Logistically Speaking, Part 1: Meet Don Pisano, Logistics Guru President of American Coffee Corporation

By Nora Johnson, Commodities Manager, Massimo Zanetti Beverage USA

Where is that container of coffee?”

Don Pisano

Chances are, if you work for a green coffee importer, exporter, roaster, or warehouse, you have either been the one asking this question or the one being asked this question. This answer to this question lies in a fundamental aspect of the coffee trade and supply chains everywhere – logistics.

Given the events of the past fifteen months – a global pandemic, a container shortage, record-breaking container demand, port congestion, blank sailings, a blockage of the Suez Canal, a rare freeze in Texas, the hack of the Colonial Pipeline, and a strike in Colombia, just to name a few – supply chains have been faced with numerous challenges.

For the inaugural piece of the ‘Logistically Speaking’ interview series, Nora Johnson, Commodities Manager at Massimo Zanetti Beverage USA (MZB-USA) and NCA Next Gen Council Member, sat down with Don Pisano, President of American Coffee Corporation and renowned leader in logistics.

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

Tell me about your background and career. How long have you worked in coffee, and how did you find yourself in logistics?

Don: I got into the commodities business back in 1976, working for a British firm handling insurance and claims. They were trading cocoa, coffee, and tea, but they were bigger in cocoa than coffee. I worked for them for about three years, then moved over to the logistics field. I then spent the rest of my career in coffee, apart from a four-year stint with the Sugar Division of ED&F Man. That was right before I joined American Coffee and the Hacofco Group. For 38 out of 45 years I was strictly in coffee. I was glad to get back to coffee, that’s for sure – coffee is an engaging industry, everyone likes to talk about coffee – it gets in your blood and you build a lot of relationships.

As the President of American Coffee Corporation, do you still find that logistics has a role in your everyday job?

D: I am an admitted “logistics geek,” but you can’t really separate logistics from running a company. The commodities business is supply chain and it just so happens that the product that we are dealing with is coffee. Coffee is unlike any other industry, but at the end of the day, it is supply chain – logistics is supply chain and it is a key part of the overall business.

There are constantly decisions that need to be made and dealt with whether it is on the origin side or on the US/Canada side. I am very fortunate to have the logistics background and I think the company is served well by it. Any senior level person should have at least a knowledge of the processes and an understanding of what it takes to get your product delivered whether it be an agricultural product or a finished good.

Don Pisano at the Port of Virginia

From the NCA to the GCA to the National Industrial Transpiration League, you have dedicated yourself and served in so many capacities throughout both the coffee and logistics industries overall. What kind of topics would these different committees address for the industry?

D: Each role is quite different, but they are all related.

For the Green Coffee Association [GCA Logistics Committee (Chairman) and GCA Board of Directors (Board Member)], we have dealt with all things related to coffee movements, from U.S. Customs and FDA issues to ocean, truck, and rail transportation, to warehousing issues, cargo insurance, and more. The GCA Logistics Committee currently has around 29 members representing companies across the coffee supply chain – we span the full gamut, and it represents a significant portion of the GCA membership.

We have published a number of industry best practices over the years. These have been widely distributed to the membership and outside the membership. You can still find these on the GCA website.

The National Industrial Transportation League [NIT League Board of Directors (Board Member) and NIT League Ocean Transportation Committee (Former Chairman)] deals with everything transportation. We work with regulatory agencies, Senate and House Committees, the Federal Maritime Commission, the Surface Transportation Board, and the Department of Highways. The League acts as the voice of the shipper. Members range from small shippers to the likes of Cargill, Nestlé Purina, and Exxon Mobil.

I had the privilege to serve 2 terms, 6 years, as Chairman of the NIT League’s Ocean Transportation Committee. Internationally, NIT League is a member of the Global Shippers Forum. Based in London, the Global Shippers Forum represents various national trade associations from around the world. It is a recognized NGO and deals with issues in front of the United Nations, International Maritime Organization, and World Customs Organization. It is a privilege to serve them. Recently, the NIT League has been dealing with demurrage and detention issues, working with the National Retail Federation, and right now, we are drafting proposed legislation to revise the U.S. Shipping Act of 1984.

