To those wondering what’s so different about this approach versus other schemes designed to give small farmers a fairer wage in commodity-driven markets, notably Fairtrade, quite a bit, says Ketabi.
“The co-ops we work with are Fairtrade certified, and we wouldn’t have been able to set up our business [VEGA has invested in coffee roasting equipment, packaging and labeling kit with farmers and farmer co-ops in Nicaragua] without the groundwork Fairtrade laid down.”
But while Fairtrade cuts out some of the middlemen and has enabled farmers to establish more direct relationships with traders and roasters overseas, she observes, Fairtrade certified farmers still sell their green beans to someone else, albeit at a premium to what a local middleman might pay, and they still don’t get involved in the value-added parts (roasting, packaging, retailing) of the value chain.
Our farmers take on more of the value chain, so they earn more, typically four time more
“Coffee farmers have historically lacked direct access to markets, and relied on intermediaries to sell their coffee,” says Ketabi.
“As a result, farmers have historically had no idea what the finished product looks like or how coffee lovers enjoy it, and typically get 80c-$1/lb on a product that might retail at $20/lb. Meanwhile, coffee lovers pay a high premium and have no connection to the farmers who grow their coffee.”
VEGA, she claims, bridges that gap, and has set up a roasting and processing center in Estelí, Nicaragua, in the heart of Nicaraguan coffee country, and trained farmers to roast, grade, cup and pack their own product, and then train the next wave of employees.
“Our farmers take on more of the value chain, so they earn more as a result, typically four times more, while consumers get a better deal because VEGA’s coffee goes through fewer hands, and can feel better knowing that more of their dollars are going directly to the farmers. And that’s transformative.
“We match the Fairtrade price and pay for the value of the processing on top of that. And the higher the grade, the more we pay,” adds Ketabi, a lawyer – and certified coffee roaster and licensed Q Grader – who completed a Fulbright scholarship on renewable energy in Nicaragua in 2011, and now lives there with co-founder (and husband) Rob Terenzi.
(The third co-founder, Will Deluca, is based in New York, designed and runs the web site, and handles the technology side of the operation.)
Coffee is particularly well-suited to the online subscription model
As for the direct to consumer aspect of VEGA's operation, this gives the farmers a direct connection to the end customer, says Ketabi.
And with subscription services of all kinds from Blue Apron to Naturebox just starting to take off, it also feels like the perfect time to get in on the action, adds Ketabi, who raised money on Kickstarter to get the project off the ground (and just as importantly, gain its first ‘guinea pigs’ as users) and is now raising money from a pool of investors focusing on businesses with a social justice dimension such as VEGA.
“There’s a lot of VC money going into subscriptions services, but as yet there is no real market leader, and we wanted to get in at an early stage.”
And coffee is particularly well-suited to the online subscription model, as it’s a premium product with high household penetration that people consume regularly (unlike fancy condiments and some of the gourmet items you see in some food subscription services), but can also be a complex and intimidating category to navigate, she says.
So, if the coffee is superb, and the price is right, $15 a month for a box is something many people will be prepared to pay, especially if they know that a far larger chunk of that $15 is going to the people that actually grow, and roast, the coffee, she says (users get to choose between a light, medium, dark or ‘surprise’ roast, in whole bean, finely, coarsely, or medium ground format).
And the connection doesn’t end there. Not only do the growers write their names on the packs of coffee, they also pack the boxes and prepare the shipping labels to the end consumers in Idaho, Nebraska or Ohio before they are loaded onto pallets, shipped to Miami, and mailed to consumers.
And while there are other coffee subscription services out there, none give growers the same share of the pie that VEGA does, she says.
Keeping up the excitement
The challenge for VEGA, like any new business, is letting the world know it exists, and finding the most effective way to communicate the benefits of its business model. So far it has chosen to call out ‘farmed and roasted by women’ and 'farmers earn 4x more' on front of pack, but will learn what messages resonate most strongly as the business grows and evolves, she says.
But assuming you can attract consumers that like the idea of getting a world-class coffee delivered to their door with a dose of social justice added for good measure, how do you retain their loyalty, and keep them engaged, if you’ve only got a limited selection of coffee on offer?
In the short term, this hasn’t been an issue, says Ketabi, as VEGA’s website has only been up and running since early this year, and customer retention rates are good – with around half opting for monthly deliveries and half for deliveries every two weeks.
But variety will become more important in the long-term, she acknowledges, and in future, she hopes to replicate the business model set up in Nicaragua in other coffee-growing regions, so VEGA customers might be able to “get coffee from Nicaragua one month, Guatemala the next, and so on.”
Read more about VEGA HERE. [Readers that enter the code FOODNAV will receive their first shipment for free].