NCA Next Gen Interview with Gustavo Cerna of National DCP

By Nora Johnson, NCA Next Gen member and Commodities Manager at Massimo Zanetti Beverage USA

Nora Johnson, NCA Next Gen member, recently spoke with Gustavo Cerna, Senior Manager Coffee & Tea at the National DCP. Check out the interview below to learn more about Gustavo’s experience and his advice for fellow Next Gen members in the coffee industry.

The interview below has been condensed and edited for clarity with approval from the interviewee.

Tell me more about your background. How did you get to where you are today?  

Gustavo Cerna

I was born into coffee. My family started growing coffee in the 1990s after the civil war in Nicaragua. My dad had this idea that coffee would be a good business; he started with one farm, and that grew to 10 farms by the year 2000. It was a rough ride in the year 2000. I was young, a teenager, and that was when the coffee price crisis started. Over that time, coffee hit $0.46 per pound. That was when we [the family] really started getting involved in the business.

I was 15 years old and working on the exporting, doing the paperwork, gathering certificates of origin, going through customs, getting the quality analysis; that was what we had to do – we had to cut costs at $0.46 per pound. This experience allowed me to learn first-hand of the organization and the paperwork that it takes to get a container of coffee out from origin. I truly understand the great amount of work that happens at origin to get a container out, especially in countries where technology isn’t always friendly.

For me, going to a farm is almost like second nature. I know what is going on from the moment I step in – growing coffee, harvesting, fermenting, processing, going to farms every weekend – that was my childhood.

                My coffee journey then took me to other stages in the coffee supply chain. I started at Starbucks, working not on their coffee team, but as a demand planner. Working at Starbucks really gave me the full view of what happens once coffee gets to the roaster: what it takes to serve coffee at scale. All the things that happen in the middle – it’s incredible. From demand planning to supply planning to store development to the creation of the art on the bags; it’s a whole army of people working just to develop the concept and serve the cup of coffee to customers. My jaw dropped – this is what it takes to run a coffee operation. Sometimes, as coffee farmers, we forget that it’s not simple to serve coffee; there is a whole operation to serve coffee to consumers too. Yes, it’s a profitable business, but it also takes a lot of work: distribution, supply chain, roasting.

Gustavo at El Cielo farm.

I learned a lot there, and it was the moment in my coffee career the where I learned the breadth of the coffee industry. That’s where I explored other origins. I grew up drinking Nicaraguan coffee – a lot of farmers only drink their own coffee. Nicaraguan is my go-to, but now I have other coffees that I enjoy as well. It was when I learned to appreciate the coffee world outside of Nicaragua and how Starbucks really tries to deliver that story to the consumer, because at the end of the day, how you tell that story is also really important.

From there, I voluntarily left Starbucks to go to Cornell to get my master’s in Agricultural Economics. I was there for 15 months, but then I took a sabbatical from coffee and went into cocoa. I did cocoa for 2 years, then I saw this opportunity at Dunkin’ and went for it.

The business has changed so much from what is was in 1990, 2000, 2010. Now in the era of COVID, who knows what trends will stick. The business is upside down from what it was back when my dad started. Back then, consumers didn’t understand as much about coffee; now, the new generations have more clarity of where the coffee is coming from and they know what they want. There are more expectations for coffee: cup profile, ethical sourcing, how it is consumed. Cold beverages in coffee are king now.

There are more opportunities and more occasions for coffee, and that is giving consumers more power in today’s world. Origin diversity, sustainability targets – it’s great when consumer expectations and sustainability targets can meet. That’s my goal. At the end of the day, we can all be competitors, but if we all work towards something, it is a better coffee world and industry. All companies need to collaborate and work together to make a better coffee world. That’s why I took this opportunity – to take on this challenge.

Did you feel a pressure to stay in coffee?

I am the youngest out of four; my two older brothers still manage the farm and help my dad manage the whole operation. Generational relief had to be there – my brothers are great at doing that.

Gustavo and his father on a farm visit in 2014.

I didn’t feel that pressure. I am now using my knowledge that I gained there for the greater good in coffee. Someday I can go and apply what I have learned here back in Nicaragua. Coffee farmers need to understand that they live in a globalized world. Sometimes we want the best price for our coffee, but us farmers need to understand that it is going to be impacted by what happens in Vietnam, Peru, Kenya, etc. We need to be able to differentiate and create a product that is unique for consumers.

As the Senior Manager Coffee & Tea at the National DCP, what does your role entail? What does a typical workday look like for you?

I am responsible for working with our roasters to procure the green coffee that is needed for our Dunkin’-approved items. I work directly with five roasters to convert green coffee into the different packaging formats that we have. I also work with them to hedge that green coffee from the physical side and the futures side. Doing this requires having a good rolling hedge and a good strategy, determining how far out we cover for certain origins. I design that strategy and my roasters collaborate with me in taking those positions. It’s a constant work in progress. Outside of coffee, I also manage the tea side, which is a bit more straight forward than coffee as it is less volatile.

Finally, at the end of the day, I am responsible for ensuring that we have a constant supply within our DCs [Distribution Centers] in all formats. I need to guarantee that we have a non-issue supply chain from roaster to DC for roasted coffee from both a price and a supply perspective. 

What other commodities have you managed or traded? How did you best learn and get the skillset to be a successful trader? Have any tips for an eager trader at the front of his/her career?

