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Proposal to Establish a PovertyFighting Wine Industry within Ethiopia
Report Prepared by:
Global Feasibility Study Team, Goizueta Business School, Emory University
For:
Stephen Satterfied, International Society of Africans in Wine (ISAW)
Circulation Draft*
October, 2010
If you have any comments or suggestions, or would like to offer support for this important project, please contact Peter Roberts ([email protected]) or Stephen Satterfield ([email protected]).
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Background
With 85% of its employees working in the farming sector and an estimated $900 of GDP per capita,
Ethiopia is one of the poorest countries in the world. 1 As a result, 70% of Ethiopians earn less than
$2 per day, while almost 50% survive on less than $1 per day.
This project was conceived following discussions during which Prime Minister Meles Zenawi
expressed an interest in the creation of an economically and socially beneficial wine industry within
Ethiopia; one that might expand upon its recent successes with high‐quality coffee.
At the request of the International Society of Africans in Wine (ISAW), a 501(c)3 based in Atlanta, a
team of six students and one professor from Emory University’s Goizueta Business School (see
Appendix A) traveled to Ethiopia to analyze the feasibility of encouraging the development of a
commercial wine industry in and around Addis Ababa. The specific charge was to assess the
prospects of developing an economically‐viable and socially‐responsible wine cluster and then
provide specific recommendations.2
The team travelled to Ethiopia in August, 2010 and met with government and industry leaders and
visited different farming regions along with the recently‐planted Castel Vineyard. In particular, we
met with His Excellency, President Girma Woldegiorgis, to discuss his vision for wine production
within Ethiopia. We also met with Dr. Abera Deressa and Mr. Haileselassie Tekie, the Minister of
Agriculture and Director General of Horticulture, respectively, to discuss historical land surveys and
the prospect of obtaining government land to plant vineyards. Another set of meetings was with Mr.
Tadesse Meskela, the General Manager of the Oromia Coffee cooperative. As the largest and most
successful coffee cooperative in Ethiopia, we were able to draw parallels between the successes
that he had achieved with coffee and potential economic successes in the wine industry.
This report documents the viability of a quality‐oriented anti‐poverty initiative for Ethiopia in the
wine industry. It outlines the considerable potential and the various impediments before proposing
an interconnected set of programs that will collectively address these obstacles.
1 See The World Fact Book, CIA, 2004. 2 The expressed priorities of our target audiences include: (a) building sustainable communities through viticulture (ISAW); (b) promoting market‐led agriculture, private enterprise, increased productivity, food security, foreign direct investment, and overall development (Ethiopian government); (c) transforming cooperatives into dynamic agribusiness enterprises with shareholder members exercising their ownership rights to take control of their economic future (USAID); and (d) eradicating poverty and providing opportunities for reinvestment in Ethiopia (Diaspora community).
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The success of the proposed endeavors is linked to the potential to create a quality‐based identity
for Ethiopia in the wine market. At the same time, a key point of differentiation for Ethiopia (at least
initially) relates to the strong social mission of this project. To our knowledge, this represents the
first attempt to develop a wine‐producing region with the primary aim of reducing poverty. By
paying careful attention to the design of this wine industry cluster, many of the ensuing economic
benefits should flow directly to Ethiopian farmers and their families.
We therefore make a strong business case for the centrality of a clear and strong anti‐poverty
mission for this project. More specifically, we outline a number of specific market ‘subsidies’ that
follow such a commitment; i.e., examples of the financial, knowledge and market‐access support
that might be expected.
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Executive Summary
With several coordinated efforts and some targeted external support that seems promising given the antipoverty mission of the project, Ethiopian farmers should be able to earn (by year 6) roughly ETB 12,000 per year from a ¼hectare plot, compared to the roughly ETB 2,500 earned by planting other crops.
At the request of the International Society of Africans in Wine (ISAW), a team of six students and one professor from Emory University’s Goizueta Business School traveled to Ethiopia. Their specific goal was to assess the prospects of developing an economically‐viable and socially‐responsible wine industry cluster in and around Addis Ababa.
It seems plausible that Ethiopians might profitably produce high‐quality grapes and wines. Ethiopia has an appropriate climate, some experience with winemaking, demonstrated interest from the government and from the private sector, several small‐scale vineyard experiments underway, potentially‐interested winery investors in the growing middle and upper classes, and growing levels of local wine consumption.
Preliminary financial analysis affirms that grape growing can be economically attractive for farmers living in specific regions within Ethiopia. With conservative assumptions about yields, grape and wine prices and discount rates, and accounting for up‐front investment that will bear no fruit during the first two years, we estimate that ¼‐hectare planted to quality wine grapes has a net present value of more than ETB 40,000 over a 20‐year period.3 This compares quite favorably to roughly ETB 17,000 if that same land is left planted to teff (a cereal crop grown primarily in Ethiopia). The return is even higher (i.e., almost ETB 60,000) when farmers also receive a 5% “social premium” from the downstream profits associated with making and selling wine from just 40% of their grape output.
However, various impediments – limited financing, lack of industry knowledge, concerns about market access and problematic infrastructure – must be overcome to achieve this potential.
Several of these impediments can be overcome by establishing Vineyard Cooperatives. Cooperative arrangements have allowed Ethiopian coffee growers to penetrate higher‐quality segments of that industry and to benefit financially from their investments and commitments. Working with the support of the founder of the Oromia Coffee Cooperative (Oromia), one can leverage this success in the global wine industry.
These cooperatives provide the means to lower each farmer’s personal investment in vineyards while achieving sufficient overall scale. Small initial plantings also allow farmers to grow food and other cash crops on the remainder of their land holdings. Our proposal calls for the initial establishment of two Vineyard Cooperatives of 40 families each, with each family initially planting ¼ hectare to vines. An estimated investment of less than ETB 15,000 per farmer (spread over two years) will create two 10‐hectare cooperative vineyards, which will initially produce almost 12,000 cases of wine per year.
There are documented concerns about the ability of cooperatives to consistently produce high‐quality grapes and wines. However, our cooperatives will also serve as vehicles to attract valuable industry knowledge from established viticulture programs in other countries. Our proposal calls for two related programs – a Vineyard Planting Program and a Vineyard Monitoring Program – that will 3 One US dollar is currently equal to roughly 17 Ethiopian birr.
