain. These middlemen enable Sawi Buying Station, Thailandi check the quality to see if it meets coffee farmers to sell their crop. Tatrit Kunasol is 31 years old. He Nestlé standards. Assuming it does, However, when the supply chain is started working for Nestlé four and the farmer immediately receives a inefficient and involves too many a half years ago after graduating date of payment for the coffee. The intermediaries, it is to the detriment from university with a degree in order is transmitted via satellite to of the farmers, who then receive agronomy. He is now in charge of our headquarters in Bangkok and a lower price for their coffee. the Sawi buying station in the the transaction is made within days. Direct purchasing of green coffee Chumphon Province of Thailand We make bank transfers. Cash is no – where the roaster buys directly and supervises the six satellite longer used. It is safer for everybody. from the farmers or their buying stations in the area. “The price of coffee is defined in organisations – is a way to improve After the harvest, Tatrit Kunasol agreement with our management the farmers’ revenue when the and his team of Nestlé agronomists in Bangkok. It is significantly higher coffee chain is inefficient. It helps provide agricultural advice to the than that offered by the local the farmers retain a greater part 16 000 local farmers who supply traders, and the pricing is of their coffee’s value. the buying stations. Through a transparent. The price of the day In addition to that, it has other combination of farm visits and is displayed on the main street, advantages. It promotes quality organised seminars, they explain in front of the road leading to our improvement, as payment is based cultivation techniques to improve buying station. Last year the on strict quality criteria, and it both quality and yield. average price was between THB 35 provides farmers with an alternative “During the harvest season, and THB 40 per kilogram, which is sales channel. we draw up a calendar so that the a lot more than the local traders.” farmers know when to bring their coffee. Before we started this system, we often had a queue several kilometres long that disrupted the traffic on the main road nearby. “Today, with our computerised system, we know in advance roughly how much coffee each farmer will bring. This allows us to forecast deliveries and we display in advance the dates when every farmer has to bring his coffee. “To make sure that those delivering coffee are genuinely farmers, we have a system of identity cards. These also provide details of the size of the farm, the average quantity of coffee produced and the bank details of the farmer. Faces Faces of coffee 32 “The price we pay for coffee is Tatrit Kunasol offered by local traders .” significantly higher than that THB 25 (USD 0.35 to USD 0.50). typically paid between THB 17 to (about USD 0.97) while local traders Nestlé for coffee was THB 38.70 complete transparency of price. to enforce this rule and ensure the use of identity cards – are used coffee. Rigid conditions – including are the only ones allowed to sell their 000 coffee farmers. 16 These provide a selling point for areas in the south of the country. stations in the coffee growing farmers in 2002/2003. coffee were purchased directly from 000 since tonnes 1991, of 34 green procurement has been in place direct procurement in six countries. The company currently engages in green coffee directly from farmers. tonnes – or 14% of its needs – of In 2002 Nestlé purchased 110 000 direct buyer of coffee Nestlé is the world’s largest In 2002, the average price paid by In these buying stations, farmers Nestlé has opened six buying In Thailand, where direct i i

33 Faces of coffee From cherry to cupii Paying farmers promptly

When a farmer sells his coffee, it is Samarn Khaewkhongnoaki preferable that he is paid at the point Coffee Farmeri of sale. If this is not possible, the Chumphon Provincei farmer should at least know how Thailandi long he must expect to wait for Samarn Khaewkhongnoak is payment. Any mechanism which a coffee farmer in Chumphon means that the farmer is directly Province, Thailand. paid is valuable. “A number of years ago, there In some cases, the existence of was a drought in the northeast, intermediaries in the coffee supply where I was a rice grower. I decided chain is necessary, for without them to come to Chumphon Province to the farmers’ coffee would never grow coffee. You have a better life as be sold. a coffee farmer than as a rice farmer. But sometimes middlemen take “When I started growing coffee, advantage of a farmer’s weak the price was a lot higher than today. financial position and location in Then, I could get THB 75 for a remote areas to offer him a very low kilogram of green coffee. Today, price for his coffee. Others abuse the local traders pay just THB 20, their relative wealth to make loans to but, fortunately, Nestlé gives me farmers with very high interest rates. THB 35-40. “I sell all my coffee to Nestlé. They gave me a card that allows them to track the coffee back to my farm. “When I sell my coffee, Nestlé immediately tells me how much I will receive and when it will be paid into my bank account. This way I do not need to carry money with me; when I need some, I go to the ATM In Thailand, in the next town.” Nestlé has a Each bag bought by Nestlé is system of identity cards to make labelled, allowing the company to sure that those monitor the crop’s journey through delivering coffee the coffee cycle. are genuinely farmers Faces Faces of coffee 34 “When I sell my coffee, Nestlé Samarn Khaewkhongnoak into my bank account.” receive and when it will be paid immediately tells me what I will his income. paid by Nestlé, thereby improving greater portion of the price enables the farmer to retain a which respects the market’s rules, green coffee per year. This system, accounts for 110 000 tonnes of 000 tonnes of 25 green coffee. movement accounts for less than depressing prices. coffee production, thus further to encourage farmers to increase price, the result would be prices exceeding the market coffee farmers were paid fair trade in the developing world. their solidarity with coffee farmers individual consumers to express about the coffee issue and for a useful way to raise consciousness Nestlé recognises that fair trade is Nestlé and fair trade Nestlé’s direct purchasing Worldwide, the fair trade However, if on a broad basis i