The Warehouse and License Committee of the NY Board of Trade [Warehouse and License Committee of the NY Board of Trade (Former Chairman)] provided oversight of the companies and individuals that were licensed to store or perform services on behalf of the Exchange for both coffee and cocoa (and wood pulp products at the end). Over the years, the Warehouse and License Committee enhanced the warehousing, storage, and insurance requirements to ensure that the performance of the licensed warehouses and companies kept the contract [futures contract] liquid. This committee has since been brought in-house within the ICE.

While with the National Coffee Association Logistics Committee [NCA Logistics Committee (Former Chairman)], we were working more directly on coffee regulatory issues, whether with Customs, the FDA, all the FSMA regulations, and various other issues. 

Can you elaborate on your experience with the NCA Logistics Committee and the work you did with FSMA (Food Safety Modernization Act)?

We addressed each of the 7 regulations that resulted from FSMA. The FDA created 7 different regulations over a period of years addressing the different segments that would require a regulatory authority over them. The NCA weighed in on all relevant regulations that applied to coffee to make sure that coffee was being treated as a raw, agricultural product as opposed to a finished product. Green coffee is processed prior to consumption, so it must be treated differently than other finished products. We also worked with the Scientific Advisory Committee and other NCA members to come up with the Hazard Analysis Template that the industry could use as a guideline.

Would you recommend that up-and-coming coffee professional get involved early on? How would one go about that?

I definitely would – the coffee industry is going to face many challenges and opportunities, so I would encourage each of you to get active and get engaged in efforts that would provide benefits to your careers and your companies and the coffee industry at large.

The coffee trade associations are always looking for volunteers – reach out to any of the associations and look out for requests for volunteers for the various committees (note: your company must be a member in good standing to participate). Check out the associations’ websites, look at the various committees, and see what best aligns with your discipline, role, and interests. As long as your company and your immediate superior supports you, reach out and volunteer your time to serve.

You will benefit, your company will benefit, and you will get knowledge of the issues that are being faced throughout the trade. You are then better equipped to deal with those issues. At the end of the day, the industry is still very much based on relationships. It is well worth the investment of your time.

This might be the toughest question of them all…! Can you walk us through and characterize the logistics crises of the last 15 months? What has the past year in logistics looked like from your perspective?

D: The crisis was the COVID pandemic. We’ve been treating the logistics dilemma as a crisis, but really, it’s more the consequence of that crisis and lock downs, and a tough challenge for our supply chain. In my career, this has probably been the most difficult challenge and certainly the most costly one. The sheer volume of trade has overwhelmed the existing network capacity. There is currently insufficient equipment – insufficient containers, trailers, vessel space, rail and truck capacity, and even drivers – it has been extremely difficult.

Going back to the early stages at the beginning of 2020, there was excess capacity in the market – mostly on the ocean side – but there was more than enough capacity. Then COVID hit and everything plummeted, but once people repositioned themselves at home, there was a surge in demand. Then you had an influx in spending with stimulus money and a surge in spending on PPE and medical equipment. Between electronics, consumer purchases, and medical equipment, the demand was tremendous. The carriers were fairly slow in getting their capacity back online. Ships were at anchor, idle, because the carriers didn’t want them to be sailing at 50% capacity. When things started to move, they were slow to get capacity back into the market. Then, the demand just outstripped any increase in capacity. It got bad in the fall, then it got worse, and it has remained extremely tight. Many of your traditionally containerized commodities are now even being shipped in break bulk as in years prior.

Right now, it’s a struggle to find capacity. The last round of stimulus enacted in March has prolonged the challenge of getting enough capacity back online. Personal savings has been at an all-time high, consumer debt was at a very low level, and governments were still rather restrictive on the services sector at this time, so people continued to spend money on electronics and durable goods.

Coffee competes for capacity against other products of higher value. The value of the freight versus the value of the goods within the container is more bearable for these higher valued goods (electronics, furniture) than what you could bear for coffee or another agricultural product.

Now, with the lifting of the restrictions on the hospitality sector, you are starting to see a narrowing in the gap between consumer purchases of goods and spending on services. As this gap narrows, there should be less money to be spent on the purchasing of goods and supplies. I am remaining optimistic and hoping to see capacity start to improve towards the latter end of the fall though this may not lead to any immediate reduction in freight rates. As they say, live in hope, die in despair!

