Issue No. 38

‘With the microlots program, the FNC has helped me improve my profitability’

December, 2018

Product and Innovation

‘With the microlots program, the FNC has helped me improve my profitability’

In 2018, the Microlots Program has given over 250 producers from 19 departments access to high-value markets through marketing of 222 microlots, and they have received on average COP 2.4 million per load of dry parchment coffee.

At age 32, as an enthusiastic coffee entrepreneur, Óscar Hernández has had the courage and drive to continue his father’s legacy.

His farm Los Nogales, in Pitalito, Huila, is located at 1750 masl and produces mostly Castillo and Colombia coffee varieties: about 22 loads per hectare a year.

Betting on highest quality coffee production, with the support of the FNC, his coffee reaches important customers in Japan, and on its own initiative in Switzerland too.

What this young coffee grower values the most about working with the FNC is the transparency and honesty with which his coffee premiums are paid, which in turn increases his profitability. “The numbers speak for themselves,” he says.

“With the FNC, what I have liked the most is transparency in trading: it pays my coffee based on the information about the sale price and the costs incurred in exporting,” he explains.

“On the other hand, logistics, the possibility of delivering my coffee in the cooperatives, in Almacafé itself, makes things much easier,” he notes.

Óscar recognizes that betting on quality requires investment, both in time and in labor, but these additional efforts are rewarded with better income. In addition, stability can be achieved compared to standard coffee price volatility, allowing for better future planning on the farm and the coffee business.

In 2018, the FNC Microlots Program was strengthened as a business channel at the service of coffee farmers to access high-value differentiated markets based on coffee quality.

Although the share in volume terms is low compared to the FNC total exports, these volumes are growing. Diversification of both customers and differentiated market niches served by the FNC specialty coffee area makes this Microlots Program a strategic line for the FNC exporting activity and the positioning of Colombian coffee worldwide as a superior quality origin.

The Microlots Program is based on a business model that seeks to build long-term relationships between customers and coffee growers, achieving greater profitability for the latter. By marketing specialty coffee, the FNC connects both parties, paying coffee growers the margins obtained in exporting based on the prices negotiated for Colombian coffee in this segment. In this way, not only is the best coffee in the world guaranteed to consumers, but also sustainable production of high-quality coffee.

Since 2010, as part of the Program, over 20,000 coffee bags of 60 kg have been exported to 25 countries, a supply concentrated on over 100 customers who are part of the most specialized and demanding coffee market niche in terms of quality.

This year, the commercial dynamics of this business channel has paid to producers direct premiums worth over COP 1,327,000,000. And since 2010, the program has paid COP 6,338,000,000. The average total price paid per microlot load in 2018 was COP 2.4 million.

The Microlots Program already works with 19 departments nationwide, which means greater diversity.

Purchases by cup profile, an innovative bet

In an innovative bet, the FNC Commercial Division has developed a mechanism for purchasing differentiated cup profile coffee to generate a high-quality specialty coffee inventory. With this strategy, the sales team knows the coffee quality and can offer it depending on the profile and preferences of each customer and market.

Two mechanisms are used for purchasing coffee based on cup profile. The first occurs when cooperatives or associative groups have a significant inventory. The specialty coffee team, with an Almacafé quality analyst, visits the point of purchase to evaluate the coffee and authorize the purchase of that meeting the required quality conditions. This exercise has allowed approaching coffee farmers and recognizing coffee quality in each area to identify other specialty coffee projects that look for a certain profile.

The second mechanism is based on Almacafé‘s evaluations at national level: the coffee grower, group and/or cooperative interested in selling their coffee for the Specialty Coffee Program sends a sample of the lot to be offered. If the coffee is accepted, a premium is offered depending on the cup quality. Until September, samples were evaluated in Almacafé Soacha, Tuluá, Popayán, Ibagué and Neiva.

You are invited to learn more about our coffee family and our products, visiting the COLOMBIAN COFFEE INSIGHTS sections on the top of this page.