LA PERLA DE OAXACA

I N T E L L I G E N T S I A

DIRECT TRADE PARTNERS

DIRECT TRADE ORGANIC MEXICO

smallholder farms, Café San José Zaragoza | CEPCO

REGIONSanta Cruz Itundujia, OaxacaCULTIVARSBourbon, Typica, Mundo Novo

Dried Cherry, Blood Orange , Caramel

ELEVATION1700 maslHARVEST

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Dec 2017 - March 2018

mexico

Intelligentsia made its first direct purchase of coffee in 2002 from CEPCO, a smallholder cooperative in Southern Mexico. The organization soon became the source of La Perla de Oaxaca, our organic Mexico single-origin and a perennial favorite of Intelligentsia customers. CEPCO has been a Direct Trade partner ever since — 16 seasons and counting. The long-term relationship we have developed with CEPCO, however, obscures some fundamental differences in the ways we think about and approach coffee.

CEPCO believes in lot blending, combining thousands of tiny single-farm lots its thousands of members deliver every day of the harvest to produce larger, homogenized lots. It believes in symbolic quality, generating value for its members chiefly through organic and Fair Trade certifications that coffee drinkers can’t taste for themselves but rely on third parties to verify through inspections and

field audits. It distributes the premiums it earns from those certifications equally among its members as a reflection of its commitment to egalitarian ideals. CEPCO has historically cared more about the equality of its members than the quality of its coffee.

On every one of these counts, Intelligentsia’s beliefs and practices are diametrically opposed. We believe in relentless lot separation, convinced based on more than 15 years of Direct Trade relationships that segregating coffee by farm, harvest date, variety, post-harvest process and other variables represents the most reliable path to cup quality and higher returns. We believe that intrinsic quality customers can taste is the most reliable source of value for everyone in the supply chain. We are comfortable with the idea that farmers who produce quality coffee earn more than those who don’t, and in fact our model is predicated on it.

In other words, we privilege quality over equality unapologetically.

These are some pretty foundational issues. In fact, the gaps in the ideological underpinnings of archetypal Fair Trade cooperatives like CEPCO and Direct Trade pioneers like Intelligentsia contributed for many years to acrimonious debate in the marketplace on the relative merits of the two approaches. At origin, these philosophical differences combined with persistent operational differences to make mutually beneficial collaboration between many Fair Trade coops and Direct Trade roasters difficult to achieve and sustain. It is in some ways a wonder our relationship with CEPCO has endured as long as it has.

The success of our trading relationship with CEPCO has been rooted in the strength of the personal relationships behind it and the ability of CEPCO and its members to continually produce lots that meet our high quality standards, despite a system that was not created for this purpose. Over the past 16 seasons, CEPCO has succeeded in delivering clean coffees for our organic blends on a consistent basis, and produced coffees worthy to be released under the La Perla de Oaxaca banner nearly every year. Their success at the latter is a testimony to Oaxaca’s terroir, its traditional cultivars and the hard work of its smallholder growers, and was achieved even under a system not designed to optimize quality.

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Over the past 18 months, we have worked intensively with CEPCO’s leadership to introduce modest reforms that build bridges between our two models and help CEPCO and its members capture more value through quality, all while respecting the values of the organization. That work has focused in this initial phase on incentives for individual achievement. The success of the Direct Trade model is predicated on its ability to deliver on the promise of quality — to pay more for better coffee. Without such incentives, it is difficult to imagine growers committing to the labor-intensive practices required to optimize quality. The transparent incentive system with graduated premiums for quality that has been a bedrock of the Intelligentsia Direct Trade program for more than a decade has become a standard practice in specialty. But it represents a radical break with CEPCO’s collectivist creed and tradition of sharing premiums equally.

So we worked with CEPCO to devise a transparent incentive system in which

the quality premium we pay for each lot is split between the organization and the individuals who produce it. This approach only seems fair. The cooperative should share in the individual successes of its members, which would hardly have been possible without its collective investments in renovation, logistics, milling and marketing. We call it a “blended incentive” program, one that creates some incentive for individual achievement without undermining the cooperative structures smallholders in Oaxaca so desperately need.

This work has been deeply personal for me.

I got my start in coffee leading a Fair Trade program for a nonprofit. For four years, I worked with pioneering Fair Trade roasters in the United States and groundbreaking Fair Trade cooperatives in Central America. Then I spent nine years living and working with in Central and South America with thousands of smallholder growers and dozens of

roasters of all shapes, sizes and stripes. I was convinced by that work that both the farmer organizations that drive Fair Trade and the promise of intrinsic quality that is so central to Direct Trade are essential for the sustained success of smallholders: that the best hope for the future of smallholder coffee lies in the space where the Fair Trade and Direct Trade circles overlap in the Venn Diagram of specialty coffee. Our blended incentive initiative with CEPCO represents a deliberate, if modest, first step toward building bridges between two models smallholder growers in Mexico and everywhere need to thrive in today’s coffee market.

The first lot up in this year’s La Perla de Oaxaca Organic Mexico lineup comes from growers in the village of Santa Cruz Itundujia in the Sierra Sur who earned individual quality premiums this year for the first time ever.

- Michael SheridanDirector of Sourcing and Shared Value/

Green Coffee Buyer for Mexico