Next time that you go to a Chick-fil-A restaurant, try one of its “cold brew” coffees. Back in the 1950s when Chick-fil-A and its chicken sandwiches were only a gleam in S. Truett Cathy’s eye, his restaurant had a sign posted, “Fresh Coffee Brewed Every Hour.”
As the restaurant chain spread through shopping malls throughout the country, the chicken sandwiches propelled a business that has grown to several billion dollars in annual sales. But the emphasis on coffee sat on the back burner.
Mr. Cathy, who died in 2014 at age 93, must be smiling down from heaven at the restaurants’ new coffee line, which has been ranked as a specialty-grade brand by the Specialty Coffee Association of America and is a hit with customers as it draws favorable reviews from restaurant critics.
Known as a devout Christian, Mr. Cathy is widely remembered for closing his restaurants on Sunday so that the employees could go to church and visit their families. He also taught Sunday school at the First Baptist Church in Jonesboro, Ga., for more than 50 years.
So he must be pleased with his son’s leadership in partnering with THRIVE Farmers Coffee establishing Chick-fil-A as the first quick service chain to offer specialty-grade coffee. Dan Cathy took over from his father as the chain’s chairman and CEO in 1993.
But, not so quick, senior Mr. Cathy’s heavenly smile may not be derived from the chain’s just being the first to offer the special-grade. Rather it’s probably derived from Chick-fil-A’s role in establishing the first farmer-direct platform providing the growers with a fair deal, and enabling them to earn up to 10 times more than farmers earn in traditional revenue models.
To find out how this is so, Global Atlanta traveled to San Rafael de Abangares in the Monteverde region of Costa Rica during a reporting assignment on the commercial and educational activities of several native Georgians in a country widely known as a tourist destination.
Once there, Global Atlanta met with THRIVE Farmers’ chief sustainability officer, Kenneth Lander, who has a story that would warm Mr. Cathy’s heart.
The former attorney and real estate developer from Morrow, Ga., had a successful law practice in Decatur and a self-proclaimed “good life” when he first settled in 2005 on his 12-acre farm in Costa Rica’s highlands. At the time coffee growing was a casual hobby sustained by a thriving real estate market in the Atlanta area.
That is until 2008 when he lost all of his investments to the recession. “All we had for survival was the coffee farm,” he recalled over a hot cup of coffee in his rustic home. In addition to his plants, he had a roaster and a processing mill. “There was a wide gap between what it could be and what it was.”
A first lesson was a rough one as he needed to support his wife and five adopted kids. Despite his many hours growing, collecting and processing the coffee beans, he found that even though his product was of a high quality and in demand, he collected only about 10 cents on the dollar.
The 6,000 to 8,000 lbs of green coffee beans that he was growing on his farm were roasted and sold for $30,000 on the demand side of the value chain. Yet his net profit on a good year was only $600. The small coffee farmers in his area make only about $300 a month and he quickly came to the conclusion that “being a small coffee owner was not a way to make a living.”
In keeping with the many chapters following in this story, Mr. Lander found a divine will at work when Alejandro Garcia entered his life. A fifth-generation Costa Rican coffee farmer, Mr. Garcia had seen his farming livelihood collapse in the early 2000s, sending him to Pennsylvania where he worked in a buffet-style restaurant. Having saved $40,000, he returned to rescue his family farm and upon meeting Mr. Lander the two of them commiserated about their fates and their dependence on a supply-chain that skimmed off the profits of their labor.
If they could only control the supply chain that siphons off the value of their crops, they reasoned, they had a chance of making a living. “Coyotes,” Mr. Lander calls those who can browbeat a grower to sell his crop at a low price because he has a cellphone and quotes the world prices when they are going down.
Developing trustworthy, person-to-person relationships and retaining ownership of their product would be essential elements in redefining the supply chain as a workable solution, they supposed. The main shift from the traditional supply chain under this model would be that the farmers wouldn’t release their raw beans into a volatile commodity market. THRIVE now retains the beans for the growers while making sure they control the roasting, packaging, exporting, marketing, distribution and sale of their crops.
Mr. Lander calls this approach “value chain modification,” which requires THRIVE to take the beans on consignment and track them through the entire process until the first cup is drunk. He estimated that roasted coffee at $7.50/lb. should return to the farmer $3.75 – seismic change.
Realizing that there might possibly be a way to alter the farmers’ downward spiral, the two consolidated four farms and decided to sell their beans to customers rather than to a cooperative. Thus was born the Common Cup, a small coffee shop where the beans were sold directly to tourists and other buyers. “This was not a grandiose plan for how we were to survive,” Mr. Lander said. “But we did develop a tribe of people that we marketed to.”
