Farm to Cup Merger Emphasizes Partnership & Economic Empowerment
A grassroots student effort led by three Stanford GSB alumni now has even more impact through a merger with Pachamama Coffee Cooperative.
Their mission has been to disrupt the coffee industry by providing the most direct connection to growers and to empower every participant in the supply chain. In 2011, three intrepid Stanford MBAs launched Farm to Cup as an online coffee marketplace for farmers to sell their coffee directly to American consumers. After more than a year of growth, last December they merged their enterprise with Pachamama Coffee Cooperative, a farmer-owned distributor of premium coffee, which will allow that organization to accelerate its growth in the online farmer-direct coffee market in North America.
“We’ve been all about partnership from day one, so joining forces with Pachamama, which has an open and collaborative business model, made sense to us,” says Caroline Mullen, MBA ’12, who co-founded Farm to Cup with her twin sister Catha, MBA ’13, and Monica Lewis, MBA ’12, while they were all still in school.
“Pachamama is 100 percent farmer owned,” Caroline emphasizes. “Their boardroom is filled with farmers. They’re making a real impact on the ground in terms of empowering people who work the land with what is really an innovative economic framework. Their model represents the wave of the future, and so we saw them as the ideal organization for us to team up with.”
It was on a trip to Guatemala with the Stanford Center for Social Innovation that the trio was inspired to help farmers to take greater control of their economic lives by fostering an online link between coffee farmers and consumers. The “ah ha” moment came traveling between farms, when they realized that each farmers’ coffee was unique and that they lacked an easy way to market this. “I began to think of all the intermediaries in the supply chain that extract value from the coffee, and then I began to think of how sites like eBay connect the buyer and seller directly,” says Lewis, the organization’s CEO, who worked in the sustainable development arena at the global consulting firm Arup before coming to Stanford. Farm to Cup’s online platform was created to give the consumer the chance to “travel to coffee’s origin” and buy directly from coffee farms.
Upon returning to Stanford, Lewis shared the idea with Michael Dearing, former senior VP of eBay, and Perry Klebahn, former head of sales and marketing of Patagonia and CEO of Timbuk2, both faculty consultants to an entrepreneurism course at the Stanford Design School. “They enthusiastically told me to go for it,” says Lewis, who promptly enlisted the Mullens in forming the enterprise.
The team decided to hire web developers to launch the site and use their own funds to buy 100 pounds of coffee from the As Green as It Gets Cooperative they connected with while on the trip. Simply by soliciting friends, family, and their extended Facebook and Twitter networks, Farm to Cup sold nearly all of its initial beans. The company has consistently offered growers three to four times the fair trade floor price for the beans.
In November 2011, while exploring strategic options and locating others in the coffee space who were treating farmers with dignity and taking a longer-term, more sustainable approach to business, the Mullens and Lewis came upon Pachamama Coffee. Founded in 2001 and based in Sacramento, California, Pachamama is the hub of a worldwide collaborative of 140,000 small-scale coffee farmer-owners in Peru, Nicaragua, Guatemala, Mexico, and Ethiopia who brand and distribute their best coffee directly to consumers. In 2011, Pachamama launched the first global Community Supported Agriculture (“CSA”) program for coffee, which offers U.S. consumers the convenience of freshly roasted organic coffee, delivered straight to their doorsteps from small-scale farmers.
When Monica decided to lead another start-up endeavor and Caroline joined the impact investment fund Armonia in Connecticut after both graduated from Stanford in summer 2012, the team realized they needed more support in handling the day-to-day tasks of the organization. After several months of due diligence and talks, Farm to Cup and Pachamama shook hands, finalizing their agreement in November. The trio will continue on as advisers to the organization through the end of 2013.
In structuring the deal, Farm to Cup benefitted from the legal advice of a former classmate, an attorney at a local start-up focused law firm, and one of his colleagues there. “It’s a testament to the wonderfully supportive nature of the Stanford community,” reports Catha.
“The farmer-direct business model is a powerful alternative for small-scale producers and consumers of the world’s most coveted crops. Farm to Cup’s successful web-based platform fits well with Pachamama’s goal of selling coffee in the most direct way possible. This is a smart move for coffee farmers,” said Thaleon Tremain, Pachamama’s CEO.
“They have great logistics and operations, so this merger will allow them to increase their customer base and expand their social media component,” affirms Catha, now in her second year at the Stanford Graduate School of Business while also working part-time at Personal Capital, a wealth management startup in Silicon Valley. “As we see it, our ‘baby’ will now live on in a better form.”
Caroline notes that the experience should be an inspiration to all Stanford MBA students who want to make an impact even while still in school. With just a good idea and very little money, the three women were able to launch an enterprise that had real and sustainable results.
“It’s amazing how little external capital was involved in this entire exercise,” she says. “We didn’t go to investors to raise funds; we simply worked off our own savings, equity from the farmers themselves and were helped by business school colleagues who provided support and advice and, of course, our consumers who bought the product. We think such collaborative business models have real potential to make an important impact in the global economy.”
For media inquiries, visit the Newsroom.