EDITOR’S NOTE: Coffee does not only have many health benefits, but it’s also the world’s second most traded commodity after oil. Ashley E. Chandler, deputy policy director at the U.S. Global Leadership Coalition, writes about how innovative coffee-growing PPPs can help smallholder farmers in developing countries, and at the same time create business opportunities for American companies.
Recently, I stumbled upon a Huffington Post article which touted the many health benefits of drinking coffee. (My favorite, by the way, is lowering “your risk of death.”) This is terrific news because not only do I like living, but also because perhaps my addiction has some health benefits after all? Reading about coffee’s antioxidant properties (and trying to justify my sleep deprivation) made me wonder about another favorite food with underlying health benefits: chocolate.
Right about now, you are probably asking yourself what this ode to coffee and chocolate is doing in a magazine dedicated to the importance of global development and the extraordinary work of development professionals. I’ll tell you in two words: global market.
Let me explain. The fact is that in today’s hyper-globalized world, development and the overseas market have become increasingly connected, intertwined and sometimes interdependent. As a result, U.S. foreign assistance agencies play an increasingly important role in our economic prosperity and our national security, in addition to demonstrating our finest values as a nation.
Both coffee and cocoa translate into big business in America, but these antioxidant rich products are also the cornerstone of many economies all over the developing world. Coffee is the second most traded commodity in the world, second only to oil. According to a 2012 small Business Market research report, around 75 percent of American adults drink coffee regularly, with around 60 percent sipping on this caffeinated delight daily. All of this consumption translates into big bucks for the U.S. coffee market — to the tune of $30 billion to $32 billion. As for chocolate, Scientific American recently reported that the industry rakes in around $90 billion a year, which is larger than the GDP of 130 countries.
With the U.S. Department of Agriculture estimating that Americans consume about a ton of chocolate per year, it is no wonder companies are eager to capitalize on every holiday, life celebration, breakup and “because I deserve it” moment.
But without development, none of us would be able to satisfy our coffee and chocolate fixes. In fact, almost all of the world’s coffee is produced in developing countries, with Brazil leading the pack. As for cocoa, the West Africa region produces around 70 percent of the world’s supply. The common denominator for both coffee and cocoa: smallholder farmers.
The business of doing good
According to a 2013 report by the Fairtrade Foundation, the majority of the world’s coffee and cocoa is produced by 30 million smallholder farmers. Even though market demand for high-value agricultural products is bringing more and more smallholder farmers into global value chains, they often operate with little or no access to viable markets and represent some of the world’s poorest and most vulnerable communities. This is why USAID Administrator Rajiv Shah believes “investing in smallholder farmers remains the key to unlocking agricultural growth and transforming economies.” This is also why the U.S. government’s Feed the Future food security initiative focuses on improving the livelihoods and health of smallholder farmers through innovative public-private partnerships. These partnerships, by the way, also benefit the partnering U.S. businesses.
One country where business interests and development intersect is Rwanda. The 1994 genocide largely obliterated Rwanda’s small, relatively low-quality coffee bean industry. But fast forward to today and Rwanda has staked a claim on high-end coffee production. One reason goes back to 2001 when USAID decided to help Rwandan farmers do something they had never done before: Produce specialty coffee. Five years later, you could find Rwandan-grown coffee in Starbucks, all because the company developed a partnership with USAID and the government of Rwanda. And others weren’t far behind; U.S. wholesaler Costco purchases about a quarter of the country’s beans. Thousands of Rwandan farmers can now produce higher-quality coffee beans as a result of public-private partnerships that also “do good.” The beans are then purchased by coffee buyers eager to sell them at higher prices to consumers — cha-ching for business! However, much work obviously remains to be done.
