The Peruvian Amazon is a beautiful and mysterious place. It has one of the most diverse faunas on the planet, and an endless variety of cacaos that have already become a great social tool. Cocoa crops have largely replaced coca crops in certain regions of Peru. Coca is traditionally a sacred plant and its leaves are a natural remedy to altitude sickness as well as a natural stimulant. Mountains of coca leaves tower in the Andean markets of Peru and are offered for sale but in the past decades, coca has also been used for the production of cocaine in the western world. In recent years, Peruvian and US programs have been focused on providing viable alternatives so that farmers are incentivised away from coca production.
Within this context, the Alto Huallaga cocoa cooperative stands out as a model of good practice. It has received a relatively low government subsidies-mainly in the form of a warehouse and processing plant – but apart from that it is very much a sales-driven and commercially sound operation. It has an exciting vision, undeniably strong social impact and presents a true example of sustainable food production.
Leadership and growth
The cooperative has been operating since 2009 and in 2017 it sold over $5 million-worth of cocoa to customers in Italy, Switzerland Austria and France. It buys high-quality, certified fair trade and organic cocoa from 440 farmers in the region. The cooperative operates with a democratic structure through an elected assembly to which the management team reports on a monthly basis.
There are 60 paid members of staff who work together and are very innovation-focused, from a team of six field technicians who visit 50 farms each per month to provide technical support and teach the latest cocoa farming methods, though to a taste profile and chocolate team who are developing the cooperative’s own chocolate brand for national and (in due course) international consumption.
The vision of the cooperative is to continue increase sales by bringing in new members, increase productivity (farmers are constantly testing new approaches, such as planting cocoa trees closer together and using better varieties), and to start selling higher value products such as cocoa butter, liquor and chocolate. In fact their chocolate has been selected as one of the top five Peruvian chocolates to be judged at this year’ international awards in Paris!
Social impact in practice for low income communities
The Alto Huallaga cooperative aims to improve the living conditions of its members, by providing them with guaranteed sales at a better price than on the open market, technical assistance to improve their farming, low interest loans and emergency grants for their healthcare needs. The cooperative receives a fair-trade premium of 200 USD per tonne of cocoa sold. This is used to pay for certifications, to offer advanced training, to improve the cooperative’s infrastructure and to collect the cocoa directly from the farm gate, saving the farmers high transport costs.
Finally, a bonus per kilo sold is paid out directly to the farmers at the end of each year. Producers are not tied to the cooperative and have the power to choose what they do with their cocoa, including selling it on the open market if they so wish (though to remain a member they must sell a minimum of 500kg per hectare to the cooperative). However most choose to produce the best quality cocoa possible and to sell to the cooperative, as it pays consistently more than the open market.
Though the benefits to producers are largely economical, there are also numerous social aspects to the cooperative, such as competitions, social gatherings and collaborations between farmers. Finally the ecological benefits of the cooperative are undeniable- all farms are organic and free of harmful fertilisers and pesticides, and the cooperative runs long-term reforestation programmes in conjunction with an NGO and one of its buyers.
Lessons for the UK?
1) Scale is possible in community food businesses – This case study shows that community enterprises can scale. The co-op has a simple business model despite the complex social structure behind it, demonstrates good leadership and has empowered and self motivated staff. It provides multiple benefits for its producers, who are starting to live more comfortable and contented lives in what used to be an area dominated by illicit crops and violence.
2) The “cocoa effect” – The cooperative is a shining example of food production that is healthier for people and planet. It brings people together and builds skills to enable vulnerable groups who were once on the edge of criminal activity, to become self sufficient – and indeed to start winning international prizes for their products! Can this “cocoa effect” be applied to working with vulnerable groups or people at risk of being drawn into crime in the UK, or to improve the prospects of today’s youth through creative ventures that engage their talents, potential, and passion?
3) The role of UK cooperatives – In developing countries the role of organic, fair trade cooperatives can be particularly strong because they are empowering and opening markets to small producers and enabling sustainable food production. When I return I will dig into UK co-ops and draw up some comparisons.
