BY STEPHEN SCHABER
On 14th Street between 5th and 6th Avenues in Union Square, across from Jason’s Jewelry & Diamonds and next door to a Western Union, you will find Bourbon Coffee, a large café with a larger mission.
This upscale retailer of signature Rwandan coffee, whose walls are painted with heavy doses of warm earthen tones and decorated with traditional Rwandan woven baskets, plays an important role in the reconstruction of Rwanda’s economy, still recovering from the devastation caused by the 1994 genocide.
“Our goal is to alleviate the poverty of rural coffee farmer in Rwanda,” said Bosco Munga, the lanky, impassioned CEO of the Kigali-based Bourbon Coffee, who possesses an easy handshake and sports a pair of white Chucks.
Rwanda is an agrarian society where farmers comprise nearly 90% of the population. Traditionally, the majority eked out a subsistence living, barely growing enough to meet their needs. And that was before the genocide in 1994.
A number of issues contributed to the genocide: extreme poverty, land scarcity, falling government subsidies to farmers, high unemployment among the youth, and finally, the Hutu government’s provocative policies targeting the Tutsis, Rwanda’s ethnic minority.
The aftermath left Rwanda’s society and economy in mangled ruins. Hutus indiscriminately slaughtered more than 800,000 Tutsis and moderate Hutus over the course of 100 days. Rebels from the Tutsi-formed Rwandan Patriotic Front (RPF) wrested control of the state from Hutu government, finally ending the massacre.
“There was really no economy to speak of. Bank vaults and government coffers had been emptied [by the fleeing Hutu government],” said Matt Smith, director of finance for the Rwanda Trading Company, a coffee exporter located in Kigali. “The remaining citizens were traumatized. The infrastructure was completely destroyed, and many of the farmers throughout the country fled to the Congo or were purposely not producing export crops to destabilize the new [RPF] government.”
In addition to abandoned and non-producing farms, falling prices for coffee and tea on the international markets during this time further gutted the Rwandan economy. In the 1970s and 80s, coffee and tea exports provided up to 90% of the country’s export revenue. In 1994, Rwanda’s economic output shrank by nearly half from the previous year, as indicated by its GDP logging a negative 49 percent.
Starting in 1996, President Paul Kagame introduced major changes to rejuvenate the feeble economy. Kagame, a charismatic and controversial former Tutsi exile who led the RPF rebels to victory but now stands accused by human rights groups of crimes against the political opposition and rigging elections, eschewed international aid in favor of a more self-reliant path centered on attracting foreign direct investment, implementing an export oriented economy as well as privatizing nationalized industries.
A crucial component to Rwanda’s economic recovery, the coffee industry and its 500,000 workers and their families was a beneficiary of the government-led sector privatization.
“Farmers are so important to the economic stability of Rwanda,” Smith said. “When you look at total exports from Rwanda you will see that coffee is a significant portion.” Last year, Rwanda’s coffee exports earned a record-high $56 million, which represented over 22% of its total exports.
Before privatization, the government controlled the processing of the coffee bean. The difference between high and low quality coffee is that high-quality beans are “fully-washed” after harvest. “By fully washing and processing the coffee bean, it will keep its purity and therefore gets a better price,” Munga explained. The government only “washed,” not fully-washed the beans, producing low-quality, “C-grade” coffee destined for the Folgers can.
The government also formerly controlled the sale and export of coffee. It was the only buyer for all domestic coffee producers, establishing a single price, known as the “farm gate price.”
Low-quality, “washed” coffee sold by the government on the international market to foreign buyers coffee fetched low prices. As a result, the government paid minimal wages to the coffee farmers. “Much of the income generated from coffee was recorded outside of Rwanda,” said Smith.
The old practice stifled growth and the quality of Rwandan coffee beans remained low. Farmers had no incentive to improve the quality of the coffee bean nor the capital to expand operations.
Privatization thrust the industry’s profit maximization ceiling upward. No longer would the government interfere in the production and sales process. But experts argue that the creation of the coffee-growing farmer cooperatives is more responsible for the vast improvement of the farmers’ livelihood.
“The formation of coffee cooperatives has done more to help coffee growers than any attempt at deregulation or privatization” said Dr. Patrick Cannon, professor of government at Sacramento State University and expert on Rwanda’s political economy.
Dr. Dan Clay, director of the USAID-funded Pearl Project, which is a field-based aid program focused on improving crop quality and market access for rural coffee farmers in Rwanda, concurred.
“The formation of coffee cooperatives and what they’ve done for coffee is more important than what the government has done,” he said.
Though farmer collectives and associations existed in Rwanda to market potatoes or purchase fertilizer, none existed among coffee farmers. Programs run by international aid and non-governmental organizations (NGOs), such as Pearl Project, were instrumental in establishing the first coffee growing collectives.
“It’s a really interesting lesson in development because when you see something working farmers are pretty quick to catch on,” said Clay. “If there’s a good model to follow, they’ll spread like wildfire.” He estimates there are currently approximately 80 coffee cooperatives in Rwanda.
Munga spoke positively about NGOs, such as Pearl, detailing how they brought communities together and created self-sustaining cooperatives. “They have had quite an impact,” he said.
