As demand for Fair Trade-certified coffee grows, there is concern that farmers don’t always reap the economic benefits. While the Fair Trade coffee you buy at a store is priced at a premium, most of those profits – 90 percent, according to Vega Coffee – go to the roasters. There are also up to 20 middlemen involved in the value chain from from farm to your cup. Vega Coffee wants to turn this model on its head. It gives small scale farmers the training and equipment to roast and package their coffee. Eaters are then able to purchases the coffee through Vega’s website and have it delivered within 5 days of roasting. This model enables the farmer to earn up to 4-5 times more per pound.
As we get ready for FoodBytes! San Francisco, the premiere food startup pitch competition taking place in San Francisco on March 16, I spoke with Vega Coffee co-founder Noushin Ketabi, who will be pitching at the event, about Vega’s business model. My interview is below.
Want to see Vega Coffee and 19 other game-changing food and ag startups pitch? Snag your ticket to FoodBytes! SF on Thursday, March 16 for 20% off with the code FTC HERE!
Noushin Ketabi: Despite the fact that coffee has a massive market worldwide (and a $48 billion industry in the US), 80 percent of the world’s 25 million coffee farmers earn barely enough to get by. They’re often disconnected from the market, and rely on middlemen (as many as 20!) to bring their product to market. Meanwhile, coffee consumers wind up paying high premiums for coffee due to the inefficient supply chain. Given that 80 percent of coffee farmers worldwide live in economically vulnerable conditions, they can no longer afford to be keep out of the profit making activities of the supply chain. The time for disruption is now.
NK: We are creating a whole new coffee experience by distilling the supply chain to three essential parts: the producer, the consumer and the marketplace. We equip farmers with the tools and training to roast and package their coffee into a high end product. As a result, they earn 4-5 times more money than they would from selling an unprocessed commodity to a middleman. Meanwhile, customers order coffee on our online marketplace and receive their order direct from origin within 5 days of roasting, fresh and ready to enjoy.
We are committed to promoting gender equity throughout our supply chain, and over 90 percent of our farmer roasters are women. This is something that’s very important to us.
NK: At our roastery and training center in Nicaragua, we train farmers in all facets of coffee production — from roasting to cupping to brewing to quality control. Not only do our farmers produce world-class specialty coffee, but they learn technical skills that pay dividends for the rest of their lives.
Meanwhile, our online marketplace, www.vegacoffee.com, is the first of its kind to link coffee farmers with coffee lovers across the world. As we expand, more and more farmers can roast efficiently at our roasteries and sell directly to consumers through this marketplace. Think Etsy for coffee. At scale, not only will our roasting centers dot the map of the coffee-growing world, but Vega will eventually expand to sell other products such as chocolate, spices, and nuts.
NK: My co-founder and husband Rob Terenzi began working with a women-run coffee cooperative in Esteli back in 2006. In order to supplement the modest income they earned from exporting their raw specialty coffee, the cooperative, along with Rob, began roasting and selling their coffee within Nicaragua. Rob, our good friend Will, and I started Vega to take that initial model one step further and export ‘farmer roasted coffee’ to the U.S. and beyond.. Our main challenge was navigating the required regulatory and transportation regulations and logistics in order to meet the needs of the discerning specialty coffee market. Today, we’re happy to report that (1) our coffee arrives to customers within 5 days of roasting, (2) we’re deepening relationships with producers on the ground, introducing new, delicious coffees, and (3) expanding our customer base to reach all over the US, Europe, and even the Middle East.
NK: We have 450 individual subscribers and about 15 business accounts.
NK: Our gross margin is currently at 27 percent. We plan to expand this margin to 48 percent as we scale.
NK: We are the only specialty coffee company roasting at origin and delivering to customers in the US. Our location at origin gives us a distinct advantage over our competition because we are able to have first access to exclusive lots. Our middlemen-free supply chain means that we can deliver our coffee quickly to customers at the height of freshness for much less than the competition. And, given that we are online only, we have lower overhead than our brick-and-mortar competitors, so we can drive more revenue toward growth and product. From a brand perspective, we have massive leverage in our ability to market our origin story and impact model as truly distinct — and superior — compared to the competition.
NK: We have raised $750,000 to date, mostly from impact funds and angels.
NK: We are excited to participate in FoodBytes in order to connect to folks in the field, raise capital, work with mentors and learn about other exciting innovations are happening with food. Thank you for having us!