Nespresso has begun exporting coffee from South Sudan, as major companies look again at how and where they source their beans
(CNN)George Clooney could be right: the future of big coffee is small farmers. The film star and face of Nespresso has been promoting the nascent coffee industry in South Sudan, where he has long been involved as a political activist.
The company has been working with the non-profit organization TechnoServe and around 500 small farmers to restart commercial coffee exports in South Sudan, which gained its independence in 2011, but has since been gripped by a new civil conflict. Nespresso says intends to invest around $2.5 million in the country to expand its program to reach 8,000 farmers by 2020.
“The high-end coffee market is not just interested in having the best quality beans, but in having a compelling story behind those beans,” says William Warshauer, TechnoServe’s CEO. “In that sense, South Sudan represents both in a way that’s off the charts. This is the world’s last new coffee origin.”
As well as gaining it access to a unique coffee, Nespresso’s investment reflects a growing momentum within the big buyers of the commodity to invest in Africa, and in the small-scale farmers who actually grow the beans, and whose livelihoods are increasingly under threat.
“You cannot have on one side a business strategy and on the other a sustainability strategy,” Jean-Marc Duvoisin, CEO of Nestlé Nespresso, told CNN in an emailed response to questions.
“As a business, we couldn’t be sustainable if the farmers we work with are not sustainable themselves. Our approach, combining quality, sustainability and productivity principles, has resulted in better coffee quality, better environmental conditions, better social conditions and higher income for farmers.”
Livelihoods under threat
Worldwide, 85% of coffee is grown by smallholders, who sell their crop either directly to the big traders and processors, or at the farm gate through middlemen. In Africa there are more than 3 million small-scale coffee growers, according to TechnoServe, and 80% live on less than $2 per day. Research from the Fairtrade Foundation shows that the farmers at the end of the supply chain receive less than 10% of the retail price for coffee.
This structure is looking less sustainable every year, and coffee buyers are worried that their long-term prospects may be undermined by a lack of investment at the farm level. To redress the balance, they are putting more effort — and more money — into supporting the livelihoods of smallholders.
In June, Starbucks, which sources coffee from more than 30 countries, put an extra $30 million into its Global Farmer Fund program, to support smallholder farmers, more than doubling its size.
“I think the biggest market driver [for investments in smallholders] is that companies have realized it’s in their best interest, and beyond their best interest, that it’s core to their operations,” says Liam Brody, senior vice president at Root Capital, which manages funds that invest in small farmers. “Some of them have just realized that the way they’ve done business can’t continue.”
A vicious cycle
The global crop has been threatened by climate change, ageing trees and diseases, all of which have contributed to the fragility of these rural livelihoods. This in turn has made it difficult for farmers to invest in new plants, irrigation or fertilizers, leading to a vicious cycle of falling productivity and lower income. At the same time, demand is increasing as consumers in China and India switch from tea to coffee.
Africa only produces around 12% of total coffee production, but the low levels of development — and consequently low yields per farm — mean that it is well-placed to take up the slack. Comparatively small investments in inputs can have significant impact on the amount of coffee that is harvested.
“I think we’ve really reached a tipping point on this,” TechnoServe’s Warshauer says. “I think companies are seeing this fundamentally differently than they used to. They understand better than ever before that when they’re sourcing things from emerging markets, that when the family that’s growing them can’t live above the poverty line while doing so, then what they’re buying might not be there when they come back the next year to buy it again.”