Gigante Central Wet-Mill

Acumen partnered with the Asociación de Cafeteros Desarrollo to create Gigante Central Wet-Mill. Through a centralized coffee processing facility, farmers can produce higher-quality coffee, reduce negative environmental impacts, and improve their quality of life.

The problem

Coffee production is the largest driver of employment in Colombia’s rural areas. In 2019, there were 700,000 coffee farms in Colombia, employing over 5,000 people. But in order to reap the monetary benefits of growing coffee, farmers must meet high-quality standards. Unlike other coffee producing countries, many regions in Colombia lack central processing facilities which means higher costs for farmers, lower-quality coffee, and negative environmental impacts, such as water contamination and over-consumption.

Most smallholder farmers in Hulia handle the post-harvest wet milling and drying processes themselves. The post-harvest process is both time consuming and labor-intensive. Further, without adequate drying facilities, farmers are forced to sell humid coffee beans at steep discount rates to middlemen. Farmers who process their own coffee also have to wait several weeks after harvesting, until their coffee is dried, in order to get paid. These inefficient, manual methods can prevent farmers from achieving the volume and quality demanded by international buyers for premium prices.

The solution

Gigante Central Wet-Mill (GCW) standardizes the post-harvest processes for local coffee farmers through its centralized wet-mill and drying facility. Rather than farmers drying the coffee cherries themselves, the company buys coffee cherries directly from farmers and processes them into high-quality, sustainably-processed, export-grade coffee. The processed coffee is then sold at premium prices to national exporting companies.

The origin

In 2012, Nespresso set up a program that would pilot centralized wet-mill facilities in order to improve coffee quality and reduce negative environmental impacts, and the Asociación de Cafeteros Desarrollo (ACD) in Gigante expressed interest in participating in the program. Through a partnership between Acumen and ACD, Gigante Central Wet-Mill was born to produce higher-quality coffee, reduce negative environmental impacts, reduce farmers’ workloads, improve their quality of life, and provide farmers with shorter cash cycles and premium payments for their product.

The impact

As of 2022, GCW has purchased coffee cherries from 63 smallholder farmers, positively impacting the lives of 252 people. In a single season, farmers supplying GCW experienced a 35% income increase compared to those selling wet coffee to traders.

“I have more time to share with my family. Before I sold to La Central, I had to work after 5pm on Saturdays.”

The story

GCW is among the first companies in Acumen’s portfolio to provide a blueprint for how investors can partner with community associations to improve smallholder incomes and quality of life, all while producing higher-quality coffee and reducing negative environmental impacts.

In the early 1990s, Colombia’s coffee industry began to hit a pricing crisis that still continues to this day. The collapse of the International Coffee Agreement led to a sharp decline in prices, disproportionately hurting Colombia due to the country’s high market share, and resulting in exploited and underpaid coffee farmers, despite stable retail prices. In response, the Asociación de Cafeteros Desarrollo was born in 2003 to produce coffee in order to guarantee community self-sufficiency and economic, social, and cultural development. 

Over the next 11 years, ACD continued to grow its membership base, as well as its operations. During that same time period, a Colombian coffee sector study between Nespresso and TechnoServe found that investing in central wet-mills could be a powerful driver to improve smallholder farmers’ income, reduce their workload, increase the amount of AAA coffee produced, and reduce contamination of water sources due to farm-level coffee processing. ACD had been looking for a loan to build its own wet-mill and drying infrastructure when the opportunity arose to collaborate with Acumen.

Gigante Central Wet-Mill was created through a partnership between Acumen and ACD. When Acumen first approached ACD in 2014, there was some skepticism. In response, Acumen invested an underappreciated resource: trust and relationship building. Acumen’s Latin America team put time and energy in meeting with and getting to know the asociación and vice versa. Over time, the asociación began to seriously consider a partnership, and Acumen sat down with the president for a co-creation process. Both parties evaluated questions such as:

• What would the structure be?
• What would the ownership be?
• Who would be on the board?
• What would an exit look like?

Acumen’s blended investment of debt and equity enabled ACD to maintain majority ownership of the company, while also allowing Acumen to play a significant governance role on GCW’s board. The equity portion was calculated as the maximum that would still qualify as a minority stake in the company. The debt component was estimated based on the remaining capital needed to operate a financially sustainable structure. The partners agreed that ACD would use the profits of the joint-venture company to re-buy Acumen’s shares over seven to ten years, so that at the end, ownership will be fully held by the asociación.

“I recommend [it] for three reasons. 1) I save work and time. 2) Employees treat the customers well and I trust in them. 3) The coffee is good.”

GCW undertook a Lean Data study three years later to learn about the company’s impact on farmers in the community. 83% of farmers reported an improvement in their quality of life, and the company found that farmers were saving time and effort as a result of GCW taking on the wet-milling process. GCW’s operations model reduced growers’ working hours by up to 40%. One farmer stated: “I have more time to share with my family. Before selling to La Central, I had to work after 5pm and on Saturdays.”

Additionally, farmers saw their incomes increase by 35%. Prior to GCW, farmers would sell wet coffee to buyers, rather than coffee cherries or dry coffee. But by selling cherries to GCW, farmers earned more than they would have from selling wet coffee. GCW’s drying facility also provided farmers with access to infrastructure they did not previously have. As stated by another farmer: “I have better income and less expenses. I save time and don’t need a lot of workers.” 

Since Acumen’s investment, GCW has been able to provide more timely payments and better prices for farmers. Farmers are paid when they harvest, rather than after wet-milling and drying the coffee, and they receive premium prices. With access to GCW’s drying infrastructure, farmers can save time and money and greatly improve their quality of life.