35 Faces of coffee From cherry to cupii Supporting income diversification

For many years and around the Nestlé helps farmersi Javier Correa Ortizi world, growing coffee has been to diversify their incomesi Fish Production Projecti a way for small farmers to earn Nestlé is supporting projects in a San Miguel Tenejapan, Mexicoi an income. Coffee is a cash number of countries to help coffee Javier Correa Ortiz is in charge of crop that can be easily sold and it farmers diversify their production the Fish Production Project in San can be grown on small areas in and secure alternative sources Miguel Tenejapan community in the diverse environments. of income. In the Philippines, Tezonapa Region of Mexico. This However, with the current low the cultivation of a wide range project, which was started with coffee prices, relying solely on of alternative crops has been Nestlé’s support in April 2003, will coffee is a precarious business. promoted. Peanuts, bananas, soon provide local coffee farmers Some farmers have looked to other coconuts, ginger, cassava, with an additional source of income. areas to earn an income, turning pineapples and sugar cane are all “There are fourteen of us involved attention away from their coffee grown alongside coffee trees. in this project and I am the president trees. In some cases, growers have In the Tezonapa region of Mexico, of the group. We are all coffee completely abandoned their trees. Nestlé has established several farmers and divide our time Roasters depend on a steady projects to help coffee farmers between here, La Victoria nursery supply of high quality green coffee. diversify their sources of income. and our fields. We work for four This is jeopardised as soon as A fish farm, managed by teams hours each day at the fish farm, coffee farmers neglect their trees. of farmers, provides a valuable feeding the fish and changing the To become less reliant on coffee additional income for local water. The rest of the time, we tend but continue to be able to grow it, communities, and the cultivation of our coffee. growers need to diversify their tropical trees for sale is an important “Currently there are 1600 tilapias income generating activities. This investment for the future. in the pond. They are growing fast, is a difficult transition for many Nestlé has provided the initial and the farmers are confident the to make, but it is possible with the funding for these diversification project will be a success. When the right support. projects and will continue to provide fish are mature, they will be sold in technical assistance. In the long the community and the profits from term, with the financial security the project reinvested for expansion provided by these activities, in the future. Nestlé’s direct support will no longer “We are thinking about building be required. a new pond soon. It’s like having a company, now that we have our own resources. “I don’t think this would have been possible without Nestlé. It was their idea that we engage in fish production and they have provided support throughout.” Faces Faces of coffee 36 “We work four hours each day Javier Correa Ortiz time, we tend our coffee.” on the fish farm. The rest of the

