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Monitoring and Evaluation of Nespresso AAA Sustainable QualityTM Program in Colombia First follow-up Carlos Ariel Garcia Romero Researcher CRECE New York, 14th of May 2013
CRECE M & E Team: Gustavo Adolfo Ochoa, Julián
García, Marly Tatiana Celis, Juan Carlos Mora
Nespresso has increased its involvement in
Colombia since its entry in 2004
2
Nespresso Clusters
Coffee productive areas
Antioquia
Cauca
Santander
Huila
Caldas
Nariño
Cundinamarca
In 2012, Nespresso sourced 76% of its
Colombian coffee from the AAA Program
Today:
- 44’462 AAA farms in Colombia
- 131 agronomists
Biggest Challenges in the Coffee sector reflected on Colombia
3
Sustainability Challenge
Profitability of smallholders
Long term supply of quality coffee
COLOMBIA’S CHALLENGES Nespresso’s ACTIONS
Price structure Productivity decrease Climate change Social development Smallholder profitabily Succession Regional differences Internal conflicts
Increase no. of AAA farmers
Support expansion of coffee areas
Focus on reducing quality rejections
Focus on Real Farmer Income™
Focus on long-term loyalty
AAA Program scale up
Launch new tools
Monitor progress and impact
Challenges in the coffee sector
4
What we want to know through this study?
What difference the AAA Program is making in terms of sustainability ?
Do environmental practices make a difference in the results?
Do AAA farmers get an increase of income and better productivity?
Do small farmers receive also any marginal benefit?
5
Monitoring & Evaluation Methodology and Timeline
CRECE adapted the COSA methodology to
Colombia
Year 2008 / 09 2009 / 10 2010 / 11 2012 2013
Design of M & E study to assess AAA Program
in Colombia
AAA Program Baseline survey deployed
AAA Program First Follow-up survey
deployed
AAA Program Second Follow-up survey
deployed
Baseline “Arbol de vida” project
Nespresso support the project by giving the
AAA’s farms data from Nariño and Cauca
Monitoring Evaluation
Feedback from Nespresso
COSA Project assess the impact of seven sustainable schemes
Feedback from
Nespresso
6
Sample size
Department Projects No.
farms
Antioquia Central Mill 77
Caldas Certification & Fertilization
474
Cauca Certification 166
Huila Certification 142
Nariño Certification 363
Total AAA 1.222
Control 563
Regional samples by cluster and project
8
The context: coffee sector conditions have been mostly adverse
* Last twelve months on October ** CBB = Coffee Berry Borer
Source: FNC Databases
Variable 2008 2009 2010 2011 2012
Production Adverse
-9% (11,7) Adverse
-32% (7,8) Adverse
+14% (8,9) Adverse
-12% (7,8) Adverse*
-2% (7,6)
Prices (ex-dock )
Favorable 1.45 USD/lb
Favorable 1.77 USD/lb
Favorable 2.25 USD/lb
Favorable 2.84 USD/lb
Adverse 2.10 USD/lb
Productivity (Kg/ha)
Favorable 1,034
Adverse 697
Adverse 773
Adverse 671
Adverse 658
Share of total area with resistant varieties (ha)
29.6% 30.8% 29.5% 44.4% n.a
Share of total area with young trees
56.9% 58.6% 65.0% 72.4% n.a
CBB** Favorable
Low level 1.4%
Favorable Low level
2.2%
Favorable Low level 2.2%
Favorable Low level 1.3%
Favorable
Rust infestation % n.a n.a 30,3% 14,5% n.a
Fertilization Adverse
Low level & High prices
Adverse Low level & High prices
Improving PPP support
Improving PPP support
Improving PPP support
Climate Adverse La Niña
Adverse El Niño + La
Niña
Adverse La Niña
Adverse La Niña
Adverse La Niña
9
The Context: Key ideas
Production in Colombia has been adverse since 2008, with an
overall production fall of 35%.
Prices were favourable in Colombia until 2011. Since then, prices
have fallen nearly 50% at the “C” coffee futures in New York and
worsened due to the Colombian peso appreciation
Productivity has decreased for all farmers in Colombia, mainly due
to the renovation program and harsh weather conditions.
Coffee area, number of renovated trees, as well as fertilization
levels in the country increased significantly for AAA farmers. The
impacts of these improvements in productivity are expected to
appear on 2013’s crop.
10
Sustainability indicators
Although a wide set of indicators is available, aggregate indexes were
performed to measure the components of sustainability. Principal
Component Analysis (PCA) for categories were used to build indexes
for social, environmental and economic performance:
Social index, it includes indicators that reflect good working
practices, economic and social aspects of the household and coffee
farmer’s social perceptions.
Environmental index, it includes good agricultural practices (GPA),
soil and water conservation measures and agrochemical handling.