Next week I will be popping back to Lima briefly for some last meetings then heading to Bolivia to explore more community business models-namely around the promotion of locally sourced ingredients. I will continue thinking about UK issues which can be solved through social food businesses, such as loneliness, food poverty and unsustainable food production.
The social enterprise scene in Peru has started to take off in the last 5 years. There are some 250 self-declared social businesses but if you include co-operatives and associations in the agri-space (who have often been around for 30+ years), this goes up by several thousand. I’m told that food is the most promising sector for social enterprise in Peru – gastronomy and agroindustry in particular. Other observed trends include a more stable economy in the last 10 years, the emergence of Peruvian cocoa and chocolate on the international scene, and an explosion in the national and international consumption of foods grown in Peru such as quinoa, chia and avocados.
With regards to “impact models”, I am mostly coming across businesses supporting vulnerable people through their supply chains – but also some who work with vulnerable employees, and a handful who have a positive social impact through the use of their profits. Here is a round up from my encounters to date, and a few early stage lessons for the UK!
Promoting Peru is a start-up market connector for agri produce, dedicated to finding markets for the producers that don’t have access to the traditional export channels and ensuring that these producers benefit directly from fair prices. They have been finding smaller organisations hard to do business with (slow turnaround of orders and obscure leadership structures) but are committed to building their capacity and to helping them find the right buyers abroad.
Shattell is an award winning artisan chocolate maker. Many of the farmers who Shattell work with used to grow coca trees before cacao, and since coca is illegal, growing it put the farmers in a lot of risk. Shattell’s mission is to help those farmers get a good enough income from their cacao growing, so that they don’t feel the need to go back to growing coca. They pay 50-100% more than commercial buyers for the finest beans, pushing them towards premium quality and new markets.
Cacaotal is a bean to bar chocolate shop and tasting school. Again, whilst not branding herself as a social enterprise, founder Amanda Jo helps cocoa farmers (who are increasingly seeking to make their own, tree-to-bar chocolate) with free advice on quality and marketing.
Yaqua is a bottled water company which re-invests 100% of its profits into clean water projects in the most vulnerable and remote areas of Peru. Apart from co-operatives and associations, dedicated structures for social enterprises don’t exist in Peru as they do in the UK, and Yaqua has dealt with this by running its own water projects and by having 99.9% of shares owned by a foundation, to ensure profits are given away.
Support and finance providers
Nesst is an international non profit which supports the creation and growth of sustainable social enterprises.To be supported by Nesst, there has to be social impact management for vulnerable groups, fair prices, secure contracts, training and good governance/a voice for vulnerable people in the business. Nesst offers two main support mechanisms: an incubation programme offering capacity development and tailored finance (using philanthropic capital) and a $20m investment fund. Nesst is one of the only providers of early stage tailored finance (most social enterprise start-ups are self funded).
Shared Interest is a finance provider to community businesses, offering short and long term financing. They used to only invest in the agricultural and craft sectors, and only into associations and cooperatives.They have broadened their impact definitions quite recently and now independently assess a business against the 10 fair trade principles of the world trade organisation https://wfto.com/fair-trade/10-principles-fair-trade
Lessons for the UK?
1) In Peru, even food businesses that do not describe themselves as social enterprises are often working with vulnerable groups in their supply chains, and find themselves playing a capacity building and knowledge transfer role, as they depend on these groups for their own product development. This a win-win relationship and there is no sense that these groups are “beneficiaries”. Could the UK learn something from this?
2) The social enterprise sector remains young in Peru (with only some 250 self declared social enterprises), and whilst there are now many providers of capital for the agri-sector and co-operatives, Nesst is one of the only providers of early stage tailored finance. Should the UK, with its 90,000 social enterprises, export its experience or franchise its models to other places?
Next week I will take a deep dive into a cocoa co-operative in the Huanuco region of the Peruvian jungle. I will stay with them for five days and explore the co-op’s leadership, how it has grown and what its social impact means in practice for low income communities. I will continue to think about UK issues which can be solved through social food businesses, such as loneliness, food poverty and unsustainable food production.
I will travel to Bolivia and Peru during the month of May, to explore how community food businesses can be successfully scaled up for public benefit. https://www.wcmt.org.uk/about-us/news-events/news-full-list-2019-churchill-fellows
When I return I will share my findings with community-owned food businesses in the UK and with support providers. In particular I will be exploring the themes of leadership, scale and support needs/provision.
