The disappearing coffee farm

Panama’s lauded crop loses ground to development. In May, coffee grown from the Geisha plant, an Ethiopian varietal that flourishes 5,500 feet up on Daniel Peterson’s Hacienda la Esmeralda plantation in Panama, sold for $50.25 a pound—a world record—in an online auction.

“I couldn’t believe the price,” says Peterson, a second-generation farmer whose family settled in Panama and started producing coffee in the late 1960s. “That coffee two years ago set a world record price at $21.10. I thought there was no way it would go over that.”

Even as growers like Peterson help Panama secure its place as an international coffee-growing hotspot, another market force threatens the very land that produces those coveted beans. Over the past decade, developers, eager to build houses and resorts for American and European retirees, have been snatching up prime coffee-growing land.

“Before, you could buy land in this area for $1,000 a hectare [about 2.5 acres],” says Calle Janson, owner of the Hacienda Lagunas farm, near the town of Boquete, where Peterson’s farm is located. In recent years, Janson says, prices have skyrocketed to $15,000 to $20,000 a hectare, and development pressure remains intense. By one estimate, 1,000 hectares have been sold in the past five to 10 years around the town, a quarter of the area’s coffee-producing land.

For farmers eking out a living, top-dollar prices for their land can be too enticing to ignore. “There’s tremendous pressure to sell,” says Janson, who, like Peterson, is holding out. “If a farmer isn’t making ends meet, what do you think he’s going to do?”

Indeed, even specialty coffee isn’t exactly a goldmine. (Of the 115 million pounds of coffee produced worldwide each year, Panama contributes just 150,000, much of it specialty varietals.) “Generally, you grow both” specialty and mass consumption coffee, says Mike Ferguson, chief of staff of the California-based Specialty Coffee Association of America, which sponsored the online auction highlighted by Peterson’s Geisha. The high-altitude land necessary to cultivate the top varieties is limited even among the best growers. And though Peterson’s pound of low-yield Geisha fetched a record sum at this year’s auction, the average price of all the beans sold during the event was $5.82. The lowest-quality beans pull in only 60 cents a pound, a loss when you consider that the average price to produce a pound of coffee is $1.50, Janson says.

By contrast, the economics of real estate development continue to be rosy. For ex-pat retirees, the Panamanian highlands are Shangri-la on the cheap: safe communities, spring-like weather year round, housing prices that are a fraction of those in the more popular retirement destinations of Central America or the Caribbean. Developers are only too happy to meet the demand. No wonder farm owners are opting to cash in on land rather than beans.

Peterson’s windfall notwithstanding, Panamanian growers aren’t the only ones having trouble making ends meet. In Vietnam—which, ironically, is part of the reason for low margins on coffee due to the large quantities it produces—farmers are being forced to sell their land to pay off debts. It’s the same story in Guatemala; according to the International Coffee Organization, the coffee harvest labor force in that country was cut from 500,000 to 200,000 in 2002 due to dwindling production, the result of coffee-producing land being sold to pay the bills. In other parts of the world, coffee farmers are turning land over to more lucrative crops—coca plants in Colombia, for instance.

In Panama, Peterson says he’s diversified his operations to include dairy farming as a way to become less reliant on coffee. “If I put the farm up for sale we would get offers,” he says. “We’re holding onto anything that we can make work.”

Gift Certificate Redux

An old tool finds some new tricks.

If you don’t have a gift certificate program, you’re passing up free money. By most estimates, only 60 percent of certificates purchased are actually redeemed. But there’s more to an effective program than that.

“It builds traffic, it gives you cash flow opportunities up front, and it’s a great way to build a frequent guest program,” says consultant Gregg Rapp. “It’s a key connection to a lot of ways to make your restaurant successful.”

Smart operators are also moving beyond the paper coupon book to new-generation gift cards, which can be an effective way of building traffic and providing you with valuable intelligence for a multi-pronged marketing approach.

A gift card offers everything that the old paper coupons provided, but they also can easily become a loyalty card, with dollar amounts added as rewards. Taking the idea one step further, some loyalty card programs can keep track of how often customers visit, what they order and how much they spend, information that can be used to fine-tune your email and direct-mail programs. “[This kind of] system is more complex to integrate, but it lets you find out as much about your customers as you possibly can,” says Patrick Brown of Gixex, a card management company. “If you can start with a gift card and build it into this kind of a loyalty program, you’re way ahead of the game.”

That’s what Mike Binninger had in mind when he launched a card program two years ago. Binninger, CEO of Java Detour, a chain of 17 coffee shops based in California, wanted to improve on the stamp cards his stores passed out to frequent customers. They shopped around for a year before settling on a single-card system that combines gift and loyalty functions. “Having just one card makes it more convenient for the consumer, but we also liked how easy it was to integrate into our existing POS system,” Binninger says.

Java Detour spent about $20,000 to launch the program, including the cost of the cards and various setup fees. Customers can buy the cards at the register or on the company’s Website, with the stored value ranging from $10 to $100. To activate the cards, recipients register online, where they can also reload the cards and monitor their balances. The monthly per store cost to run the program is about $1,200 to $1,400, Binninger says.

He wanted three things out of the card: increased loyalty, increased frequency and shorter transaction times. Binninger got them all—“the cards became cost-effective almost immediately,” he says—and discovered that their gift potential was even greater than he’d imagined. “We did a big push around Mother’s Day, and one of our stores sold $8,000 of the cards.”

While Binninger allows that the cost of such a program could be prohibitive for a smaller operator, he also thinks it’s money well spent for an outfit like Java Detour. “We’re about to start working on phase two, where we use all this great information that we’re getting about customers to improve how we communicate with that customer base,” he says.

“With a program like this, there’s a ton of potential out there.”


More from our partners