Do you think that the happenings of the past 15 months have transformed the logistics landscape forever? In other words, do we have a “new normal” for logistics practices moving forward?

D: It has definitely highlighted the importance of logistics departments and personnel at just about any company that has to deliver a product – this is a good thing. I think that companies will reevaluate their supply chain partners, how they contract with their carriers, and whether they have enough options to choose from when times get tough in addition to considering upgrades to their systems to manage their supply chains. I also think that manufacturers, warehouses, and distribution centers will look at what they need to do in-house to become “shippers of choice.” This would make life better for our truckers – oftentimes, the trucker gets little consideration at some facilities. Becoming a shipper of choice where they [the trucker] know they will be treated with respect will count.

I’m not sure the term “new normal” would be appliable to the logistics industry since it is perpetually changing. You get a “new normal” every other day.

Of your entire career, what was the most memorable logistics crisis, event, or time that you experienced?

D: Honestly, there are many difficult periods that I’ve had over a long career – many that I would prefer to forget! – but for the coffee industry in the U.S. and myself personally, Hurricane Katrina in 2005. It devastated New Orleans and caused significant damage to warehouses, the port, businesses serving the coffee industry, and of course, it was a huge loss to coffee stocks that were stored within the port warehouses.

At the time, I was Chairman of the Warehouse and License Committee, and together with their VP of Operations, we went down to New Orleans to report on the conditions, expected losses, and the recovery efforts. We stayed on a Naval vessel as no hotels were available. I was equally as awestruck by the scope of the devastation that was inflicted on New Orleans as I was by the dedication and perseverance of our many friends in the industry. After ensuring that their families were safe, had survived, and were cared for, these people looked first at protecting the hundreds of thousands of bags of coffee that were stored in their facilities. The facilities were severely damaged – half a roof and side walls missing – it was incredible. They then had to work to repair the facilities and deal with the damaged product in an effort to recover and preserve as much of it as possible and as quickly as possible. By reporting on these efforts to the Exchange we helped to stabilize the market volatility that was caused by the storm and allowed for a rational and deliberate path forward which benefited the coffee industry and the great people and businesses of New Orleans.

I saw this first-hand – it was remarkable how they persevered and recovered.

What would be your best piece of logistics-related advice for a “Next Gen-er” working in the coffee industry?

D: In general, reach out beyond your desk and your office perimeter. Challenge yourself and expand your sphere of influence. You always want to be part of the solution, not the problem. Volunteer your time (whether it is within your company or within trade organizations) and build your network with professionals inside and outside of the coffee industry. Broaden your knowledge, elevate your career potential, give yourself different dimensions, get involved in your community, and make your life more interesting. Find a mentor, someone who you trust that will have your best interest at heart. Importantly, remember that it is always best to build your network before you need it! 

Coffee and Chat with Alejandro Lozano Rojas of EXPOCAFE

Bent Dietrich, Trader at American Coffee Corporation and NCA Next Gen member, recently sat down with Alejandro Lozano Rojas, Manager of marketing and Innovation at EXPOCAFE S.A., for a discussion on his background and any words of advice he has for aspiring young coffee professionals.

Alejandro Lozano Rojas
  • Let’s start at the beginning. How did you start your coffee journey? How did you start at Expocafe and what made you decide that coffee is what you wanted to pursue?

I started as an independent businessman, broker and advisor for international business (import and exports) in the Colombian market. In 2005, I was ready for a journey to the UK but Mitsubishi Corporation recruited me as a coffee buyer in Colombia, for the Japanese market. That marked 5 very intense years of learning the coffee trade and many other products. By the end of 2010, my chapter with Mitsubishi closed. It was during a vacation in Europe when I was contacted by Expocafe to become a coffee trader. The ten years since has been made up of incredible experiences and continuous learning in the world of coffee.

  • Since you started working at Expocafe in 2011, what would you say have been the biggest changes you’ve seen in the industry, on both the customer side, and also within Colombia?

Shifting from mainstream to 100% certified, I would say coffee drinkers around the world are thirsty to have more stories about coffee and better understand how they participate and consume sustainably. There is still work needed in solving problems the market cannot address. Colombia is shifting from just great quality to a leader in terms of sustainability and innovation. I still remember when the Scandinavian market was purely commercial and now it is interesting to see them shift to 100% certified coffee.  Also leading this change is the growth in specialty shops and the boom of micro-lots.

