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cupWhat’s in Your Cup?

On a Study Trip to Guatemala, students sample the socioeconomics of coffee

By Blythe Yee, MBA Class of ’09

Let’s say you like coffee. Perhaps you go to Starbucks every day. Maybe you want developing countries to develop, and you also believe that small coffee farmers deserve a chance to make a living. Perhaps you care about the environment, and have been buying organic coffee because that seems the most sustainable way to farm.

Blythe YeeSo, what kind of coffee should you buy? Fair trade? Organic? Starbucks? We hoped to figure this out during a School-sponsored service learning trip in December 2007, as we took a look at coffee farming and supply chains in Guatemala, a country where a nearly 40-year civil war ended only a decade ago. Ten days, six coffee farms, erratic showers, four blackouts, and one earthquake later, we’re still not sure. But the trip was a rich experience, one that raised questions far beyond coffee. Some of us are still puzzled as to where we should buy our morning cup. But we’re also thinking about corporate social responsibility, agriculture, education, and the challenges that the small farmers we met are facing every day.

Should you buy Guatemalan coffee? Anacafé certainly wants you to. Our trip kicked off with a visit to Anacafé, the association of coffee producers charged with promoting Guatemala’s coffee. Christian Rasch, Anacafé’s president and a big coffee producer himself, gave us a primer on the organization, which is authorized by the Guatemalan government to grant farmers and exporters the licenses necessary to export coffee and which works hard to drive up demand for high-quality Guatemalan Arabica beans. (For the caffeinated, there are two main types of coffees, Arabica, which is the better stuff, and Robusta, a hardier but harsher-tasting bean that you’ll find in mass-market coffees. Around 2000, Vietnam started producing Robusta, sending coffee prices plunging—and creating an incentive for countries like Guatemala to focus solely on cultivating Arabica.)

 
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Rasch and his fellow Anacafé members are trying to make Guatemala’s coffee appealing to the buyers and cuppers (coffee tasters) of the world. Twenty years ago, said Rasch, the country’s biggest buyer was Folger’s. Now, 25 percent of Guatemala’s coffee goes to Starbucks. “In Guatemala we say, ‘You don’t fight with the cook,’” he joked. This strategy of cooperating with big buyers, marketing, and investing in the cupping that differentiates regional coffees seems to have worked; Guatemalan coffee sales have been growing steadily.

After Rasch’s presentation, we had a cupping session. It’s a difficult task for the nose and palate. You’ve got to get a good whiff of the froth that crowns a cup of grounds and hot water. Then you’ve got to suck the coffee through your teeth, evaluate it, and spit. We knew what we liked; the mountain-grown Arabicas of which Guatemala is so proud were complex and deep. As for the Robusta, critiques included “corn,” “grass,” and “diaper.” We left our meeting appreciative but somewhat skeptical. If Anacafé had a stranglehold on the export licenses—and was run by coffee producers—the organization could pose conflicts of interest.

Should you buy Fair Trade coffee? Before our trip, we had read about Fair Trade, a certification and labeling system that seeks to bene-fit agricultural producers in developing countries. To obtain this Fair Trade certification, a farming community needs to meet standards that include having democratically elected leadership, paying living wages, and investing in schools; those who meet these standards are guaranteed a minimum price for their goods. Fair Trade coffee fetches a farmer about $1.50 a pound, versus about $1.35 for non-certified coffee. And Fair Trade lets a consumer feel pleased about paying a bit more for coffee produced by small, forward-looking farms. Very often, we had learned, small Guatemalan farmers wound up at the mercy of “coyotes,” middlemen who paid them dirt-cheap prices for unprocessed coffee and then sold it to exporters. Fair Trade, it seemed to us, was a way to give coffee farmers some price protection from the coyotes.

 
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The group spent two days at Santa Anita, a Fair Trade-certified coffee cooperative of about 40 families who each owned about 10 acres of mountainous land. The cooperative formed a decade ago after the end of a civil war that pitted guerrilla fighters against U.S.-backed military governments. With nowhere to go, some 100 ex-guerillas purchased the farmland with a government loan. Santa Anita’s leader, Rigoberto Agustín, had spent nearly three decades as a guerilla fighter. Agustín was stout, charismatic, humble, and humbling. “It’s one thing to say 36 years of war, but it’s very different to have lived it,” he said modestly.