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ensure that best vineyard practices are learned and applied in the two cooperatives. Critical inputs to these two programs are trained viticulture faculty and students from established wine‐producing regions. Many of these individuals are attracted to the social mission of this project. Our proposal leverages this interest in two programs that will bring these global experts to Ethiopia in order to supervise vineyard plantings and then monitor vineyard progress. This will enhance our farmers’ ability to produce high‐quality grapes and will also allow selected Ethiopians to develop valuable industry skills in parallel ‘train the trainer’ initiatives.
Investments in vineyards are only viable if we are able to encourage the development of wineries within Ethiopia. Preliminary analysis indicates that after promising vineyards are established, investments in wineries also become viable. For example, a roughly $250,000 investment in a 2,000 case winery produces (again under conservative assumptions) a positive net present value at discount rates of more than 18%. This estimate again incorporates the 5% social premium paid to the cooperative grape growers. Targeting interested social investors, we will encourage investment in one or more wineries that will each vinify a fraction of the cooperatives’ output.
Finally, this proposal depends on finding an interested audience for high‐quality Ethiopian wines once they are produced. Our Market Access Program will emphasize three natural market segments: wine shops, restaurants and hotels within Ethiopia, Ethiopian Diaspora, and socially‐conscious wine consumers in the US and Europe who will be attracted to our project’s joint commitment to quality and poverty alleviation within Ethiopia. Given the anti‐poverty emphasis of this project, cooperative farmers and their affiliated winery owners will also benefit from free promotion (over several years) from the project’s sponsor, ISAW, and its affiliated organizations. Thus, preliminary research affirms that these three segments will provide more than enough demand initially, and then be able to absorb expected growth into the foreseeable future.
Funding for the different elements of this proposal must come from diverse sources. Foundations and government financing will be encouraged to support the education exchanges that are built into the planting and monitoring programs, and to fund necessary investments in irrigation. Social impact investors will be courted to support investments in for‐profit, double‐bottom‐line wineries. Finally, farmers themselves (with funding provided through local cooperative banks) will be called upon to make their own investments in the vines and related materials required to establish the vineyards.
Given the economic promise inherent in this endeavor, and its ability to have a pronounced impact on the lives of many Ethiopians, we strongly encourage investment in what we are calling the project’s Triage Period. In short order, we must fund a visit to Ethiopia by a skilled team of viticulturists from the University of California, Davis, who will (on a pro bono basis) provide critical insights about the specific viability of different sites and about matching grape varietals to these locations. We must also hire a full‐time project manager on a 12‐month contract to conduct or oversee the fine‐grained research that will provide further proof‐of‐concept for the various elements of this project. He/she must also develop the specifics of the various programs and ensure that the requisite planning is done in time for a successful first planting. We estimate the full cost of this Triage Period will be less than $150,000 over 12 months.
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Potential for Wine in Ethiopia
According to recent DataMonitor figures, the global wine market is expected to increase by 3.4%
between 2009 and 2014 and reach a total volume of more than 22 billion liters (equal to roughly
2.5 billion cases). This should correspond with a total market value of $291.5 billion, an increase of
10.5% over 2009 levels. Similar growth is expected in African and Middle Eastern markets. By the
end of 2013, the value of wines sold in these regions is expected to be worth more than $6.7 billion.
In terms of volume, this represents a total of 47.2 million liters (equal to 50 million cases).
There is also evidence of
increasing demand for wine
within Ethiopia (see Trends in
Global and Local Wine
Industry). Philip Parker
estimates a latent demand for
wine in Ethiopia of $62.5
million in 2009, 60% of which
comes from Addis Ababa.4
Latent demand is forecast to
grow to $86.71 million by
2014. Based on DataMonitor
figures presented above, the
implicit average price per
bottle of wine sold in the
Middle East and Africa in
2013 will be $11.21. If we
assume this implicit price, the
expected latent demand
translates into a potential of
roughly 650,000 cases of
wine purchased inside
Ethiopia by 2014.
4 Latent demand is the expected earnings of a market when it becomes accessible and attractive to producers.
Trends in Global and Local Wine Industry Worldwide Market Potential (in US millions) Global Africa/Middle East 2010 $74,473.09 $6,151.3 2011 $77,785.57 $5,333.6 2012 $81,262.40 $6,510.3 2013 $84,912.66 $6,681.5 2014 $88,745.98 n/a Ethiopia Latent Demand (or Market Potential) (in US millions) Ethiopia % Region % World 2010 $66.73 2.20% 0.09% 2011 $71.24 2.24% 0.09% 2012 $76.06 2.27% 0.09% 2013 $81.21 2.31% 0.10% 2014 $86.71 2.35% 0.10%
Ethiopia: Latent Wine Demand in 2009 (in US millions) US $ millions % Country % World Addis Ababa $38.83 62.14% 0.05% Asmera $7.69 12.30% 0.01% Dire Dawa $2.55 4.07% 0.00% Gonder $2.10 3.37% 0.00% Nazret $1.97 3.16% 0.00% Dessye $1.97 3.16% 0.00% Jimma $1.66 2.66% 0.00% Harar $1.64 2.62% 0.00% Mekele $1.61 2.58% 0.00% Bahr Dar $1.43 2.29% 0.00% Debre Markos $1.04 1.66% 0.00% Sources: Wine in Middle East and Africa to 2013 Market Databook. DataMonitor, January, 2010
Global Wine Industry Profile. DataMonitor, May, 2010
Philip M. Parker (2008). “The 20092014 World Outlook for Wine. ICON Group International
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However, Ethiopia is not currently prepared to take advantage of this expected growth in global
and local demand.5 This is not due to unfavorable growing conditions. Despite being located
between the Tropic of Cancer and the Equator, the elevation of certain regions within Ethiopia
causes the temperature to range (typically) between 59°F and 77°F. These same regions are
abundant in sunshine and receive adequate rainfall. In short, climate conditions are conducive to
high‐quality wine production.
Nor is this due to a lack of history with wine production. As early as the 16th century, Portuguese
and Italian missionaries used Ethiopian grape varietals to make wine for church ceremonies. As
recently as the 1970s, wines (particularly those made from Italian grape varietals) were produced
and consumed in Ethiopia.6 Even today, wine grapes are grown in small quantities in several
different regions.
