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We Bought a Mill — and Other Excitement in Sumatra

Five Senses CoffeeDean Gallagher 18 December 2013

For those of you who follow the Five Senses blog, you’ll know it’s been a while since I posted anything in the bloggersphere, so it might surprise you that I’ve popped up again. Well, I’m back because I’ve got something really exciting to tell you.

I’d like to announce that… We bought a mill. Yes, WE BOUGHT A MILL!

And it’s something that we’re very excited about.

As regular visitors to our website and as regular drinkers of the coffee that we roast, you would have probably noticed, or even drunk, the coffee we offer from the Simalungun region of Sumatra. Some of you may also have followed with interest the relationships we have developed over the last few years with a specific farmer group in that region.

I use this word ‘relationship’ with caution as it is becoming one of the most overused and misleading words in the coffee industry. In our industry, there are transactional relationships and there are real human-to-human relationships. Now that I’ve chosen to use this word ‘relationship’, let me explain what I mean.

Transactional relationships occur when we, as roasters, buy coffee from different origins which entails a series of transactions between entities which are in business relationships with each other. The traditional transactional supply chain goes a little bit like this. The farmer grows the coffee and they sell it to a mill. The mill processes the coffee and sells it to an exporter. The exporter at origin (often the mill is also the exporter) then sells it to an importer who then sells it to a roaster. This supply chain is very long and creates huge separation between the farmers and roasters. Hence historically it has been very difficult for the two entities at either end of the chain to even know who the other is — let alone be in ‘relationship’ with each other. Added to this, systems and motivations within the supply chain don’t really exist or lend themselves to enabling beans to be tracked from farmer to roaster.

In the past, most roasters would only have had transactional relationships with importers. This is changing as more and more roasters are trying to build transactional business relationships with different companies further up the supply chain, in the hope of getting closer to the source of the coffee they are buying and thus creating an opportunity to assert some influence over the quality they are receiving from the farmers.

This is largely because the method that most big international coffee traders (the corporations which own the big mills and most of the large exporting and importing companies) employ to buy and then extricate the coffee from origin can quite typically result in very average quality coffee and an unsustainable business model for farmers. The reason for this is that, more often than not, these companies provide the only access that a farmer has to the market and it’s these massive companies who dictate what price the farmer gets for their coffee. Basically, a farmer who desperately needs some cash to buy the basics like food is rarely in a position to negotiate a better price. These fundamentals work against quality. A farmer will get paid the same low price for their coffee crop irrespective of its quality, so, as you’d expect, they just do what they need to do to achieve the required quality for the price they are being offered. The obvious result is that the farmer stays poor and the coffee stays very ordinary.

Lots of roasters ‘talk up’ their relationships with growers, so here’s the rub. Just because a roaster says they are in relationship with a farmer (and even if they are actually best mates with the farmer) it doesn’t automatically mean that they can influence the long term prospects of the farmer through the growing of coffee.

Whilst their motivations are noble and their intentions are good, the impact is mostly neutral. We know this, trust me, we’ve tried. Sure, the roaster can help make the life of the farmer a little bit better here and there through donations of money and goods, but they can’t really do anything to directly influence the ability of the farmers to generate wealth of their own through the toil of their own hands on their own coffee farm, unless they have the complete co-operation of everyone in the supply chain or unless they change some of the economic fundamentals which cause the problem in the first place. But, try and tell a multinational what they should be paying the farmers for coffee — yeah right.

Everything changes when you change the fundamentals.

Firstly, the supply chain is too long. It needs to be shortened — ideally to include just the roaster and the farmer.

Let’s make it just us and the farmers. So, let’s build a mill and gift the farmers an economic stake in it. They’ll grow the coffee, together we’ll mill it and export it, and then Five Senses will import it and roast it.

Secondly, let’s pay the farmers more when they produce a better quality crop.

Thirdly, let’s share the cost and exposure to risk when farmers try and innovate with processing and varietals. Let’s work with them to achieve better results in the cup.

So this is what we have done. We’re building a mill.

Tiga Raja Mill has been built from scratch in the town of Permatang Purba. The project has been managed by Leo and Lisa who are also farmers in the region (See our article on Coffee Varieties in Sumatra for the back story on Leo and Lisa) and should be complete in the next month or so. The first container of coffee should be ready for export from current crop by the end of February.

In practical terms this means the following:

  • Our mill is an all-in-one, collector/miller and exporter. Having all the processes controlled in the one facility should result in a refined quality process. The Tiga Raja mill allows us to bypass the typical exporter mentality of ‘gather volume and post-process later to achieve specialty grade’. The benefit of doing this is that the green beans supplied to our mill should theoretically have a lower defect level from source. We don’t want to promise higher quality at this early stage, but on paper there is no reason why this won’t be a by-product, leading to cleaner, sweeter cup profiles.
  • Our Tiga Raja mill will be supplied by farmers who have been hand-selected by Leo himself from high altitude regions and cooperatives which have shown promise for organisation both in terms of farming practices and their ability to listen to advice and implement ideas on the quality supply front.
  • The supply chain works independent of world market prices which provides huge benefits to the Tiga Raja mill and farmers. We are now able to set our own market price for parchment purchase. Whilst the world market (driven by large exporters and multi-national companies) will set a median price, we are now able to pay above this price at a rate which allows farmers to operate sustainably. Setting our own price encourages loyalty and enables us to engage farmers in a quality development programme run by the mill, thus promoting sustainable practices for the benefit of the mill and the farmers.
  • Lisa and Leo are highly educated locals equipped with a strong global, regional and local understanding of coffee. They have uprooted themselves from their highly paid lives in the USA and are in a sense, gifting themselves to their people in an effort to give the people in their region a chance at a sustainable and prosperous future. Essentially, without their expertise and presence on the ground, none of what we are doing here would have been possible. There has been shared sacrifice in getting this project up and running, meaning that the people involved are genuinely invested and are therefore motivated to make it work.
  • Through the mill, we will have the ability to experiment with processing and varietals. In a complex, smallholder-dominant landscape that seems to dictate its own set of sourcing rules, we will be able to source micro-lots and single varietals from our collection of hand-picked contributors.

So, what this means is that there are ‘relationships’, and then there are relationships which enable us to influence long term, positive change. We know that that nothing we do will fix all the problems of this world. We’re realistic. This project will only impact several hundred farmers and their families. It’s a small number when you consider the hundreds of thousands of coffee farmers in the same predicament globally. We hope that we will be able to elevate the profile of Sumatran coffee through showcasing the excellent coffee we know we can produce through Tiga Raja in Simalungun. We’re hoping that this will influence demand positively, even if it’s in small increments, and that the coffee farmers of Sumatra will become the eternal beneficiaries of the economic benefit, well beyond the boundaries of our direct involvement there.

We’ll keep you posted on how things are progressing. We know from the support we receive from you, our customers, on projects like this that we’re not alone in trying to impact people positively. We’d welcome any one of you to come on this journey with us.

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