Ensuring a new crop of farmers

Continuing to create shared value for those along its supply chain, premium coffee business Nespresso has developed the one thing it knows a particular group of farmers need if they are to continue supplying high quality coffee: a retirement savings plan, says head of sustainability Jérôme Pérez

Coffee-farming is a tough business, especially in the remote, high-altitude region of Caldas in Colombia, one of many locations across the country where the optimal micro-climate offers the perfect conditions to produce the highest quality coffee demanded by the portioned coffee brand Nespresso.

The back-breaking daily routines for smallholder farmers there – who rely on the use of donkeys to get around and transport their goods to market – are taking their toll. The average age of coffee farmers in Caldas is 53. And, generally, the next generation of young people are turning their backs on the family business and going in search of jobs in the city instead.

It’s a challenging social issue – not only for the ageing farming community, but for Nespresso too.

The company’s unique approach to building resilience, trust and improving the wellbeing of suppliers along its value chain – known as the AAA Sustainable Quality Program – has been hugely successful since 2003, helping farmers improve the productivity and profitability of their farms, while ensuring a consistent supply of high quality coffee that meets the quality and aroma profiles required for its Grand Crus range.

But the company was keen to extend the scope of AAA, to look at social security issues too. “In places like Caldas, farmers are not always protected and are increasingly vulnerable to a range of external factors,” says Jérôme Pérez, head of sustainability at Nestlé Nespresso.

“So, we wanted to find out what the farmers wanted and needed most.”

The co-operative of farmers in the region unequivocally told Nespresso that they wanted access to a retirement savings plan. “So, that’s what we set out to do – to safeguard their futures and encourage young people to stay and produce coffee by developing a savings plan for them.”

A little over 12 months ago, the Farmer Future Program was born. By tapping into Colombia’s existing government-subsidised retirement savings scheme aimed at workers that are not covered by a traditional pension system – known as Beneficios Económicos Periódicos (BEPS) – coffee farmers that are operating within Nespresso’s AAA scheme have been given savings accounts, accessible at retirement age. Earlier this Summer, the first payments hit their accounts, with the Colombian government matching 20% of what each farmer invests. Fairtrade International is also a part of the programme, helping members of the cooperative determine how best to invest their earnings in the scheme.

Of the 850 farmers that have so far registered in the initiative, 164 of them have already decided to save additional money into the fund on their own.

And the public-private partnership allows the Colombian government to widen the reach of its own retirement savings scheme by reaching into Nespresso’s extensive farmer network – something that the company has invested heavily in during the past decade via its AAA scheme.

“We have created a ‘win-win’ scenario and, one year in, we are very happy with the level of engagement from farmers,” says Pérez. “And we’ve seen many more farmers wanting to join the AAA Program because of their ability to access the retirement savings plan. In fact, around 150 farmers joined the cooperatives thanks to this project .”

The ambition is to demonstrate the benefits of such an initiative, so that the programme can be rolled out throughout Colombia.
However, the social security issues that are most important to farmers is different from region to region, and country to country. “Some farmers want straightforward savings accounts. Some want crop insurance, or health insurance – every community has different needs,” says Pérez.

“Rather than impose a mechanism on coffee-growing communities, it’s important that we listen to the farmers to find out what it is they want and need most.”

Of course, the Future Farmer Program is an example of creating social value for Colombia’s coffee farmers. Unable to retire with dignity after working hard their whole lives, the scheme is designed to give the younger generation hope that coffee farming is a viable career option – and so preserving an essential part of Colombia’s economy and heritage.

But the decision is also about creating business value for Nespresso. By building resilience and supporting the wellbeing of the coffee-growing communities it so relies upon for its high-quality coffee supply, the company is helping to future-proof its business for the long-term.

Colombia is hugely important to Nespresso. For one thing, it is one of the only countries able to produce the required volumes of the diverse profiles that give its range of products its distinctive taste and characteristics. But coffee production faces many challenges and threats. Some areas remain unsafe due to political and social unrest. Average temperatures have crept up by one degree in the last 30 years, affecting productivity levels. Local infrastructure is patchy, with farmers struggling to access roads or water sources.

However, the intergenerational succession issue is arguably the biggest concern right now; without a new generation of coffee farmers coming through, the required volume of supply could run dry.

“What we are doing in Caldas is being watched with much interest in all coffee-growing regions – not only in Colombia but in other countries too,” adds Pérez.

“This unique approach, developed by strong partnerships, is one of the best ways we can mitigate the risks contributing to instability in the coffee-growing sector, and safeguard the future supply of coffee coming out of Colombia.”