More significantly, in March of 2008, the Castel Group – France’s largest wine producer –
announced its $4.2 million investment to plant vineyards in the southern region of Ziway. The
Prime Minister supported this development by providing the initial 300 hectares of land to Castel
rent free. In response, Castel planted a 120‐hectare vineyard with Merlot, Cabernet Sauvignon,
Syrah, and Chardonnay, all international varietals with significant market potential.7
5 In addition to this expected growth in demand, rumors are circulating that there may be a decrease in the supply of Ethiopian wine as Awash Winery may be on the brink of closing down. 6 At that point in time, political developments led to the eradication of the various wine‐industry efforts. 7 Indications are that Castel has plans to increase the size of this vineyard to roughly 400 hectares.
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Investment Models
Notwithstanding these promising indications, the establishment of vineyards and wineries must be
based on sound investment logic. We therefore developed a simple model that demonstrates the
economic feasibility vineyard investments (see Appendix B1).
This model is based on figures and assumptions contained in two companion reports on the
economic viability of planting vineyards in the North Coast region of California (see Appendix B2).
These models were aggregated after being adjusted for obvious differences in land and labor costs
(both assumed to be zero in the Ethiopian anti‐poverty context), as well as the prospect of inducing
outside support for certain major investments (e.g., irrigation). Thus, the following estimates are
total returns to land, labor and capital.
We assume that the design of this project will attract land at favorable terms (either by using land
already owned by farmers or provided rent‐free from the government) and attract outside funders
to pay for important irrigation investments (see below).
With conservative assumptions about yields, grape and wine prices and discount rates (see
Assumptions for Vineyard Investment Model), and accounting for the fact that up‐front investments
will bear no fruit during their first two years, we estimate that ¼‐hectare planted to quality wine
grapes has a net present value of more than ETB 40,000 over a 20‐year period. This compares
favorably to roughly ETB 17,000 if that same land is left planted to teff, a cereal crop grown
primarily in Ethiopia. The return is even higher (i.e., almost ETB 60,000) when farmers also receive
Assumptions for Vineyard Investment Model
Vineyards are planted equally to the six most popular ‘noble’ varietals – cabernet sauvignon, merlot, shiraz, chardonnay, sauvignon blanc and chenin blanc.
Grape prices are (on average) equal the lowest prices received in South Africa for each varietal during the 2005 to 2010 period (see Appendix B3).
Yields eventually equal the average of a sample of South African vineyard yields (see Appendix B4). However, due to the lack of vineyard experience, yields are 70%, 80% and 90% of eventual yields in first, second and third harvests.
An appropriate discount rate for this project (14 percent) is the weighted average of rates charged by Ethiopian microfinance institutions.
Major Components of fixed and variable costs are equal to the average of those from two North Coast (California) cost studies.
Land and labor costs are equal to zero.
Irrigation costs are equal to zero (assuming foundation support for irrigation investments).
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a 5% social premium from the downstream profits associated with making and selling wine from
40% of their grape output.8
We ran this vineyard investment model under a number of different scenarios and find investments
to be financially attractive in all but the most improbable scenarios (e.g., regular losses of entire
crops). Even if one includes the costs of irrigation into the calculations, vineyard investments still
tend to return positive net present values.
Wineries
Investments in vineyards are only viable if we are able to encourage the concurrent development of
wineries within Ethiopia. We must reach out to different types of winery investors, including
Ethiopians interested in owning and operating boutique wineries, and other social investors
interested in funding cooperative or contract wineries (in addition to companies like Castel, who
are already investing in medium and large‐sized wineries).
Preliminary financial analysis indicates that after promising vineyards are established in Ethiopia;
investments in wineries also become viable (see Appendix C1). This model is based on figures and
assumptions contained in a published report on the economic viability of cooperative wineries in
the United States (see Appendix C2). This base model was again adjusted for obvious differences in
the current context. For example, we assumed that expenditures on a tasting room are currently
unnecessary.
Again under conservative assumptions (see Assumptions for Winery Investment Model), a $250,000
investment in a 2,000‐case winery produces a positive net present value at a discount rate of 18%.
This again incorporates a 5% social premium paid to Ethiopian grape growers.
We again ran this model under a number of scenarios and find that a typical investment is attractive
under most reasonable circumstances. For example, at average retail prices (in Ethiopia and
abroad) prices as low as $9.75 (assuming an 18% discount rate) and at discount rates as high as
22% (assuming an average retail price of $10.94), winery investment still yields a positive net
present value.
8 According to the Transfair website (www.transfairusa.org/), “Fair Trade farmers and farm workers invest Fair Trade premiums in social and business development projects like scholarship programs, quality improvement trainings, and organic certification.
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We must note that if wine prices and inflationary pressures result in adverse exchange rate
movements, the investment may result in losses. However, in the foreseeable future, we do not see
average wine prices (within Ethiopia and for fairly‐traded wines globally) falling below a $10 per
bottle average, the weighted‐average channel costs exceeding 60% of revenue and discount rates
exceeding 20%.9
Additional Benefits of a Thriving Ethiopian Wine Industry
Along with the direct economic benefits associated with participating in a high value‐added
agricultural sector, other benefits come with effective wine industry participation.
Given the specific requirements of high‐quality wine grape production, there are important
complementarities between Ethiopians growing wine grapes and their simultaneous ability to grow
other food and cash crops. Notably, wine grapes tend to fare better on lands that are not well‐suited
9 On the contrary we see prices increasing marginally over the next several years, channel costs reducing (due to increased efficiencies) and the discount rate staying within a reasonable range.
Assumptions for Winery Investment Model
Estimates are for a 2,000 case winery.
The prices paid for wine grapes correspond to prices received by farmers in the Vineyard Investment Model.
Half of the wines are sold within Ethiopia, 30% to Diaspora in the United States, and 20% to socially‐conscious wine consumers.
Ethiopians pay the expected average price for wines in Ethiopia ($11.21). Non‐Ethiopians pay a price equal to one standard deviation below the average price paid for Fair Trade wines in the U.S. ($8.94). Diaspora in the U.S. pay the average price paid for Fair Trade wines in the U.S. ($11.83) (see Appendix C3).
Only half of the first vintage is sold in the first year because red wines must bottle age for one more year.
Fifty percent of the final price of wines sold in Ethiopia is allocated to downstream costs (e.g., distribution costs and wholesale and retail margins). This percentage is higher for wines sold overseas – up to 75% for wines sold in standard Fair Trade channels.
The major components of fixed and variable costs are equal to those from a recent study of cooperative wineries in the US.
