Vertical Integration in the Coffee Supply Chain: Pachamama Coffee Cooperative

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By Maria Hill

In recent years, the specialty coffee industry has actively focused on the producer. There are two major issues the industry faces when it comes to empowering the farmer: coffee prices are determined by the commodities market and the farmer is far removed from the consumer. In response to these obstacles, several new types of coffee company have emerged that are vertically integrated. I had the pleasure of interviewing Thaleon Tremain, founder of Pachamama Coffee Cooperative, an example of the vertical model, about how his company is helping to put the producer first.

How Pachamama Got Started

Tremain spent two years in the Peace Corp that took him to Bolivia and exposed him to bean, pork, and orange small-hold farmers. He quickly realized that farmers take the most risk for the least income. Through his work, he decided that his passion was to learn more about business structures, so he could help empower these small farmers. Tremain returned to the U.S., where he earned an M.B.A. and met future business partner Nick Brown. At that time, Fair Trade was just starting to take off, and consumers were looking for a more direct transaction with farmers. The two started exploring the idea of a coffee co-op where farmers actually owned the brand. In order for the concept to work, it would require the involvement and support of the farmers, so Tremain and Brown reached out to several leaders in Latin America and found a co-founder partnership in Raúl del Aguila, who was head of the Peru coffee cooperative COCLA. The first official meeting of the Pachamama Coffee Cooperative happened at the 2003 SCAA conference in Boston, Massachusetts, where a room crowded with coffee farmers decided to launch the brand. The vision was to create a global coop brand that farmers own and control. It would focus on a direct connection to consumers. The closer the farmers are to the consumer the more money they make.

How the Vertical Integration Model Works For Pachamama

Tremain notes that in today’s coffee market, there are “price makers and price takers”: The farmer is forced to take whatever the C market will give them, regardless of their actual incurred costs. This means farmers are dependent on the market price to help recoup cost-of-production: “It makes it hard to control your brand and capture a bigger piece of the pie.”

At Pachamama, the farmers have control of the pricing, and it happens in the boardroom. Tremain believes, “If you claim to represent the farmer there should be farmers in your board room. If you are selling to empower farmers, you should have them represented.” The Pachamama board is made up of five directors from producer coops in Peru, Nicaragua, Guatemala, Mexico, and Ethiopia, so they are essentially a cooperative of cooperatives. These directors control the vision and strategies of the company, and have done so quite well. They entered the market in 2006 selling directly to food cooperatives, a strategy that has grown to distribution into about 60+ food co-ops nationwide. Their growth has been steady, and in 2012  they opened an office space/outlet store in Sacramento followed by the 2014 opening of their first cafe in Davis, California. Tremain credits the growth to the vision of the board: “ They put time into thinking through bylaws, marketing, point of view, and strategy. They were also adamant about selling roasted coffee to food co-ops. The farmers knew the market, and wanted to grow the brand from the grassroots up.” Pachamama works with a local roasting partner in Northern California, as well as a partner at origin that manages sourcing and exporting.  The entire chain works directly with farmers. Tremain is proud to be a co-founder of a company that is run from the bottom up, giving famers the opportunity to invest in themselves.

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Pachamama Cooperative’s future growth plans are focused on continuing with their successful wholesale model, but are also interested in exploring more retail locations. The cafe offers a direct consumer connection with farmers and their coffee. From the coffee bags with the farmer’s pictures on them, to the cost of the final cup, the farmers have led every detail. Tremain sees that coffee quality is becoming more valuable to consumers, which means they feel justified in paying a higher cost for a coffee deemed to be specialty. He also thinks the younger generation of coffee drinkers is more critical about marketing claims, and demands more transparency when it comes to food sourcing. Consumers should be mindful of where the money goes for good reason, says Tremain, because “quality has never been better–but never been harder and more expensive to produce.”

For more information about Pachamama Cooperative visit their website.

Maria Hill is a freelance writer, blogger and founder of the social media management company Say Hey Girl. She has been involved in the coffee community in a variety of roles: SCAA staff member, event manager and coordinator, and volunteer. Maria resides in Sacramento where she can often be found enjoying her favorite snack: a warm glazed doughnut and any coffee from Ethiopia.