How SACCO rose from pulping to exporting processed coffee

Coffee pple sortingWhat started as a modest hand pulping coffee venture by a farmer group in Nandi County has metamorphosed into a fully fledged processing facility which now exports ready made coffee and more than doubled smallholder earnings, at a time when lack of value addition in Kenya has denied coffee farmers billions.

With 40 founding members, Toroton Farmers Cooperative Society was registered as a cooperative in 1991. Despite registering the new cooperative, members continued to deliver their produce to other cooperatives as their new entity did not have the infrastructure required to collect and process coffee.

In 1993 however, Toroton farmers decided to start collecting and marketing their coffee as mbuni (unwashed coffee). This continued until 1995 when a local councilor donated a hand pulper to the cooperative. The pulper was situated at a central location where each member used to go to manually pulp their coffee, before carrying it back home for washing and drying. The cooperative then collected dried parchment for onward bulking, milling and marketing. All through this time, Toroton FCS continued to see a steady rise in membership as more farmers established coffee farms in the pristine highlands west of the rift valley.

Home processed coffee however posed several challenges to the young cooperative. Hand pulping was a tedious affair as the farmers spent hours queuing, waiting to pulp their coffee before carrying it back home for washing. Each farmer washed and dried their coffee at home resulting in uneven quality of coffee delivered.

Home processing also posed a serious environmental challenge as parchment was often washed directly into the river. Comments such as “musty”, “under-dried” and “over-fermented” were common in Toroton’s quality reports. For 15 years, Toroton collected and marketed home processed coffee. As coffee incomes dwindled, the farmers grossly neglected the coffee leading to a downward spiral in quality and price. To meet immediate financial demands, some farmers even sold part of their parchment to hawkers, disposing their produce for less than half of the market value to illegal dealers.

In 2005, Toroton FCS developed a strategic plan which envisioned a central processing facility. “We were tired of hand pulpers and dreamt of a central factory that could process and preserve the quality of our coffee, and be free to do other activities,” says David Sang, treasurer, Toroton FCS. “It has not been an easy journey setting up a processing facility. We approached several banks for financing but were turned down because we did not have an active financial history and some institutions even required us to provide substantial collateral which we did not have at the time,” he recalled.

“We were disillusioned. The reason we had low quality and low turnover was because we did not have a processing facility yet this was the reason the financier’s turned us away,” explained Sang. Though Toroton farmers were not satisfied with their situation, business-as-usual continued until 2009 when the farmers pursued a partnership with TechnoServe Coffee Initiative.

As Sang says, “TechnoServe officers were in our area looking for potential cooperatives to take part in their project. They explained that this would entail business and coffee quality training for management, farmers and factory staff. They told us that we would have access to business advisory services and financial linkages. I remember the chairman grinning when TechnoServe introduced the project to us. It was like a dream come true.” “Our entry into the project was not automatic,” adds David Tanui, chairman, Toroton FCS. “We were subjected to an interview process and feasibility study before we could join the TechnoServe Coffee Initiative Project.

It was not until November 2009 when we entered into a formal agreement, where they offered to provide technical and business advice and we were required to invest in our business and offer leadership in a sustainable and transparent way, while implementing the various action plans we jointly agreed on.” The leadership and members of Toroton seized the opportunity to work with TechnoServe and quickly developed a cordial working relationship with their newfound partner. A need assessment identified the need for a centralized coffee processing facility and the requirement to train members, staff and leadership as integral to production of high quality coffee and subsequent higher incomes to farmers. TechnoServe scheduled a series of engagements with Toroton FCS leadership and members to tackle these priorities, leading to the development of a comprehensive training program for Toroton FCS staff and management, and the development of a detailed business plan for the Centralized Coffee Factory.

Sang continues: “From the business plan, it was clear that our reserve funds were sufficient for construction activities but we had to seek additional financing for the pulping machine and initial operations. We jointly pitched the Business plan to ABD and SMEP describing the investment and repayment plan.”

Results have been impressive. Uniform quality has been achieved through central processing by trained staff. For the first time in history, Toroton produced a class 3 coffee in 2010, up from an average class 7 coffee in previous years. Production increased by 25 per cent from approximately 72,000kg in 2009 to 90,000kg in 2010. Payment to the farmers nearly doubled from Sh48 per kg/cherry in 2009 to Sh88 for the 2010 season.

“For the first time, Toroton produced class 3 coffee up from an average class 7 coffee, production has increased by 25 per cent, and payment to the farmers has nearly doubled.” Farmers have more confidence in the cooperative proved by a steadily rising increase in membership from 220 members in 2009 to 330 members in 2010.

A substantial amount of the farmers’ time and energy that would have been spent rotating the hand pulper has been freed for other activities. Central processing is much faster and Toroton FCS is able to deliver produce for marketing much earlier than in the past, enabling the farmers to maximize favorable market conditions.