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How Runa is Empowering Ecuadorian Farmers

Hult Social Entrepreneurship
Hult Social Entrepreneurship | Tuesday April 23rd, 2013 | 0 Comments

runaIt’s 4:00 o’clock in the morning. It’s still dark in this little village in the Ecuadorian Amazon. The only light around is from the communal fire burning. There’s some chattering, the water is cooking and the Guayusa tea is getting ready. The Kichwa tribes have known about the energetic effects of Guayusa for generations and that a cup of this tea in the morning will carry them through the day.

A single bottle of Guayusa tea contains as much caffeine as a cup of coffee but doesn’t lead to jitters and contains abundant antioxidants, much more than any other type of tea. The taste is smooth and clear and doesn’t require any high-calorie sweeteners.

Despite a long history of difficult colonization periods, the Kichwa have always been a strong community of agricultural prowess. For hundreds of years, these families have worked together to harvest the leaves of the guayusa tree from their land; drying them out and consuming them is a sacred ritual of their daily routines.

Until now, these farmers have never had the option to sell much product outside their local markets. They’ve also struggled with accessing services like healthcare and education for their children. This is where Runa comes in.

Runa LLC. is a U.S.-based company named after the kechua, a word that means “fully living human beings.” It sells guayusa tea leaves and beverages with the mission “to create livelihoods for indigenous farmers in the Amazon.” The company was founded in 2009, and to date, deals directly with over 2,000 small farmers, employs over 40 people and is proving that sustainable, high-impact businesses in the Amazon can support producers and connect consumers to ancient traditions.

Fair trade and sustainability are the keys to Runa’s operation in Ecuador. In the words of Dan MacCombie, Co-CEO and Cofounder of the company, “We believe people everywhere can benefit from the bounty of the Amazon without destroying it, starting with the people who live there.”

We had a chance to speak with Dan MacCombie about his exciting journey with Runa. Here’s an excerpt of the interview.

Hult: What is your social mission and vision towards the indigenous people in Ecuador?
Dan MacCombie: We are out there working to build a new economic system in partnership with the community, so it’s not just about extracting industries or mono-crop cultures, but how we look at the whole fabric of the Amazonian economy and ecology and make it all work together.

Hult: What kind of activities does Runa engage in with communities?
DM: Runa is organized in two main organizations. The for-profit side is composed of the Ecuadorian branch Runatarparuna and the American branch is Runa LLC. The non-profit side is represented in Fundacion Runa (Runa foundation).

The for-profit organization’s main job is buying guayusa which, in and of itself, is a sustainably-grown and harvested plant. This enhances the livelihoods of farmers that often have few other choices.

Through the foundation, we support farmers through research, education and economic programs. We are working on building markets not just for guayusa but also for other crops that are grown in these agroforestry garden systems that they have. We are also looking at land use, environmental sustainability and supporting traditional methods of in agriculture.

Hult: Can you tell us approximately how much of the profit is distributed to these different projects?
DM: We originally invested a couple hundred thousand dollars and a lot of time to start and build the foundation up. At this point, we’ve brought it to a place where it’s self-sustaining, and we’ve focused our resources on building the brand and market that drive income to farmers rather than supporting the Foundation directly. That will likely change in the future once Runa as a beverage company becomes profitable. We still actively work with the Foundation on strategy, planning, and fundraising support, and continue to do what we can to support it financially.

Hult: Let’s talk a little about Fair Trade. What kind of impact has Fair Trade had on your company financials?
DM: The truth of this is that we don’t know. Fair trade is the only way we’ve ever done it. This is a core part of our business that we don’t intend to change. We chose to work with smallholder farmers. We could have done it differently, but that would have been disrespectful to the community and to the environment and that’s not how we wanted to do business. I’d say this certainly increases the cost of our supply chain.

Now, what I can say is, compared to Fair Trade, the organic certification is significantly more expensive. That’s the one that is really challenging for us.

Hult: How expensive are we talking about?
DM: Let me give you an example. When our staff goes out to work with the farmers, they have to allocate about one-third of their time toward organic certification. So, we actually have crops that are grown with the exact same methodology, but for some of our new products we just didn’t get them certified organic because it’s just too expensive and time consuming.

Hult: How do you protect yourself and the farmers from competition to export the guayusa leaf? Can you guarantee the prices even if other players enter the market?
DM: The competition could come and buy a lot of land to plant guayusa themselves and cut the farmers out. That’s why we are trying to grow to be the biggest market and create enough demand on our own so we can support these farmers’ livelihoods.

If someone wanted to compete with the price it is certainly possible, but there is no competition in offering a lower price [...] given that we buy the vast majority of what farmers have.

Hult: Is the Ecuadorian government supporting or hindering Runa’s activities? Have they introduced any policies regarding your operation?
DM: The government owns 42 percent of the equity stake in our company. We have close relationship with local governments as well as local indigenous federations. We work with them on all sorts of education and environmental issues.

Hult: Ecuador is on the list of the most corrupted countries. How do you protect your company from corruption?
DM: In both our own experience and what we’ve heard from others, Ecuador is far less corrupt than some assume. You can see some pretty interesting discussions about the basis of and potential bias in Transparency International rankings. I’m sure, as in any other country (including the US) there is corruption, and quite possibly more so than other countries. However, after talking with many friends and colleagues in both Ecuador and in other Southern Hemisphere countries, I believe that generally Ecuador is a pretty solid place to do business in that regard. We have not, to my knowledge, ever been asked for bribes or faced red tape due to corruption.

Hult: Final question – How is Runa becoming more profitable? What is the expected impact for the next five years?
DM: In five years we expect to have about a million dollars annual income generated for the farmers, 500 hectares of organic certified forest gardens that are sustainable, 50,000 hectares of new conservation areas committed and formalized, 20 percent women leaders in decision making roles in the value chain, 20 percent of youth leaders, 20 percent of farmers having bank accounts and credit lines, and 15 percent of farmers having established land titles.

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Companies with a social mission, like Runa, are building bridges for local communities in developing countries to connect with the world. This kind of initiatives can change many lives. But what are the challenges or the risks for the local communities? Are the governments prepared to create policies that can guarantee the safety of the farmers? A long-term vision is needed to move forward. In our following articles, we’ll explore some alternatives and existing cases. Stay tuned.

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By Javier Sierra, Maria Villacres, Jerry Wagner, Sean Worang, Ting Ye.   The authors are Master of Social Entrepreneurship candidates at Hult International Business School. 


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