The rounds of emails and personal relationships began to work and the business began to take off. The increased demand, however, entailed producing more coffee and then getting the beans to customers, which all required more funding. Exasperated by his inability to find lenders, he decided to start his own crowd-funding campaign, calling on customers to lend him $35 so he could plant next year’s crop at which time he would pay them back. His solicitations earned him a total of $10,000 from 300 contributors, all of whom he was eventually able to pay back.
By the end of 2010 a viable business model slowly came into focus, but it was clear that it had to be scaled: the market had to be wider and the number of farmers greater.
Conceiving the process and actually putting it in place are two pieces of the puzzle that needed the input of yet another partner, who was on the brink of a life changing moment, this time not out of economic necessity but a desire to exercise his evangelical faith.
A veteran entrepreneur, Michael Jones had built the Implantable Provider Group (IPG) over the past 10 years that enabled commercial insurance carriers such as Blue Cross and Blue Shield of Florida to control the coordination, billing, replacement, tracking and other services for the health plans’ ambulatory surgery center networks that eventually became hospitals. Once a major investment firm partnered with IPG, he was ready to do something else.
As Mr. Jones contemplated his future, he went over possibilities with his father-in-law a long-time Blue Mountain coffee farmer in Jamaica who was as acutely aware as Mr. Lander of the inefficiencies of the global coffee supply chains and the difficulties for the farmers.
Mr. Lander said he had a “chance meeting” with Mr. Jones to whom he was introduced by a mutual friend. Having disrupted the medical device supply chain, Mr. Jones had good insights into how the coffee supply chains might be changed to help the growers. A three-hour Skype call between the two helped them understand the challenges allowing the farmer-direct market model to take shape.
Mr. Lander understood the necessity of producing a quality product through an “intimate process” of handpicking. The result of machine picking, he says, is the gathering of defective beans.
In collaboration with Mr. Jones, they eventually put in place a system whereby the farmers consign their beans to THRIVE Farmers, which in turn guarantees a firm price for the beans. Under the model, a farmer can now think long term without the insecurity of extreme price volatility. “We created an incredible amount of alignment in the value chain that had never been there before,” he said. “It can have an incredible impact on the industry.”
With the THRIVE Farmers model in hand, the next challenge was to grow not only the supply but the demand for their beans.
And once again divine will played a role bringing in another partner, according to Mr. Lander. This time it was Edgar Cabrera, who married into a coffee farming family in Guatemala which operates the San Miguel coffee operation. Seizing the opportunity to launch a chain of specialty coffee shops around the capital city Guatemala City, known as Cafe San Lucas, he connected the family coffee production directly to the consumer on a daily basis.
The annual Specialty Coffee Association of America meeting in 2013 was held in Houston, and naturally Mr Cabrera attended. It was there that he met Mr. Lander who had been expanding THRIVE Farmers across national lines and continues to do so including as many small farmers as possible.
This encounter is easily explainable in terms of their common interests. But less so was Mr Cabrera’s inability to sleep one night during the conference and his decision to switch on the hotel room television to pass the time. What came on was a documentary of Mr. Cathy’s life that made an indelible impression not so much because of the business success but rather because of Chick-fil-A’s underlying values.
Once again, as if by divine intervention, another soul was attached to the THRIVE Farmers’ initiative and Mr Cabrera now serves as its chief origin officer.
Meanwhile, THRIVE Farmers was getting some hot press. Mr. Lander recalled an article appearing in the Daily Gromet, an online shopping site and product launch platform for innovative and undiscovered products, in January 2013. In March, an article about THRIVE appeared on the front page of the New York Times. From then on there has been a virtual avalance of articles appearing in a wide range of publications from the trade press to the Huffington Post.
As if to come full circle, by August 2014, Chick-fil-A announced that it was offering THRIVE Farmers coffee in all of its outlets nationwide with one of its managers having had sort of an epiphany when he went to the company’s museum and saw that sign “Fresh Coffee Brewed Every Hour.”
Far from being the end of story, however, it has to be continually updated. Fortune ran an article about the success that THRIVE’s “cold brew” is having, doubling coffee sales despite the 18-to-24 hours required to allow the coffee grinds sit in water. And Chick-fil-A keeps coming up with mutations such as its “Frost Coffee” combining the “cold brew” with its “vanilladream” drinks.
And while Truett Cathy can only enjoy the success from on high, his son, Dan, is on the ground validating THRIVE’s human touch. On a recent visit to San Rafael de Abangares, he brought his trumpet and joined in a celebration with a local band.
How far THRIVE Farmers has come is clearly evident in its management team. With a seasoned board of directors, it now is taking on some of the larger social concerns and has launched a foundation that seeks to provide new educational facilities and housing opportunities for the farmers and their families and to provide stability to their activities so that the farms may be handed down through upcoming generations.