Santa Anita was one of the service elements of our trip. We picked, hauled, and sorted coffee. Picking coffee, we learned, canbe a bit like sledding—with no snow and no sled. Some of us picked on a plot of land known, we learned later, as “The Cliff.” It was a near-vertical mountainside slope that had to be hacked through with a machete. With baskets tied around our waists, we picked coffee cherries with one hand and clung to the trees with the other. “We also had to battle swarms of bees,” recalled Andy Martin, Class of ’09. And while we genuinely appreciated Santa Anita’s organic farming—nobody had to worry about harsh pesticides—we sure as hell weren’t going to touch the coffee clusters that were riddled with ants. After picking the cherries, we hauled them in sacks and baskets on an uphill trail back to the farm. Our haul for the morning was about 170 pounds of coffee cherries, which would have earned us about 80 cents each—not quite enough for a bottle of Gallo, the national beer.

Squatting on a cement drying patio, we sorted the coffee cherries. The women of Santa Anita challenged the GSB women to a basketball game (and thrashed us, despite the GSB team’s height advantage). The men of Santa Anita took on our guys in soccer—a rather fast game on the concrete basketball court—and beat us there as well. After a day of picking and pick-up games, cold showers awaited us.

Agustín spoke frankly about what Fair Trade practices mean to his farm. “Through the Fair Trade family, we get a lot of

 
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interaction with buyers,” he explained. “Buyers are listed on the internet, but we wouldn’t know this.” Nobody at Santa Anita had the English skills to market coffee internationally, he added. Fair Trade certification has allowed Santa Anita to find a market, but the certification initially cost the little cooperative 2,000 euros. They’re paying less for it now, but when Hurricane Stan decimated their crop in 2005, they had to fork over a certification fee—even though it amounted to more than the farm’s production that year.

After dinner with the families of Santa Anita—Professor Jesper Sørensen and his wife were hosted by the community’s chicken supplier whose house was filled with bowls of freshly slaughtered chicken feet and heads destined for New Year’s celebrations the next night—we found out what had happened to the coffee we had painstakingly picked that morning. The farm’s wet mill, which strips the pulp off the coffee cherries, wasn’t operating that day, and unprocessed cherries are perishable. Because some families were in need of cash, our haul had been sold to some local coyotes at a rock-bottom price. We looked at each other in dismay—and then laughed ruefully at the irony of it. Even a Fair Trade farm can’t always afford to be fair.

Should you try to buy direct from a coffee farm? One issue preoccupied us throughout our trip: roasting. Why did coffee roasters and final sellers capture so much value in the supply chain? Suppose small farmers roasted coffee collectively and sold it overseas. They would be able to capture a lot more value, we figured. We never could determine what percentage of coffee’s retail price went to roasters and exporters, but putting more of that price into small farmers’ pockets, we thought, would be a no-brainer for improving their business.

Unsurprisingly, it’s not that simple. Coffee quality deteriorates faster after you roast it. Plus, big buyers have their own roasting specifications, which can also be a way to mask inconsistencies in their bean supplies. A roasting machine can cost about $25,000. And there was another obstacle, pointed out Franklin Voorhes, who heads an economic development organization called As Green As It Gets (asgreenasitgets.org). If you’re an illiterate farmer, “Where are you going to sell your coffee?” he asked.

Voorhes’ organization, just outside the city of Antigua, tries to answer that question. As Green As it Gets, which provides small Guatemalan businesses like coffee farms and textile producers with training and financing, sells roasted coffee to churches, school fundraisers, and a few coffee companies in the United States with whom Voorhes has cultivated relationships. Every dollar from the $8 price of a 1-pound bag goes back to the families in the organization’s farming collective. Touring the village around the farm, we saw flimsy cornstalk houses with corrugated steel roofs, and then sturdy concrete homes that coffee money had helped build. One family had started a brisk business in totes and satchels made of burlap coffee-bean sacks, a cottage industry As Green As It Gets had helped fund.

The organization’s coffee isn’t Fair Trade, which, Voorhes explained, certifies unroasted green coffee; the lion’s share of the roasted coffee price still ends up in the hands of roasters. Anacafé, he asserted, wasn’t doing much to help small farmers capture more value. It had taken his small collective two years to get an export license. Some farmers fare worse: “If you’re an illiterate Mayan, filling out a form is a major obstacle,” he said.

At As Green As It Gets, we helped out again. To process coffee, you have to dry the beans after you strip the pulp. Drying beans requires a flat concrete surface, and the collective was facing a production bottleneck: not enough space to dry the coffee. So we pitched in and helped build a patio. Though monotonous, picking coffee had had a certain agrarian appeal; mixing and pouring concrete offered no such charms. Making concrete required mixing up a heavy sludge of dirt, cement, and rocks. We then pushed it in tottering wheelbarrows and dumped it into the patio’s frame. And then we repeated that process again and again. We spewed expletives as wet concrete slopped out of our shovels and onto our shoes.

