Initially,
coffee used to be collected by the traders in Kathmandu through collectors in
the district. This system of collection is still in existence in many coffee-producing
districts. In this traditional system of coffee collection and supply, farmers
were not able to know at what price the trader is buying their coffee and where
the coffee is being sold. This system was characterized by late payment to the farmers,
which discouraged farmers to improve the orchard management and do timely
harvest. Similarly, pulper operators engaged in primary processing of coffee at
village level, were discouraged to produce good quality dry parchment at the
pulping center.
Initial step towards introduction
of fair-trade principles in production, processing and marketing of coffee was
taken by Coffee Promotion Programme of HELVETAS Swiss Intercooperation Nepal in
the year 2005 by formation of Market Facilitation Committees within the DCPAs in
Lalitpur, Gulmi, Syangja and Parbat to improve transparency in the coffee
supply chain. Market Facilitation Committees were able to organize collection
and supply procedure to some extent and maintain certain level of transparency in
the coffee supply chain. Market Facilitation Committee motivated and paved way
to form coffee producer's cooperatives through the self-motivation and
initiatives of the coffee producers and their association i.e. DCPA.
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| Coffee Farmers in Gulmi district |
Despite successful intervention of coffee stakeholders and increased
production and sale of coffee during first half of 2000s, structural misfit at
the farmers’ level and exploitation of the farmers by the traders and their collectors
raised the issue of involving farmers and their associations in coffee
marketing for the benefit of the farmers with transparency along the supply
chain. As a result, HELVETAS commissioned a study on existing organizational
set up of the coffee farmers and need for the future. “Revisit to Organizational Arrangement of
Coffee Growers in Nepal” the
report of the study clearly recommended to move ahead with the formation of
converting strong coffee producer groups, one or more, to Primary Coffee
Cooperative and transformation of DCPAs into CCUs, district level federation of
PCCs at village level.
Coffee Cooperative Union,
Lalitpur established itself as the first coffee producers’ cooperative to
export coffee to GEPA, fair-trade buyer in Germany in 2010. Presently Coffee
Cooperative Union (CCU) Lalitpur is annually exporting around 12 metric tons of
green coffee to Germany and roasting coffee for sale in the domestic market.
Success story of Coffee Cooperative Union, Lalitpur encouraged DCPAs in other
coffee producing districts to form coffee producer's cooperatives. DCPAs themselves, transformed groups
into primary cooperatives and federated them under district cooperative unions.
Information
collected in 2014 shows that there are CCUs formed in 12 districts (Syangja,
Parbat, Kaski, Gulmi, Palpa, Kavre, Nuwakot, Gorkha, Lamjung, Tanahu, Sindhupalchok
and Lalitpur) and 118 PCCs formed in 13 districts (Table 1). CCUs and PCCs are registered with the District
Cooperative Office of the Department of Cooperatives of the Government of
Nepal. The information do not include the PCCs formally registered but not
affiliated with CCU. According to the statistics of coffee cooperative
enterprises, 2014 published by Department of Cooperatives, Government of Nepal,
there are 146 primary coffee cooperatives (35 PCCs in Central Development
Region, 109 PCCs in Western Development Region and 2 PCCs in Mid-western
Development Region) in Nepal.
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| Table 1 |
2. Coffee supply chain before involvement of producers' cooperative in collection and marketing
Prior to the formation of
coffee producers’ cooperatives and their involvement in coffee collection,
processing and marketing, coffee produced by the farmers used to be collected
and processed in the pulping center owned/ managed by individual pulper
operators on personal basis. The pulper operators process the fresh cherry to
produce dry parchment at the pulping center.
The dry parchment is supplied to the processor/ traders, mostly based in
Kathmandu either directly by the pulper operators or through the
agent/collectors in the district with prior arrangement for collection and
supply.
However,
within this coffee supply chain, though value addition was done at the village
level (pulping center) the benefit of the added value did not go back to the
farmers. The pulper operators or the agent collecting dry parchment from the
pulper operators and supplying it to the processor/traders enjoyed the profit. The producer farmers used to get low price
and the payment used to be delayed. Low price and delayed payment to the
farmers was one of the major reasons for lack of motivation among the farmers
to increase the production and quality of coffee. Price of coffee (fresh cherry
and dry parchment) used to be same regardless of the quality of the
product.
3. Initiatives of to develop organic and fair-trade value chain in Nepal.
History
of initiation of coffee marketing by cooperative goes back to 1994 when
District Cooperative Federation Gulmi, district level federation of
cooperatives including savings and credit cooperative, was formed in Gulmi
district. Along with many other products DCF started procurement and sale of
coffee from the coffee producers in Gulmi district. However, over the years
coffee became the main business of DCF. From the year 2005, District
Cooperative Federation Gulmi collected the majority of the coffee produced in
Gulmi in coordination with DCPA Gulmi.