Economic index, it includes variables that are associated with
market knowledge, land productivity, production costs and income,
and coffee farmer’s economic perceptions.
11
Social index: Better living conditions suggest that AAA is impacting positively at farm level
**The indexes were performed with principal component analysis using polychoric and polyserial correlations. See Kolenikov, S., and Angeles, G. (2004).
Average social index
Score
Source: CRECE, coffee growers surveys, 2009 and 2011
Components
• Farm crop production for family consumption
• Revenues from sales of other farm crops
• Extra-earnings due to certification of other farm crops
• Possession of household assets
• Number of protective gear items used by the workers
• Living conditions of the workers
• Occupational safety and health
• Perception of the household’s quality of life
• Perception of relationships with the employees
+22.6% difference in social index for AAA
farmers in 2011
` Control
AAA
46
53 54***
65***
2009 2011
13
Environmental index: AAA farmers improved their environmental conditions
Control
AAA
**The indexes were performed with principal component analysis using polychoric and polyserial correlations. See Kolenikov, S., and Angeles, G. (2004).
Average environmental index
Score
Source: CRECE, coffee growers surveys, 2009 and 2011
Components
• The farm has recycling program
• Soil conservation practices
• Positive agrochemical practices
• Farm’s environment care perception
• Village’s environment care perception
• The farm has an environment map/plan
• Trained in environment topics
The change in environmental index for AAA farmers was +38.8% with respect to control group in 2009, rising to +52.1% in 2011.
49 48
68*** 73***
2009 2011
15
AAA farmers improved their overall economic conditions
Control
AAA
**The indexes were performed with principal component analysis using polychoric and polyserial correlations. See Kolenikov, S., and Angeles, G. (2004).
Average economic index
Score
Source: CRECE, coffee growers surveys, 2009 and 2011
Components
• The farmer tried to find new customers
• Trained in marketing topics
• Trained in management and traceability
• Less than 3% of C.B.B. affectation
• Less than 10% of Rust affectation
• Less than 3% of coffee sold as low quality
• Keep records of fertilizer’s application
• Performs soil analysis
• Applies organic fertilizers
• Fertilize under technical recommendation
• Knows the average price of the zone
• Knows the domestic price
• Knows the sale price of the buyer
• Knows the international price
• Income perception
• Perception of the farm’s economic situation
• Perception of the business opportunities
• Net income categories
• Yield categories
The change in economic index in 2009 for AAA farmers was +22.5% with respect to control
group, while in 2011 this difference rose to
+41%.
40 39
49*** 55***
2009 2011
16
Economic benefits are reached by AAA farmers across all farm sizes
Source: CRECE, coffee growers surveys, 2011
540**
493 540***
501 538***
489
229 ** 188
237 ***
168 191
*** 119
311*** 305 303*** 332 347***
370
AAA Control AAA Control AAA Control
<1 Ha 1-5 Ha 5-10 Ha
Income (cents/Kggreen)
Net income(cents/Kg green)
Cost (cents/Kggreen)
AAA farmers’ net income has increased by +80.0%
A higher net income is related to greater productivity levels and AAA premium
Indicator AAA+RA AAA Control
Productivity – 2009 857** 985*** 793
Productivity – 2011 902*** 773*** 562
D 5% -21% -29%
Fertilizers (synthetic) 1,273*** 1,278*** 1,046
Coffee age 3.8 3.6** 4.2
Resistant varieties 73%*** 58%*** 50%
Density 5,115 5,002 5,064
Hours of training 33*** 27*** 17
Rust infestation 30%*** 35%*** 49%
17
Contrary to the national trend, AAA+RA farms productivity is rising
2009 2011
Source: CRECE, coffee growers surveys, 2009 and 2011
Observed higher levels of productivity are explained by resistant varieties adoption and more training
Productivity (Kg green/ha)
857 902 985
773 793
562
AAA+RA (+5%)AAA (-21%)Control (-29%)
19
Average training hours per farmer by year
AAA Control
2011
2009
Results are related to technical assistance: AAA farmers have been receiving more training and support than controls
Source: CRECE, coffee growers surveys, 2009 and 2011
A farmer in the Program receives 40% more technical support than a control farmer in Colombia
This implies better technological and economic differences. (More rust resistant coffee trees, better use of fertilizers, higher renovation rates, more productivity)
28.0
16.6
33.6 ***
27.4 ***
20
AAA farmers have been upgrading their technological level faster than conventional farmers thanks to trainings and technical assistance
Variable AAA D Colombia D
Total area (ha) 4.3 4.8
Area coffee (ha) 2.4 2.0
Share of coffee of total area (%)
72.5% 62.4%
Coffee age (years) 3.7 4.6
Trees per hectare 5,049 5,128
Resistant varieties (%) 64.4% 55.6%
Leaf rust (%) 33.3% 45.7%
CBB (%) 2.5% 3.3%
Renewed trees (%) 24.1% 23.5%
Fertilization (kg/ha) 1,276 968
Compared to baseline, AAA farmers have improved key variables to optimize farm productivity: Younger trees, higher shares
of rust resistant varieties and improved levels of fertilization
Fertilization increase are leading levels to local standards
Fertilization costs are compensated by more net income. Source: CRECE, coffee growers surveys, 2009 and 2011
* Colombia information comes from CRECE surveys in six Departments
23
Impact indicators
Impact variables were defined from the Program theory of change.