37 Faces of coffee From cherry to cupii Finding alternative crops Faces Faces of coffee 38 “It is better not to rely on just one crop because prices can fluctuate. When they do, it’s good to have other crops to compensate you.” Khaun Kadkhratoak Khaun Kadkhratoaki approximately THB 50 000 Coffee farmeri per year. Chumphon Province, Thailandi “It is better not to rely on just Khaun Kadkhratoak is 39 years old one crop because prices can and a farmer in the Chumphon fluctuate. When they do, it’s good Province of Thailand. He has been to have other crops to compensate married for 16 years and has a you. That is why, when I came daughter, Kik, who is 14. to Chumphon, I planted Khaun Kadkhratoak moved to different crops. Chumphon Province 18 years ago, “My wife works with me on the from the northeast of the country farm and, after school, our daughter where his family grew rice. gives me a hand too. We all work “I knew that the south was better together and we share the tasks. because here you can grow coffee During the harvest season, I pay in addition to many other crops”, relatives to also help with the work.” he says. Khaun Kadkhratoak also Now Khaun Kadkhratoak owns grows vegetables on his farm and five hectares of coffee, which fishes locally. brought him about THB 200 000 “My dream is to have a bigger last year. At the same time, farm. I am investing my savings to the durian he grows gives him an purchase new land. I sell my coffee additional income of THB 130 000. to Nestlé and this allows me to get He also grows other tropical substantially more money than fruits, such as mangostein if I sold it to the local middlemen, and rambutan, which provide him as I did before.” with another THB 24 000. After expenses, he has over THB 100 000 per annum in his pocket. An average factory worker in the region earns Growing other crops, like durian, alongside coffee helps to stabilise the farmer’s income Faces Faces of coffee 39 From cherry to cupii Monitoring the quality of coffee

Carefully and well prepared coffee Nestlé and the ICOi Severin Niampii that is presented for purchasing resolution 407i Quality control, Nescafé factoryi with the defective beans removed, The International Coffee Abidjan, Côte d’Ivoirei and free of foreign material, will Organisation (ICO) recently passed Severin Niampi is in charge of result in a higher price for the farmer a resolution aimed at eliminating quality control at the Nescafé factory due to its superior quality. low-grade coffee from the supply in Abidjan. A worldwide commitment to chain (ICO Resolution 407). “Providing the coffee sample high quality coffee will also help The Nestlé Quality Control passes the moisture test, I set aside coffee farmers in the long term. Centres (NQCC) were created over 100 g for a defect count. This By reducing the quantity of 30 years ago to ensure that exported establishes the proportion of the substandard coffee being sold, coffees comply with the quality sample that is foreign matter – quality controls help to restrict the requirements of the Nestlé stones, etc – or bad beans. If the supply of coffee to an already subsidiary that ordered it. defect count is too high, coffee can oversupplied international market. Nestlé believes that the NQCC be rejected for further sorting. This will mean, in the long term, network in producing countries Similarly, if the moisture content is that coffee farmers will be able encourages and enhances a better too high, the coffee can be returned to command a higher price for understanding of quality and this to the farmers for further drying. their crop. contributes to the objectives of ICO “I check coffees that will be used Furthermore, by ensuring that Resolution 407. here in the factory, but also green only high quality coffee reaches the coffees that will be exported by market, coffee consumption is likely traders to French Nescafé factories. to remain buoyant. It is nice to think that my work here in Abidjan contributes to pleasing the French Nescafé consumers.” Faces Faces of coffee 40 “I check green coffees that Severin Niampi to French will be exported by traders Nescafé factories.”

41 Faces of coffee From cherry to cupii Creating jobs in coffee-growing countries

The process that converts green A large share of Nescaféi N’gessan Assanavoi coffee beans to soluble coffee that is manufactured ini Head of Nescafé factoryi is eventually sold involves many developing countriesi Abidjan, Côte d’Ivoirei stages and a considerable amount Eleven out of 27 Nescafé factories “I started working for Nestlé on of technology. are in coffee producing February 14, 1977. The director A typical instant coffee factory countries. About 55% of Nescafé is who recruited me put me to work will employ several hundred people, produced in developing countries unloading pallets. It’s a hard job and many of whom are highly skilled. – creating jobs, generating he wanted to see if I could stick it Nestlé’s strategy of locating tax revenues and transferring out. I must say I wasn’t enthused. production facilities close to the state-of-the-art technologies. “After two years, I decided that source of green coffee wherever This beneficial impact is in actual fact I wanted to be a possible means that the value multiplied through increased television presenter and I made added to the green coffee remains supplier activity and the presence arrangements to travel to France in the country of origin. of a well paid workforce in to train. When my uncle and my In addition to Nescafé factories, communities with Nestlé parents learned of these plans, Nestlé sets up many of its other installations. they were furious. My uncle was production facilities in developing In addition to all of this, Nestlé’s a director of an Ivorian company countries. In fact, 40% of all of presence in a country serves at the time. I remember he told me Nestlé’s factories are located in to draw attention to international that if I stayed with Nestlé I would developing countries. standards of quality, food safety go on to earn more than him. and environmental awareness. “Unable to make a choice, I went to speak with my line manager at Nestlé, who persuaded me to stay. I’m glad he did. Today I am in charge of Nescafé production. I am responsible for 67 staff, and I earn more than my uncle! “I have had great opportunities to travel in my job, including to Switzerland, France and UK. When I travelled to France, I took with me some Nescafé from Côte d’Ivoire. During my meeting with colleagues By building from Nestlé France, I was offered factories in coffee. I settled for hot water and coffee-growing countries, added my own sachet of Ivorian Nestlé directly Nescafé. We all laughed, but I really contributes to do prefer it.” developing local economies Faces Faces of coffee 42 “I never thought I would be the N’gessan Assanavo Côte d’Ivoire, but today I am.” Head of Nescafé production in