Labor costs are comprised of two cellar hands (at $3 per day year round) and one winemaker at five times the cellar hand salary.
Consistent with standard Fair Trade practice, the winery pays a 5% social premium to cooperative grape growers.
An appropriate discount rate for this project is 18 percent.
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to growing other crops (i.e., in gravelly soils and on relatively steep slopes). Thus, wine grape
production represents an appropriate approach to agricultural diversification.
Unlike other agricultural commodities, quality wines are processed in close proximity to where
grapes are grown. Thus, the government’s goal of process‐driven agriculture as a means of
achieving sustainable economic development is a prerequisite for effective wine industry
participation. Because agricultural and processing knowledge are developed and kept within
Ethiopia, there is greater chance that the longer‐term economic benefits of this agricultural
endeavor will remain in the country.
Relative to other agricultural products, wine consumers tend to be drawn to the specific places
where wines are made. They tend to think about and want to learn more about the regions in which
their wines are produced. This increases the benefits to Ethiopians by allowing global consumers to
learn more about local conditions and cultures.
Given the need for close proximity between vineyards and wineries, and given the psychological
closeness between a winery and its end consumers, the development of regional wine clusters
within Ethiopia offers real potential for certain rural Ethiopians to migrate from farming to
processing to business roles across successive generations, as opposed to simply migrating to
nearby cities.
Finally, this project has important links to other agricultural sectors (e.g., moving from dairy to
cheese production) and other downstream and upstream activities (e.g., wine tourism and retailing,
trucking and bottling). It therefore serves as a critical demonstration project for further
development of these related regional endeavors.
Success not Assured
Despite the potential indicated in the above two sections, success in the wine industry is by no
means guaranteed. Consider first that the wine industry is highly competitive. A burgeoning
number of quality‐oriented producers from, for example, Australia and New Zealand, South and
North America and Israel are joining traditional old‐world producers to compete for demand that
is, some would argue, flattening. In such circumstances, it will be critical to ensure that our wines are
competitive in terms of price, quality and identity.
It is also important to recognize that encouraging the development of a novel agricultural sector
requires simultaneous consideration of a number of inter‐dependent initiatives. This kind of
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thinking is detailed in Michael Porter’s discussion of geographic industry clusters.10 In particular,
thriving wine clusters tend to be populated by many grape growers and winemakers of varying
sizes. It is critical to appreciate the need for regions to house many small players alongside a few
larger producers.
Start‐up costs for vineyards and wineries can be very large. The low wages that many farmers are
currently earning create the challenge of keeping the farmer solvent between planting and harvest
and ensuring that there are adequate up‐front investment funds available to farmers who want to
plant grapes. Moreover, the timeframe from planting to market for white (red) wines is
approximately three (four) years.
These costs are exacerbated by the need for coordinated investment in irrigation, bottling and
transportation infrastructure. A specific challenge relates to infrastructure. There are concerns
about the adequacy of roads and ports, especially for a product that requires care and timeliness in
its handling. Here, we are excited by recent developments. Several of the businessmen interviewed
in Ethiopia expressed confidence about recent developments related to transportation
infrastructure. Their enthusiasm is corroborated by the recent announcement of a major increase
in infrastructure funding (to the tune of ETB $77.2 annually) in the country.11 Two‐lane roads,
while crowded, seem well‐maintained. Moreover, other crops, including flowers, have been
successfully transported out of Ethiopia using both air and cargo freight.
A final challenge relates to perceptions of government stability. There may be apprehension among
outsiders that some political faction might retake control of the government and socialize lands that
have been distributed to businesses and farmers. However, the current government is frequently
cited as being among the most stable in Africa. Ethiopia is indeed experiencing more economic
growth than ever before and the general approval rating for the current government is high. There
is continued multinational investment and private‐enterprise establishment, indicators that many
are confident in Ethiopia’s long‐term stability and prospects.
10 Michael Porter. 1998. Clusters and the new economics of competition. Harvard Business Review. 11 See http://www.africagoodnews.com/infrastructure‐finance/ethiopia‐says‐record‐budget‐to‐boost‐infrastructure.html.
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Vineyard Cooperatives
There are different ways to establish wine industry activity within Ethiopia; e.g. the Castel
investment, “out‐grower” schemes and small privately‐held vineyards and boutique wineries. Given
the priorities of our audience members (i.e., economic sustainability and equitable distribution of
economic opportunities), we propose to establish Vineyard Cooperatives.12
As suggested at the outset, various impediments – limited financing, lack of industry knowledge,
concerns about market access and problematic infrastructure – stand in the way of Ethiopia
achieving its potential in the wine industry. Many of these impediments are overcome by
establishing cooperatives. Cooperative arrangements have allowed Ethiopian coffee growers to
penetrate higher‐quality segments of that industry and to benefit financially from their investments
and commitments (see Appendix D1). Working with the support of the founder of Oromia, Tedesse
Meskela, we plan to leverage this success in the global wine industry (see Oromia Coffee
Cooperative).
Cooperatives provide the means to lower each farmer’s personal investment in vineyards while
achieving sufficient overall scale. Smaller initial plantings also allow farmers to grow food and other
12 In making the case for investments in Vineyard Cooperatives, we do not wish to downplay the prospects for other similar initiatives; i.e., out‐grower schemes. However, we do emphasize that much of our optimism about the economic viability of these investments hinges on their ability to attract the support that “zeroes out” important (and potentially costly) investment items; like investments in marketing.
Oromia Coffee Cooperative (www.oromiacoffeeunion.org)
The Oromia Coffee Farmers Cooperative Union (Oromia) was established on June 1, 1999 and registered on June 28, 1999. Its initial membership comprised 22,503 coffee growers organized into 34 cooperatives. Its initial capital was a modest ETB 825,000 or $101,425 U.S. dollars (in 1999, ETB to U.S. exchange rate was ETB 8.1340 to $1). Today, Oromia stands at 155,808 workers, organized into 171 cooperatives with a market cap of ETB 89,468,080 or $6,578,535 US dollars (2010 exchange rate of 13.6 Birr to $1). The volume and value of coffee beans sold has increased from 126 tons and 2,271,157 Birr in 2001 to 5329.3 tons and 270,496,542 Birr in 2009. Furthermore, the net income of the union has risen from ETB 289,184.86 in 2001 to ETB 44,758,339 in 2009. This increase in profitability has benefited the farmers that are the foundation of Oromia. In 2009, Oromia paid ETB 31,478,157 in dividends to its members compared to the ETB 262,855 in dividends that it was able to pay in 2001.