In Colombia, farmers are very open to change and ready to adapt. They want better farms and more income. They have and will continue to adopt modern technologies, be better informed and better connected.

  • Expocafe is known for their ties to local cooperatives. Can you please elaborate/explain your structure, and what makes you different?

Bent, this is such an interesting topic for economic theory. Basically, thousands of coffee growers in Colombia, let’s say roughly 77,000 out of about 540,000 are members of 33 Cooperatives. These Cooperatives make transactions with members and non-members accounting for about 30% of the total Colombian coffee output. Under this baseline, Expocafe S.A is owned by the Cooperatives and trades about 30% of this grand total, in this sense our channel trades roughly 9% of the total coffee exports of Colombia, in its majority differentiated coffee (total about 1.1 M bags 70Kg).

With this you can see, how complex and interesting our network to build this coffee economic system can be.

  • With that in mind, are there any special projects, initiatives you are particularly proud of on the sustainability front?

As about 80% of our portfolio is traded as differentiated coffees (certified, verified, Direct Trade, origin, micro-lots and preparation among others), we believe we are mature enough to build new initiatives to innovate and integrate resources with other players in the national and international economy. Our new venture in sustainability is named WRM (Water Resource Management – The Blue Coffee Bean). This represents the ethics of virtues to generate manageable projects, and to support highly vulnerable coffee communities such as children, indigenous, women and those in high poverty region, to name a few. The core is to first approach the person behind the coffee and help give access to basic sanitation, reduce water pollution in coffee processing and increase education among others.

Through this, we can help develop their capabilities to produce value added coffee (for example as certified coffee, or premium demanding specialty lots).

  • In your opinion, what should your customers (trade/roasters) be doing differently in their approach to promote sustainability? What steps can we take to improve the industry as a whole?

Sustainability is part of the business but should not be negotiable. Integrative vs distributive, changing the world starts solving problems at the source.

Origin is not a utopia. The new reality of Covid demonstrates how basic sanitation is still the key to survive.

The industrial revolution occurred in 1780 and after 240 years, many industries are still searching for a way to be environmentally friendly, to improve the world we live in. The environmental challenges are no longer just ideas, these are real threats.

Businesses should now be thinking about building wealth through elevating living standards (Conscious Capitalism). 

We should be starting discussions on sustainability from the bottom-up, not top-down. Sustainability initiatives should grow from discussions had with producers, and expand from there.

  • Since this interview is targeted for the NCA Next Gen, where do you see the industry in 10-20 years? What changes do you anticipate in Colombia (farmers/coops or anything else) and with your customers?

Cooperatives at the end will strengthen their operations as an expression of the local culture’s needs and desires. We will have coffee growers who will use the latest technology in their farms (solar panels, smart systems to clean water, smart soil fertilization) and generate their own food. Data will be collected from the farms, and the whole value chain will be more sustainable and transparent. In this sense, 20 years Juan Valdez will be recalled for growing the best coffee and the most sustainable one. In other words, we should be the Tesla of Coffee.

We will see stronger commitment from the industry and other stakeholders, to help make this dream come true.

  • What advice would you give an NCA Next Gener?

When I joined Expocafe in 2011 I attended my first NCA (that year was the NCA’s 100th Anniversary). With this in mind, I believe you are the ones who will write a new book. To Next Gen members, I would advise you all to unite forces and work on small projects origin. Build it up it from A to Z, suffer through it, manage it, make it come true and market it. You will enjoy the experience, and learn the values of the coffee chain.

  • How has the NCA helped Expocafe? What value does it provide?

The NCA is a great example of how an industry should perform and grow. For Expocafe, we find it to be the best network, information, and regular updates about the coffee industry. The friendships it facilitates.  All this shows how the coffee world is more than just business. It’s about community and relationships.