With
an objective of promoting specialty coffee produced by the resource poor smallholder
farmers of remote Nepal, Beautiful Coffee started buying coffee from District
Cooperative Federation (DCF) Gulmi from the year 2006/07. BeautifulCoffee is a
fair trade social enterprise
in South Korea. One of the key principles of Fair Trade is to develop sustainable
relations with the supply chain partners and contribute to their long-term
development. Having worked with DCF for a few years BeautifulCoffee started
further exploration of the areas for improvement including the quality of
coffee and institutionalized collection and supply system that comply with
fair-trade principles to benefit the producer farmers. Gap Analysis done in 2011
by Mr. Anup Singh, Fairtrade Consultant from India indicated need of
improvement in the existing modus operandi. One of the possibilities was to
form primary coffee cooperatives, which will be further federated, into
district level Coffee Cooperative Union. The union being responsible for coffee
marketing that will be one of the members of the District Cooperative
Federation Gulmi. Beautiful coffee in collaboration with coffee stakeholders
including Coffee Promotion Programme of HELVETAS Swiss Intercooperation Nepal encouraged
the coffee producers’ association (both District Cooperative Federation Gulmi
and District Coffee Producers Association Gulmi) to adopt the modality of
district level Coffee Cooperative Union for involvement of coffee producers not
only in coffee cultivation but also in processing and marketing in an
institutionalized basis. After the formation of several Primary Coffee
Cooperatives at village level and Coffee Cooperative Union at district level,
BeautifulCoffee started buying coffee from Gulmi and Sindhupalchok with
respective Coffee Cooperative Unions from the year 2014. Beautiful coffee and
Coffee Promotion Programme, under a memorandum of understanding, is
collaborating with each other in the area of organic certification,
organizational capacity building and institutionalization of coffee supply
chain for introduction of Fair Trade principles in the supply chain.
Present status of coffee
supply chain with institutionalized coffee supply chain is presented in Figure
2.
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| Figure 2 |
Farmers
produce coffee (fresh cherry) which is delivered to pulping center either
managed by individual pulper operator or Primary Coffee Cooperative in
collaboration with Coffee Cooperative Union. Fresh cherry is processed in
pulping center and dry parchment is produced. The dry parchment is collected by
Private processor/traders or Coffee Cooperative Union. The dry parchment is
processed in the central processing unit to produce green bean. Green bean is
exported and for domestic market, it is roasted.
At
present, Coffee Cooperative Unions in Sindhupalchok, Gulmi, Lalitpur and
Syangja are exporting coffee to different countries including South Korea,
Japan and Germany and fair-trade buyers are making advance payment to enable
the coffee cooperatives to make payment to the farmers in time and fair trade
premium is provided for community development. Coffee cooperatives in rest of
the districts are collecting and supplying coffee (dry parchment and /or green
beans) to the domestic market (processors/traders) depending on the
availability of processing facilities and capacity to do business.
5. Problems
Attempts
to develop Fair Trade coffee supply chain through establishment of
institutionalized collection and supply system within the network of coffee
producers’ cooperatives have been able to establish/develop the fair trade
supply chain in several districts. The coffee producers’ cooperatives have
direct linkage with the coffee producing farmers. However, there are problems
and challenges to be addressed to develop sustainable coffee producers’
cooperatives. Major problems and challenges are listed below:
1) Lack of resources at the
district and village level coffee cooperatives including personnel for
international market access.
2) Except for few districts,
farmers lack awareness about fair trade.
3) Processing facilities at
the village level and district level in many districts are rudimentary.
4) Lack of commercialization
in coffee production resulting in lower quantity of coffee production thus
lower amount of profit.
5) Lack of coordination and collaboration
among stakeholders for appropriate utilization of funds supported to the
cooperatives.
6) Lack of coordination among cooperatives and collectors/processors/traders resulting in competition with each other in coffee collection
7) Lack of appropriate
production and business plan developed by the cooperatives.
6. Conclusion
The
initiatives to improve the quality of coffee and develop Fair Trade coffee
supply chain through establishment of institutionalized collection and supply
system, will need coordination and collaboration with likeminded coffee
stakeholders. The fulfillment of the objective of the initiatives will depend
on the clearly defined role of the actors in the supply/value chain; and
coordination and linkage among the structures of coffee producers’
association/cooperative
Experience
has shown that if improvements are done in existing pulping centers with establishment
of a system for timely payment of the coffee farmers, it will not only increase
the quantity of coffee collected through the cooperatives, but also motivate
farmers and pulper operators to improve the quality.
Though
Fair Trade concept is a new concept in coffee sub-sector, successful
introduction of Fair Trade principles in the coffee sub-sector is worth
commendable due to the involvement of the coffee stakeholders including the
coffee farmers in the fair-trade movement. However, there is enough room for
improvement by disseminating the Fair Trade knowhow at the grass roots level
and bringing majority of the coffee producer farmers within the network of
coffee producers’ cooperatives. For this the executive members of the
cooperatives should be transparent and should not be involved in the personal
coffee business.
*This article was published in "Fair Trade at Grassroots" celebrating 20 years of milestone, Fair Trade Group Nepal