Aside from demonstrating the potential of cooperatives in Ethiopia, Oromia also illustrates how a Fair Trade play can benefit cooperatives through the generation of premiums earned on Fair Trade coffee. In 2004, Oromia received an additional ETB 884,332 in fair trade premiums on the sale of beans from 11 of its fair trade cooperatives. In 2009, Oromia received ETB 7,350,992 in fair trade premiums on the sale of beans from 28 fair trade cooperatives. Money generated by these fair trade premiums has been invested into a community development fund used to renovate and build schools, bridges, offices, flour mills and buy valuable health resources.
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cash crops on the remainder of their land holdings.
Our proposal calls for the initial establishment of two Vineyard Cooperatives of 40 families each,
with each family initially planting ¼‐hectare to vines. Thus, an estimated investment of less than
ETB 15,000 per farmer (spread over two years) will create two 10‐hectare cooperative vineyards,
which will initially produce almost 12,000 cases of wine per year.
Preliminary conversations indicate that financing of this magnitude can be made available to
potential farmer‐members through local cooperative banks (and potentially other lenders).
Moreover, with the above investment models in hand and validated, there is confidence that
Ethiopian farmers will embrace the opportunity to invest in vineyards.
Cooperative arrangements also credibly and visibly commit this project to the anti‐poverty mission
that will attract overseas consumer interest and other critical resources. Cooperatives in Ethiopia
have been able to achieve the economies of scale that help to assure a better bargaining position for
coffee farmers. They have also established profit‐sharing arrangements that ensure that a
substantial percentage of the profits are returned to the individual farmers.
The economic viability of our proposal hinges on realizing the potential for Ethiopian grape
growers and winemakers to make wines of high quality. However, there are documented concerns
about the ability of cooperatives to consistently produce high‐quality grapes and wines (see
Appendix D2). According to the Wine Economist, cooperatives have a generally poor reputation in
the wine industry.13 Many of these concerns will be addressed by adopting emerging best practices
among Ethiopian coffee cooperatives (see Appendix D1). For example, Oromia determined that in
order to induce reliable quality demonstrations from its member farmers, training must occur
before planting begins. Members of the cooperative were trained through a grant from USAID by
ACDI/VOCA, an experienced American non‐profit dedicated to economic and social change. By
clearly showing members the value proposition relative to what they were earning growing low‐
quality beans, they created an environment conducive to higher‐quality production.
There are other ways to leverage the best practices of Oromia within the wine industry while
minimizing exposure to the potential downsides of a cooperative model. For example, experiences
out of Germany suggest establishing ‘strategic member groups’ within each cooperative. Different
member groups are created to make different “quality plays.” Vines and grapes are rated and only
farmers meeting quality specifications can contribute to premium wine batch (and be paid 13 See http://wineeconomist.com/2009/01/24/fair‐trade‐wine‐paradox/ and http://wineeconomist.com/2009/01/27/cooperatives‐and‐fair‐trade‐2/.
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accordingly). This kind of program incentivizes farmers who are not currently in the premium wine
member group to seek membership.
Ensuring Grape and Wine Quality
To reach the goal of producing high‐quality grapes, it is critical that members have access to
viticulture and enology expertise that resides in top‐ranked university programs outside of
Ethiopia.14 The Vineyard Cooperatives serve as crucial vehicles to attract valuable industry
knowledge from established viticulture programs in other countries. Certain well‐trained
viticulture faculty and students are attracted to the social mission of our cooperative project. Our
proposal leverages this interest in several programs that will bring these global experts to Ethiopia.
Foreign university partners will be recruited to commit student/faculty teams to work alongside
local project managers and interns to assist in training and in vineyard planting and monitoring as
described below. These rotational roles give foreign students and faculty the chance to work on
vineyards beginning in their developmental stages and progressing through the initial 2‐3 years of
vineyard maintenance. These partnerships may come in one or more of the following forms:
student exchange programs between university agriculture programs within Ethiopia and one
of several US (or other) viticulture or enology programs;
graduate student work‐study programs for foreign viticulture or enology students within
Ethiopia’s developing wine regions; and/or
other forms of information sharing and technology transfer.
These exchanges will enhance cooperative members’ ability to produce high‐quality grapes while
allowing selected Ethiopians to develop valuable industry skills in parallel ‘train the trainer’
initiatives.
Site and Varietal Selection
Success in the early stages of this project depends critically on identifying and assessing suitable
growing regions and then specific plots of land. The key metrics for making these determinations
14 Viticulture is defined as (1) the culture or cultivation of grapevines; grape‐growing; or (2) the study or science of grapes and their culture. Enology (or viniculture) is defined as the science and study of all aspects of wine and winemaking.
16
typically relate to climate, soil properties, and available ground water. Thus, the first stage of
partner involvement relates to site and varietal selection.
Although Ethiopia has produced wine on‐and‐off for several decades, the efforts proposed herein
embody a dramatic series of changes that will bring high‐quality Ethiopian wine to the world’s
stage. Empirical evidence accumulated within Ethiopia suggests that certain varietals have had
better successes than others, but the reasons underlying this variability are poorly understood and
not linked to the particulars of specific regions. Moreover, given the historical lack of attention to
wine quality, little of this accumulated knowledge relates to the prospects of participating in the
quality segments of local and global wine markets.
In order to obtain sound recommendations about site and varietal selection, we are initiating a
partnership with individuals from the University of California (UC), Davis to perform this critical
first‐stage analysis.15 UC, Davis is widely regarded as the preeminent winemaking program in the
United States. Working with an aggregate set of primary data and secondary/government data,
experts from UC, Davis will make a set of recommendations about the winemaking potential
inherent in different regions within Ethiopia (site selection analysis) and then recommend which
specific grape types to plant in each region (varietal selection analysis).16
Final land and varietal selection will be determined based on the recommendations of the UC, Davis
experts. Additional considerations will include: the availability of infrastructure like roads and
reliable electricity, and the presence of a suitable and interested labor force.
Once suitable sites and varietals are identified, the team will work with farmers and/or the
Ethiopian government to designate and then gain access to specific plots of land.