  • If you had to pick a favorite coffee/prep, what would it be? (Correct answer is anything traded through Hacofco 😊 )

I like tinto campesino. It’s black coffee, sweetened with sugar cane. It reminds me of good times with my father on our farm. When I’m at work, I enjoy an espresso. Now that I see the two faces of the business (commercial and sustainability), it’s a gratifying experience to drink a coffee I know benefits the coffee growers in our value chains

Origin Spotlight: Ethiopia

By Alma Likic, Marketing Manager, PLITEK and NCA Next Gen member

Recently, Alma Likic, Marketing Manager at PLITEK and NCA Next Gen member, interviewed Yisehak Awel, a third-generation coffee grower and exporter from Mullege Coffee, for a discussion about the history of his company and the current coffee growing situation in his home country. 

But first, a little history about Ethiopian coffee:

Ethiopia has long been considered the place of coffee origin. According to legend, a goat herding monk noticed that when his herd was nibbling on the bright red berries of a certain tree, they became more energetic (“jumping goats”). The goatherder chewed the fruit himself and confirmed his discovery, which he then shared with others at the monastery. The rest is history: Word of this energizing bean spread, and by the 15th century, coffee was being sipped across the Arabian Peninsula, making its way to Europe by the 17th century and soon spreading around the world. To this day, coffee is critical to Ethiopia, accounting for 70% of all its export revenues and employing 15 million Ethiopians.

The flavors of Ethiopian coffee are notably diverse – from citrus, bergamot, and florals, to candied fruit and even tropical fruit flavors. It’s principle coffee-growing regions can be divided into the following: Sidama/Sidamo, Harrar, Yirgacheffe, Limu, Jima, and Ghimbi/Lekempti.

There are three coffee production systems used in Ethiopia: Forest Coffees, where wild-grown coffee is harvested by the local population; Garden Coffees, grown in small holder plots around homestead or other dwellings along with other crops; and Plantation Coffees, a very small percentage of Ethiopian coffee, grown on large estates.

The following interview with Yisehak Awel has been lightly edited and condensed for clarity.

Yisehak Awel

How did Mullege Coffee come to be?

My grandfather, Awel, started Mullege Coffee PLC in 1953. His beginnings were humbling as a lone farmer within the confines of small city called Areka in the southern part of Ethiopia. His big ideas weren’t as restrained as his economic situation for which he found a solution; He started as a farmer selling to wet mill owners. To increase sales, he managed to negotiate with other farmers to buy their red cherry coffee to expand and diversify his product line, having an advantage and opportunity to grow. He did that long enough to be able to own his own washing station and buy from multiple red cherry farmers in southern Ethiopia to sell parchment coffee directly to the exporters. And by 1996, thirty-three years after its inception, and with my father, Mustapha, joining the family business, Mullege Coffee started selling coffee directly to the European market.

“Joining the NCA is worth for me to take a 16 hour flight every year for this 3 day event.”

-Yisehak Awel

What is the socio-economic situation in Ethiopia?

The socio-economic status in Ethiopia may not be ideal, but through farmers’ growth in wages, there is some optimism of that continuous growth in the years to come. The productivity is still at an infancy stage. The most common farm size is 1.98 acres, limiting each farmer’s opportunities. Farmers’ inability to scale their crops encumbers growth at a more rapid pace, which ultimately affects their overall income. Despite this, the small but steady growth over the last decade has given everyone a glimmer of hope to see more significant changes to the country’s infrastructure to improve the lives of farmers.

What are the biggest challenges for young Ethiopian coffee producers? The greatest opportunities?

Scale of production is a major challenge. Most young farmers inherited land from their parents which they share amongst their siblings. Farm lot sizes are extremely small ranging from 1.5 to 5 acres of land. Therefore, the cost of production is high due to low output. However, there are tremendous opportunities in diversifying crops.  Avocado trees are used as a shade tree for coffee. There is an increase of demand for Avocado fresh fruits and avocado oil for both local and international markets.

Is there a sense of excitement about coffee for young producers?

Not quite. Young people want to work in an urban environment and pursue careers or entrepreneurship.

What is coffee consumption like among producers? 

Ethiopia consumes more than 50% of its production. Coffee is a ritual and part of our lifestyle. Majority of young people consume coffee.

How do young coffee producers view sustainability in coffee?

There isn’t enough awareness when it comes to sustainability of coffee among young producers. Those who are aware challenge the logic of sustainability since the monetary return is low. I’ve had a farmer who said to me “we barely have enough to produce let alone to sustain.”

Any current events/forces outside of coffee affection young coffee producers in Ethiopia?

