Arusha, Tanzania -- The Association of Kilimanjaro Specialty Coffee Growers (AKSCG) has assisted its 62 smallholder-group members to achieve a record US$1,050,000 in sales for the 2003/04 season, during the national coffee auction recently held in Moshi, Tanzania, according to TechnoServe/Tanzania, a non-profit organization that works with AKSCG and its members to improve coffee production and marketing and help them earn higher prices.

AKSCG is shaking up Tanzania's coffee market with the competitive prices it is negotiating for its 4,500 smallholder grower-members. In the three coffee-growing areas where AKSCG operates -- Kilimanjaro, Mbeya and Mbinga -- the Association has consistently obtained higher prices for its farmers' coffee than other sellers. In Mbinga, for example, AKSCG farmers received between 61 and 83 cents (US) per kilogram of parchment coffee, while other coffee farmers received between 39 and 49 cents (US). For the second year in a row, the prices AKSCG has obtained represent over 65% premiums above the average price paid in Mbinga, with some farmers receiving much higher premiums. And in Mbeya, AKSCG members earned between 68 and 88 cents (US) per kilogram, while other coffee farmers received between 39 and 83 cents (US).

This week, in a related development, Peet's Coffee & Tea (NASDAQ: PEET), a specialty coffee roaster with an international reputation for offering the highest quality coffees, is purchasing 176 bags (23,280 pounds)* of washed Arabica from five AKSCG member-groups representing 645 smallholder growers in northern Tanzania. Peet's purchase of AKSCG coffee represents the first direct coffee smallholder grower-to-roaster transaction in Tanzania. The
premium price paid by Peet's will result in farmers receiving 50% higher prices than AKSCG member-farmers who sell their coffee at auction. In comparison with non-AKSCG farmers, the farmers selling to Peet's will receive up to 100% higher prices than their neighbors. [*One bag equals 60 kilograms or 132.28 pounds.]

The coffee that Peet's is purchasing was processed in "central pulperies" that TechnoServe helped to establish between 2002 and 2003 in the villages of Dohom, King'ori, Messe Ngarony and Mlimani Ngarashi. These central pulperies are processing facilities where farmers collectively remove the coffee cherry skin, wash and then dry their coffee, resulting in a higher-quality and more consistent end product.

TechnoServe/Tanzania facilitated the direct sale of AKSCG coffee. "After meeting with TechnoServe's staff and coffee clients in Tanzania last summer, I was very happy to sample and purchase one of the finest lots of coffee from this region, which met Peet's high standards for great acidity, body and flavor," said Jim Reynolds, Vice President of Coffee, Peet's
Coffee & Tea. "It's especially gratifying because over the years, Jerry Baldwin, Peet's former chairman, and also a TechnoServe Board member, has encouraged the coffee producers in Tanzania in their pursuit of quality, and we are beginning to see great progress from them. I'd also like to acknowledge Paul Stewart of TechnoServe** and Volcafe Specialty Coffee for their significant contributions to this development." [**Paul Stewart is Coffee Marketing and Finance Advisor for TechnoServe/Tanzania.]

For the first time in Tanzania, growers of high-quality coffee can bypass the national auction system and sell directly to specialty buyers, a result of changes to industry regulations enacted in October 2003 by the Tanzania Coffee Board (TCB). TechnoServe, AKSCG and other key stakeholders pushed hard for the changes, which are designed to help Tanzanian specialty coffee growers receive premium prices in direct negotiations with roasters. One of TechnoServe's volunteer consultants, Parviz Parvizi, also assisted the TCB and the Tanzanian government to draft the new regulations.

"The coffee that Peet's is purchasing was grown by farmer groups who are working at the highest altitudes, at a minimum of 1,500 meters, and who are operating central pulperies that were installed with the support of TechnoServe," said Thom Dixon, TechnoServe/Tanzania Country Director. "The excellent price premium these coffee growers are receiving from Peet's will create the best incentive possible to encourage farmers to deliver coffee cherries to central pulperies rather than process them at home. It will also highlight for central pulpery operators the importance of strict quality control, as one group relaxed its quality standards and was among those whose coffee samples were rejected."

Following a decade-long decline in Tanzania's coffee industry -- made worse by the current global coffee crisis of near-record-low prices being paid to growers -- the vast majority of Tanzania's 400,000 smallholder growers are trapped in a vicious cycle of ever-worsening production and quality. As one farmer put it, "when prices are low, farmers get frustrated and might weed only once a year. But if things go well, they will weed four times a year." Poor farming practices like these, driven by a lack of income, only serve to lock coffee growers into a declining spiral: as they earn less and less, producers are increasingly unable to make the necessary on-farm investments, and coffee quality and volumes suffer.

But Tanzania's coffee growers now have a new sense of hope with the advent of AKSCG and TechnoServe's involvement. "Since TechnoServe arrived prices are higher and things are better because now farmers can afford inputs. Our farmers are very happy with AKSCG," said N. Ndomba, Chairman of AKSCG's Mbinga Chapter Committee. "AKSCG helped us to get agricultural inputs on time, and now our fields look good!" said a farmer from the Bagamoyo Super Coffee Group in Mbinga. "AKSCG's input credit scheme assisted farmers in Mbinga to acquire US$44,660 worth of fertilizer and other inputs when they needed them," explained Adolph Kumburu, AKSCG's Executive Director. According to Filbert Kapinga of the Lutondo Coffee Growers Group, "My neighbors sold coffee for only 300 Tanzanian shillings per kilogram. Through AKSCG I received 700TSh/kg!"