Cooperative Vineyard Planting and Vineyard Monitoring Programs
Adequate education and training and proper dissemination of information to cooperative members
will be critical in ensuring that our cooperatives reliably produce high‐quality grapes. Our proposal
calls for two additional programs (see Vineyard Planting Program – Major Elements and Vineyard
Monitoring Program – Major Elements) that will ensure that best vineyard practices are learned and
15 Conversations are ongoing with Tom Shapland from UC, Davis. 16 Although the UC, Davis team will assess which sites and varietals are best suited for our initial cooperative investments, their analysis and assessments will be made available to other interested parties, who might wish to pursue other organizational arrangements (e.g., out‐grower schemes).
17
applied in the two cooperatives. This should include basic viticulture insights augmented with
appropriate environmental best‐practice use and treatment of water and soil resources.
The specifics of these two programs will be designed by experts from selected viticulture programs
during the 12‐month Triage Period (see below).17 Their execution will be guided by these same
experts and facilitated by support from interested volunteers.
The initial phase of planting involves a team of experienced viticulturists, working with selected
overseas volunteers, educating co‐op member farmers on site as they plant the first vineyards. In a
gradual process of technology transfer, co‐op members will become self‐sufficient, soon requiring
oversight only at critical decision times and eventually none at all.
A critical challenge to the success of this project relates to managing the critical first two years after
planting when vines must be cared for appropriately while not bearing grapes that are suitable for
high‐quality wine production. Our proposal turns this challenge into an opportunity by forging links
between first‐world viticulture programs and the cooperatives that will be early entrants into this
high‐value and knowledge‐intensive agricultural sector.
It is imperative that this vineyard monitoring program also provide strong incentives for
cooperative members to apply high‐quality production techniques and consistently follow through
with appropriate vine maintenance. Based on feedback received from experts during the Vineyard
Monitoring Program, we propose to offer interest forgiveness to members (or groups of members)
whose behaviors are deemed consistent with the cooperatives’ long‐term quality goals.
17 Conversations are ongoing with Dr. Ramón Mira de Orduña and Dr. Gavin Sacks (both of Cornell University).
Vineyard Planting Program – Major Elements
Arrange materials sourcing; i.e., cuttings and other materials.
Recruit volunteers; e.g., Diaspora, Rotarians.
Arrange farmer loans (under supervision of Oromia’s Cooperative Bank).
Provide vine planting instruction and supervision
Run a concurrent train‐the‐trainer program, with selected young Ethiopians serving as “vineyard apprentices.”
Develop clear instructions for cooperative members for first six months.
This program will be developed and marketed as a critical “knowledge transfer” and should therefore encourage foundation and nonprofit support.
18
These two programs will ensure that our cooperatives of farmers are placed at the leading edge of
the development of an Ethiopian wine industry. Leveraging and importing requisite knowledge
from educational institutions in other countries will help to ensure the quality of our early harvests.
It will also serve to educate the younger people in the affected communities so that they might have
expanded opportunities as this sector develops.18
18 Given this educational mission, we will explore the best ways to use Ethiopian governments, NGOs and universities (e.g., university programs in cooperative studies at Haramaya University, Hawassa University, Mekelle University and Ambo College) in these two programs.
Vineyard Monitoring Program – Major Elements
Determine the periodicity and length of the program (e.g., six month intervals for two years).
Visit, monitor and make recommendations regarding vineyard development and vineyard management practices.
Evaluate the progress and performance of the farmers. This is where the initial quality checks are taking place to ensure that farmers are behaving in ways that maximize future grape quality This must include financial incentives for proper quality‐oriented vineyard management. This might include a program of (partial?) interest relief for farmers (or groups of farmers) that are behaving in ways to optimize chance of highest quality grapes.
Work with vineyard apprentices on maintaining and managing between‐visit correspondence.
Replant vines (as necessary) during second visit (after one year).
Celebrate progress (and expose farmers to quality wine) with events during visits.
Oversee first harvest during fourth visit.
This program will be developed and marketed as a critical “knowledge transfer” and should therefore encourage foundation and nonprofit support.
19
Market Access
The success of this proposal depends on finding interested audiences for high‐quality Ethiopian
wines once they are produced. Our Market Access Program will emphasize three natural market
segments: wine shops, restaurants and hotels within Ethiopia, Ethiopian Diaspora, and socially‐
conscious wine consumers in the US and Europe. Preliminary research affirms that these three
segments can provide more than enough demand initially, and then be able to absorb expected
growth into the foreseeable future.
Local Demand – As noted earlier in this report, there is evidence of increasing wine demand inside
Ethiopia. This is consistent with the recent trend in wine imports, as reported by the Food and
Agriculture Organization of the United Nations (Wine Imports into Ethiopia). Latent demand for
wine in Ethiopia is forecast to grow to
$86.71 million by 2014. Based on
DataMonitor figures presented earlier,
the implicit average price per bottle of
wine sold in the Middle East and Africa
by 2013 should be $11.21. If we assume
this implicit price, then the latent
demand translates into a potential of
roughly 650,000 cases of wine
purchased inside Ethiopia by 2014. If we were required to sell all of the cooperative wine output
into Ethiopia, our project would claim less than 2% of forecast latent demand.
Ethiopian Diaspora – According to Urban Spoon (www.urbanspoon.com), there are at least 204
Ethiopian restaurants currently operating in the twenty largest US cities (see Appendix E).19 Those
that responded to our phone calls indicated that they currently sell an average of roughly 30 bottles
of Ethiopian (i.e., made by Awash/Gouder) wine per month and another 30 bottles of non‐Ethiopian
wine. It seems reasonable to assume that the new generation of Ethiopian wines (including those
being produced by Castel) would completely displace the low‐quality wines currently produced by
Awash (see footnote #5) and that these higher‐quality wines can also replace half of the non‐
Ethiopian wines that are currently consumed in these restaurants. This creates a latent restaurant
demand in the US for quality Ethiopian wines equal to roughly 9,500 cases per year. If wines made
19 Because some restaurants many not have added themselves to the Urban Spoon website, our figures might understate the number of Ethiopian restaurants in the United States.
‐
200
400
600
800
1,000
1,200
1,400
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
$ ,'000
year
Wine Imports into Ethiopia
20
from cooperative grapes capture 25% of this demand (leaving the majority for the likes of Castel),
then we can expect to place roughly 2,500 cases into this distribution channel. This figure becomes
higher under the reasonable assumptions that similar restaurant demand exists in Europe and that
high‐quality Ethiopian wines are also consumed at home by Ethiopians living in the US and Europe.