Urban migration is a main factor affecting young coffee producers. There numerous industrial projects coffee growing region by local and international investors. Wages are very attractive and young people prefer the urban lifestyle.

Any message to your Next Gen counterparts in North America?

The perspective and perception of farmers has already changed. Farmers are aware and exposed to what’s happening in the global coffee value chain. As young coffee professionals in consuming countries you have different challenge than your predecessors; we all need to come together to convince coffee farmers to keep producing coffee.

What is the impact of Covid-19 on coffee growers and exporters?

As exporters, we have been negatively impacted by the Covid-19, but we’ve still managed to sustain during these unfortunate times. One of the reasons is because we serve the international market as well as the local market. And the local market has not been affected as much. Ethiopia consumes over 50% of the coffee produced. Coffee growers and exporters have been able to maintain their local customer base. Additionally, the government has provided incentives to farmers with a goal to increase farmland for coffee growers in certain areas like Jimma and Leemu, which will contribute to increase in farmers’ output.  Because of the mass consumption of coffee locally and government initiatives to sustain farmers, coffee growers have been able to weather this storm.

How would you describe your experience with NCA (events) to young professionals looking to join?

I have been attending NCA events since 2013. The contents of the presentations are very insightful and informative about the coffee industry. It is by far the best event for networking with potential clients, industry experts, and catching up with colleagues from the entire coffee supply chain. In the past few years NCA has focused on engaging young coffee professionals with the Next Gen initiative. Joining the NCA is worth for me to take a 16 hour flight every year for this 3 day event.

What’s Happening with ‘Ideation to Action?’ A recap of the Next Gen Panel from the 2021 NCA Virtual Convention

By Nora Johnson, Commodities Manager, Massimo Zanetti Beverage USA

To kick off the 2021 NCA Virtual Convention, the Next Generation Council was proud to present the panel discussion: “Ideation to Action: Sharing the risks and rewards of sustainability in the coffee value chain.” Organized by the NCA Next Gen’s Events Committee, this panel discussion was an attempt to bring the supply chain together for an earnest conversation about sustainability.  As the Events Committee’s Chair, Eric Mitchell, explainsIt is clear to this generation that when it comes to sustainability, we must act united as an industry—individual initiatives will only get us so far.”

Thus, NCA Next Gen invited participants from each part of the value chain: Francisco Lacayo (L53 Estates), Hugo Valdivia (HVC Exports), Esteban Jaramillo (S&D Coffee and Tea), Nathalie Gabby Huddleston (RGC Coffee), and David Browning (Enveritas). And the panel was moderated by Olivia Bartelheim of the Rainforest Alliance.

Sustainability is one of the “hottest topics” in coffee, yet, despite the topic’s forefront position in conversations across the supply chain, getting from conversation to application has proven to be challenging. These knowledgeable panelists provided experienced-based insights into how the risks and rewards of implementing critical sustainability initiatives can better be distributed and how the next generation of coffee leaders can help forge the way.

We have highlighted some key insights from each of the panelists below, but if you missed your first chance to watch the panel live or think you would benefit from a second viewing, be sure to check out the recording above.

The responses below have been paraphrased and lightly edited for clarity.

Nathalie Gabbay Huddleston, President RGC Coffee:

In response to the opening question of the panel, Nathalie shared three themes to keep in mind in order to ensure a balanced risk and reward for all stakeholders in the value chain:

  1. Collaboration is critical – you can’t tackle the world’s challenges alone.
  2. Listen to your partners along the supply chain and then build something that makes sense. Use a ground up approach on a wash-rinse-repeat cycle of trying, testing, and measuring as every solution is going to be different based on the situation and the community.
  3. Start small and scale up but think big! Practice sustainability at scale.

When it comes to engaging other producers, workers, and customers, Nathalie said to “inspire the why.” Feel inspired about the initiative and the project and why it matters, then inspire others to understand the need to make these changes while backing it all up with the data-supported business case.

David Browning, CEO – Enveritas:

When asked about how companies should be using data to take on responsibility in accelerating progress towards the most urgent issues, David explained that “you can’t manage what you can’t measure.” 

David contextualized this issue by metaphorically contrasting the reactions that occur in sustainability with the more proactive measures that are part of most organizations’ day-to-day business practices. Quality testing and measurements are part of the standard practices within most companies, yet oftentimes it takes a media story to trigger actions in sustainability. The scientific process with quality testing works, so apply it to sustainability in the same manner.

