Market Reports

Doi Chaang Coffee Company’s business ties

An innovative business model in Thailand is making headlines as the next wave in direct trade. David Swinfen reports on the role Doi Chaang is playing on producing one of the region‚Äôs highest quality coffees. ‘,’none’,’ Doi Chaang village is a small community in the North-west of Thailand; it is an area that lacked the support of government or even a basic infrastructure until recent years. In 1983, His Royal Highness the King of Thailand visited the remote village and gave the farmers imported Arabica coffee plants. It was an attempt to lure growers away from the lucrative but damaging profession of cultivating opiates. Doi Chaang does indeed still nestle in the drugs trafficking flashpoint of what is known as The Golden Triangle; a dark delta where the borders of Thailand, Laos and Myanmar converge to provide a notorious gateway for runners to expedite the delivery of their harmful wares. Today, opium growing in Thailand has all but been eradicated, and the Doi Chaang village thrives under self-sufficiency from an even more profitable crop. It is the result of tireless initial work on the part of two men; John Darch, formerly a British-born mining CEO, and Doi Chaang village representative, Khun Wicha Promyong. Doi Chaang Coffee Company's Bangkok Office is a trendy coffee shop, a showroom for coffee-making hardware and also the organisation's hub in Asia. First to arrive is Khun Wicha. He is a successful businessman who encouraged the Doi Chaang farmers to unite and form a company to represent their shared interests. Wicha does not talk about dollar turnover, but rather about the number of schools or hospitals he is going to build. It is a single-mindedly selfless approach to sustaining community development and it’s driven by the production of a high-end gourmet coffee. In the coffee shop lounge, visitors are able to view televised material showing documentaries by filmmakers who have travelled out to meet Wicha and the Akha hill people. His dedication to the villagers is hard to refute. “I live for Doi Chaang and it’s 24-hours,” he offers. “I sleep for two hours sometimes, but I work at night, in the day; whenever there is anything the village requires me to do. This is the driving idea behind Doi Chaang; this is how we started with nothing and now we have schools, hospitals, a transport infrastructure, a coffee academy and an international business which is self-sufficient and growing.” His trading partner, John Darch, is a congenial Englishman who lives in Canada but has worked all over the world, both in banking and mining. He is a successful and compassionate entrepreneur who freely admits to knowing nothing about the industry at the time when he was approached with the Doi Chaang cooperative proposal. “I was developing Thailand’s first potash mine, so one day Sandra (Bunmusik, now General Manager at Doi Chaang) came to me and said: 'You must meet this gentleman; he is doing wonderful things for people who make coffee.' I didn’t even know anything about coffee! I met with him out of politeness, but I was overwhelmed by the commitment that I saw. That’s how it started,” Darch explains. Doi Chaang Village is located in the mountainous region of the Chiang Rai Province of Northern Thailand. The village is home to the Akha hill tribe which grows and processes the coffee. The Doi Chaang Coffee Company is a unique partnership between the Akha hill tribe of Doi Chaang Village and Darch’s small Canadian coffee distributor, Doi Chaang Coffee Co. The Thai families cultivate and process the beans, while the Canadian firm finances, roasts, markets and distributes the coffee. The Thai farmers own 50 per cent of the joint venture, so they not only receive a better-than Fair Trade price for their beans, but also receive half of the organisation’s overall profit. This is the essence of the company’s trademarked mantra of going ‘Beyond Fair Trade’. “We believe that The Fair Trade Organisation has done a wonderful job in terms of raising public awareness about the need for a decent and reasonable deal for growers,” says Darch. “But, the minimum prices specified to be paid for the coffee beans is essentially like specifying a basic living allowance; it does little to break the cycle of poverty for many coffee farmers.” With a total volume of 1700 tonnes a year, Darch describes the organisation as both a high-end gourmet producer and a role model for sustainability. With annual improvements in cultivation and with more areas planted and developing, the Thai farmers are hoping to be able to build up to a gross of 5500 tonnes over the next five years. “Thailand is a good country for growing a great number of things. When we first tried to take the idea of gourmet Thai coffee to other territories, it was a tough sell. We presented the product to roasters in Canada, but they simply refused to believe that the high-quality bean we were showing them was from Thailand. Despite the difficulties, I pressed on because I believed in the concept and I supported the purpose; those were always the two key elements for me. So, we looked at ways we could increase the