Age is no barrier for Nespresso

It’s been said that wrinkles tell a story: crows feet from years of laughing, stress lines from years of worry, and cheek creases from summers spent under the sun. These fine lines tell the story of a life well lived. Speak to any coffee producer and most will tell you it’s a tough profession. They put their bodies through labour-intensive work and live through unpredictable conditions for the love and pride of family tradition, and the reward of producing some of the world’s best coffee. Yet for the 35,000 Colombian farmers who work directly with Nestlé-owned pod giant Nespresso, and the half a million farmers across the country, retirement is met with trepidation, not reward. According to Nespresso, of Colombia’s population of 50 million, 7 million have no access to pension due to people working in sectors that are not advanced in social security measures, or in situations where they do not have a stable income each month. With an ageing population and growing vulnerability of the coffee farming profession, Nespresso says it was time to take action. Since 2003, Nespresso’s AAA Sustainable Quality Program had been successful in improving the productivity and profitability of farmers who supply the company with coffee that meets the quality and aroma profiles required for its Grand Crus range. Nespresso has paid higher premiums for its Colombian coffee, and given farmers environmental protection through Rainforest Alliance Certification. However, it recognised that the social index of Colombian farmers could be improved. As Jérôme Pérez, Head of Sustainability at Nestlé Nespresso, explains, the company wanted to extend the scope of the AAA program to focus on improving the social security of farmers. As such, Nespresso held focus groups directly with its farmers to see what their most pressing issues were, and where attention should be directed. “Was it straightforward savings accounts, or crop insurance they needed? What about insurance that might improve their dental health?” Pérez says. According to Susana Reber, Sustainability Innovation Manager of Nestlé Nespresso, because the Colombian government was already providing basic healthcare to all farmers, what they really wanted was access to a retirement savings plan. “The farmers said they would love a pension. At the time [in 2014] only eight per cent of farmers had access to a pension. Coffee crops are only processed twice a year so farmers struggle to manage a monthly pension and pay back into their savings funds,” Reber tells Global Coffee Report. “This lack of security is one of the main reasons why new generations are leaving the coffee fields in search of city jobs. Without a pension, farmers can never afford to retire.” Being able to secure a decent standard of living for agricultural farmers is a challenge many countries have. However, Reber says this innovative scheme may be one of the most significant steps to achieving the objective. Since a change of policy in 2014, the normal retirement age in Colombia under social security raised to 62 for men and 57 for women. The average age of Colombian farmers is 53. However, Reber says, if you look closely into the farming cooperatives, it’s not uncommon to see farmers picking and drying coffee into their 70s and 80s. “The fact that the farmers are entering their later years of life without a pension is a confronting reality for them,” Reber says. “Coffee farmers are dedicated to their profession, but historically coffee farmers and entrepreneurs and those that need micro insurance have been left out from access to retirement funds and loans because banks ask for collateral, which is difficult to secure because there’s so much risk in farming.” Determined to find a solution, Nespresso set out to safeguard the Colombian farmers’ futures and encourage the younger generation to stay. Reber says in many ways Nespresso was “a bit lucky” because at the time it was considering a pension scheme, the Colombian government was working on introducing a pension project called Beneficios Económicos Periódicos (BEPS). This is a voluntary savings program designed to protect Colombian workers whose income does not allow them to contribute to traditional pension. People who save in BEPS build capital that allows them to enjoy their old age with a lifetime income. The program is flexible and allows Colombian citizens to save according to their economic capabilities on a daily, weekly, or monthly basis. With this structure in the works, Nespresso considered applying the same structure for its farmers. As such, Nespresso, in partnership with the Colombian Ministry of Labour, the Aguadas Coffee Growers Cooperative in Caldas, Cafexport and Fairtrade International, entered into a public-private-partnership to create a retirement savings fund specially for farmers in the Nespresso AAA Sustainable Quality Program. The Colombian Coffee Growers Federation supports the pilot initiative, called the Farmer Future Program, which Nespresso hopes will be permanently embedded in the BEPS government-subsidised retirement scheme to give farmers financial security when they reach old age. Reber says developing and implementing this pilot savings plan has been a complex process. It demanded a unique approach to collaboration and strong partnerships to make things happen on the ground. To start the communication process, Nespresso invested in an agronomist, trained by the Colombian government, to explain to farmers how the pension system would work. The test ground for the pilot program was the Aguadas Coffee Growers’ Cooperative in the remote coffee growing community of Caldas. Nespresso extended the scheme to about 1200 Caldas AAA coffee farmers to begin with. Situated high up in the mountains where the unique microclimate protects the production of the coffee, farmers operate small farms of around two to three hectares, on average. The landscape is challenging, and at such high altitudes and with scarce road infrastructures, farmers often have to rely on the use of donkeys to climb to their farms and transport goods. Imagine doing that at 70 years old. To date, more than 1500 coffee farmers in Caldas have registered to the Farmer Future Program. Nespresso has paid US$5.4 million towards the initiative, investing 50 per cent towards technical assistance, and 50 per cent to a special retirement savings fund using the additional Fairtrade Premium it pays. This goes directly into the farmer’s individual savings account, managed by the cooperatives, which can be used to receive the pension. The Colombian government matches 20 per cent of what the farmers invest themselves into the retirement fund, however this contribution is received only when the farmer retires. “Under the pilot program, farmers can save any time during the year, which could be as little as US$1 a month and US$20 the next. A saving of any volume allows them to receive the pension when they are ready to retire,” Reber says. Farmers can take out the money from the savings account at any time before the age of retirement, but this means they don’t receive the government subsidy. They can also use their pension savings at any time to buy a house. In this case, the Colombian government will guarantee the subsidy. Reber says around 30 per cent of participating farmers have already decided to save additional money into the fund on their own, “proof that they really believe in the program”. More than just providing farmers with retirement savings, the Farmer Future Program is empowering farmers to embrace the future and what retirement means for their families. Delio Gonzalez, a AAA coffee farmer, says the program provides “hope to be able to reach our retirement age, [so] we can rest and enjoy our old age quietly”. For Cesar Julio Diaz, Manager of the Aguadas Coffee Cooperative, the program will “motivate young people to stay in the area and engage in coffee production”. Nespresso has seen a 15 per cent rise in the number of farmers who have become part of the farming cooperative in order to benefit from the program. Farmer empowerment
