Peet's Coffee: In Africa, Brewing Good Works
Kigali, Rwanda - Few food buyers can match Shirin Moayyad's willingness to take risks. As director of coffee purchasing for Peet's Coffee & Tea (PEET) in Emeryville, Calif., she often treks to remote corners of the globe in search of great coffee discoveries—and in the process endures landslides in Papua New Guinea, menacing policemen in Yemen, and army ants in Tanzania.
But over the past year, Moayyad has taken on a new type of challenge. Peet's has joined an effort to develop a vibrant coffee industry in sub-Saharan Africa. The Coffee Initiative, as it's called, is run by TechnoServe, a Norwalk (Conn.) nonprofit, and funded by the Bill & Melinda Gates Foundation. The goal: to double the income of poor coffee farmers in Kenya, Rwanda, Tanzania, and Uganda by linking their products with coffee lovers in the developed world.
TechnoServe helps farmers improve the cultivation, processing, and marketing of gourmet coffee. Peet's is working to develop a special blend of these coffees that will be sold online and in its 191 cafés starting this summer. Moayyad says the motivation is to nurture new sources of great coffee and help farmers. "If they produce a high-quality product," she says, "we'll pay more for it." The company, which recorded $284 million in sales last year, hopes its efforts in Africa will be a brand-burnisher, too.
While executives across different industries are increasingly interested in ventures that combine profits with good works, Peet's initiative underscores the difficulties in getting them off the ground. In Rwanda, which has 450,000 family coffee farms, Peet's has had to contend with a frayed infrastructure, a shortage of money to pay for fertilizer, and suppliers who have little experience in dealing with quality control. "You have to be willing to plant some seeds and wait a few years," says Chief Executive Patrick J. O'Dea.
The Rwanda project differs from the company's usual purchasing efforts in several respects. Instead of dealing with sophisticated suppliers, it's setting up shop in a war-ravaged nation that exported just $47 million worth of coffee last year. While U.S. companies have long bought food from poor countries, few have made it a stated goal to boost the economic fortunes of producers in those markets. If Peet's is going to make the positive impact of its coffee a key selling point, it has to make sure the impact is real. TechnoServe, which is working with other roasters such as Starbucks (SBUX) and Green Mountain Coffee Roasters (GMCR), expects 5 million farmers and family members will eventually benefit from its program. (Video: Rwandan President talks business)
O'Dea is determined to make it work. While the CEO laid off a handful of employees late last year, anticipating a slowdown, he hasn't backed off from the initiative. Customers increasingly care where their coffee comes from and about the fairness with which it is procured. "The return on investment is really the value of our brand, including the lifetime value of every loyal customer we have," he says.
Doing business with African farmer cooperatives hasn't been easy. To start, there's no local market for coffee, as few Rwandans drink it. Jim Reynolds, Peet's roastmaster emeritus, spent two weeks in the country last spring visiting nine TechnoServe farmer groups. He sampled their coffee and gave them tips on how to improve quality. Some farmers had never tasted coffee and reacted as if they had bitten into a lemon. He had to teach them the hallmarks of a top bean. Last summer, back in Emeryville, Peet's buyers tried dozens of bean samples. In the end, they purchased coffee from three cooperatives.
Because of bad roads and delays at border crossings, it took 12 days for a truck with a container full of green coffee beans to travel 1,000 miles to the Kenyan port of Mombasa. The sea journey from Mombasa took nearly two months. Worse, when the shipment arrived in Oakland, Calif., in late February, a portion of the coffee was slightly damaged.
Moayyad traveled to Rwanda to cement relationships with farmer groups and gather stories about the farmers for use in marketing. With a videographer tagging along, she navigated molar-crunching roads in a four-wheel-drive pickup to remote villages and farms perched on hillsides high above Rwanda's Lake Kivu. On the roadsides, children greeted the passing truck with an excited cry of "Abazungu [white people]!" Moayyad plans to post a journal of her travels on Peet's Web site, aimed at the company's most loyal customers, called Peetniks.
Coffee companies have run into trouble in Africa in the past. Starbucks wrestled with Ethiopia over the use of the country's name on its products. But fair trade advocates say TechnoServe's partners are on the right track. "It's good corporate citizenship, but it's also enlightened self-interest. They have to bring the farmers along so they have enough quality coffee," says Seth Petchers, who ran a campaign against Starbucks for Oxfam International.
For the efforts in Rwanda to pay off, Peet's needs to see more high-quality coffee produced. Last year's purchase amounted to just 8 metric tons of beans, a mere drop in its annual consumption of beans. At Peet's headquarters, Doug Welsh, the company's vice-president for coffee, pointed to a small sample of Rwandan coffee beans that he had just tasted. "The really good news is the inherent quality of the coffee is very good," he says. "That's why it's worth developing."