Better than Fair Trade: One Company’s Plan to Pay Coffee Farmers More

Erin Stewart — Social Adventures

For many consumers, a “fair trade” seal on their coffee, tea, clothing, or chocolate is a mark of excellence. And the fair trade movement, which started in the 1940s and has gained momentum in recent decades, does provide farmers a bigger cut of the profits for the commodities they grow. Coffee companies, for example, must pay fair trade producers at least 20 cents more per pound. This program, which is regulated by the World Trade Organization, “has done a good job helping to make an impact,” says Farmers First Coffee Company co-founder Matt Hohler. “But we were asking ourselves, ‘Could we go beyond that? What could we do better?’”

Hohler and co-founder Robert Durrette started Farmers First Coffee, a Lima, Peru-based company (known as Levanta Coffee before a recent name change), in January with a mission to make more money for the farmers that grow its product. “We, too, used to think that fair trade was the best way to support small-scale farmers,” the Farmers First Coffee founders wrote on their Kickstarter page this summer, which raised money for the company’s initial round of production. But Hohler and Durrette realized that while registered fair trade companies ensure good working conditions, create supply-chain transparency, and pay relatively better prices to producers in developing countries, farmers participating in the program were still struggling.

Hohler’s investigation into the coffee industry found that intermediaries in the supply chain seriously dilute the income of coffee farmers. Buyers, exporters, importers, roasters, and distributors all take a cut of the profits, leaving even fair trade coffee growers scrambling for perhaps a few hundred extra dollars per year. While substantial, that sum does little for Peruvian farmers and their families facing food insecurity, poverty, the effects of climate change, and a lack of access to clean water and health care.

Hohler says a model that pays farmers more directly can “really make an impact in the lives of our producers.” And in turn, the Farmers First founders hope that by sharing the stories of their farmer-partners with consumers, customers will better understand why their consumption choices matter. Farmers First Coffee farmer-partner Daniel Diaz, for instance, has been running a coffee-growing family business for 25 years. He’s been farming since he was a child—first growing cocoa before moving to coffee at age 15. He helped found a local coffee cooperative in Peru’s mountainous San Martin region, but the work left him unable to tend to his own fields. He hopes the extra income Farmers First is offering will allow him to replenish the plantation he manages with his parents and wife.

By showcasing the “depth of the farmers’ stories, who they are, and the commonalities we all share in our own stories,” Hohler says the company aims to raise awareness of supply chain issues and the challenges faced by coffee producers—challenges that he first became aware of volunteering with Casa de Angeles, a Honduras-based organization that focuses on improving malnutrition in children. Many of the program participants were the children of coffee farmers, Hohler wrote on the company’s Kickstarter page, and it inspired him not only to get a master’s degree in public health but to “find solutions to coffee’s biggest problems so that no more kids end up in centers like Casa de Angeles.”

After raising more than $50,000 in its summer Kickstarter campaign, Farmers First Coffee has begun purchasing beans directly from the two small farming operations in Peru that produce its coffee (the founders plan to work with a third farmer in Honduras later this year), paying the growers 50 percent more than they’d make working with fair trade brands. To afford this increase, the business model relies on cutting out as many intermediaries as possible. Hohler says Farmers First Coffee ensures the few processing partners they do require—roasters, for example—also have business practices in line with the company’s beyond-fair trade ethos.

Farmers First Coffee plans to start selling coffee via direct shipping and subscriptions in November, though the company is working to overcome setbacks following a huaico—flash flooding and landslides caused by torrential rains—in the Peruvian mountains in March. Currently, interested customers from around the world can preorder coffee (along with other products) via BackerKit. Farmers First also aims to have its products sold at coffee shops, restaurants, and other businesses in the near future.

“We want to sell more and more coffee … so we can bring more producers in and so more people can benefit,” says Hohler. “Hopefully [the company] can grow to be quite big and quite impactful in the long run.”