Cooperatives, which typically have between 200 and 2000 members, possess their own washing station and establish an infrastructure for transporting the product from the farm to the washing station, then the washing station to the market. By producing fully-washed coffee beans, cooperatives command high prices and now have a choice of buyers.
“Now Bourbon has to compete, like anybody else, for the farmers’ attention,” said Munga. “You have to show them that you’re willing to pay a higher price, but that’s one of our missions.”
American companies- Starbucks, Intelligentsia, Green Mountain Coffee, and Counter Culture Coffee- are also among the competing buyers for Rwandan coffee.
“Significant quality improvements have been which spurred interest and subsequent growth among specialty coffee roasters in the U.S.,” said Tracy Ging, deputy executive director of the Specialty Coffee Association of America.
Bourbon Coffee is the most successful domestic company driving the growth of Rwandan coffee abroad. It is an ambitious company focused on empowering the rural farmer and recasting Rwanda’s image as a revitalized nation participating in the global economy. The first goal begets the second.
Bourbon contributes to the alleviation of farmer poverty through direct trade, a step beyond fair trade. Displayed on the windows of the New York City store, the company’s motto succinctly captures its distinct business model: “naturally crop to cup.” The formula is simple. Instead of buying coffee through a middle-man, formerly the government, Bourbon Coffee buys directly from farmer-organized collectives. As a result, farmers earn a higher wage.
Rwandans Arthur Karuletwa and Emmanuel Murekezi opened the first Bourbon Coffee store in 2007 in the Union Trade Centre, Rwanda’s first mall, located in Kigali. A second and third store followed, one in Rwanda’s second mall and one at the international airport.
Munga explained the impetus behind the establishment of Bourbon Coffee- reconciliation required an economic component. “We couldn’t depend on foreign aid forever,” he said.
Business was successful, attracting foreign business executives who were in Kigali negotiating contracts, likely in the burgeoning services and telecommunications industries, as well as a new class of Rwandans who were breaking with tradition and choosing coffee over tea. “We thought, let’s do a little more. Let’s explore possibility of going overseas,” said Munga.
The group first considered Europe, specifically eyeing Scandinavia, before deciding to establish its presence in the US. “We said, you know what, let’s test our “crop to cup” concept in the most important capital in the world,” said Munga. “We wanted to focus on political, financial, academic capitals of the country.”
As the company targeted Washington DC for expansion, it faced two problems. Bourbon had no experience retailing coffee in the US and finding a location turned out to be more difficult than anticipated. Landlords were unwilling to rent to a new company with no credit history in the US.
“So, I went to coffee expos, I took classes to learn how coffee is retailed in the US,” said Munga, who now resides in Washington DC. “We also hired a broker to help us secure a location.”
In July 2009, after paying a year’s rent in advance, Bourbon opened its flagship store in the city’s DuPont Circle neighborhood, surrounded by numerous embassies and offices of international aid and development organizations. It replaced a failing Starbucks.
For the launch, Bourbon bought 12 50-kilo bags directly from a cooperative. After obtaining import licenses in Kigali, the cargo was flown to Dulles airport outside of Washington DC. Munga picked up the delivery and loaded the bags into his pick-up. He took the beans to a private roaster who would roast them according to the signature taste profiles from the five coffee growing regions in Rwanda. “Then, we took them to the store and sold our first cup,” Munga said. “It was wonderful.”
The New York City store on 14th Avenue opened in December 2010. A third US store will open in Cambridge, Massachusetts, over the summer.
Increased profit was not the only reason for overseas expansion; in fact it did not even make the top three.
“We wanted to introduce Rwandan coffee to a broader market,” Munga explained. “Second, we wanted to generate an African brand that can compete and coexist in the international market. Third, we wanted to tell the story of our farmers and crops from our prospective and by connecting end user to the rural farmer.”
In fulfilling the first two objectives, Bourbon Coffee has become the first African retail brand in the United States. The third objective is still in the works, but not far off.
“We want to use social media to bring to tell the story of the farmer, highlighting his effort and his troubles, focusing not the journey the coffee has taken but where it has come from.” Munga explained. “America gets to know another part of the world and appreciate the effort, beauty, culture of Rwanda. It brings out the humanness and the good will.”
Munga also believes the farming collectives, which have mixed memberships of both Hutus and Tutsis, advances the reconciliation effort.
Asked how the establishment of cooperatives helps the reconciliation, “Incredibly, incredibly,” Munga answers. “It brings a group of people to willingly set up a cooperative that was only a few years ago murdering each other.”
Members voting and making decisions jointly within the cooperatives teach the two groups to work together and trust each other again, Munga said. He said it is not uncommon for Hutu and Tutsi neighbors to work and cook together despite the husband of the Hutu being in jail for committing genocide.
Smith maintains a more modest stance.
“As much as I love coffee, it would still be wrong of me to give it too much more reconciliatory powers than just the income that it generates for the Rwandans that are involved in the industry,” said Smith.
Nevertheless, because of record high commodity prices, Rwanda is in position to cash in. It could potentially double its revenue from coffee exports “in each of the next three years without planting a single tree.”
“We want to give the farmer his fair share of this trade,” Munga said.