Tessa Meulensteen

Senior Program Manager Coffee at IDH

Nov 27, 2023

Tessa leads the coffee work at IDH, developing strategy, aligning the different country teams and programs, and managing the global accounts.

She approached me a couple of months back to talk about cocoa. She felt there were similarities between the coffee and cocoa supply chains, but that cocoa was a step ahead on issues like farmers' income and deforestation. I didn't want to talk about cocoa. I had started writing a book about it but found the politics too challenging. I asked her instead if she could chat about IDH and coffee.

But first, I had a couple of issues to resolve.

Tessa is a shareholder in Herenboeren, an organization that brings together groups of interested people to build cooperative farms. She is a member of a 20-hectare farm on the outskirts of her hometown of Rotterdam. It is similar in size to the smallholding on which I grew up (and which I described in The New Merchants of Grain). My father could never make the farm pay, and I didn't see how she could. That was my first issue.

"The farm is close to my heart. I am passionate about it".

The cooperative's 200 shareholders employ someone to farm the land for them. She admitted that she has learned a lot since they began and that they produced little in the first three years.

"I don't understand how we expect farmers to farm when we put so much risk on their shoulders," she said. "I understand why it leads to a business model where you go for intensive production rather than the diversified model we're trying to do."

My father had done the same, moving into intensive pig production. He couldn't make that pay either.

I suggested the problem is that the price of food is too low as it does not cover the environmental and social costs of production. Consumers do not pay environmental costs like deforestation, social costs such as child labour, or healthcare costs from obesity or poor diet.

"I am aware that I can afford to pay more for my food and that other people might not be able to afford to," Tessa admitted. "We must also remember the amount of labour you need to farm. We all work on the farm. It's unpaid labour. Without that labour, we don't have the farm."

Herenboeren's website promotes eating food produced near home, which I have an issue with. Transport contributes less than 5 per cent of the food supply chain's greenhouse gas emissions. I suggested we could do more good by importing more of our food from Africa or South America, where many people depend on agriculture for their living.

Tessa looks at the issue from a different angle.

"The big benefit of eating food produced close to home is the connection you build with the food production system," she told me, "Learning from that, understanding how much effort goes into producing food and therefore not wasting as much. It also encourages me to eat more seasonally and cook more creatively."

"I think the drive should not be around eating locally," she continued. "It should be around understanding that our food production system doesn't consider the externalities. That's what we need to change, and there are multiple ways of doing that - and this is one way."

I hadn't finished with my issues. I had a third one. The farm also raises cattle, pigs, and chickens. I asked Tessa how she could justify that in environmental terms.

"I would argue that a diversified farm includes livestock," she said. "We have a 20-hectare farm. We use around 3 ha for vegetables and fruits; the rest is for grazing. We have two cows per hectare because that's what a hectare can support. "You can produce beef in an environmentally friendly way, but at a much lower threshold than I would have expected.

"We try to have 250 chickens," she admitted, "with the idea that they graze in the orchard and eat insects. It's a natural system. The problem is we only have 70 chickens left because we also have foxes and birds of prey. We no longer keep the chickens in the orchard as they don't survive there. There is an ideal picture of how livestock and crop production can work together, and then there's reality."

I wanted now to turn to IDH. I have known IDH for some years and am a fan. The organization is firmly grounded in the reality – not the theory - of food production.

Tessa explained that IDH is a not-for-profit organization financed by multiple governments and donors like the Bill & Melinda Gates Foundation. Its stated aim is to transform markets. IDH doesn't implement projects on the ground. Instead, it works in coalitions with the private sector or public-private partnerships to drive change. IDH views its strength as collaborative– bringing people together – rather than in advocacy.

Better jobs, better incomes, better environments

"It's big, right," Tessa told me. "Better jobs, better incomes, better environments. We try to find the interlinkages. Farmers can double their incomes by cutting down the forest, but that's not necessarily what we want to advocate. Or we can say that farmers should invest in climate-neutral production, but how can they do that if they don't have the money even to eat?"

Tessa and her team are working on a project to map the value and the risk in the coffee supply chain, tracking coffee from Brazil, Colombia, Vietnam, and Ethiopia to the German market, the largest in the EU.

They've defined the five stages of the value chain as production, farm to export, import to roasting, roasting, and retailing. They have mapped the value within each stage and their cost, taxes, and margin profiles. They also looked at coffee formats - roast and ground, whole beans, and capsules – and the difference between private labels and national brands. They have also considered the difference between consumer-facing certifications, voluntary business-to-business standards, and conventional coffee at the retail level.