More recently, a partnership between USAID, the World Cocoa Foundation and the Sustainable Trade Initiative produced the WCF African Cocoa Initiative. The doing good part of the equation involves training 100,000 cocoa farmers over five years as a more sustainable solution to poverty and food insecurity in Cameroon, Côte d’Ivoire, Ghana and Nigeria. The doing business part involves bridging a critical productivity gap between the world’s cocoa supply and the large global demand for chocolate. It should come as no surprise that this partnership also includes WCF’s business members. Consider that the trade journal Candy Industry ranks several of these WCF partner businesses in the top ten of its top 100 global confectionery companies and it is pretty clear that doing good can mean big business.
Operate globally, create jobs locally
More and more, American companies must seek out new markets to succeed in today’s dynamic global economy. And this is my favorite part: doing so creates jobs right here, at home in America. Just ask the Business roundtable and the United States Council for International Business. In a 2012 report, they showcased the correlation between the expansion of U.S. companies overseas and economic growth at home. Remember that 95 percent of the world’s consumers live outside of the U.S., and to grow our economy U.S. businesses need to be in those markets. Over half of our exports already go to developing countries — and that number steadily grows each year — so we cannot afford to not be investing in these places.
This means the unsung facilitator of job creation is foreign assistance, which fosters a more enabling environment for private sector investment and trade. Take for example the U.S. State Department’s “economic statecraft” policy, which is a policy wonk’s way of saying that State prioritizes economic growth. It is official policy in U.S. embassies and development missions all around the world to help more U.S. businesses enter new markets. This means there are significant economic benefits — abroad and at home — to improving things like health, education and regulatory systems in developing countries.
Good for America’s bottom line
Think this only applies to big, household name brand companies? Well, think again. By mobilizing private capital, the Overseas Private Investment Corp. tackles global development challenges while helping U.S. companies expand into areas where investment possibilities would otherwise be too difficult (like Afghanistan, Egypt and Haiti). And three-quarters of OPIC’s investments are with small American businesses — the engines of economic growth.
To see the possibilities, look no further than Westrock Coffee Holdings in Little rock, Arkansas. Westrock Coffee is owned by Scott Ford, entrepreneur and former CEO of Alltel who oversaw the company’s $28 billion buyout by Verizon. In 2009, Rwanda Trading Co., a subsidiary of Westrock Coffee, began purchasing coffee from Rwandan farmers to sell to roasters. One year later, Westrock Coffee began roasting Rwandan coffee in North Little rock. Then earlier this year, OPIC announced it was partnering with Rwanda Trading to provide political risk insurance for the company’s coffee processing operations in Rwanda.
Rwanda Trading gets its beans from about 75,000 Rwandan farmers, on each of whom they spend about $50 per year on basic agronomy training. In an interview with Arkansas Business earlier this year, Rwandan Trading managing director Matt Smith said he “wouldn’t call it a social business, but it’s a business with a very positive social impact,” particularly since coffee exports impact more Rwandans than any other commodity. Even better, this entrepreneur’s investment paid off back home too. Today, Westrock Coffee employs over a dozen people and sells Rwandan coffee to more than 1,000 Wal-Mart and Sam’s Club stores across the United States.
The best bang for America’s buck
Make no mistake, working to eradicate extreme global poverty and helping the next generation of the world’s children avoid hunger, preventable diseases, and premature death reflect our most basic U.S. values. And let me be clear: strengthening gender equality and fostering economic growth, dignity and hope are also the right thing to do. But when considering the fastest growing markets are in developing countries — with seven of the ten in Africa — you understand why strengthening our development and diplomatic tools is not only the right thing to do, it is also the smart thing to do.
Here is the best part. We achieve all of this using only 1 percent of the federal budget. The phrase, “bang for your buck,” is an understatement. Knowing all of this frames my skinny mocha, half-half, no whip espresso concoctions in a new light and makes my chocolate breaks seem just a tad sweeter. The next time you enjoy a cup of Joe or tear into a Hershey bar, I hope you will be reminded of the significance of foreign assistance for all those smallholder farmers and the American economy.
Edited for style and re-published with permission by the U.S. Global Leadership Coalition. Visit the original article.