                After Cornell, I went back to Nicaragua and managed a cocoa nursery. My goal was to start up a high-tech cocoa farm. Efficiency in production starts with having the right plant – in cocoa, by nature, you need to clone plants. It is a very diverse variety, so the seed is never the same as the mother tree. While there, I traded Nicaraguan and Ecuadorian cocoa.

Coffee people tend to only want to be in coffee. It’s always good to have a different perspective. The other non-soft commodities are more efficiently priced – coffee is in a gray area. In the other commodities, you also may have one major entity – like the USDA – regulating and controlling information. The softs are a world of their own – information is not clear, you must rely on on-the-ground information, and sometimes people don’t want to share information for that reason. My recommendation for any coffee person is to go work in another non-soft commodity. It will give you a different view on how risk is managed.

                In graduate school I really focused on derivatives. I also took some other courses with FC Stone [StoneX]. Since I was 12 years old, I’ve been watching the board [futures market] – I have always been interested in futures, how coffee is priced, and what goes into it. School gave me a great foundation; I still use it in my day-to-day work. Take a course on options and derivatives – I learn something new every time I take a course on something like that.

Sustainability is a critical topic in coffee, and there are so many facets to what sustainability looks like. Given your background and experience across the supply chain, if you could unite the industry around one or two main areas in sustainability, what would they be and why?

                We try to focus on all things sustainability, but at scale, we need to focus on one issue and that should be transparency. If we don’t know how our dollars are flowing from destination to consumer, then we don’t know what decisions to make. Transparency will tell us how efficient our supply chain is and where the farmer needs the most help.

We can’t just have data that gets thrown out there either. We need more tangible methods on how to tackle it. Once we know the issue to focus on – what steps do we need to take next? Do we contact a breeder? Is it a better soil management program that is needed by the farmers?

Let’s nail down one category and one subcategory and let’s tackle it one at a time with the category being reestablished on an annual basis. What we identify also needs to be the result of a group consensus in order to do it at scale, or else we are on a hamster wheel, and will revisit the same issue again in 5 years.

You mentioned your graduate degree in agricultural economics. How has what you learned in your graduate program impacted your career or supported you in your various roles?

                I learned a lot, particularly about agricultural optimization and what that means for a farmer in Kenya to a corn producer in Iowa. You evaluate the decision factors that these different people have and what their decision trees look like. Cornell provided me with an opportunity to understand the decisions that different farmers make based on different factors, their location, etc. This was very well suited for coffee – it helped me understand how decisions are made on a case-by-case basis, for instance, how to compare a corn farmer in Iowa with a coffee farmer in Brazil.  Cornell also had a wide range of paths and programs. I chose to go on a deep derivatives path combined with a focus on understanding farmer rationale and resource valuation. These two areas provide great value for both sustainability and futures trading.            

If you could change anything throughout your career path (i.e. timing of an event, more experience in a related area), what would it be? (No regrets, of course!)

                If I had the opportunity, I would not have left Starbucks to do my master’s full-time at Cornell. If there was a way, I would have remained at Starbucks while going to school.

                I also would have traveled more to other origin countries. I still want more experience with Asian coffee production. I would’ve liked to start that process earlier than I did. You don’t want to get too obsessed with the countries you regularly go to – from an origin diversity perspective, it would be great to experience these other origins and get a better understanding for how they make decisions based on their socioeconomics.

Based on your career experience, what skills do you look for in a strong leader or manager?

                Somebody that can listen. Listening skills are key – not just someone that hears you, but someone that absorbs and synthesizes what you said. Overall, the rest of the work will happen, but if you don’t listen to what people say and transmit that to others, it’ll be very hard.

COVID has required that we all adapt to working differently. Are there any changes or adaptations that you have made that you think will remain, even in a post-COVID work world?

                I think it is all connected – work from home is giving consumers more power, particularly when it comes to coffee. Consumers can now say “I like what I tried last time at the store, and now I am going to buy it again.” On top of that, this behavior is coming at a savings to consumers and more profit to farmers.

                Consider Colombia – Colombia has invested significantly in their marketing, name, and reputation. Consumers associate Colombia with good coffee – more people are drawn to buy Colombian coffee. That’s great – Colombia coffee has established this direct relationship and awareness from consumers. It is a differentiating factor in the market. Other origins will also have more direct contact with consumers now that consumers have more options in choosing what to brew at home.

What advice would you give to a fellow Next Gen candidate working in the coffee industry?

                For someone that is just getting started in coffee, be open minded – don’t think that coffee is everything. Be aware of trends that are happening in other categories. Try to explore and knock on the door of other decision makers if you are interested in something. Coffee careers and jobs aren’t often widely publicized – talk to people outside of your company and listen to the problems and opportunities that others are facing. You will definitely learn something new; don’t turn down an opportunity to learn something because you think you know everything.

                For people that have been in the industry, sometimes we need a break from coffee. It’s okay to take a break from coffee – post-COVID, travel, meet people in different parts of the supply chain – it will always benefit you in the long run. In coffee, we are fortunate to have this continuous learning experience. It is grown in so many countries that there is really no excuse not to learn.

                Don’t be afraid to speak up – being the young generation in coffee, it is easy to be intimated, but we have a unique point of view being from another generation, so don’t be afraid.   

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