SociallyConscious Wine Consumers in the US and Europe – A major element of our proposal relates
to the leverage that comes from a commitment to developing Ethiopian wines (of high quality)
whose main purpose is to lift Ethiopian farmers and their families out of the cycle of poverty and
subsistence living. A proposal that emphasizes a strong anti‐poverty mission gives participants in
the global market another reason to consider Ethiopian wines, above and beyond their quality
(which may take several years to fully develop). This provides access to the lucrative and growing
socially‐minded, or Fair Trade segment of the global market (see Appendix F).20
According to Nicholls (2002), for example, consumer support for the general idea of helping
developing nations’ producers is much higher than specific knowledge of fair trade products and
brands. This leads us to believe that our story, and the anti‐poverty mission it embodies, will make
20 Setting up the vineyard cooperative and associated winery as Fair Trade certified requires the winery to pay the cooperatives specified minimum prices for grapes. This is built into our vineyard and winery investment models. It also requires the importer to pay a certification fee (e.g., Fair Trade USA requires a fee of $0.10 per bottle). This fee is factored into the roughly 50% of retail price that is assumed to be allocated to distribution channel costs.
Market Access Program – Major Elements
Organization (like ISAW) will work during the Triage Period to “pre‐promote” the project and the wines that will come from it.
Catch the attention of the wine world (e.g., critics and publications) at the right moments (e.g., at planting and during monitoring visits).
Explore the possibility of attracting talented socially‐minded winemakers for small “symbolic” vintages during set up years (using, if possible, the limited supply of mature grapes already being grown in Ethiopia) and then to produce the first few vintages from cooperative grapes.
Cultivate demand within Ethiopia.
Cultivate demand among Diaspora (e.g., in Ethiopian restaurants). For example, develop specific programs to “pre‐sell” wines and cases to those interested in the project’s social mission.
Cultivate demand among socially‐conscious wine consumers and channels.
We might consider building upon current and potential interest in honey wines, which are currently produced in Ethiopia (http://en.wikipedia.org/wiki/Tej). During the first several years, potential wine consumers might have their interested piqued and then held by this alternative wine product, which is experiencing a small renaissance among some wine drinkers (see www.gotmead.com/).
21
a critical difference in marketing our fairly‐produced‐and‐traded wines.
Given the anti‐poverty emphasis of this project, cooperative farmers and affiliated Fair Trade
winery owners will benefit from free promotion (over several years) from the project’s sponsor,
ISAW, and its affiliated organizations (see Market Access Program – Major Elements). It will also
benefit from being interesting to ‘double bottom line’ distributors like Worthwhile Wines21 and to
major socially‐conscious retailers like Whole Foods (US) and Tesco (UK).
With limited budgets and little brand recognition initially, our aim will be to leverage and build
upon the strong anti‐poverty emphasis of this project. With the persistent support of ISAW, we plan
to begin partnerships with local Ethiopian restaurants and retailers like Whole Foods to help create
awareness of the “Ethiopian Wine Story.”
21 Worthwhile Wine Co is an “importer of great South African wines that are sustainably made” (see www.worthwhilewine.com/).
22
Funding the Necessary Investments
Funding for the various elements of this proposal must come from diverse sources. It is first critical
to stress that Ethiopian farmers (with loans provided by local cooperative banks) will be called
upon to make personal investments in the vines and related materials required to establish the
cooperative vineyards.
The keys to attracting outside support for this project are its commitment to opportunity creation
and poverty alleviation, as well as its demonstrated economic viability and sustainability. In terms
of opportunity creation, government entities like USAID and the United States African Development
Foundation (USADF) are committed to encouraging and supporting small businesses within
Ethiopia.22 These two organizations have also been influential in providing training for farming
cooperatives, and USADF (although not yet focused within Ethiopia) generally accepts proposals
related to new employment ranging from $50,000 ‐ $250,000 that cater to groups that are
“underserved and marginalized” throughout Africa.23
Sustainable economic development is also a concern of Ethiopian Diaspora currently living in the
United States and foundation investors like the Gates Foundation. These kind of supporting
organizations want to know that their initial investments will create longer‐term payoffs.
Appendix G provides a partial list of institutions, foundations and nonprofit entities that may be
interested in supporting various aspects of this project.
Land Availability and Financing
This project also requires favorable land lease agreements (see Assumptions for Vineyard
Investment Model). Officials from the Ministry of Agriculture and from the Ethiopian Investment
Agency expressed interest in providing this kind of program with access to both land and financing
provided that the impact and scale of the project is sufficient.24 Government support in this respect
seems more likely if we adhere to and emphasize the following key program attributes:
employment and opportunity for marginalized farmers and workers;
process‐driven and high value‐added agriculture;
22 The “Development Innovation Ventures” grants from USAID seem particularly promising. 23 See http://www.adf.gov/. 24 Once the viability of the cooperative vineyards is demonstrated, we envision growth in both the amount of land that each farmer commits to vines and in the number of Vineyard Cooperatives in Ethiopia.
23
clear potential for exporting;
addresses capacity development in key agricultural sectors; and
prospect of image enhancement for Ethiopia (both overall and with respect to the social
mission of our project).
Irrigation Investment
This project also has clear implications for water access and use. We plan to commit to current best
practices in terms of water usage on vineyards (provided by our viticulture program partners) and
to show how appropriate irrigation investments will benefit the broader communities in which our
cooperatives are located. Based on preliminary conversations, each irrigation unit (one per
cooperative) will cost an estimated $3,000‐$5,000 to install. The Coca‐Cola Foundation, with its
dual emphasis on water and sustainability might be interested in financing small‐scale irrigation
projects on our pilot cooperative vineyards.
Vineyard Planting and Monitoring Programs
Foundations will be encouraged to support the education exchanges that are built into the planting
and monitoring programs. Preliminary research indicates that a number of foundations might be
willing to underwrite the development of partnerships and relationships whose goals are the
transfer of important viticulture and viniculture knowledge from the developed to the developing
world.
In addition, a key component of the Vineyard Monitoring Program is to reward farmers – in the form
of interest relief – during the first two years for taking appropriate care of their vines. There are a
number of foundations interested in developing market based solutions to poverty within Africa.