quality of the product yet further and consequently, increase the benefits the villagers enjoyed from the sale.” He continues: “It’s fairly simple to me. If the farmers make more money, then they work hard to improve the quality of their product and then look at ways to increase net yields, so it is win-win. This is why we consider ourselves to be a leader in terms of establishing a viable, profitable and renewable model for sustainability. Now it is showing real results in terms of the escalating volumes and an improvement in the quality of the finished coffee product.” In Thailand, the company is most famous for Doi Chaang Civet, or ‘Kopi Luwak’; a bean which has been passed through the digestive tract of wild civet. Wicha explains that the only coffee sold under the Doi Chaang brand is from either the premium or peabury beans. Currently, 7 per cent of total production is peabury and 46 per cent is premium. The aim is to raise that percentage to 60 per cent, which will be the result of ongoing improvements in cultivation. One acre yields 600 to 700 kilograms, with a total production footprint of 1200 hectares. Just under half a hectare used to yield just 100 kilograms before improvements in cultivation methods raised the output. Altogether, Doi Chaang total production is 1700 to 2000 tonnes. The growing altitude ranges from 1200 to 1600 metres above sea level, with the harvesting taking place between November and March. The other 2000 hectares of arable land has been planted and are at various stages of growth. Each year, the tribe plants 100,000 trees to reforest the region and provide shade for new coffee plants. This helps prevent soil erosion and encourages crop diversification. Fertilisation of the coffee plants is provided solely by the forest foliage, plus the skin, mucilage and parchment of the coffee cherries. It is a completely organic process. At no time are chemicals or pesticides used on the coffee plants or the surrounding environment. Sustaining soil quality in this way also encourages diverse crop production, which provides food for the farmers and products which are sold to help stabilise the community’s economy. “Once the demand for this coffee increases, the farmers will be very much part of that growth. Until you establish a brand which is recognised internationally, there is no demand other than for your green beans,” Darch says. “So, the surplus green beans are sold domestically. Right now, we have more demand for our Doi Chaang product than the green beans can support. In Thailand, our total sales are 200 tonnes of premium grade. This year, we have about 200 tonnes in Canada and next year, we will sell 400 to 500 tonnes of premium coffee in Canada.” Wicha elaborates: “We can only sell what we have. Korea asks us for 100 tonnes, but we can give them only 22 tonnes because we spare some for Japan, Singapore and Malaysia. We are waiting for the additional growing capacity to come on-line.” Darch is palpably pleased by the progress made so far. “Here is an organisation of farmers who are here to improve their way of working to better the lives of their families. Wicha is focused just on quality; that’s his specific role. Doi Chaang Coffee as a brand is recognised as a gourmet, single-estate coffee. It was a painful process, learning about coffee for me. I don’t deal with the mechanics of coffee production, so I treat it like mining. I just believe in the purpose and so I have people around me who are experts and specialists. Young John, for example, did the design of the bag and logo and we get a lot of compliments, so he deals with a lot of marketing and brand communication.” Darch's son is also the CFO, so his involvement with Doi Chaang Coffee Co. is full-time. He was a professional photographer previously and so has an exceptional eye for detail and an ability to communicate messages to consumers and businesses alike. “We sell into high-end grocery stores like Villa Market. It’s difficult to penetrate this market in Thailand. You have to pay money just to go into these stores, but all of the big, high-end grocery retailers request us to go in there, such as with the heavyweights like Siam Paragon and Emporium (top echelon luxury malls in Thailand),” says John junior. “The grocery stores are hardest because there is so much competition. But in Harrods of London, they wanted us to go in there for no charge because they really wanted to feature the Doi Chaang brand. We are the most expensive coffee in Harrods. The response in the UK has been excellent and we see it as an exciting – and to a large extent welcoming – growth market.” In a commodity-based product like coffee, Darch says that he sees the company as a new segment of direct trade,  “a niche within a niche”. “The fact that our growers and their families own half of the distribution company is what makes us confident to use our ‘Beyond Fair Trade’ legend,” he says. “We have proven that 50 per cent share combined with direct trade works in terms of sustainable business development… It is a viable and scalable model and so could represent a new direction for the industry.” GCR

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