Nespresso
AAA Impacts
Economic Sustainability
Net Income
Environmental Sustainability
Water consump
tion
Social Sustainability
Land Productiv
ity
24
By first follow-up measurement, AAA are over-performing control group
1 Dif-in-Dif estimator, comparison between AAA and control group
2 Kernel Matching method, comparison between AAA+RA and AAA
*** p<0.01, ** p<0.05, * p<0.1
Source: CRECE, coffee growers surveys, 2009 and 2011
Impacts AAA 1 AAA+RA 2
Fertilization Central Mill
AAA farmers AAA AAA+RA
Environmental conditions (score) 8.7
***
11.1
***
Social conditions (score) 2.3
** 5.2
***
Farm economic (score) 6.3
*** 6.6
***
Net Income (US cents /kg) 46.3
* 53.1
*
Productivity (kg/ha) 32.7
- 112.9
*** 76.6
- 371.4
***
Water consumption
(Lt of water to produce 1 kg of
parchment) -0.7
*** -1.2
*** 4.3
***
Econometric estimations of AAA impacts (scores)
Effects of Program on main impact indicators are even
positive and significant
25
1 Dif-in-Dif estimator, comparison between AAA and control group
*** p<0.01, ** p<0.05, * p<0.1
Source: CRECE, coffee growers surveys, 2009 and 2011
Impacts
AAA 1
<1 ha 1 - 5 ha > 5 ha AAA
Environmental conditions
(score) 9.4 ***
9.1 ***
4.1 -
8.7
***
Social conditions (score) 5.0 **
4.4 ***
-2.3 -
2.3
**
Farm economic (score) 7.6 ***
5.7 ***
-1.4 -
6.3
***
Mid-term impacts are being focalized on small farmers
Econometric estimations of AAA impacts (scores)
26
AAA Program key findings
The Program is achieving technologic and economic
differences between AAA and conventional farmers based on
extra technical support
Promoting environmental practices among the beneficiaries
have implied extra support leading to technological change for
farmers involved
Despite unfavorable conditions of the coffee sector, AAA
farmers are getting higher net income and productivity.
Benefits have been focalized in small farmers
27
In Summary
Farmer's net income is increasing to expected rates.
Perceptions on the Program are high for “premium” and “benefits and help” components for all regions.
Economic, Social and Environmental impact indexes are higher for RFA+AAA farmers than comparable farmers.
AAA in Colombia
Prices for AAA farmers are higher than non AAA
• Rust resistant varieties and renovated trees increased significantly for AAA farmers
• Productivity has decreased for all farmers, but the decrease has not been as sharp for AAA farmers
• AAA farmers’ proportion of overall production sold to Nespresso has increased
Farmers reinvest extra money in
their coffee crop
AAA farmers express strong loyalty to Nespresso
AAA farmers have a better economic situation
28
Challenges to Program sustainability
The continuity of technical assistance strategy is
crucial to maintain the positive direction of the
impacts
Providing support to farmers intended to continue
increasing the productivity levels of small farms
(credit and fertilizers)
30
8.5%
10.6%
30.6%
32.8%
34.2%
68.2%
77.9%
67.0%
62.3%
33.5%
8.3%
24.3%
12.8%
0.9%
24.5%
27.0%
36.0%
58.9%
41.5%
19.1%
21.2%
RFA
FT
UTZ
CP
4C
ORG
AAA
To the same initiative To another Initiative As conventional
Percentage of coffee sold by initiative
AAA farmers loyalty: coffee sold to the initiative
31
90.0% 85.9% 84.5%
79.0%
67.2% 65.6%
57.0%
AAA FT RFA ORG CP UTZ 4C
More satisfied AAA farmers
Percentage of farmers satisfied with the participation in the Program
32
The evolution of coffee sustainability initiatives has been
positive during the last four years shows certain
progress in good practices, and impacts seem to be in
the expected direction.
However, the nature and the durability of impacts are
less clear and must be understood in order to have good
results in the long term. Investment in this knowledge is
likely to have a good return.
Sustainability requires organizational support. Will
organizations continue to fund capacity, inputs, technical
assistance and credit?
Lessons from sustainability initiatives