Peru Coffee Pacha Mama and Coffee Pirates

Dear PachaMama friends,

We would like to thank you very much for your trust and the good cooperation.
You have helped us learn and grow during this challenging year, and most importantly, you have supported our cafetaleros in the village of Miguel Grau to achieve a decent standard of living .

Today I would like to inform you about everything that has happened in the cooperative, how you have supported it and what will happen this year.

1. The cooperative’s first loss after almost 10 years.
   a. How can this happen with such a high stock price?
   b. Limits of what is feasible when importing
2. review
   - from the Cafetaleros' point of view
   - from German point of view
3. outlook
   - optimistic despite stress
   - why it makes sense to maintain the strategy
   - what really moves us, what concerns us all
   - Climate challenges
   
4. This is what awaits you in 2023:
   Pozuzo coffee
   Opportunity for those who decide quickly (.... Easter will definitely be back soon)

1. The cooperative's first loss after almost 10 years.
The high coffee prices affected us all and made us very worried about whether we would find acceptance on the market in Germany.
Of course, it wasn't the roasters' fault - they sometimes gave up margins. It's up to the end customers whether they'll be willing to spend more money on good coffee.
The question arose as to when the price elasticity would break and customers would migrate to the low-cost segment despite their emotional attachment to the roaster they trust.
You all have proven that it does not happen on a large scale!
As I have learned from many colleagues, the appreciation of a high-quality product in the case of coffee is largely correct and those who have managed to compensate for lower margins to some extent by optimizing their business processes can look to the future with confidence.
In addition, one thing is clear:
It is not the small roasters who imitate the big ones. No, the big ones imitate the small roasters (with fine coffee products in the upper price segment).
This is a good sign, because only those who are good will be imitated.
Turning to cheap coffee would be disastrous because we would lose our DNA, our brand essence and our quality.
We therefore trust in our long-term cooperation with you in this market segment.

Reasons for loss of our cooperative

How can this happen with such a high stock price?
For the first time in the history of our project, in which we continually try to lead the farmers into the future, the cooperative has made a loss.
In itself, such a cooperative does not exist to generate profit, but to increase the prosperity of its members.
Nevertheless, a loss is significant for all members because they also share in the loss.
We always pay far more than what would be available locally for the coffee and not only make advance payments for the containers, but also pay well in advance of the shipment so that we can make harvest and export preparations in the spring.
So how did the loss of the cooperative come about?
As always, the reasons are manifold. One of them concerns increased costs in many areas.
To be clear, the farmers have received significantly more per Libra for their green coffee (the Pergamino - that is their green coffee, unpeeled, as they hand it over - the currency that counts for the cafetaleros), but the cost of living has also risen enormously at the same time as inflation. Like coffee, organic fertilizer is also traded on the world market. The Ukraine war has had an impact here and has driven up the price of organic fertilizer worldwide.
It has therefore become extremely expensive, even in Peru.
In addition, transport costs have also skyrocketed in Peru due to extremely high fuel prices.
A second important factor is lower crop yields.
Coffee rust has struck again, and we have an average of 20 to 30% less yield. Unfortunately, coffee rust occurs again and again.
We thought we had the problem under control with healthy bushes and good care, but we still have to learn how to deal with it. During the first analysis, we noticed that this also has something to do with "global warming". We have higher average temperatures on average. This gives fungal spores on the ground more space to spread.
We also have more days of precipitation per year, although the total rainfall is decreasing.
This promotes the growth of spores and also means harvest stress for the cafetaleros because the harvest time is narrowed by several weeks to a smaller window of time during which it ideally does not rain.
Limits of what is possible when importing
We have re-analyzed and optimized the entire value chain in order to make cost savings (flow of goods, flow of value) and try to keep our costs as low as possible.
We save on everything except quality.
We feel the same as you. We would lose our core brand - high-quality coffee - if we didn't maintain the quality.

We cannot aim for price leadership or cost leadership. The big players do that much better! As described in our preamble, our goal remains quality leadership, together with social responsibility and sustainability with regard to people and nature.
The biggest challenge, however, was the increased capital investment.
With all the additional costs, a 20” container can easily cost 40-50,000€ more.

A real cash flow problem that a few roasters helped us with very, very much by paying us early.
Banks do provide loans, but they are limited and must be financed.
Across the board, we have been shown the limits of growth.

