Fact Sheet: Real Farmer Income™
At a glance
• Nespresso is committed to paying premium prices for Nespresso AAA coffees adhering to the principles of
quality and sustainability management of coffee farms
• Nespresso has created the concept of Real Farmer Income™ in order to help farmers
• achieve a higher disposable income by receiving premium prices for quality coffee, increasing their yields,
and reducing their production costs
• Nespresso and its partners are working to help farmers keep better track of their accounting in farm
Much of the debate in coffee supply chains in recent years has concentrated on fluctuations in
coffee pricing, but these debates do not focus on the absolute levels of income generated by coffee
farming activities. Best practices combined with a commitment to Rainforest Alliance certification
within the Nespresso AAA Sustainable Quality™ Coffee Program ensure the balance is struck
between yield- and income-increasing initiatives, and the protection of vital ecosystems as well as
the sustainability of coffee farming communities.
Although the macro-economics of coffee have been studied in depth, little research has been
conducted on coffee farm economics. As such, many solutions to address the volatility of the coffee
market have been very broad in their approach.
For example, some solutions have proposed the promotion of local coffee consumption, fixed
minimum prices, increased support for small coffee producers (i.e. better infrastructure, access to
credits, better vertical integration of producers in the value chain), development of production
technologies, tax cuts, differentiation, and certification. While all of these measures can help, there
is one important piece missing: the farmers own abilities to efficiently optimize their resources.
The Nespresso AAA Sustainable Quality™ Coffee Program places the farmer centre stage. It has
allowed Nespresso to understand the cultural and economic differences between different farms
and regions and this, in turn, has facilitated better dialogue with coffee farmers. Nespresso is
committed to paying premium prices for Nespresso AAA coffees adhering to the principles of
quality and sustainability management of coffee farms. The Nespresso premium fluctuates from
country to country and over time but on average price premium for Nespresso AAA coffee is 35%
above the New York market and 10%-15% above similar quality coffees.
In order to ensure that the premium prices farmers receive result in an increase in net income
Nespresso has created the concept of Real Farmer Income™. Farmers in most cases do not know
their production costs or productivity levels and are mostly concerned with the final sale price,
rather than net farm income.
For this reason Nespresso is helping farmers increase their income through improved productivity
and quality while at the same time reducing their costs through production efficiencies. Within the
Nespresso AAA Program these practices collectively constitute Qualitivity™.
In 2008, Nespresso asked INCAE, the leading business school in Latin America, to conduct an
independent study in order to understand if, in fact, the Nespresso AAA Sustainable Quality™ Coffee
Program was really having a positive impact on farmers’ income levels. The study was conducted
in three Nespresso coffee origins: Guatemala, Colombia and Costa Rica. The researchers analysed
and compared data from farms participating in the Nespresso AAA Program with data from farms
located in the same regions that were not part of the program. A profit and loss analysis for each
farm was compiled.
In all three countries, while price is the main reason why farmers decided to participate in The
Nespresso AAA Sustainable Quality™ Coffee Program, they also appreciate that their relationship
with Nespresso and coffee suppliers leads to greater price transparency.
Farmers in the survey do not recognise the importance of accounting in farm management. More
than 60% of farmers in Costa Rica do not keep records of their accounting in books. In Guatemala,
more than 70% of farmers use coffee price as the main financial indicator as opposed to net
income or costs. In all three countries a high percentage of farmers were unable to say what their
production costs were.
The study did however demonstrate that the Nespresso AAA Sustainable Quality™ Coffee Program
was helping farmers to have better understanding of net income and not just price. A major
objective of the Nespresso AAA Program is to ensure that coffee farmers in the program do
maintain accurate and up to date farm management reports.
The study concluded that there are a number of opportunities for Nespresso to positively
contribute to Real Farmer Income™ by working with farmers to help improve farming and
management practices, as well as financial and commercial strategies. Among the results, in the
Caldas Region of Colombia where Nespresso and its partners have been working intensively, Real
Farmer Income™ on Nespresso AAA farms is more than double that of comparable farmers.