How Brazil’s cooperatives could upset the specialty coffee status quo

BRASIL – Coffee cooperatives in Brazil are a beast like no other. And while many have historically grown commodity-grade coffee, more and more in recent years have shifted to specialty.

The fundamental purpose of a coffee cooperative is to group producers together in order to leverage economies of scale. Together, producers can benefit from shared farming costs, such as bulk purchasing of fertilisers. Cooperatives also provide greater marketing opportunities, and they can facilitate access to finance for smallholders who might find it challenging to secure loans individually.

Coffee cooperatives can be found all over the producing world. However, in no other country do they operate on a scale as large as Brazil.

“Cooperatives in Brazil are big, representing anywhere from 500 to over 10,000 members,” says Murilo Martins, a coffee expert from Brazil.

For instance, the Cooxupé cooperative has over 16,000 members, 95% of which are smallholder farmers throughout 200 municipalities. This year, the harvest in Cooxupé’s regions is expected to reach approximately 8.3 million 60kg bags. As a comparison, this is significantly more coffee than the entire country of El Salvador.

And Cooxupé is not alone in operating at this scale. Cocatrel has over 6,000 members, and Minasul has over 7,000. These are just two more examples of Brazilian coffee cooperatives operating at an immense scale – setting them apart from those in other producing countries.

Big and organised

Brazilian cooperatives are extremely well organised. To effectively manage such large-scale operations, their structures enable them to be productive and decisive.

“These cooperatives are very professionally managed,” Murilo says. “They have managers, directors and an elected board. They follow the laws and all the ESG protocols, and are very well-organised.”

Because they don’t operate at the same scale, cooperatives in many other producing countries struggle to reap the same benefits as those in Brazil. In East Africa, for instance, cooperatives often encounter difficulties in securing financing. In contrast, Brazilian cooperatives are not only better collateralised for financing, but they are likely able to finance themselves.

“Cooperatives in Brazil support farmers by financing them with the necessary inputs, such as fertilisers,” Murilo says. “They can even provide advances to farmers, which can be settled when it comes round to harvest.”

Thanks to their scale, Brazilian cooperatives are also often able to handle exporting themselves, directly connecting with buyers and shipping their coffee.

In these cases, the cooperatives have unparalleled reach into other major consuming markets – giving them direct access without relying on intermediaries. This also often means faster payment terms, too.

Cash flow is one of the biggest challenges for producers worldwide. Payment terms for coffee farmers can be challenging – whether they are extended or fragmented. Similarly, for many producers, access to finance is limited, and only granted with higher interest rates due to the supposed volatility of coffee production.

Disrupting the status quo

In recent years, cooperatives have primarily focused on producing large volumes of coffee. Recently, however, more of them have shifted their focus to quality.

As well as a huge growth in the specialty coffee market overseas, domestic demand is also increasing. Brazil is a unique producing country because it also has high internal consumption. As specialty coffee experiences market growth both inside and outside the country, many of the country’s producers are responding accordingly.

“Usually big cooperatives produce an average quality cup – not specialty quality cups,” Murilo says. “The main focus has been on receiving a good price with big volumes. Recently, however, there are some cooperatives that are focusing on high-end, unique specialty coffees.”

The entry of major Brazilian cooperatives like Minasul and Cocatrel into the specialty coffee market signifies a clear shift in their focus. These cooperatives have recently established dedicated specialty coffee departments, demonstrating their commitment to explore and capitalise on the growing demand for specialty coffee.

This represents a wider trend of Brazilian cooperatives actively embracing the specialty coffee sector.

As this happens, these cooperatives have the ability to be highly disruptive. Their capacity to generate such large volumes of coffee will be disruptive in itself. As they gradually begin to produce more specialty coffee, they could begin to outcompete regions unable to operate as cheaply.

Furthermore, their direct access to consumer markets could create disruptions within the supply chain as intermediary phases are able to be skipped. By challenging existing distribution models on such a scale, these cooperatives have the potential to transform the dynamics of the specialty coffee sector.

Ultimately, cooperatives in Brazil are bigger and more organised than anywhere else in the world. While their focus has largely been on achieving good prices on large volumes of coffee, their focus is increasingly shifting to quality. This could make them a disruptive force in specialty coffee for a long time to come.

https://thecooperator.news/itc-supports-coffee-producers-in-liberia-through-cooperative-training/

Buy your copy of thecooperator magazine from one of our country-wide vending points or an e-copy on emag.thecooperator.news