43 Faces of coffee From cherry to cupii Boosting the demand for coffee

The underlying causes of low coffee Nestlé plays a key role ini Graham Whitei prices are complex but the simple increasing coffee consumptioni Marketing Manageri fact is that coffee consumption is For many years Nestlé has led the Croydon, United Kingdomi not growing fast enough to absorb way in increasing coffee Graham White is a marketing excess production. consumption. Over the past decade, manager for Nestlé UK. For the last Collaborative efforts and total coffee consumption has five years he has been involved individual marketing campaigns are increased by 17%. Driven by in promoting Nescafé consumption needed to promote consumption Nescafé, soluble coffee in the country. around the world. consumption has actually increased “Nescafé is a great product with Under the auspices of the ICO, by 35%. Nestlé alone has a fantastic heritage. If you ask the world’s most important roasters increased its soluble sales by 40% people for a coffee brand they trust, have committed to the Positively over the last ten years. Nescafé ranks highest. Indeed, Coffee Initiative. In recent years This is the result of intensive for many people in the UK, Nescafé consumers have heard many efforts to create and develop spells soluble coffee. negative messages concerning Nescafé consumption in both well “However, in today’s fiercely coffee. This initiative aims at sharing established markets (Europe, North competitive market, you can trade more balanced information, based America, Japan) and younger ones on your past success for just so long. on scientific research into the (Russia, China and a number of There is no room to be complacent, positive aspects of drinking coffee. other emerging economies). even though drinking coffee is such a popular habit. “Today, there are so many other products that answer to customers’ needs and desires. As a result, for the past few years in the UK, we have been witnessing a decline in domestic coffee consumption. “What I particularly enjoy about my job is the challenge of finding new ways to make what are essentially ‘brown granules in a jar’ relevant and compelling for today’s Nescafé sampling consumer. At Nestlé we spend efforts – in Russia, a great deal of time talking as well as in other emerging to consumers, identifying what markets – they want from a drink. We contribute to also continually develop and test increasing new concepts.” the demand for green coffee Faces Faces of coffee 44 “My challenge is to make ‘brown Graham White interesting for today’s consumer.” granules in a jar’ relevant and

45 Faces of coffee From cherry to cupii Increasing consumption in developing countries

Soumahoro Segbetii Soumahoro Segbeti’s cart has Nescafé Pushcart Operatori been repainted three times and Abidjani upgraded once since he took Soumahoro Segbeti operates a possession of it in December 1997. Nescafé coffee pushcart. These are “Nestlé provides me with a unique to Senegal and Côte d’Ivoire. thermos, and I buy supplies of Nestlé plans to have 500 Nescafé Nescafé from the company. I earn coffee carts operating in Abidjan about CFA 48 000 per week, which by December 2004. pays my rent and provides my wife Each morning Soumahoro and me with a good livelihood. Segbeti collects his cart from the I’m saving to buy a kiosk, or two! Nestlé offices close to the industrial “I prefer it when it rains a little. port in Abidjan and steers it to the People prefer to drink coffee in the main market in Koumassi. It is a drizzle. I’m a good salesperson, 7 km walk. explaining to my customers that He stops regularly along the way Nescafé is good with food, or after to sell cups of Nescafé to his food. Every time of day is coffee customers. Soumahoro Segbeti time for me and my customers!” has a good rapport with many of the offices along the route and serves them daily. He has at least 80 loyal customers, each of whom pays CFA 100 for a cup of Nescafé.