After finishing part of the coffee-drying patio, we prepared to head back to Antigua. The town’s power failed leaving most of the concrete-encrusted group without showers. So we discussed the day by candlelight in our hotel dining room. (It was the first of several blackouts we endured.) We liked Voorhes a lot. He was making a real difference in his community. But we worried about the families he worked with. What Voorhes had didn’t seem like a sustainable business model. He was the one who maintained all the relationships with the U.S. buyers. Without him what would those families do? He’d said he could probably charge more and find more buyers but that he was no marketer. He drew no salary and his girlfriend, a speech therapist, supported him. Over candlelight, we agreed that he was quite admirable and perhaps a little mad.

Should you buy Starbucks coffee? Starbucks has a program called C.A.F.E. (Coffee and Farmer Equity) Practices, which sets standards for the coffee farms from which it sources its beans. Based on U.N. labor standards, the program tries to ensure that farms adhere to sound environmental practices and provide decent wages and working conditions. Over half the coffee Starbucks bought in 2006 was from C.A.F.E.-certified suppliers. Starbucks also provides funds to loan programs that serve small farmers and makes community investments in schools and free health clinics around coffee farms. We visited one such facility, the Clinica Santa Clara, a pleasant little community health center. We also stopped by Finca San Sebastián, a large farm that supplies Starbucks. It dwarfed Santa Anita, and its coffee plants sat in vast, neat, irrigated rows. During the coffee harvest, San Sebastián pays temporary pickers as much as Santa Anita does—about $7 per hundred pounds of coffee cherries—but its flat land, healthy plants, and easy access would have made a worker’s day worth much more. San Sebastián’s size and efficiency were impressive but a little dispiriting: How could a little farm like Santa Anita compete? Rigoberto Agustín and his comrades had spent decades fighting for the right to own their land. But wouldn’t workers be better off picking at a big, productive farm with access to corporate-funded schools and health clinics?

Touring a huge processing mill owned by Cafcom, Guatemala’s largest coffee exporter and a Starbucks supplier, we asked more questions about C.A.F.E. Practices. To be C.A.F.E. certified, a farm must pay a Starbucks-approved, third-party certifier to verify that it meets labor, quality, and environmental standards. Starbucks also has an agronomy team that trains farmers in sustainable, high-quality production techniques. Under the program, Starbucks scrutinizes its supply chain; the exporters from which it buys beans have to provide documentation of how much they paid the farmers.

Discussing Starbucks brought up the issue of corporate social responsibility: What is a public company’s real obligation, and what constitutes the right level of contribution? To be sure, Starbucks doesn’t have to build clinics. But if it has a corporate social responsibility program, should it be doing more? The company was touting its economic transparency, but farmers had no idea what their coffee was fetching further up the supply chain, nor was there a minimum price to the farmer.

After our visit to San Sebastián, the group took a short break from coffee farms. But it wasn’t all relaxation. One free evening our dinners came with a side of earthquake. The next day hiking up an active volcano and toasting marshmallows in its cracks, we wondered if our proximity to the molten lava was wild fun or just idiotic.

So, what should you buy—and do? “I was hoping we could come back and say: ‘Buy this,’” said Sophie Pinkard, MBA Class of ’09. But 10 days left us with no obvious answers about how supply chains, farming, marketing, or big business could be changed to make the lives of small farmers more productive and promising. We were disenchanted with labels like Fair Trade. We weren’t sure if the children of Santa Anita would ever, as their parents fervently hope, escape coffee farming. We wondered how the families of As Green As It Gets would fare if anything happened to Franklin Voorhes.

Some of us didn’t think the answer lay in agribusiness at all: “Small-scale farming in coffee is Guatemala’s past, not its future,” commented Evgeny Pervago, MBA Class of ’09. “We should not focus on paying 10 cents more per pound.” Education, we agreed, would make the biggest difference, and contributing directly to schooling initiatives could be the best answer, given the Guatemalan government’s poor record of social investment. We had seen effective models of farming and nonprofit educational organizations but wondered how scalable they were. And yet small organizations were making a real improvement in disadvantaged communities. You didn’t have to swing for the fences, Professor Sørensen reminded us, to make a difference.

Coffee BeansSo, if you’re a curious coffee drinker, we can tell you a fair bit about brewing techniques, roasting specifications, and bean quality. (In short, don’t buy anything that’s not 100 percent Arabica.) We can tell you how your beans were picked and processed. We’ll probably tell you that we’re a bit skeptical about labels like Fair Trade. We’re still stunned that a half-day’s labor on a Guatemalan coffee farm wouldn’t have earned us enough to buy a latte. And though we might not be able to tell you where to get your cup of coffee, we can promise you a great story about where it came from. 

Blythe Yee previously was a reporter with the Wall Street Journal. A version of this article first appeared in the Stanford Business Reporter.