So I am looking to speak to community food businesses in the UK first, so that I can understand where they are at, motivation, aspirations and challenges.
So far I have identified over 40 food enterprises in the UK and spoken to five of them, including Sutton community farm, Nemi Tea, Elysia Catering and HISBE supermarkets.
In Peru and Bolivia I will be visiting food cooperatives deep in the Amazon rainforest, community owned food chocolate businesses, community kitchens and other local food enterprises, and a number of incubators, investors and support providers.
I will use this blog to summarise my visits and findings. Stay tuned…
If you know community food businesses in the UK or South America who might be interested in this research please do let me know!
I’d like us to think about the last coffee you had or the last lettuce you bought. Maybe your coffee was certified fair trade how about that poor lettuce, who knows where that came from, who grew it and how much they got paid? In this age of sophisticated palates we still know so little about the origin and social impact of the food we eat.
Last summer I visited Sutton Community farm, where I could not only buy a lettuce knowing where it had been grown sustainably and ethically, but also knowing I was supporting a community businesses to improve community cohesion, bring people together, increase their skills and create jobs in the UK food sector.
In the UK there are many great businesses like Sutton Community Farm, but what we are seeing is that very few ever grow – with 84% of social enterprises in the UK turning over less than £1 million. That means that their impact is limited despite the high potential for good that they might have.
In South America there are examples of community businesses that have grown, with a high number of food cooperatives in sectors such as coffee and cocoa, but there are also other interesting models such as share distribution schemes for producers, which make South America an interesting place for exploration.
In the next few months I will be speaking to several UK community businesses to ensure that I understand the challenges that they face in some detail.
So far three challenges have surfaced – one is around leadership and entrepreneurship and how community business leaders are not often businesspeople; the second is around access to the right support – even though there is quite a lot of funding available in the UK for community businesses this is not necessarily what they are lacking; the third is scale – is it a contradiction for community businesses to scale and does it mean that they will then lose their community focus per se?
I will then talk to infrastructure and finance providers in South America such as Shared Interest and Oxfam, and research relevant businesses such as chocolate business Choba Choba explored in a previous blog, which is giving an increased number of shares to its producers as the business grows.
If you know community food businesses in the UK or South America who might be interested in this research please do let me know!
1) Farmers as entrepreneurs- A community business works best when it manages to harness both social good and business acumen. Choba Choba entrepreneurs Eric and Christoph teamed up with 36 organic cacao farmers from the Alto Huayabamba Valley of Peru who have a direct stake in the company and benefit from its success. Choba Choba farmers define the price of their cacao (Bottom-up pricing), benefit from the profits as shareholders of Choba Choba and are represented on the board of the company.
2) Scale – maintaining accountability Despite the exponential growth of the global cocoa industry, farmers usually benefit the least. Most cacao farmers receive less than 6% of the retail price of a chocolate bar and struggle to survive. Since 2016, Choba Choba farmers have seen a 20% increase in their total yearly income, as well as increasing their ownership of the business from 7% to 17%.
3) Talent- upskilling in partnership Cocoa producers are struggling due to unfair prices, but also because cocoa trees are delicate and difficult to grow. Enemies of cocoa trees come in different shapes and sizes, two being disease and pests which cause yearly losses of 30% to 40% of the total global cocoa production. Choba Choba has formed a research partnership with a University to conserve and re-produce ancient and indigenous cocoa species that grow in the wild, and to develop organic methods to fight pests affecting cocoa trees in the region.
So what can UK community businesses learn from Choba Choba? Give your community members (who may also be your suppliers) a direct stake in the company so that they benefit from its success and growth. Treat community members as entrepreneurs, sharing equity, governance and decision making as well as the benefits the company generates. Treat community members as team mates and tackle your biggest challenges together by upskilling in partnership with experts.
Choba Choba is an inspiring community business that looks set to start a chocolate revolution! So let’s get chomping.
References: https://www.chobachoba.com http://www.bbc.com/capital/story/20180926-could-we-be-facing-a-chocapocalypse?ocid=ww.social.link.facebook