#coffee#profit sharing model#coffee industry#Thrive Farmers

Thrive: coffee with a conscience

|Nov 5|magazine12 min read

Everyone loves coffee. Starbucks has built its business around the love of coffee. Busy people everywhere depend on coffee to perk them up and keep them going even when they find themselves functioning with little to no sleep. Let’s face it, it’s the delicious nectar that keeps everyone civil and more alert while in the office, running errands or trying to manage a household.  

But where does it come from? The grocery store? Starbucks? A local roaster? The best cup of coffee is rooted in generations of farmers cultivating and perfecting their art. Without the steady pruning of a seasoned farmer, coffee cannot reach its full potential.

Coffee farming is a struggling industry. Farmers rarely make ends meet and apply great effort just to cover the cost of production. Frankly, this is the way it’s always been. Coffee farmers are often passed down the trade from generation to generation with virtually no business training rendering their business operation highly unsuccessful.  More than a lack of training, a lack of funds to maintain farming equipment, hire help etc., makes it difficult to sustain. This links back to an average of $600 a year earned by farmers

Michael Jones, founder and CEO of Thrive Farmers Coffee has set out to change the landscape of the industry forever. Coffee has started to become an expensive commodity in the market; however the price hike is not mirrored in farmers’ salaries. It hit a high in 2011, but is now at a four-year low of $1.15 per pound. It is expensive to general consumers, but big businesses are increasing cost with a low cost to themselves. Farmers continue receiving unfair wages. 

There are common challenges in the supply chain, the farmers are not well educated on best practices and they live in limited communities. Jones saw an opportunity, cut out the middle man, and simplified the supply chain to bring a level of transparency to the market so coffee farmers could begin to Thrive.

“There were way too many layers in the supply chain that weren’t necessary,” explains Jones.

Thrive began with humble roots as a former colleague of Jones’ moved to Costa Rica to farm coffee as a hobby. When he discovered that coffee farming on the whole yielded no income he started brainstorming. Through a series of strategic partnerships he partnered with a fourth generation coffee farmer and they sold coffee directly to tourists who came through their tiny tourist town. They fundamentally eliminated the costly supply chain by selling directly to consumers. They sold their entire crop and developed a profit sharing model to help other coffee farmers. The consignment model allowed farmers to make five to 10 times more profit compared with fair trade prices.

“We found that people loved supporting the farmers directly. By getting rid of a blind supply chain we were able to provide people with a real connection to their coffee,” says Jones.

The Thrive model was built to prove there is a way to change how farmers are paid for their crops. The company keeps it simple with a revenue sharing model. The farmers give the company coffee on consignment and reap the benefits of a limited supply chain and thus a greater return on their crops. Thrive teaches farmers best farming practices and cost management techniques. Farmers are accepted into the growing community based on the quality of their product. Quality is the number one attribute for a Thrive farmer and the company takes it very seriously.

Jones explains, “We went to work, put together this profit-sharing model, and designed a brand around it. We traveled central America and now have over 400 families growing 350,000 pounds of coffee in 12 regions and three countries. Most coffee farmers needed a reason to have hope for the future. That is where we come in. We give people a sense of accomplishment and pride while providing great growth in the marketplace.”

In the first year of business, Thrive sold all of the coffee it sourced. That is validation of the great partnerships and alignment of values Thrive set out to accomplish.

So what about “fair trade?”  According to Jones, “Fair trade is technically not fair trade, and a lot of parallels get made between Thrive’s profit sharing model and fair trade coffee.”  Fair trade is an insurance policy, stating that farmers can’t get paid below a certain price for their crop. There is no real incentive or tie in to quality where fair trade is concerned. As long as the farmer pays for the fair trade certification, they are in the program. Additionally, nothing about the fair trade system is designed to allow the farmers to participate in the upside of the market.  There is no real way to make more money. If a farmer operates under the fair trade system, they will not benefit if the price of coffee goes up. With Thrive’s profit sharing model, farmers get the opportunity to monetarily benefit from the market’s upswing.

But Thrive is not just about turning a profit; it’s about nurturing the coffee growing industry and building lasting relationships. Relationships mean everything to Jones, “we are adding real value to our partner’s’ lives, building great relationships and long-term loyalty. If they can make more money selling their coffee somewhere else then we encourage them to do so. We aren’t here to hinder progress; our hope is to recreate the landscape for this industry and help this struggling industry thrive.”