Nespresso creates retirement program for Colombian growers

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CALDAS, Colombia

By Dan Bolton

Wisps of snow-white mist frame the steep hillsides of lush green coffee below. The plane descends to a high plateau, setting down in Manizales, a city of 350,000 in the north western Andes and the capital of the Department of Caldas.

Caldas is the third point of Colombia’s “Coffee Cultural Landscape” a Unesco recognized world heritage site and a fertile zone that includes Risaralda and Quindio in Colombia´s central Andes. Caldas is the fourth largest producer of Colombia’s fabled Arabica. Its hillsides are home to more than 35,000 farmers who produce coffee.

In Caldas yields are rising and value is rising faster still, explains Luis F. Samper, chief communications and marketing officer for the Colombian Coffee Growers Federation (FNC). The annual harvest is worth $250 million. Coffee supports 300,000 Caldas residents, the majority of whom live on peasant farms of less than four  acres (1.5 hectares). Only 2.3% of the land is commercial farms of 25 acres (10 ha) or larger.

During the next few days as I bounce along in the FNC van, I discover that Caldas celebrates coffee excellence in the most sustainable way possible — by concentrating on incremental long-term improvements at the farm level.

Samper said that in Caldas FNC employs 127 agronomists whose primary task is to educate and advise “and improve the competitiveness of their coffee.” The entire region is organized into 500 groups of 15 to 35 growers who individually strive for excellence. The region is relatively isolated so agents become involved in the life of the grower, said Samper.

Agronomists serve several municipalities, linking hundreds of farms in a network where good communication is a priority. A culture of friendly competition has emerged in which local growers compare yield, share insights on combatting pests and encourage innovation in farm management.

When confronted with the devastation of La Roya, Colombia’s agronomists rallied the nation’s small growers and together renovated 3.25 billion coffee trees, reducing the average age of plant stock from 12 to seven years. Productivity increased 50%, reaching 15.3 60-kilo bags per hectare nationally. In 2014 production reached pre-crisis levels of 12.1 million bags valued at $2.3 billion, a 23% increase over 2013.

It is no wonder then, that Nespresso chose Caldas as one of seven Colombian regions to source coffees for its Grand Crus. The Nespresso AAA Sustainable Quality Program, created in 2003 in partnership with the Rainforest Alliance, prides itself on selecting the top 1% of the world’s coffee. The program now operates in 11 countries with 63,000 growers, the majority of whom grow coffee in several different regions in Colombia.

“Through the AAA initiative we have helped producers to improve the quality of their beans, increase productivity and receive higher premiums for their coffee,” said Samper. “Nespresso has been a key partner for the FNC in promoting sustainability programs for Colombian coffee growers in Antioquia, Caldas, Cauca, Cundinamarca, Huila, Nariño and Santander provinces. In fact, the largest AAA Nespresso cluster in the world, accounting for over 25,000 growers, is located in Nariño and Cauca to produce the Rosabaya de Colombia capsule, a very successful single-origin capsule,” he said.

Most farmers focus on the sales price as their main driver of profitability but FNC taught Colombia’s growers that yield per hectare is the key driver.

The price premium is the main reason farmers joined AAA but research on Real Farmer Income, a report by INCAE, the leading business school in Latin America, revealed that price transparency and long-term commitments to farmers, technical assistance, investment in infrastructure and a process of continuous improvement are what leads to true value creation.

The heart of the AAA program is to safeguard the future supply of quality coffee. Nespresso employs 40 agronomists in Colombia to insure the coffee grown for the program meets stringent requirements. Initially sustainability was viewed as a set of tangible goals such as improving bean quality and stewardship of soil and water. Today long-term sustainability is measured against 296 social and environmental standards. Among these benchmarks are the training and application of scientific practices that nurture plants to their full potential. Investment in labor is a priority. Medical care for workers and educating the young has advanced to the point where young people who remained on the farm now see a promising future for themselves and their offspring.

But what lies ahead for their aging parents?

Farmer Future Program

A lifetime of growing coffee on small plots takes its toll. Successful growers raising families must invest everything they can spare in caring for their coffee, leaving little for themselves. Colombia’s Beneficios Economicos Periodicos (BEPS) was developed for workers whose income is not sufficient to contribute to a pension in their old age but with only a few years to contribute, many famers will retire with too little to survive.

Recognizing the retirement dilemma, in July 2013 Nespresso proposed a project to enhance the social development of coffee farming communities by providing social security benefits. The pilot, launched in March 2014 with the cooperation of the Colombian Ministry of Labor and the FNC´s Caldas Coffee Growers Committee, involved 700 farmers of the Aguadas Coffee Growers’ Cooperative in Caldas, a Fairtrade certified supplier to Expocafé and Cafexport. The number has since grown to more than 800 farmers.

In addition to their retirement savings under the Colombian government’s pension program, growers who qualify for the AAA program receive an additional contribution equal to 20% of what they save annually. The greater their individual contributions to this public-private partnership, the faster the funds accumulate, encouraging savings and security in their later years.

Nespresso estimates it will contribute $300,000 to Aguadas members this year.

“The Caldas pilot has helped us to understand how best to ensure pension rights for coffee producers, and based on the experiences on that model we have recently signed a nationwide coffee grower pension initiative with Colpensiones,” said Samper.

In the future, the program may be extended to reach the more than 40,000 farmers participating in the Nespresso AAA Sustainable Quality Program.