How social responsibility helped one coffee grower land a deal with Starbucks.
One day last December, Estuardo Porras flew above the mountains of central Guatemala in a helicopter, passing over picturesque Lake Atitlan and a steaming volcano on the way to El Faro, his coffee plantation. Ash from the volcano, Porras explained, makes the land ideal for growing coffee. The soil is not the only thing that makes El Faro special. The eucalyptus-lined path that leads to Porras's office winds past a medical clinic, a schoolhouse, and an HR office--facilities that are unheard of on most Guatemalan plantations.
When Porras founded El Faro in 1998, he knew he had to offer more than just beans to break into the high-end coffee world. To set El Faro apart, he created a plantation that blended traditional farming methods with sustainable agriculture techniques and a progressive culture. His main priority was to produce high-quality coffee beans while helping the struggling community and preserving the land. But Porras also had another goal in mind: landing a deal with Starbucks. "Since day one, we believed that a company like Starbucks would be willing to pay for the quality of what we were doing," he says.
Corporate social entrepreneurship--loosely defined as leveraging business smarts to achieve social change--is nothing new. In the past few years, however, the concept has become mainstream, as companies like Starbucks and Timberland seek out socially responsible vendors not only to provide quality goods but also to help create a positive image. Such partnerships, which are often made with businesses in disadvantaged communities or countries, supply corporations with instant social responsibility, says Edward Rogoff, a business professor at Baruch College in New York City. "They are not going to get a surprise story that they are buying something from a slave owner." By next year, Starbucks aims to buy 60 percent of its beans from farms that meet its social and environmental standards.
That's good news for Porras, who got serious about growing coffee while studying business at Pepperdine University in Malibu, California, in the mid-1990s. He was amazed by the high prices Starbucks was charging for a commodity that was once Guatemala's top export but had collapsed in value in the 1980s as cheap beans from countries like Vietnam flooded the market. When his family sold its Coca-Cola bottling company for $70 million in 1998, Porras suggested that they capitalize on the growing demand for arabica coffee, the kind used by high-end merchants like Starbucks.
That year, despite a chorus of naysayers insisting that Guatemala's coffee industry was dead, Porras borrowed $1.25 million from his father to purchase El Faro, one of the country's many abandoned plantations. Since then, the Porras family has plowed $3 million into the 1,882-acre farm, planting two million coffee trees and installing electricity and running water. The plantation mixes centuries-old traditions--most of the work is done by hand--and the latest agricultural methods. The water in which the beans are fermented is recycled, for instance, and pulpy casings from the beans are fed to earthworms to produce high-quality organic fertilizer.
Porras's labor policies are just as progressive. El Faro, which means "lighthouse" in Spanish, boasts a free company-funded grammar school for local children. The company buses older children to a nearby high school. After three months, employees qualify for free health care, provided by a full-time nurse and a part-time doctor at the plantation's infirmary, along with 15 paid vacation days a year. Workers make at least $7 a day--Guatemala's minimum wage--in addition to bonuses, and can air grievances with HR. El Faro has 40 full-time employees, most of whom live on the grounds with their families, and 200 part-time workers.
Still, it wasn't easy to grab Starbucks' attention. Porras sent several letters and coffee samples to the company's buyers. He eventually received a response, only to get "buried in red tape," he says. In the meantime, he sold beans to commodity exporters. Then, in 2002, his exporter in Guatemala City convinced two Starbucks buyers to tour El Faro. Impressed with what they saw and tasted, they placed an order on the spot, inviting Porras to enroll in a new program that grants long-term contracts to socially responsible suppliers.
Porras now sells every El Faro bean that meets Starbucks' standards to the company for $1.45 a pound, about 35 cents a pound more than the coffee fetches on the commodities market. Last year, El Faro, which now serves as one of Starbucks' model coffee growers, sold 400,000 pounds of beans to the company and posted $1 million in sales. Porras, who expects sales to reach $5 million by 2010, admits that tying El Faro's fortune to Starbucks is a risky move. To hedge his bets, he recently began growing macadamia nuts, which he sells to a U.S. distributor.
For now, Porras is squeezing everything he can out of Starbucks. Last fall, after buying a second plantation, he asked the company to invest $150,000, which he used to build 10 solar-powered houses and an apartment complex for workers. He also invited Starbucks' CEO, Jim Donald, to tour El Faro. "I saw an individual putting his heart and soul into resurrecting a farm that had been written off," says Donald, who now trades e-mails about coffee with Porras every week. At Starbucks' headquarters in Seattle, Donald displays a photo of Porras and El Faro's manager, Melvin Mendez. They are hugging an arabica coffee tree.
For tips on creating a socially responsible business, read Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause by Philip Kotler and Nancy Lee. Go to FastCompany.com for more stories about social entrepreneurship.