Soumahoro Segbeti is one of the many pushcart operators that sell Nescafé in Côte d’Ivoire Faces Faces of coffee 46 “I earn 000 about per CFA 48 Soumahoro Segbeti a good livelihood.” provides my wife and me with week, which pays my rent and

47 Faces of coffee From cherry to cupii For many farmers, coffee growing still has a future

Through technical assistance and Nestlé and low coffee pricesi seedlings distribution, Nestlé is against low green coffee diversification projects and quality prices and is concerned for improvement initiatives, farmers the farmers and their families who can be supported in their efforts to depend on coffee for a living. improve their income: quality coffee Through the numerous and reliance on more than coffee programmes and assistance it gives, are two proven ways to increase Nestlé contributes to the wellbeing one’s revenues. of coffee communities. At the same time, buying coffee directly from the farmers and support to co-operatives are approaches that allow farmers to retain a larger portion of their coffee’s value. In many parts of the world, these kinds of partnerships are being developed and allow farmers and their families to see a future in After school Kik coffee growing. Kadkhratoak helps her parents But there is more to be done on the farm to solve the overall situation: consumption needs to be increased in order to reduce the imbalance between supply and demand. And more of the value of coffee processing needs to remain in the coffee-growing countries. The companies which locate factories in developing countries help local economies and create jobs. Faces Faces of coffee 48 “My father told me that it is thanks to the price he gets for his coffee that he is able to support my studies.” Kik Kadkhratoak Kik Kadkhratoaki 14 years oldi Chumphon Province, Thailandi Kik Kadkhratoak’s father is a coffee farmer in the Chumphon Province of Thailand. She is 14 years old and attends the secondary school in her village. When she is older she wants to be a policewoman, or possibly a soldier. “I have three more years of school and then, if I want to enter the police force, I will have to study at the university.” Kik is very fond of the coffee growing area where her family lives. After school, she helps her parents on the farm. “In order to be a policewoman, I first need to go to the university. I would like to study mathematics at the Chulalongkorn University in Bangkok. It is one of the best universities in the country.” Her father is proud that his daughter has such ambitious plans for her future, and that, thanks to the money he gets from Nestlé for his coffee, he can afford to pay for her studies. Faces Faces of coffee 49 The future of the coffee world Faces Faces of coffee 50 51 Faces of coffee The future of the coffee worldii

It is unlikely that coffee prices will ever reach the For Peter Brabeck-Letmathe, this is the main strategy previous highs. Unless a major climatic disaster should that could help the growers. “Farmers who today have occur, the ability of farmers in countries like Brazil diversified their income and those who planted to react rapidly to favourable market conditions and additional crops are less affected by the fluctuations produce coffee at lower costs using the latest of the coffee price. I believe it is the area on which agricultural techniques will ensure a strong supply we should focus the most. Farmers should be enabled of coffee. However, there are measures which can help to make informed choices. Training programmes and coffee farmers improve their livelihoods and obtain projects need to be set up to that effect. an acceptable standard of living. “At Nestlé, for example, we have adopted this It is partly the responsibility of the wealthy countries approach in the technical assistance we give to farmers. to respond to this crisis. “There is no easy solution,” We support practical projects such as the fish farm says Peter Brabeck-Letmathe, CEO of Nestlé S.A. we helped to create in Mexico and the diversification “Present low coffee prices are the result of a global project we support in the Philippines. These are excess supply. Concerted efforts are needed to bring concrete examples of what a company can do to supply and demand in balance to a point where the support diversification.” prices allow the average producer to receive an Diversification is made difficult or even impossible acceptable return for his labour and investment. when the natural alternatives are crops which are “Thus, action is needed on both demand and supply subsidised by western countries. This is the case, for sides. The primary and most direct responsibility of example, with sugar or soya beans, crops that could companies such as Nestlé lies on the demand side replace coffee in some regions: it is not profitable to with the promotion of coffee consumption. But grow them, as farm subsidies in the United States and I believe it is also our task to voice our support for the European Union are artificially lowering the world a faster liberalisation of trade. Developing countries market prices for these commodities. are currently victims of the developed countries’ “At Nestlé, we believe that these trade barriers are subsidy policies.” not fair for the farmers of the developing world. They Companies are not the only ones which need to be effectively reduce the capacity of many poor countries taking responsibilities. Governments, civil society, to overcome their problems. These subsidies have a coffee companies, as well as the growers themselves, real cost not just in dollars and euros, but also in lost each have an important role. “In the coffee-growing education, health and livelihoods for millions living countries, farmers need to be supported in their efforts in the world’s poorest rural communities. Subsidies to increase their revenues. Those farmers who have the export poverty.” potential to improve the quality of their supplies should However, diversification is not an end in itself, be helped in this process. Simultaneously, it is important but a way to reduce some farmers’ vulnerability. that growers diversify into other productive pursuits Competitive producers should not be constrained with better returns.” to diversify.

