Dispatches from Kenya, Part 1: Coffee, Highlands and Trees!
Coffee is a $110 billion market and growing. Kenya's traditional tea mecca looks to crack into this market, improving both livelihoods and the environment in the process.
For the last week I’ve been on my honeymoon in Kenya with my wife, Xinyi. Those who know me well probably aren’t surprised that amongst all the safari going we squeezed in a visit to a coffee farm. Advocating on behalf of smallholder farmers is one of my passions, as is… well… coffee (especially of the East African type!).
So after a day gallivanting around the Maasai Mara, out we trekked to Kericho county in Kenya’s beautiful western highlands. With its lush green hills, this landscape is in fact most well known for its tea production - to the extent that tea is what most people assumed we were there to see.
At the Java Coffee House in town we are met by my friend Sidney, who is currently Acting CEO of Aable - a “fintech startup that connects compassionate investors to underbanked people across the world.” The founders of Aable are two friends of mine who have loaned funds to a coffee business in this region.
Sidney quickly introduces us to Fred, the pioneer of the particular business model we are here to check out over the course of two days. Fred has a bold vision in a land known for producing tea and where coffee is still quite a rarity. He aims to transform the landscape, turn coffee into a cash crop, and give the dominance of tea a run for its money. Why? Well there are a number of reasons that Fred and Sidney walk us through:
The Power of Coffee
1/ For a number of reasons, the global demand for coffee is surging. To say its booming in fact is an understatement and projections in demand are solid. Coffee is a $110 billion market and its likely to surpass $160 billion annually in just the next 5 years!
2/ There is a supply-demand issue brewing with coffee producers unable to keep up with the growing thirst for coffee. On top of this expected crunch, drought in Brazil has slashed the amount of coffee from the world’s bigger coffee producer by 40%.
3/ Coffee production can also be quite sustainable if done in the right way, using regenerative techniques and practices. It can be grown using manure based fertilizer, for instance, that keeps methane out of the atmosphere for longer. The coffee plants, and the resulting ‘shade trees’, that are planted around them to give them protection from the sun also help sequester carbon.
4/ A good chunk of arable land in the Kericho community is currently not being fully utilized.
Given all of these positive factors it is a surprise therefore that coffee isn’t in more of abundance across these beautiful highlands. One of the reasons according to Fred is the specter of the ‘middle man.’ Coffee prices were at an all time high in 2021, but most smallholder coffee farmers saw little of the higher profits come their way. Thats what he is trying to change.
The other key barrier has been access to cheap credit. To buy and build the factory and equipment necessary to process coffee requires thousands of dollars. Yet, most loans on offer runs at around 18-24%, a prohibitive cost of capital! Assuming one is able to afford a loan of this magnitude, repayment terms are often not flexible enough to fit around the coffee production (and therefore cash flow) schedule. This is what Aable is seeking to change.
The Kericho Model: Removing The Middle Man
The model Fred and Sidney are pioneering has several elements. At its core though it is about directly connecting farmers as much as possible to global markets.
1/ Relying on land from his neighbors, Fred’s team first grow thousands of coffee plant seedlings in a nursery.
2/ When the plants are strong enough they give the seedlings to farmers in the community to plant, grow and harvest. The goal is to have a team of agronomists on standby to provide technical support. On average, each farmer will nurture around 300 coffee trees. Initially, they aim to also work with 300 farmers.
3/ The resulting beans grown by the farmers are then purchased by Fred and sent to a factory that he has been able to construct with funds loaned from Aable at sustainable rates. The beans are either dried in the traditional manner under direct sunlight or washed through an extensive system of water channels.
4/ Once properly bagged, Sidney helps to arrange for the beans to be sold to coffee roasters abroad where they will hopefully be roasted and brewed into delicious coffee.
Essentially, by removing middle men who would have done the traditional cleaning, and distribution, Fred is able to offer the farmers a better price up front for their coffee. In fact, he has been able to offer farmers a 100% increase in the sale of their coffee beans.
1 Million Coffee Trees by 2033
As we stand in the half finished shell of an Aable funded coffee factory, we stare out across the green hills in the distance. Most of the fields are empty. Fred explains that his goal is to plant 1 million trees over the next decade and reshape the entire landscape (and agricultural economy). In some ways, Fred explains, this is just returning things to the way they were 100 years ago. “This was all forrest once,” he explains, as the sun begins to set, “then it was all cleared for livestock. This will be much better for the environment.”
1 million coffee trees will produce roughly 10 million kilograms of coffee beans, of which about 6 million kgs will be able to be sold and consumed as coffee. “This is something we are doing for future generations and to give to the community,” Fred explains.
It is an inspiring vision but who will buy it all? “That’s Sidney’s job”, Fred laughs. In all seriousness, despite the demand for coffee, it remains a challenge to compete with the cheap prices of readily available South American coffee. “There is plenty to go around… besides this is Kenyan coffee. All we have to do is get the hipsters and roasters in London’s Shoreditch or New York’s Brooklyn to try it…. oh and we can’t forget Melbourne. That city is a mecca for coffee and sets a lot of the global trend.”
The specter of climate change
“What about the changing climate though?”, Xinyi and I ask Sidney and Fred. After all, by their own admission, the rains have been changing and the weather has warmed. Over lunch, Fred’s dad - a farmer for over 35 years -, explains to me how he has really noticed the warmer climate particularly since 2008. Will this not impact the longevity of their investment?
As we bump up and down on the drive to the coffee nursery, Sidney vents to us his frustration that no government or institution is really taking this challenge on. That is, investing in the types of resilient coffee beans that will be able to withstand warmer climates and unpredictable rainfall.
For their part though, they are not going to wait on government. As we plant our own little coffee saplings, Fred explains how they have been experimenting with different plant varieties. They are getting better, he explains, at being able to produce more climate resilient plants. Additionally, they have been planting plenty of ‘shade trees’ around the coffee plants to… well… provide more shade and protection from the heat.
More broadly though this underscores the vital work of global organizations like the International Fund for Agricultural Development (IFAD) and CGIAR who are working hard at coming up with solutions for farmers on the frontlines of climate change.
The History of Coffee: Full Circle
As we wash out hands after planting the trees, Sidney gives us a brief history of coffee. His passion is on full display. Coffee beans originally originated in Ethiopia before, through ancient trade routes, making their way to Java, Indonesia. It is the descendants of those same Java coffee plants that they are now nurturing today here in Kenya. That and more resilient hybrid varieties of course.
Keep up the good work. Fred and Sydney
Interesting and insightful read