"We wanted to see whether there is enough value in the supply chain to provide everybody with a decent livelihood.

"We have not finalized the study yet," she admitted, "but I can share that it's not as simple as we thought. You might think there is all this value at the end of the supply chain; we just need to pay farmers more. This is not the case. It depends on the type of product and the retail channel.

"What is clear is that even if we create more value," she added, "we don't yet have the mechanism to bring it back to the farmer."

I told her that raising farm incomes by increasing production through more land, better crop varieties or fertilizer can drive prices down and do more harm than good. It can lead to increased deforestation, but if it increases production, it can push prices lower. It can be counterproductive. It has been happening in cocoa for many years. It's not happening now, but you can have unexpected and undesired effects.

I suggested that part of the problem is that we want to raise farm incomes long-term, but the market price depends on short-term supply and demand.

Tessa told me that it is easier to do in supply chains like coffee, where there is a potential for quality differentiation. The larger roasters like Nespresso are building long-term relationships with their suppliers, emphasizing quality and supply security over price. Protecting their brand means they must make 100 per cent sure there's no child labour or environmental damage in their supply chain.

"I tell my friends that if they want to have a relative certainty that things are progressing," she told me. "Their best bet is Nespresso. Or if you are out of home, Starbucks. There are good models in your local store, but you must ask the right questions and choose carefully. Some amazing quality coffees don't take farmers' incomes into account. Nespresso and Starbucks have done a great job, but there's typically more value in their supply chains than in your seven-in-the-morning, I-just-need-to-wake-up coffee."

Sourcing based on relationship more than price

"Over time, we're going to see more sourcing based on relationship more than price," she told me. "Traders may now focus on the short term, but legislation will push traders to create greater visibility within their supply chains - and that allows for a vehicle to transfer more value."

I harbour a perhaps naïve view that coffee is more a victim of climate change than the culprit. I asked Tessa if she agreed.

She did. "Climate change is a bigger threat to coffee than coffee is to climate change, "she told me. "But I am a bit hesitant. I am concerned that coffee is driving climate change in some big producers such as Brazil and Vietnam – through input-intensive farming systems, where the quantity of fertilizers and agrochemicals used impact water quality and biodiversity."

I asked her if the EU deforestation legislation would help. I wanted to know whether it might adversely affect smallholders and favour the large producers, resulting in increased production in Vietnam and Brazil further driving deforestation. "Might it have the opposite effect than the one desired?" I asked her.

"I think there is a real risk," she replied. "Some small producers may be excluded from the EU market in the short term when there will be a drive towards compliance rather than mitigation. It potentially leads to roasters and traders readjusting their origins and redirecting non-compliant supply to non-EU markets.

"If you take a country like Uganda," she continued, "About 70 per cent of their production is indirectly sourced. Farmers in some areas sell a couple of kilos per day. There is a middleman, a guy on a bike who goes around and puts those couple of kilos into the bag. You lose your traceability straight away. The bag goes to a village where other guys with bikes bring the coffee to a factory, which does the quality checks and then pays for it. Trying to build traceability into that system is not easy.

"The other context is Brazil: you have large farmers, large farms, easy to trace. You have Vietnam, small farms, but typically quite visible and relatively easy to trace. Let's buy more from Brazil, let's buy more from Vietnam. And that might be the short-term implication, meaning there is no positive impact on deforestation rates and a negative impact on the smallholders.

"I hope that in the long term, the EU legislation leads to more visibility within the supply chain, making it easier for the sector to address the systemic issues. But I'm worried it will favour big companies, producers, and traders that can map their supply chains. It may drive the smaller traders and producers out of business or to other, lower priced markets."

Before joining IDH, Tessa worked in the private sector with Unilever's Ben & Jerry in the quality department in a factory. I asked her about her experience there.

"I learned a lot there." she told me, "Most importantly, I learned how difficult it is to do things. It is much easier to sit outside and tell people what to do.

"My job now is great, right?" she continued. "I can sit on the sidelines and tell people they must improve farmer incomes, but it's incredibly complex to achieve. Saying this is what you must do is very different than being on the inside and trying to change it there.

Her comments made me think about that great quote, sometimes attributed to Einstein and sometimes to the US baseball player Yogi Berra, "In theory, there is no difference between theory and practice. In practice, there is."

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