Detailed Concept
The
origin and reason for a Coffee Fund
Based on its
web-like interrelation among the many participants, the coffee world is very
complex and so are the reasons for the creation of the Coffee Fund. The
following provides several strong key points why a worldwide sustainable coffee
fund is indeed badly needed:
A.
The consumption of
coffee has seen a steady reduction in several high coffee consuming countries.
Coffee experts tend to name appearance of new, competing products on the market,
the reduction in quality of coffee drinks, sustainability and health concerns
and the lack of information and identification with coffee among a wide range of
population sectors.
The current
influence on the market to correct this trend goes only via the brands,
therefore tends to be biased. A business sector-wide initiative, that is both
neutral and independent, has by far more chances to succeed in correcting the
public perception of and attitude towards coffee. The reason is that it is
transparent, neutral and therefore trustworthy.
This was the single
original reason that led to the creation of the Worldwide Sustainable Coffee
Fund. Its concept included, and still does, the fight against global threats to
the coffee business, such as OTA and other diseases as well as fraudulent
practice; and eventually intends to counterbalance volatile price fluctuations.
B.
The depressed prices
from 2000 until 2004 added the concerns of social and environmental
sustainability in the origin countries. In a big family, as such the coffee
business can be described, it is a benefit for all to care about each other. The
coffee is grown and prepared by the farmers and if the partners along the supply
chain expect the farmers to execute a professional job, they must assure that
the farmers have the tools and motivation to do it. Hence, a reasonable support
will result fruitful to all who contribute.
The work of the
Coffee Fund shall not have any interference on the world coffee market or on any
particular price negotiation. World markets will continue to behave as they have
so far; the Coffee Fund will attempt to bring added value to the farmers, allow
for cost reduction in production and sales through comprehensive measures and
simple tools. This should make future price depressions more bearable for the
coffee producers.
The projects
implemented in coffee origin countries so far have had a positive effect, but
there are clearly too few of them. Executing projects in the origins assures
also a continuous supply of good quality beans at going market prices. With a
depressed market over a longer time, this may not be sustained as producers
start to neglect the plantations more and more in an effort to reduce cost.
Through assuring quality in production and preventing
mould and diseases all stakeholders along the supply chain benefit from the
activities of the Coffee Fund.
C.
On the political
platforms a trend has been identified towards the creation of government
organized taxes or levy with the goal to shuffle these funds into areas where
social or environmental concerns are on the world’s political agenda. Such
programmes are condemned to function under a heavy and costly bureaucracy with
little or no effect and with huge legal handicaps. The coffee business can
prevent this situation by implementing a solution to these concerns within its
own coffee world; therefore no such political agenda would be needed. The Coffee
Fund proposes precisely this.
D.
The world is striving
towards a more and more integrated free market. This globalization brings many
opportunities to develop new markets, but also the risk of bottlenecks that can
increase the cost of a primary raw material for the industry; for instance
through imbalanced offer and demand or extensive redirection of coffee producers
to more rewarding activities.. Free market is the logical way to go and it will
bring prosperity for all, provided we have a long-term vision and implement the
strategy accordingly. A long-term vision for the coffee business is to
strengthen existing markets and develop new ones – an endeavour that will only
succeed if the mix between product quality, product identification and customer
perception is ideal. This needs to happen in conjunction with the efforts of
quality bean production in the origins.
E.
The Coffee Fund does not
base itself on rules or regulations either self- or government-imposed that
would favour some suppliers and restrict others. The Coffee Fund proposes a fair
and transparent distribution of the resources. Its approach in the coffee
producing areas aims at promoting self-sustaining business concepts starting
with the key activities and gradually expands into structural set-ups.
F.
The UN has established
the Millennium Goal in poverty reduction. Some items of its eight-points vision
are mirrored in the programme of the Coffee Fund. Namely:
a.
Eradicate extreme
poverty and hunger (Goal # 1)
b.
Promote gender equality and empower women (Goal # 3)
c.
Ensure environmental
sustainability (Goal # 7)
d.
Develop a global
partnership for development (Goal # 8)
Furthermore, the
benefits targeted by the Coffee Fund go along with the majority of points listed
in the Cartagena Resolution of the ICO in September 2003. Some examples:
I.
“… lack of promotion
in new markets makes it difficult to reach potential consumers in those markets”.
That is one of the main activities of the Coffee Fund.
II.
“ … have recommended
the adoption of a global strategy to address these enormous difficulties.”
The Coffee Fund aims at helping to co-ordinate worldwide efforts in a long-term
oriented coffee business under the strategic guidance of the ICO.
III.
“ … must be resolved
through active cooperation between producing and consuming countries”. The
concern for increased quality that starts at coffee production and goes through
to the serving of a quality cup is a key philosophy of the Coffee Fund.
IV.
“ …concrete actions
to permit the long-term survival of world coffee production through improvement
of quality and the promotion of consumption in particular; increased
competitiveness; investment in human capital; diversification. Such actions aim
to increase added value, economic, environmental and social sustainability, risk
management capacity and investment in the physical and social infrastructure”.
This statement is
exactly what the Coffee Fund stands for, explained in our vision statement.
Statements in italic provide from the Cartagena resolution signed by the
Presidents of Brazil Luiz Inacio
Lula da Silva, of Colombia Álavaro Uribe Vélez and of Honduras Ricardo Maduro.
Vision statement
The Worldwide
Sustainable Coffee Fund provides a service to the coffee consumer – for all
partners in the coffee business – executed by coffee people.
The Coffee
Fund impulses the worldwide coffee business by raising the value and
appreciation of the coffee culture in the consumption areas supported through
the corresponding measurements in the producing countries relative to quality
and sustainability.
Nurturing
sustainability in the coffee producing areas has to be founded on simple and
concrete measurements in the core activities:
Coffee
production + coffee preparation + coffee sales + coffee processing = added value
The promotion
of the coffee culture within existing consumption areas as well as the
penetration into new markets shall contribute essentially to having coffee be
valued again as a fascinating product and thus increasing overall consumption.
Coffee culture stands for knowledge about coffees, its history, its plantations
and processing methods, the cultivation of the art of coffee preparation and a
broad identification with this natural product.
Sustainability is the methods and approach of (business) practices that preserve
and strengthen intact social, cultural, environmental and economic relationships
with the endeavour to hand over a healthy world to future generations.
We
will reach these goals
-
through transparency in our work, communication of the projects, expenses and
strategies
- through a continuous more and
more transparent worldwide coffee business
-
applying highest professional standards through to the smallest detail
-
through fairness, openness and mutual trust
Structure of the Coffee Fund
-
Coffee Manufacturers from the coffee consuming countries contribute to the
Coffee Fund US$ 1.- per 60kg bag of green coffee processed.
-
The Coffee Fund invests 50% of the contributions for projects in
the coffee producing countries for enhanced environmental and social
sustainability (agricultural coaching, business management practices for coffee
farmers, water & soil management, renewable energies among other aspects) and
measurements to increase quality of coffee beans. This part is treated under the
“Origin Programme”.
-
The Coffee Fund uses 50 % of the contributions for promotion of
coffee consumption. This “Marketing Programme” targets a renewed coffee culture
through education of the public and professionals in the catering sector,
tasting opportunities, dissemination of information about health related issues
(in co-ordination with Positively Coffee) and about sustainability in the
producing countries as well as advertising, where required. Promotion can apply
to traditional and non-traditional coffee consuming countries or to coffee
producing countries.
Relationship Origin Programme - Marketing Programme
The Coffee Fund
bases on two main activities: The Origin Programme and the Marketing Programme.
They are connected to each other through the increased quality of the coffee
beans that flow from production to the consuming markets. The efforts for
improved quality serving of coffee and attitude towards the drink in the
consuming markets will be reinforced exponentially by the achievements of
increased quality in the origin.
Also the efforts in
the direction of sustainability undertaken by the Coffee Fund in the coffee
producing countries will promote a positive image of coffee throughout the
consuming markets and result in a more favourable attitude towards our drink.
Through this
approach, coffee may become a model industry showing the lead to other
commodities or products. Undoubtedly, this would a further point to impulse
coffee consumption.
On the other hand
increased consumption will result in a higher demand and more quantities
exported by the producing countries. The world market prices will themselves not
be affected by the increased consumptions since a) the market prices will
continue to respond freely to offer and demand, and b) the producers tend to
quickly increase production as soon as there is more demand.
However, we
visualize that more quantities of higher quality coffee will be demanded to be
traded and sold at a higher price, that will eventually result in a higher
income for the producers, too. At the same time, it has to be added that this
will only occur if the necessary improvements in quality in the origins are
implemented and sustained over a certain lap of time.
Who
does really sponsor the Coffee Fund?
Improvements in
quality and promotion of coffees require to be funded. The concept of the Coffee
Fund proposes that the processing industry (soluble producers and roasters) make
the initial investment. They will be compensated for this initial investment
through increase in sales following the higher demand in consumption. This
increase in sales results in increased profits for the processing industry,
which will be applied against the initial investment to the Coffee Fund.
The financial
investment in the Coffee Fund will therefore not be passed on to the producers.
The producers, on their end, however, will need to supply considerable effort
into the projects and sustain the increased quality production even after
conclusion of a project. This effort will be rewarded through cost reduction and
added value in the sales of higher qualities.
It can therefore be
concluded that the financial sponsors of the Coffee Fund are the additional
consumers attracted by the activities of the Coffee Fund; the sponsors of
physical labour are the producers and producer organizations.
Flexibility of the programme
The Coffee
Fund has a clear vision, i.e. to impulse the worldwide coffee business by
raising the value and appreciation of the coffee culture in the consumption
areas supported through the corresponding measurements in the producing
countries relative to quality and sustainability.
The programme as
proposed herein is aligned to this vision statement. The characteristics of
both, the consumer and the producer markets are very dynamic and constantly
changing. Therefore this programme is subject to constant changes and
adaptations as the markets and participating partners demand. On the other hand,
the vision is clearly defined and shall not be altered.
Long-term view
An underlying
concept of the Coffee Fund is that the improvements created shall have a
long-term effect.
Quick improvements
in the consuming market behaviours are generally lost as quickly as well. Real
benefits to the processing industry and the entire supply chain can only be
achieved if theses changes in the consuming markets are also sustained and
long-term oriented. Market behaviours need repetitive impulses to be driven into
a stable direction; furthermore repetitive inputs over a sustained period of
time fosters the consumer behaviour with a long-lasting effect and reduced
vulnerability to opposing influences.
In the coffee
producing countries, methods and structures that require change will need
repositioning. This takes time. Even more important is that the changes will
have economic benefits for the producers; and these will not be perceived until
after a certain period of time. Only then, the changes start to be reflected in
the structures and only then the efforts will have some lasting effect.
Execution of projects
Any project or
marketing campaign will be executed through professionals in the respective
field. The coffee fund has a consultative, co-ordinating and financing role.
With this in mind, professionals in their respective field will execute all our
projects and marketing campaigns. We will collaborate very closely with our
industrial partners, the coffee associations in origin and consuming countries,
NGO’s and scientific research centres.
To assure
commitment, most of our projects will function under a partnership concept,
which is the parties interested in the positive outcome will bind in through the
contribution of their stake, be it financial, material or labour related.
Furthermore, we will search for co-financing from other governmental and
international institutions to allow us to execute as many projects as possible.
Transparency and
avoidance of all types of corruption in the projects are key elements for the
success of the Coffee Fund.
The
International Coffee Organization (ICO)
The Worldwide
Sustainable Coffee Fund is an independent and neutral organization. Its actions
and goals however are strongly connected to the coffee business in general. It
has a close relationship to the ICO and receives strategic guidance from the
directing positions from within the ICO.
Through the
collaboration with the processing industry in the consuming markets and the
coffee authorities in the producing countries, the international coffee
community will participate in the decision making process of the individual
projects.
Supervisory board
To assure the
organizational binding of the Coffee Fund into the international coffee business
community, three representatives of the coffee business are nominated to
supervise the execution of the programmes according to the vision of the Coffee
Fund and in sound relation to the requirements of the coffee business itself.
These nominations are made by the North American business representatives (NCA /
SCAA), by the European business representatives (ECF / SCAE) and by the ICO.
The supervisory
board should meet once a year, to be co-ordinated ideally with any major coffee
event. Further communications are to be held via telephone and email and
individual meetings. For approval of projects, see the Origin Programme, section
approval of projects.
Administration
The administration
of the Coffee Fund is situated in Meggen, Switzerland and will be lead by the
two initial promoters, Mr Walter Zwald and Urs Küchler.
It is foreseen that
when the Coffee Fund reaches its full estimated
extension of 70 Mio bags, a stuff of total 5 people will be required: three
management positions and two assistants.
All projects
planned and undertaken will be published on the website (www.coffeefund.org)
and visible to everybody at any time. These publications will include relevant
and detailed information, like the purpose, partner institutions, status, goals
achieved and the cost for each project.
Budget
First estimates of
an annual budget arrive at US$ 800,000 for the full occupancy of a 5 staff
member team. In the initial phase however, the budget will be proportionally
less.
The coverage of the
administrative expenses is planned to be obtained from third party contributors,
so that the contribution of the processing industry can be fully applied to
coffee projects. Potential contributors to the administrative expenses are
governmental and non-governmental organizations.
The Worldwide
Sustainable Coffee Fund
Meggen, April 2005
