Building a Farmer Owned Coffee Cooperative
Thaleon Tremain, CEO & Co-Founder of Pachamama
I first met Raúl in Costa Rica. He was a genuine, humble man with a great passion for life. He was a natural born leader. I later heard people call him El Padrino de Comerico Justo, or The Godfather of Fair Trade. He was my hero.
Born and raised on a small coffee farm in Peru in the 1950s, Raúl del Águila Hidalgo rose to be a powerful leader of disadvantaged farmers around the world, including the thousands of families he represented as manager of the COCLA Cooperative in Quillabamba, Peru. As the Fair Trade movement pioneered a new path for coffee in the 1990s, Raúl was a leading voice for the interests of small-scale farmers around the world.
In 2001, Raúl and I were in Costa Rica meeting with Carlos Vargas, an equally impressive leader of COOCAFE Cooperative. A few months before, I had accepted the job of organizing a global cooperative in the USA that would roast and market coffee on behalf of its members, farmer-owned cooperatives, led by Raúl and Carlos.
The first ever US-based federated cooperative to be owned by producers in Latin America would be called Pachamama Coffee Cooperative. Based in California, we would brand and distribute our members’ best coffee, creating brand equity for farmers. Raúl was the president of the board of directors, Carlos was the vice president, and I was the general manager. Within a few days, we had a draft of the co-op’s bylaws, a marketing agreement and a business plan.
Are you a Price Taker or a Price Maker?
In the mid 1990s, I was working for a small farmers’ cooperative in rural Bolivia as a member of the Peace Corps. I learned first-hand that the farmer is usually paid the least. She earns less than the processor, who earns less than the distributor, who earns less than the marketer, who earns less than the retailer. This is true for most commodities today.
The closer you get to the consumer, the better. Raúl and Carlos understood this well. Their own cooperatives helped farmers to leverage their collective power and deal more directly with importers and roasters, creating economic and social benefits for their communities. They knew the end-consumer in the North had the real power, because they paid the full retail price. And they knew those consumers would soon demand more direct access to farmers.
No Margin, No Mission
It’s interesting to compare the business of a coffee roaster to that of a coffee farmer. Coffee roasters sell a finished product and set the price of their coffee to include the profit margins they are willing to accept. Most roasters set a price that covers costs and provides a sustainable return on capital.
Farmers have little say in the price they are offered, unfortunately, because no one producer can influence the global market. As a result, the farmer must accept the market price and will do so even if it does not cover his cost of production. Fair Trade helps to guarantee a minimum price for coffee, creating greater stability, albeit with limited power and profit for the farmer.
“To gain greater independence, our farmers need to sell more value-added products and fewer raw commodities,” Raúl said. “It’s difficult to run a business when you don’t know what the market price will be next week.”
Building a Global Cooperative from the Ground Up
The second time I met Raúl del Águila, it was 4:00 a.m. at a bus depot, deep in the Andes of Peru. Although he managed a complex business, Raúl always met me upon arrival and was there as I rode off in a taxi, bus, train or plane. This was my first of many trips to COCLA, an amazing cooperative owned by more than 8,500 families in Quillabamba, Cusco.
At this time, Pachamama was preparing to sell membership shares to its three founding cooperatives: COCLA, PRODECOOP (Nicaragua) and Manos Campesinas (Guatemala). Each would buy one share and have one vote on the board of directors. Only members would have votes, and that’s true today. Later, in 2005, cooperatives from Mexico (La Unión Regional) and Ethiopia (OCFCU) purchased membership shares. The Costa Rican cooperative elected not to join. Today, Pachamama has five members and remains 100% owned and governed by those co-ops (20% ownership each), which in turn are owned by more than 100,000 family farmers.
Back to Peru. First, Raúl and I had to earn the support of the farmer-owners of COCLA. The farmers themselves would democratically determine our fate. COCLA did not belong to Raúl and he knew there would be no Pachamama if the farmers did not fully support it. Perhaps this is a universal cooperative truth. We took our concept to the people and we earned their investment.
Years later, Raúl described this time as “building the foundation on which we would construct a great home.” We built Pachamama from the ground up, with the right people, and we are stronger for it. There have been tough times, of course, and in those times our members unite. After all, ownership has benefits.
Launching the Pachamama Coffee Brand in California
In the case of premium artisan products like wine and coffee, it’s inevitable that producers will trade directly with connoisseurs. In fact, they will both demand it. In early 2006, five years after our first meeting in Costa Rica, Pachamama Coffee launched its farmer-direct operations in California, selling roasted coffee in bulk to food cooperatives and local retailers.
Our initial marketing strategy was to sell Pachamama’s coffee to food cooperatives in North America. These customers are now the foundation of our national wholesale business. Today, Pachamama’s coffee is available via many channels, including a retail café and directly to customers via the Internet.
Under Raul’s leadership, Pachamama formed an impressive board of directors, including Merling Preza, the dynamic leader of the PRODECOOP, and Carlos Reynoso, the leader of Manos Campesinas. It took a village to build Pachamama, and these are but a few of the amazing people that have been with us for more than a decade.
The last time I saw Raúl, we were in a café at the Lima airport in late 2012. We talked about our families and the future of Pachamama. Raúl passed away suddenly a few months later while working in Germany. He was a great friend and selfless man. In 2013, Merling Preza was elected the co-op’s second president and we carry on with our mission. She has followed in Raúl’s footsteps, championing our collective vision.
In 2013, Pachamama opened its first retail café in Davis, California, serving its members’ coffee and espressos drinks. This was Raúl’s dream – farmers selling their best coffee directly to customers. Last year, Pachamama built its first Certified Organic roasting facility and now roasts coffee daily in Sacramento, serving a growing national wholesale and retail business.
Raúl would be proud of the cooperative today. After ten years of selling farmer-owned coffee in the USA, Pachamama has never been stronger. Raúl’s parting words to me in Lima say it best: