How Root Capital is helping coffee cooperatives unlock the power of data

Written by Aída Palomo, sponsored by Root Capital

Digital Business Intelligence (DBI) services are customized advisory offerings provided to coffee cooperatives by Root Capital, a non-profit with more than 20 years of experience working within the sector. A few weeks ago, we spoke with Kate Hyder, Director of Innovation at Root Capital, to chat about their work in digitalization and their thinking about traceability in the coffee value chain. 

Root Capital invests in the growth of agricultural businesses so that they can serve as engines of impact in rural communities. Root Capital provides working capital financing that enables businesses to pay farmers well and on time while providing technical assistance, internal credit and other key services to farmers. Root Capital also offers Advisory Services to agricultural businesses on topics such as financial management and agronomic planning.

Picture credits Root Capital

After working closely with producer cooperatives in Latin America, Asia, and Africa, Root Capital realized that, in addition to the gap in financing that agricultural businesses face, the digital gap between urban and rural areas also leaves agricultural businesses and their farmers at a disadvantage in an increasingly digitalized supply chain. Without the internal capacities and data management tools to digitalize and leverage such information, cooperatives miss an opportunity to make better decisions based on data. Therefore, six years ago, in response to a request by a coffee cooperative in Peru, Root Capital launched Digital Business Intelligence services “to address this gap so that agricultural businesses can be empowered by digital information”, Kate says.

This service builds on existing (usually paper-based) data collection processes. Collecting information isn’t new to coffee cooperatives, many third parties and certifiers require they gather data on a number of factors. However, what is new is collecting and managing their own information to benefit themselves. And it can be transformational.

What are Digital Business Intelligence services and how do they work?

Digital Business Intelligence services begin with a diagnostic to identify a coffee cooperative’s existing technical capacities, commitment to improved data-driven decision making, and priority decision areas. Root Capital assesses and accompanies their clients by working backward from the business’ own objectives. “Let’s say a cooperative has funding to build a preschool, but you want to know where to locate it and what services it should offer,” Kate explains. “We work with the cooperative to identify what information is needed (the age and location of farmers’ children, for example) and incorporate those questions into existing data collection opportunities like internal inspections. Once collected, we help the cooperative build reports to analyze this information and inform their decision. The service starts with the priorities of the cooperatives.”

A network of DBI trainers work alongside cooperative staff to design the digital survey tools and analyze the information. But it’s the agricultural businesses themselves that collect that information in the field and manage its quality. Delivering the service “requires a deep understanding of coffee cooperatives: about their internal processes, on how they should structure a good survey, and finally how to analyze and visualize that information. So we work a lot on their operational capacity, with the ultimate goal of better serving those farmers and increasing prosperity in the rural zones”, Kate told us.

After completing this process of digital data collection, cooperatives are able to demonstrate the value of their information for their business and the supply chain through visualization. “The organizations want to invest more and unlock even deeper value from data that had previously been stored away in paper binders”. This generates a virtuous circle in digitalization in which cooperatives invest more in digital data collection, quality control, and analysis and are paid back in better decisions, a more efficient use of resources, and… strong value chain relationships.

And this is where traceability comes in. 

Digitalization is a precursor to any traceability system, and a capacity that can make cooperatives more attractive to the international market, showcasing their strengths as a client and a supplier. While there is certainly a need to move beyond certification and generate greater supply chain visibility, we can’t take for granted the expense and time required to achieve full traceability, from the farm through aggregation, processing, export/import, distribution, and consumption. 

Picture credits Root Capital

“The margins of a smallholder coffee business can’t support a large, up-front investment in digitalization and traceability. We need to have a conversation as an industry about when traceability offers enough of a business value proposition to justify the costs, and how those costs can be effectively distributed along the supply chain.”

Digital Business Intelligence is a first and important step in cooperatives realizing the real value and business importance of digital information: By “determining, what is useful and feasible internally to the cooperative, and from there fulfilling external requests that may arise. Too often data collection starts with the information requirements imposed by buyers and certifiers. In doing so, we miss an opportunity to empower the cooperatives and strengthen the supply chain for all actors,” says Kate. Innovation is the core of this participatory system design, and many of Root Capital’s clients are innovation partners, pushing them to develop solutions to emerging challenges. Kate explains, “we started with very basic visualization software, but with time and more tech-savvy young people engaging in DBI, our clients are driving us to push the envelope. So we have introduced more advanced tools like Tableau to help them visualize their information and make decisions based on it”. 

Once again, traceability and digitalization require a lot of work, time, and investment. Actors that are willing to partner with cooperatives over several years can build a lasting capacity and commitment to digitization. Root Capital is convinced that this is what will ultimately “close the rural-urban digital divide and democratize data. We want to see the power in the value chain more evenly distributed by truly empowering cooperatives with information, leveling the playing field”, concludes Kate.