Monitoring and Evaluation of Nespresso AAA Sustainable ... · Monitoring and Evaluation of Nespresso AAA Sustainable Quality TM Program in Colombia First follow-up Carlos Ariel Garcia

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




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



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


Average environmental index

Score


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


Average economic index

Score


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


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


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

22

AAA Program early impacts

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


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


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)

29

AAA Program compared to another initiatives

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

33

Acknowledgements

Coffee growers committed with the CRECE M & E surveys

Nespresso team

Cafexport

FNC - Departmental Committes of Cofffee Growers of Antioquia, Caldas, Cauca and Nariño

THANK YOU!

Documents

Monitoring and Evaluation of Nespresso AAA Sustainable ... · Monitoring and Evaluation of Nespresso AAA Sustainable Quality TM Program in Colombia First follow-up Carlos Ariel Garcia