Business

What’s fairer than fair trade? Ask Pachamama’s small farmers

Maritza Colindres, a coffee farmer in Nicaragua who is part of Pachamama Coffee Cooperative, picks beans.
Maritza Colindres, a coffee farmer in Nicaragua who is part of Pachamama Coffee Cooperative, picks beans. Pachamama Coffee Cooperative

When Thaleon Tremain was a Peace Corps volunteer in Bolivia two decades ago working with local entrepreneurs, he finally decided he could help them more if he went back to the United States.

So the Ohio native earned an MBA at the University of Texas. Then he met Nick Brown, another MBA graduate with similar ideas about how business could do well by doing good.

They developed a plan for giving small coffee farmers in Latin America more profitable direct access to coffee drinkers in the United States. After they presented their ideas to a gathering of farm cooperatives from Peru, Nicaragua and Guatemala, the farmers organized the business and hired Tremain as chief executive officer.

Over the past 10 years, Pachamama Coffee Cooperative has developed an increasingly successful business model for buying and roasting beans grown on small family farms and distributing them mainly through monthly subscriptions and socially conscious stores such as Good Foods Co-op in Lexington.

“It’s a unique company,” said Tremain, 44, who was in Lexington recently to visit his father, portfolio manager Brian Tremain. “I love the people of Latin America and I wanted to find a way to combine my interests in business, economics and Latin America.”

The Sacramento, Calif.-based company has gotten a lot of good press, including an article this month in Wine Spectator magazine by journalist Mark Pendergrast, whose best-selling books include “Uncommon Grounds: The History of Coffee and How It Transformed Our World.”

Tremain was intrigued with business cooperatives, which have a long history in this country, beginning with a fire insurance cooperative Benjamin Franklin started in Philadelphia in 1752. The model is especially successful in agriculture, including such well-known brands as Ocean Spray and Land O’Lakes.

Tremain focused on coffee because it is a major Latin American export and one of the few commodities whose value grows substantially as it moves through the supply chain. But, he said, “There was such a huge disparity from what the producer made and what the consumer was paying.”

Pachamama changes that by taking the “fair trade” concept a big step further: direct trade. Because farmers are the owners, the cooperative buys their best beans, recently paying them about $3 a pound and adding another $6 a pound to co-op profits.

Pachamama, named for an Incan fertility goddess, is owned by several thousand small coffee farmers in Peru, Nicaragua, Guatemala, Mexico and the East African nation of Ethiopia.

So far, all profits have gone back into growing the business. While the company has some debt, there is no outside equity. Tremain said that neither he nor other key members of the 15-person staff have an ownership stake, although he hopes that will eventually change. Brown remains a non-voting member of the board, which is made up of representatives from each of the five national cooperative groups.

Tremain said the rising popularity of fair trade coffee convinced him that many American consumers would pay more for top-quality coffee whose growers were more fairly compensated.

“The consumer market was trying to find a way to connect to those farmers,” he said. “But the farmers were so far removed. So we figured this could be a great business.”

Pachamama sells a variety of subscriptions, with prices ranging from $16.25 to $25 per pound and retail store prices in that range. The company also recently opened a coffee bar and retail location in Sacramento.

“We’re really hitting our stride,” Tremain said. “I think it takes 10 years or so to build a brand and build the trust and loyalty of a customer base and the industry.”

Tremain, who last year moved with his wife and two children back to his hometown of Yellow Springs, Ohio, said he sees a lot of growth opportunity. One challenge, though, is that Tremain expects coffee prices to rise over the next few years for several reasons.

Demand for good coffee continues to rise, but fewer young Latin Americans are following their parents into growing because profits are slim and they have other opportunities. Also, climate change has hurt coffee production, making crop yields less predictable and forcing growers to land higher in the mountains.

“Even if prices go up, it will continue to be an affordable luxury,” Tremain said. “We’re looking for any innovative way to distribute the coffee, and the more directly we can get it to you, the better, because that means more money in the farmers’ pockets.”

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