Nespresso recognises that a healthy sustainable supply of coffee in the future is dependent on smart partnerships. It’s thanks to Nespresso’s collaboration with Fairtrade International that farmer cooperatives are working closely with the association to understand how best to invest their retirement savings. Dario Soto Abril, CEO of Fairtrade International, says empowering farmers to actively plan for their retirement will further strengthen the social dimension of the AAA Program at a community level. “We want to ensure that coffee farming is economically, environmentally, and socially sustainable, and that tomorrow’s generation will benefit as much as today’s and hopefully more,” Abril says. As a tool to safeguard against factors contributing to instability in Colombia’s coffee sector, Reber says the pilot program has had a positive impact. Other cooperatives are already successfully using the system, and Reber hopes this model can be applied to other crops around the world. “It will take a long time to make a permanent change in Colombia, but we needed to start somewhere,” she says. Crop insurance
The second concern farmers noted from open forums was access to insurance, which traditionally is expensive and in some cases unavailable. Producers explained their hesitation to invest in their farms  because they were “scared” of the unpredictable nature of the next crop season and how they would survive. Will it be too dry? Too wet? Will crops be hit by disease? Even theft? These are likely scenarios and considerations many farmers are confronted with, yet they are not covered for. “The risk of securing the farming future is real. It is expected to continue a decline and with the instability of climate change, price volatility, decreased productivity, and lack of investment. There’s a huge risk to the future supply of quality coffee and of the farming profession unless we take action,” Reber says. “We’ve seen a natural evolution of micro credit, which initially became a huge thing for the farming industry, but if you take out a micro loans and have a terrible crop, you can’t pay it back, and therein lies the problem.” To eliminate the risk, Nespresso has developing a crop insurance program and is scaling it throughout its AAA farms. It found social business company PlaNet Guarantee, a member of PlaNet Finance Group, who suggested index crop insurance was the best way forward to assist coffee farmers. Under this system, satellite-based weather information is used to find triggers for insurance claims. According to Global Index Insurance Facility, a statistical index is measured before the start of the insurance period. It uses the satellite data mapping information overlaid with historical climate data to measure deviations from the normal parameters of rainfall and temperature. It pays out benefits on the basis of a predetermined index, such as rainfall or drought level, for the loss of assets and investments. “As a test, we asked farmers what their worst production years were over the past 30 years and then compared it to the satellite information to see if it matched, which it did,” Reber says. As such, thanks to farmer and government permission to use satellite images to assess what amount of land to insure, in 2018 Nespresso launched its first insurance program in Colombia for coffee farmers through microinsurance start-up Blue Marble, and offered through local insurer Seguros Bolivar. Blue Marble has since become the main partner to invest with Nespresso on the insurance initiative, as did AgriLogic, who designed the satellite tool, the International Research Institute for Climate and Society of Columbia University, and Cafexport who implemented the pilot. No payouts have been issued as yet due to the good crop conditions of the 2017-18 harvest season, so now lies the bittersweet waiting game for the next climatic event or disease to impact Colombia’s crops to test the insurance’s effectiveness.  “We’ve been working on this for the past three years. Once we ensure it’s accurate, we can scale it,” Reber says. “We’ve already seen great interest from a greater proportion of Colombian farmers, and Brazilian and Costa Rican farmers too.” It is also expected that the claim settlement processes will be quicker and more objective than traditional services of insurance claims assessors, which are time consuming and expensive to visit farmers who are remote and scattered throughout large regions. Under the index system, Colombian farmers would insure their crops for around US$40 per hectare, which Nespresso calculates will pay back around 10-fold what they have paid in premiums   if the satellite data triggers an insurance claim. “This figure represents cost of labour per hectare and input costs because in a weather event you would have already started work in preparing your crop. However, this does not include picking,” Reber says. She adds that this project opens the doors for more research and opportunities to introduce social welfare provisions for farmers and their families, including health and accident insurance. Nespresso is already working with the University of California, Davis, and the University of Columbia to do more research and testing, with the potential to change the industry standard. “Being able to offer crop insurance also means farmers are able to invest in their farms when they previously wouldn’t consider due to the climatic risk,” Reber says. “It also gives farmers financial empowerment and the chance to apply for a loan – and some for the very first time. Farming and beyond
In 10 years from now, what will the Colombian farming generation look like? Will the elderly still overlook the ripeness of beans? Or will wide-eyed and eager youth run the show while their parents savour their golden years travelling the world? Nespresso certainly hopes it’s the latter. “The situation is a win-win. By securing the future of farmers in Caldas, we’re helping to mitigate future risks of instability in the coffee-growing sector it is so reliant upon and given the youth a reason to see farming as a viable career,” Reber says. “Colombia has so much potential and with this new program, we believe we can really make a difference.” GCR