Westrock Coffee Chases ‘Social Impact' in Rwanda

by Kate Knable  on Monday, Feb. 4, 2013 12:00 am  

When Scott Ford, former CEO of Little Rock’s Alltel Corp., founded Rwanda Trading Co. in 2009, he was still a telecom guy. Now he oversees a growing African coffee business.

Ford created Westrock Coffee Holdings, owner of his current African coffee companies, after negotiating the $27 billion sale of telecommunications company Alltel Corp. to Verizon.

Ford was involved with a school for orphans in Rwanda for several years prior to going into business there, according to Todd Brogdon, CEO of Westrock Coffee Holdings.

When Ford looked to invest in Rwanda, he had already developed relationships with the country’s president and other leaders. Westrock Coffee Holdings owns:

Rwanda Trading Co., which buys coffee from Rwandan farmers and sells it to roasters;

Westrock Coffee, a coffee roasting and packaging company in North Little Rock that is one of Rwanda Trading Co.’s customers; and Tembo Coffee Co., a new coffee-exporting venture in Tanzania.

About 15 percent of Westrock’s roasting business involves delivering its product to offices and industries.

Scott Ford, who was not available for an interview, and his father, Joe, own Westrock Coffee Holdings. Scott Ford knew a lot about duopolies and noticed there were only two major coffee traders in Rwanda’s immature coffee market.

“A third player is what you need to keep everyone on their toes,” Brogdon said.

Ford started Rwanda Trading Co. with goals to work closely with and improve the lives of Rwandan coffee farmers in an economy still recovering from the 1990s genocide.

“We wanted to be a part of a business that would have a tangible impact on the poorest of the poor,” Brogdon said. “A lot of people are good at charity. We were about setting up a sustainable for-profit that gets access to the farmers.”

The roasting company, Westrock Coffee, was a natural fruit of the trading company. Westrock Coffee also buys coffee from traders in Brazil, Guatemala, Mexico and Vietnam.

‘A Very Bold Move’

During its first year in business, Rwanda Trading Co. gained a market share of 15 percent, Brogdon said. In year two, the trading company was profitable, he said. By 2012, the trading company bought more than 5 million pounds of coffee from Rwandan farmers.

While Brogdon wouldn’t reveal any financial data, the International Coffee Organization’s price-tracking system suggests that even the cheapest raw or “green” coffees cost at least $1 per pound. ICO data also shows that Rwanda’s coffee production has bounced around from 34 million pounds in 2009 to 53 million pounds in 2012.

Westrock Coffee began roasting Rwandan coffee in North Little Rock in 2010, where the plant currently employs 15 people. Rwanda Trading Co. is now Rwanda’s leading exporter of premium coffee, and Westrock’s coffee is sold from the shelves of more than 1,000 Wal-Mart and Sam’s Club stores across the U.S.

Next, company leaders want to expand export market share to 25 percent in Rwanda and develop operations in other countries, with Tanzania being the first new foray, said Matt Smith, managing director of Rwanda Trading Co.

“The one thing I have to say about the team at Westrock: They came into this with no knowledge of coffee,” said John DeMuria, managing partner of coffee merchant Volcafe USA LLC. “The knowledge that they’ve gained and the professionalism that they’ve gained is just phenomenal. … For a company like Westrock who has no coffee background whatsoever to go into a country like Rwanda and start a coffee export company is a very bold move.”

Volcafe is located in Somerset, N.J., and is a subsidiary of ED&F Man, a worldwide specialist merchant of agricultural commodities. Volcafe has purchased Rwandan coffee from Westrock since Westrock’s beginning, and Westrock is now Volcafe’s sole supplier of Rwandan coffee.

Rwandan coffee was well known in Europe when the Fords began exporting it, but the coffee was not used commonly in the U.S., DeMuria said.

“There was a need for someone to bring more exposure to the country and the origin in the United States. That’s part of their success,” he said.

The Business Model

Helping trading company employees and the coffee farmers improve their lives while operating a consistent, ethical business is key to Rwanda Trading’s business plan.

“I wouldn’t call it a social business, but it’s a business with a very positive social impact,” said Smith, who works in Rwanda. “A lot of our decisions aren’t financially justifiable.”

For example, the company provides extension services to the farmers without requiring the farmers to commit to working with Rwanda Trading.

Rwanda Trading Co. buys coffee beans from about 75,000 farmers in the East African country.

The company spends about $50 per farmer per year on basic agronomy training.

“We do it because they need to earn more income off of the small amount of land and the small amount of coffee trees they have,” Smith said. “There’s really a lot to be taught. There’s a huge knowledge gap in farming practices here, and really across all of Africa.”

The company’s hope is that the farmers will improve their crops as they learn about fertilizer application, organic mulching, pruning and harvesting techniques, Smith said.

As the farmers improve their crops, the trading company can pay more for it.

Essentially, two qualities of coffee come out of Rwanda, based on how the coffee is harvested and cleaned, Smith said. About 70 percent of the coffee sold from Rwanda is called “ordinary,” and it’s used in cheaper coffees like Folgers.

“Fully washed” is coffee delivered to traders the day it is harvested, processed at washing stations and later used in premium coffees. Fully washed coffee gets sold to the likes of Starbucks and Westrock uses it for its premium, Westrock Coffee-branded coffees.

The trading company employs 85 full-time workers, including an agronomist and 20 field agents, and 250 seasonal workers. All but about five of the in-country employees are Rwandan.

The 20 field agents train individual farmers, who in turn train 30-50 other farmers.

The trading company also operates four washing stations in Rwanda.

“We’re already known as a good specialty source from Rwanda, because that’s been our focus since day one, and we’re going to continue that route,” Smith said.

Westrock is nurturing the premium coffee industry in Rwanda because with that coffee “more of the value stays in Rwanda,” Smith said. “On the retail end, you make the same amount whether it’s ordinary or specialty. The margins stay pretty fixed all the way through the supply chain.”

 

 

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