Francisco Lacayo, Industrial Manager – L53 Estates:

As a young professional in coffee and seeing the struggles that many generations have faced due to both price and production cycles, Francisco invested additional capital to have a higher yield despite the higher risk on his side. This translated to a lower cost per pound in the long term. In order to support the higher yield, additional labor was required resulting in a more sustainable income for workers. The increased capital investment allowed for more consistent production cycles, yielding more consistent relationships with customers as well.

When speaking on the climate crisis, Francisco encouraged others within the supply chain to visit the regions where there is less mechanization. He elaborated, sharing that we need to create more awareness for the most vulnerable populations at origin as to what climate change is and how it can affect them. We need to increase awareness through education which requires added capital investment from throughout the supply chain.

Francisco shared that although the word “sustainable” is beautiful, sharing profits across the value chain is how we will be able to sustain lives. We cannot talk about sustainability when prices are staying the same or decreasing year after year.

Hugo Valdivia, COO – HVC Exports:

Based in Peru, Hugo spoke about the importance of the price to quality ratio and of how efforts get placed on volume over sustainability initiatives and quality. As an example from his experience in Peru, by focusing on specialty and certified coffees as opposed to commercial grades, his organization was able to increase the price to quality ratio in order to deliver a fair price to the farmer.

When asked about what the sector can do to support young professionals as they confront the climate and price crises, Hugo described of how the next generation of farmers are transitioning out of coffee and into other products with less volatility. He explained of how coffee in Peru is viewed as a cash crop, resulting in limited reinvestment. In order to support young professionals, Hugo encouraged the development of shared value relationships across the supply chain.

Esteban Jaramillo, Sustainability Manager – S&D Coffee and Tea:

Sharing the risk and reward depends on the customer – not all organizations understand the coffee supply chain. We need to start by talking about the risk of not engaging in a sustainable supply chain.

Climate change is getting more attention from consumers, nonprofits, and government institutions, yet there is a gap between the understanding and the willingness to invest in sustainability. We need to make companies accountable while sharing that accountability with consumers. Risk means something different to every company – try to understand how risk impacts each company. Sustainability needs to be understood holistically, not by only one angle.

Hope for the future:

It wouldn’t be a Next Gen panel without asking panelists to share of what gives them hope about the Next Generation of coffee professionals. From increased awareness to a greater sense of empathy and innovation, our panelists guaranteed that there is much hope to be had.

To all Next Generation professionals, David Browning left us with a challenge to harness the enthusiasm and awareness of industry and organizational leadership as it relates to sustainability. The enthusiasm from leadership is there, but it is up to us now, this next generation, to be the ones to take us from Ideation to Action.

How to get involved in NCA Next Gen

We hear it all the time, “Oh, NCA has a Next Gen focused group? Sounds great—how do I get involved?”  Well, here is your roadmap to get involved with NCA Next Gen.

First, what exactly is NCA Next Gen?  NCA Next Gen is the arm of the NCA that focuses on engaging the next generation of coffee professionals. The NCA Next Gen has a council that is comprised of seven members who volunteer for a two-year term. The Council oversees two Next Gen committees: The Communications Committee & The Education & Events Committee. Both committees support young coffee professionals by providing resources, support, and a sense of community [For a list of current council members, click here].

You can get involved right now! The NCA Next Gen is always looking to get young coffee professionals more involved. Here are some ways to get started:

  • Stay Connected! Subscribe to our Next Gen Newsletter here. The newsletter format has recently been updated and will now feature content about your peers generated by fellow Next Gen members. We have a feeling this is one newsletter you will look forward to receiving each month.
  • NCA Convention 2021! The Next Gen Council organizes a variety of activities at the NCA Convention.  This year, we have organized a panel discussion about Next Gen’s role in sustainability within the coffee supply chain.  See more details about the NCA Convention here.
  • Want more? We are always accepting new members to our committees. We encourage you to serve on one of our Committees. You can sign up here.
  • Lead! If you have the time and passion to contribute beyond a committee, maybe a Next Gen leadership role is right for you?  Learn more about the application process and sign up here.

-NCA Next Gen Council

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.