Farmers need to diversify their sources of income Raising and stabilising coffee prices The most efficient way to reduce an imbalance in Some programmes are in place to give higher income the market is to operate at both ends of the chain. to farmers through paying a subsidised price which A consumption increase is an important part of the is above the price set by the market. The fair trade solution, but that alone will not solve the problem. movement, for example, has succeeded in selling Today, too many farmers rely on coffee as their only coffee to some retail customers at a higher price, source of income. Such dependence makes it very for which a premium above the market price is paid difficult to survive when the commodity’s prices are low. to cooperatives. If they could count on other sources of income, they “I believe that this movement has delivered benefits Faces Faces of coffee could adapt their production level to the price situation. to some coffee farmers around the world. More 52 “I believe that trade barriers Peter Brabeck-Letmathe the developing world.” are unfair to the farmers of

53 Faces of coffee The future of the coffee worldii

importantly, it has also raised the consciousness of farmers to bring their produce directly to a buying western consumers about the situation coffee farmers station, thus retaining for themselves a larger portion face. But fair trade can only work in a niche market. of the value of their coffee. This mechanism accounts If it were widely expanded, it would quickly increase the for some 110 000 tonnes of green coffee, which global oversupply of coffee and depress coffee market represents 14% of the company’s needs. In addition prices further. The industry as a whole needs to bring to that, technical assistance is given free of charge solutions adapted to the whole community of coffee to coffee farmers. farmers,” says Peter Brabeck-Letmathe. “Support schemes are urgently needed to protect Research and improving coffee crops coffee farmers of developing countries in open global Another important element for Peter Brabeck-Letmathe markets from wide price fluctuations, such as the very is the investment Nestlé makes in research. “In our low coffee prices of the recent past. research centre based in Tours, France, we are active “The development of mechanisms to stabilise export in fields such as coffee selection, multiplication earnings by providing better access to the International techniques (somatic embryogenesis) and molecular Monetary Fund Compensatory Financing Facility, or by markers, as well as cryostorage. reviving the European Union’s scheme to stabilise “Nestlé also collaborates and provides assistance export earnings (Stabex), is a high priority. It is an area to research centres in Mexico, Thailand and Indonesia, in which the International Coffee Organisation could offering free training in Tours, France, to scientists play a leadership role with the international financial working in these institutions. Recently, Nestlé launched organisations, banks and coffee traders. a new collaboration programme with the Jimma Coffee “Stabilising export earnings has a number of Research Centre in Ethiopia. One of their scientists will advantages over buffer stocks and other schemes that be trained in France and Nestlé will provide technical directly interfere with commodity supply and prices. advice to the Centre.” Since such schemes are not aimed at keeping prices Nestlé has also established a collection of artificially high, there is less risk of unnecessarily 250 proven high quality coffee varieties from around prolonging periods of oversupply. They can, however, the world. These are offered free of charge to the help cushion some of the effects of the worst slumps.” countries that have contributed to the collection, enabling them to conduct plant improvement Coffee-growing countries need investment programmes using the best varieties for their climate The long-term interests of consumers depend on a and conditions. stable coffee sector in which farmers have security, and producer economies enjoy benefits from the coffee Increased consumption industry. The farmer is a producer, but he is also Unfortunately, the increase in coffee consumption has part of a wider community and economy. “Nestlé is not been as rapid as that of production. In 2002/2003, committed to developing the viability and stability of 111 million bags of coffee were produced, while the coffee industry, starting with the first step in the approximately 109 million bags were consumed. production chain.” This has added to the already large stock of coffee It is during the process that converts coffee beans which has accumulated over the past years. to instant coffee that the majority of the added value However, as noted above, Nestlé has significantly takes place. Nestlé produces over 55% of its Nescafé contributed to an increase in consumption. Over the in factories located in developing countries – creating past ten years, Nescafé consumption increased by 40%, jobs, generating tax revenues and transferring state- leading the way in increasing worldwide total coffee of-the-art technologies. consumption by 17%. In some coffee-growing countries where Nestlé has “Roasters like Nestlé are engaged in promoting a Nescafé factory, the company has put in place direct consumption. This is good for our company as much Faces Faces of coffee purchasing from the farmers. This system allows the as for the coffee farmers. The more coffee people drink, 54 “It is vital that all stakeholders material’s quality, making it more difficult to find is that they lead inevitably to a lowering of the raw Nestlé. The first negative impact of low coffee prices prices are not only bad for farmers, but also bad for good for a company such as Nestlé. However, low At first sight it might be assumed that low prices are Low prices benefit nobody attitudes that could lead to an increase in consumption. will be possible to dispel prejudices and create positive the health benefits of coffee. If this initiative succeeds, it drawing on independent scientific studies that show profession and the general public with information Initiative. This initiative aims at providing the medical consumption, in particular the Positively Coffee supports initiatives aimed at promoting coffee efforts to promote coffee consumption. It also actively increase their income by producing green coffee.” the more opportunities there will be for growers to Peter Brabeck-Letmathe the coffee chain.” work together to imp Nestlé makes significant investments in marketing rove rove the United Nations’ Eminent Persons Group.” coffee chain. This is the reason for my involvement in NGOs must collaborate to find ways to improve the solutions: governments, roasters, traders, growers and vital that all stakeholders work together to find appropriate the stakeholders. “Nestlé believes that, in this context, it is coffee farmers needs to be done in collaboration with all For Peter Brabeck-Letmathe, finding ways to help the Engaging with all stakeholders prices remain stable and above production costs.” normally. It is therefore in Nestlé’s interest that coffee they cannot consume as much as they would Brabeck-Letmathe, “and when their income lowers, consumers of food products,” observes Peter “The millions of farmers who grow coffee are also strong and wealthy economies around the globe. for its products. the coffees needed to meet the company’s standards Secondly, it is good for Nestlé’s business to have

