In Nariño, Colombia, Testing and Validation for ‘Third-Wave’ Channels

The road from Linares to Samaniego in Nariño, Colombia.

I have had the extraordinary good fortune to get to know Nariño better than most over the past four-plus years as director of our Borderlands Coffee Project there. When I first started visiting in 2010, it was the consummate “second-wave” origin: large volumes of homogenized high-quality coffee left the region every year bound for the mass specialty market.

Since 2011, we have been working tirelessly to help make Nariño easier to navigate for “third-wave” buyers by building systems that can respond effectively to market demand for smaller, higher-quality, fully traceable lots. Last month, a small group of buyers who have been accompanying the project from the beginning as part of its Advisory Council made its annual visit to Nariño and helped us take the next step in that process.

Second-Wave Pedigree

Starbucks, the paragon of second-wave coffee, put Nariño on the map in a big way starting in the early 1990s when it began sourcing and selling single-origin Nariño coffee. The company piloted its C.A.F.E. Practices standards there and invested mightily in social projects. Even today, Nariño seems to still hold a special resonance for Starbucks: its 40th Anniversary Tribute Blend, which was built to honor the company’s tradition, featured Nariño coffee prominently; its CEO Howard Schultz has said Nariño produces the best coffee in the world.

In 2004, Nespresso began sourcing large volumes of coffee from Nariño under its AAA Sustainable Quality Program, which also includes smallholder coffees from neighboring Cauca.

By the time we collected baseline data in Nariño in 2012, Nespresso and Starbucks were buying more than 98 percent of the region’s coffee. This is generally a very good thing for growers. For coffees that meet their respective sourcing standards, the companies pay prices that go beyond the modest premium Nariño coffee commands within Colombia, and their competition for Nariño’s coffee serves to keep upward pressure on prices. And Nespresso and Starbucks both deliver agronomic assistance through their local exporters, the Federación Nacional de Cafeteros and Carcafé, the local Volcafé brand in Colombia, respectively.

Market Failure

The rest of the region’s coffee — less than 2 percent — was being sourced directly by a small number of quality-focused third-wave buyers.  What we noticed when we surveyed the region’s coffee sector is that there was a clear market failure in Nariño — capable farmers who wanted to explore third-wave opportunities and willing buyers in that segment of the market who wanted to source coffee from Nariño were not finding each other as easily as they might have and were missing opportunities to create more value for one another.

Nariño’s Third Wave

We recognized with no small amount of humility that there was relatively little we could do through Borderlands to improve on the second-wave model entrenched in Nariño.  After all, who can do volume better, or with more positive social and economic impact, than Starbucks and Nespresso?

Instead, we focused our energy and resources on trying to expand the capacity of the pipeline for smaller, quality-differentiated, fully traceable lots. That’s where the Borderlands Advisory Council — currently comprised of Allegro, Counter Culture, Keurig, Intelligentsia, Stumptown and Sustainable Harvest — comes in. Buyers at these companies are “market-validating” our ideas — almost always helping us to improve on them — and buying coffees from project participants.

In 2013, it was just 16 tiny single-farm lots and one container of coffee from a Fair Trade Certification pilot from barely 100 growers. After that, we committed to expanding the number of farmers involved in the process and growing the volume gradually every year. In 2014, it was 25 single-farm lots and 16 community lots from over 300 growers. This year we emphasized single-farm lots less and focused more on building larger community lots. In the end, we offered 13 single-farm lots and 18 community lots from more than 550 growers, six containers of coffee in all. That’s six containers of coffee sold at price premiums by growers who need every bit of income they can get.

In a region that produced over 600,000 bags of coffee last year, six containers may not seem to be too much to get excited about. But delivering six containers through the project’s third-wave channel means the volume has increased six-fold in just over two years. And the big increases in volume are still to come.

The project plans to break ground before Christmas on two washing stations, Nariño’s first, in La Florida and Linares, two coffee-growing communities off the beaten path of Nariño’s coffee sector with extraordinary potential for quality. Counter Culture is buying up everything it can from La Florida and Intelligentsia is doing the same in Linares. The washing stations in these communities will mean more volume and further improvements in quality control and grading.

Meantime, farmer organization efforts have helped growers in municipalities where we won’t be building washing stations to build their capacity to bring quality-differentiated coffees to market. Some of these include municipalities still relatively unknown to buyers of Nariño coffees: Samaniego, a conflict-affected community rarely visited by U.S. buyers where we helped implement a Fair Trade USA certification pilot, and El Tambo, a small municipality with big potential for quality. It also includes municipalities that are better-known: Buesaco, Chachagüi, La Unión and Taminango.

In the Borderlands, in other words, the best is very surely still ahead.

Building Better Business Models

Helping foster these new commercial relationships based on mutual commitment to quality and value-creation is an important part of our work with the Borderlands Advisory Council. But it isn’t just about helping Council members source coffee. It also involves working with them to test innovations that can make their business models more profitable, more inclusive, and more impactful. Last month, we began prototyping the first of these with Counter Culture and Intelligentsia, whose emerging trading relationships in the Borderlands project are the deepest.

We are devising, implementing, analyzing and upgrading these innovations in a cycle of continuous improvement in collaboration with our friends on the market access team at CIAT. If they prove effective, Advisory Council members can apply them to their sourcing operations in other countries, amplifying the impact of our work in the Borderlands by bringing better business models to other parts of the coffeelands.

The 2015 Borderlands coffees will be on the water shortly, and at a third-wave location near you soon.