2. Review
Thanks to your appreciation for good coffee, which also has people with faces, fates and hopes in the background, life in our village has become more worth living.
a) from the perspective of the Cafetaleros
How do we determine this:
Despite the inflation described above, the cafetaleros have earned above-average amounts in recent years. But that is not the only reason.
- Young people are coming back to the village because they see that you can make a living from coffee!
- More support for education with the volunteer program with German young people who support the school (we currently have 2 young supporters, Finja and Eliah, in the village until August).
- Through better school equipment such as teaching materials, computers, etc.
- More women empowerment
In the newly created “Café Elisa”, which is founded and run by women from the village thanks to a donation from a roastery, the women serve their customers with pride, which gives them a new kind of self-confidence.
- Deforestation-free growth. The export of high-quality coffee has increased tenfold in 10 years. Growth without slash-and-burn agriculture while the number of members and area have remained almost the same. We also use existing crops for Cascara.

- Increased self-confidence. People have become more self-confident.
The cafetaleros can proudly represent their cooperative through quality and acquired know-how. Some visitors can experience this there.
But they are also welcome as speakers at other cooperatives. Because they have managed to change (methodically and through the leadership of a new generation), they are seen as exemplary.
Another example is that they managed to produce the coffee cherry tea, Cascara, which meets the strict German requirements.
- More prosperity. There are many new or renovated houses in Miguel Grau, and the village square has also been improved.
- Handling the latest technology (photovoltaics, computers)
- Own car for the Cascara project (to increase the quality process and efficiency)
- New management of the cooperative and new young members.

- Cooperation with other cooperatives (exchange of experiences, resource sharing)

b.) from a German perspective
- Trust is growing. Hardly any existing roaster wants samples because we have proven continuity over the years.
- We have new customers in Germany and Austria/France/Denmark/Italy
- Cascara has not only overcome a major hurdle with EU approval. Renowned tea and beverage manufacturers have approved the coffee cherries and put them through their paces to ensure they pass the strict EU regulations.
- We support startups in the development of new drinks made from cascara.
- We are again climate neutral with this delivery.
- In order to set a small example in the world and to raise awareness among as many people as possible, our coffee, including roasting, is climate neutral.

3. Outlook

- optimistic despite stress

Despite all the adversities, we are looking to the future with optimism. The issues that weighed heavily on us last year will come to an end at some point.

- Why it makes sense to maintain the strategy

We want to maintain our vision of “connecting the Andean jungle of Peru with Germany”.
We also offer an individual trip for roasters!
One issue that will keep us busy for a while is climate change. It affects everyone, so we want to do something about it.
We are already climate neutral and are already offsetting our ecological footprint from cultivation to roasting with certificates. This is just the first step.

- We have started projects with fellow roasters to reforest secondary forests back to primary forest.
- In order to see the earth not only as a substrate for coffee, but as a living organism for sustainable agriculture, the foundation for “Terra Preta” was laid.
The challenge is to create a triple win-win-win situation. The farmer benefits, nature wins, and customers/roasters and end users both see a benefit.

4. What awaits you in 2023

We will be able to ensure the delivery of PachaMama coffee in proven quality again in 2023.
In order to give the Cafetaleros a look into the future, we continually motivate them to produce something “special”.
The result is coffees with an excellent price-performance ratio .

• MicroLot Geisha (sold out)
  
• Cascara, according to EU regulation
• Cocoa shells as tea
• Pozuzo Project Coffee (German/Austrian Coffee, Made in Peru)

This year we are getting high-quality organic coffee from Pozuzo for the first time.
The German-speaking colony on the edge of the Amazon.

To get to the best coffee from Pozuzo, you have to climb another 1000 meters to reach a coffee area (1840m) that has pine trees as a shade forest.
Great idea, the falling needles form the best fertilizer and prevent weeds from growing. Ecologically/biologically perfect and the quality in the cup is excellent.

The “Pozuzo Coffee” also has an incredibly interesting history.
In the middle of the 18th century, Tyrolean and German emigrants settled here and continued to cultivate the customs, language and culture. See Wikipedia

We look forward to your inquiry and of course you can request samples.

We would therefore like to emphasize once again how grateful we are to have such good partners and friendships with you and appreciate the trust you have placed in our small project.
We wish you a successful start into the new year and above all good health, continued success and many happy customers.

And remember: PachaMama - good coffee makes you happy!
…. not just connoisseurs
…. but also the farmers in Peru

We look forward to hearing from you!

Walter&Margot


PS: We are grateful for suggestions and tips. Any feedback is welcome.