Following the announcement of our Coffee Farmer Resilience Fund in July, many people have asked how the fund differs from our Coffee Farmer Resilience Initiative, launched last November. In short, the Coffee Farmer Resilience Fund is a component of the larger Coffee Farmer Resilience Initiative that channels private-sector funding, matched by the public sector and philanthropic sources, for targeted supply chain investments at the base of the supply chain. The diagram above is designed to illustrate the interplay between the two, and the text below explains the impetus and rationale for each.
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Last year brought tremendous challenges to the coffee industry. The coffee price fell precipitously in 2013, and extreme weather in Latin America exposed longstanding vulnerabilities of smallholder coffee farmers: historic underinvestment in agriculture, aging coffee trees and farmer populations, emigration and other factors. The erratic weather – abnormal rains and extended dry periods – set the stage for a coffee fungus called leaf rust, or roya, to take hold, and it ravaged its way through the coffee lands, carrying major economic disruption in its wake.
Root Capital’s response to the crisis was the Coffee Farmer Resilience Initiative (CFRI), a multifaceted approach to helping our clients invest in coffee farmers at the base of the value chain. We immediately identified philanthropic partners in the Multilateral Investment Fund of the Inter-American Development Bank, Keurig Green Mountain and the Skoll Foundation to provide core operating support for Root Capital’s three-pronged strategy to build long-term resilience for our clients in Latin America. Since launching last November, we have approved $7.1 million in long-term loans for coffee renovation under the CFRI in Peru and Nicaragua.
However, as the coffee industry took stock of the effect of roya on farm families and supply chains, we also started to hear from buyers who, motivated both by moral obligation and a recognition of the need for investment to secure long-term supply of quality product, were looking for ways to get involved. Many buyers and other industry partners gravitated towards Root Capital’s CFRI, but they wanted a way to engage beyond philanthropy. Looking to have their dollars go further than one-time charitable gifts, they were seeking an investment approach grounded in capital markets, value chains and long-term supply chain sustainability.
In speaking with these industry partners and others engaged in the issue, we saw an opportunity to create the $4 million Coffee Farmer Resilience Fund, a funding mechanism under the broader CFRI that directs private-sector dollars from Keurig Green Mountain, Cooperative Coffees, matched with funding from the public sector and philanthropic sources, namely USAID, the DOEN Foundation and Open Road Alliance, to value chain investments with farmer organizations affected by roya. Essentially, this is an investment in the supply chain from the supply chain.
Working with industry leaders, policy makers, development practitioners, and visionary foundations, Root Capital has brokered a public-private partnership designed for coffee farmers and industry partners alike to build resilience and prepare for what lies ahead. As we move into the challenging phase of implementation, we’re grateful to have the support of these partners throughout the value chain.