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INCAE research on Real Farmer Income™

A selling receipt allows AAA farmers
to cash the value of their crops

Factors affecting farmers’ net income

Between 2008 and 2010, INCAE Business School, the leading business school in Latin America, conducted studies of more than 600 farms within and outside of the Nespresso AAA Sustainable Quality™ Program. The aim of the project was to understand the different factors that affect farmers’ net income.

The study took place in seven growing regions across five AAA producing countries (Costa Rica: Santa Maria and la Giorgia, Guatemala: Huehuetenango, Colombia: Caldas and Narino, Brazil: Cerrado, Mexico: Ixhuatlan).

 

Study highlights

  • Most coffee farmers focused on sales price as their main driver of profitability.
  • In fact, productivity (or “yield”, the amount of coffee produced per hectare) was the key driver of profitability.
  • Most farmers were not aware of their key drivers of (or obstacles to) farm profitability.
  • The AAA Program was beginning to help farmers better understand and optimise their incomes.
  • While the price premium is the main reason why farmers join the AAA Program, they appreciate that their relationship with Nespresso supports higher coffee quality and leads to greater price transparency.

 

Real Farmer Income™: maximising economic and social value for farmers

The findings of this research project led Nespresso to develop a concept called Real Farmer Income™. 

Real Farmer Income ™ describes the Nespresso approach to implementing the AAA Sustainable Quality™ Program in a way that maximises economic and social value for farmers belonging to the program. It is a multidimensional approach that includes a global framework for improving coffee farm incomes, tools and instruments, pilots and specific projects and monitoring, surveys and studies.

Through the Nespresso AAA Sustainable Quality™ Program, Nespresso helps farmers to increase Real Farmer Income ™. The Nespresso approach is to focus on creating conditions to support producers improving their net income in different ways :
  • Paying premiums for introducing and maintaining farming practices leading to sustainable, quality coffee.
  • Providing security by making a long term commitment to farmers.
  • Supporting farmers with training and technical assistance to improve productivity and optimize costs through production efficiencies.
  • Co-investing in coffee growing projects and infrastructure to improve production processes, increase yields and optimize production costs.

 

Evaluating quality and price of coffee sample

Increasing farmers’ net income

The aim of the Real Farmer Income™ concept  is to increase and sustain net income for AAA coffee growers. It consists of four parts:

  1. A global framework that puts quality, sustainability and productivity at the heart of driving net income at farm level
  2. Key tools and instruments to implement the framework (for example TASQ™, Qualitivity™ training and support, technical assistance, price premiums)
  3. A series of pilots and specific projects in coffee growing communities (for example building a central mill, developing coffee tree nurseries, farm management and fertilization programs)
  4. Monitoring, surveys and further studies to ensure a process of continuous improvement

 

In parallel, Nespresso has initiated a partnership with INCAE to create sophisticated coffee farming models, including profit and loss accounts. It will enable Nespresso to better understand the key drivers of profitability, evaluate different scenarios, and simulate net income and economic value creation. These studies are essential for driving the implementation of the AAA program, today and in the future.

Nespresso Sustainability

     

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