With TechnoServe's assistance, AKSCG has established a reputation as a supplier of high-quality specialty coffee. TechnoServe and AKSCG worked together to send coffee samples overseas in order to test international interest, and the response has been very encouraging. During a series of cupping sessions held at the Sintercafe Coffee Conference in Costa Rica in November 2003, TechnoServe's Paul Stewart presented six samples of top-quality Tanzanian coffee (including a sample from AKSCG) to representatives of five leading specialty coffee companies for their appraisal. Peter Torrebiarte from Starbucks Coffee Agronomy Company described a sample of AKSCG's Kilimanjaro blend as "clean, bright, good acidity, with interesting flavor notes." Don Jensen of Bridgetown Coffee (Portland, USA) said that the AKSCG coffee he sampled had a "magnificent after-taste, light acidity and floral notes."

In addition to higher prices, AKSCG has delivered a host of other benefits to its smallholder-members as Oscar Mapunda, now Chairman of the Mwongozo Coffee Quality Group, can attest. Poverty-stricken, Mr. Mapunda was forced to leave school after completing his primary education. Since then he has been farming coffee and working to improve his community's lot. In 2002 he took a giant step in the right direction by helping to form the Mwongozo Group of specialty coffee farmers and join AKSCG. Its members meet weekly
to discuss production issues. Mwongozo also acts as a quality-control mechanism: its members visit each other's farms during harvest to verify that everyone is adhering to the Group's rigorous quality guidelines, to ensure acceptance by AKSCG. TechnoServe has also trained the group to develop its own micro-credit savings scheme, which pre-finances the members' investment in coffee inputs -- or their children's education --while they await the annual payment they receive for their coffee.

Prior to joining AKSCG, Mr. Mapunda received very low prices for his coffee. During the 2002/03 season, when desperately in need of cash, he was forced to sell some coffee to a passing trader and was paid only 16 cents (US) per kilogram. This is in sharp contrast to the 59 cents (US) per kilogram he received through AKSCG later that very same season for the remainder of his crop. In 2003, AKSCG's marketing services resulted in the Mwongozo Group receiving 83 cents (US) per kilogram -- while the highest-paying competitor offered only 49 cents (US). Apart from the obvious financial benefits to the individual members, AKSCG has created greater competitiveness in the Tanzania coffee market overall, resulting in better prices for all farmers. According to Mr. Mapunda, "AKSCG and TechnoServe have done a great job by helping us to get a good price for our coffee."

By providing services including quality and management training, credit facilitation, and linkages to markets at just above cost, AKSCG is assisting its member-groups to achieve the true potential of their quality coffee and realize higher prices. In order to stay competitive, other traders have been forced to increase their prices. "I advise other farmers to join us on our road to progress," said Mr. Ndomba. In the near future, this journey will include assisting more farmer groups to adopt central pulpery technology to achieve the prices realized by the farmer groups who have sold to Peet's Coffee & Tea.

This will require continuing technical assistance and management guidance from TechnoServe -- and significant investment by farmers -- but the growers are excited about the potential benefits. "Our aim now is to work together to establish these central processing centers," said Mr. Ndomba. TechnoServe has already established 11 of the village-based central pulperies, which are enabling over 1,000 Tanzanian farmers to produce consistently high-quality coffee and receive premium prices, and hopes to establish 20 more central pulperies over the next two years.

TechnoServe's coffee work in Tanzania is funded by the U.S. Agency for International Development (USAID), the Swiss Organization for Development Cooperation (SDC), and private donors to TechnoServe.

The following photographs were taken March 9, 2004 in Moshi, Tanzania.

Noel Yatera (l.), AKSCG Operations Manager, with Sifaeli Urio, Chairman of King'ori Specialty Coffee Growers, one of the member-groups involved in selling coffee to Peet's Coffee & Tea. This sale marks the first direct smallholder grower-to-roaster transaction in Tanzania.

Sifaeli Urio (r.), Chairman of King'ori Specialty Coffee Growers, one of the member-groups involved in selling coffee to Peet's Coffee & Tea and Noel Yatera (2nd from r.), AKSCG Operations Manager, with staff from Taylor Winch, the local coffee exporter assisting AKSCG with handling and shipping arrangements, during loading in Moshi on March 9. This sale marks the first direct smallholder grower-to-roaster transaction in Tanzania.

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TechnoServe is leading a movement that empowers people in the developing world to build businesses that break the cycle of poverty. Growing enterprises generate jobs and other income opportunities for poor people, enabling them to improve their lives and secure a better future for their families. Since its founding in 1968, the U.S.-based nonprofit has helped to create or expand thousands of businesses, benefiting millions of people in more than 30 countries. The Financial Times has rated TechnoServe one of the top five NGOs for corporate partnerships. Charity Navigator has also awarded its highest Four Star ranking to TechnoServe.

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