55 Faces of coffee The future of the coffee worldii

Called upon by the United Nations General Assembly and under the auspices of the United Nations Conference on Trade and Development (UNCTAD), an appeal was signed by 15 eminent persons, including Peter Brabeck-Letmathe. The aim of this group is to propose global solutions in the area of commodities issues. “I think that there is a wide range of actions which can improve the conditions on commodity markets and thus help to alleviate the poverty of many producers,” says Peter Brabeck- Letmathe. “In the case of coffee farmers, I believe that addressing the problem of oversupply and creating optimal conditions for easier market access are the best ways to support them.” In collaboration with two other food companies, Nestlé founded the Sustainable Agriculture Initiative (SAI). A coffee working group of eight companies has been created and is working to identify ways to help coffee growers. Nestlé also backs the Common Code for the Coffee Community (CCCC), which was initiated by the Deutscher Kaffeeverband (DKV), the German coffee association, and the Gesellschaft für Technische Zusammenarbeit (GTZ), the German agency for technical co-operation. This multi-stakeholder platform aims at defining a code for establishing sustainability in the coffee chain from the coffee tree right through to the end product. Representatives of the industry, civil society and growers themselves are working together towards sustainable coffee production. Through DKV, Nestlé is one of the founders of CCCC and is presently an active member of the Steering Committee and the Environmental Working Group. All member companies of the SAI coffee group actively participate in this initiative.

Grounds for hope “Today, coffee is a powerful practical link between diverse communities in the North and the South,” says Peter Brabeck-Letmathe. “It is a global industry which, if properly developed, can continue to invigorate many different cultures, and provide a solid livelihood for millions of farmers and for rural communities. At Nestlé, we are optimistic about the coffee industry and we are committed to playing our part in making Faces Faces of coffee it work for producers and consumers alike.” 56 Writing and editing Nestlé S.A., Public Affairs

Concept and design Nestec Ltd, Marketing Communications, Corporate Identity and Design with Esterson Associates, London, United Kingdom

Illustrations Aude van Ryn, London, United Kingdom

Photography Markus Bühler/Lookat Photos, Zurich, Switzerland; Jillian Edelstein, London, United Kingdom; Harmen Hoogland/Nestec Ltd, Marketing Communications, Corporate Identity and Design; Marc Latzel/Lookat Photos, Zurich, Switzerland; Christian Vogt, Basel, Switzerland; apg image, Vevey, Switzerland; Keystone, Zurich, Switzerland

Printing Entreprise d’arts graphiques Jean Genoud S.A., Le Mont-sur-Lausanne, Switzerland

Paper Munken Lynx, totally chlorine free (TCF)

Cover picture Coffee harvest in Mexico

© March 2004, Nestlé S.A., Public Affairs

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