We believe that they can be encouraged to support these early incentive programs which are
designed to cultivate appropriate behaviors that will lead to a sustainable market presence for
Ethiopia in the global wine industry.
Winery Investments
As suggested earlier, the viability of vineyard investments require near simultaneous investment in
downstream wineries that will process grapes into high‐quality wine. Our investment projections
24
suggest that these kinds of investments are viable, even at small scale. Moreover, our market
projections suggest there will be ample demand for Ethiopian wines (assuming appropriate quality
levels are assured). Our research visit revealed a number of Ethiopian businessmen who are eager
to invest in wineries, assuming one could establish high‐quality vineyards. Several Diaspora have
made similar remarks.25 Therefore, we assume that the real bottleneck in developing a sustainable
wine cluster in Ethiopia relates to vineyard development.
25 Social impact investors may also be courted to support investments in for‐profit double‐bottom‐line wineries.
25
Requirements of TwelveMonth Triage Period ($150,000)
The investment in this feasibility study came from the Social Enterprise Initiative at the Goizueta
Business School at Emory University. We estimate that another $150,000 will be needed in order to
hire a project manager, to commission the in‐depth study of the viticulture promise of different
regions within Ethiopia, to formalize the partnerships and the specific design elements of the
Vineyard Planting and Monitoring Programs, and to formally establish the two Vineyard
Cooperatives. The estimated costs for this critical period are outlined below.
Project Manager (estimated at $75,000)
This project will require consistent oversight and coordination during the Triage Period. We
therefore recommend hiring an individual (with relevant business experience and/or education) to
manage this critical Triage Period. In addition to centralized control over fund‐raising, this
individual must:
interview farmers in the identified high‐potential regions;
arrange the financing required for initial farmer investments; and
arrange and fund the Cooperative Vineyard Planting Program;
arrange and fund the Cooperative Vineyard Monitoring Program; and
encourage interest among potential winery investors.26
Visit from UC, Davis Experts (estimated at $25,000)
A critical early component of the Triage Period is the proposed visit by UC, Davis experts to make
recommendations on site and varietal selection. We recommend (with great urgency) that $25,000
be secured to fund the cost of this trip so that further planning can be commenced.
Additional Triage Period Tasks (estimated at $50,000)
Given the proposed involvement of various local (e.g., Oromia) and non‐local partners (e.g., UC,
Davis, Cornell University, Emory University, Diaspora), we expect a number of development and
26 The project manager must pay special attention to how the initial contracts (between growers and wineries) should be structured over the initial 3‐5 years.
26
coordination expenses during the Triage Period. The following will be overseen by the Project
Manager and may include expenses incurred within Ethiopia and trips between Ethiopia and the
U.S.:
validate vineyard and winery investment models;
arrange and secure funding for the irrigation investments;
coordinate with Ethiopian government to ensure ongoing support for the project and its
mission;
identify and coordinate volunteers to assist with vineyard planting; and
encourage investment in bottling capacity (or access to bottling for small and medium‐sized
wineries).27
27 For reasons related to sustainability and cost reduction, we might consider selling wines in tetrapak. It is becoming trendy for sustainable wineries to market their use of this kind of packaging because it reduces waste. It is also much less expensive to transport wine with this kind of packaging.
27
Appendix A. Roster of Project Participants
The leader of the project, Dr. Peter Roberts, has studied wine regions in the U.S., Australia, Canada and Israel. He serves as both a professor in the Organization and Management group and the founder of the nascent Social Enterprise Initiative at Goizueta Business School. The students, five of whom are currently graduate students in the MBA program, have varying backgrounds ranging from finance to non‐profit management to sociology.
Alana Zavett Green is an independent non‐profit consultant with a background in volunteer coordination, board development, and fundraising for organizations such as United Way of Metropolitan Atlanta, The Ben Marion Institute for Social Justice, and Hillels of Georgia. For almost a decade, she has engaged in community organizing and grassroots efforts through educating children with Autism, working towards hunger relief, and leading service learning initiatives. Alana is a graduate of Emory University where she holds degrees in Sociology and Religion.
Steven Green is a Full‐Time MBA Candidate at Emory University's Goizueta Business School with a background in nonprofit management. He previously worked as a public affairs director for the Consulate General of Israel and as a regional director for JNF, an international nonprofit rooted in environmental sustainability.
John Allen Langford is a Full‐Time MBA Candidate at Emory University’s Goizueta Business School with significant experience in food & wine marketing and advertising. John is a graduate of The Savannah College of Art & Design where he holds a degree in Photography.
Natalie Reese is a Full‐Time MBA Candidate at Emory University’s Goizueta Business School with a background in Psychology and Executive Education. Natalie is a graduate of Dartmouth College where she holds a degree in History with a focus in War and Peace Studies.
Olivier B. Quinn is a Full‐Time MBA Candidate at Emory University’s Goizueta Business School, where he serves as the President of the Goizueta Business Association. With a background in Real Estate Development, Olivier previously worked in the Washington DC area developing mixed‐use and multi‐family projects. Olivier is a graduate of Brigham Young University where he holds a degree in International Studies.
Abdul Wahab Shaikh is a Full‐Time MBA Candidate at Emory University's Goizueta Business School with a background in Consulting. He previously worked as a business process and technology consultant for Fortune 100 companies in the US. Abdul Wahab is a graduate of Mumbai University where he holds a degree in Electronics Engineering.
We have also developed relationships with several key people who are poised to be driving forces behind this project and its various component initiatives. This project will rely on their expertise when making specific decisions regarding grape growing and wine making. Of equal importance, they have expressed an interest in helping to develop study‐abroad opportunities for interested students and faculty in their programs. These individuals include:
Tom Shapland is a PhD student in the Horticulture and Agronomy Graduate Group at University of California, Davis where he specializes in viticulture and biometeorology. He has worked in vineyard development and winemaking in California, Spain, and New Zealand and has taught classes in the UC Davis Department of Viticulture and Enology and the UC Cooperative Extension Program. He received his undergraduate degree at UC Davis in Viticulture & Enology and Classical Civilization.
28
Dr. Gavin Sacks' research is centered on defining the enological and viticultural parameters that shape wine flavor from vine to bottle and is actively involved in the development of the new undergraduate major in Enology and Viticulture (VIEN) at Cornell. Dr. Sacks' ongoing projects include characterizing key odorants responsible for the distinctiveness of varietal wines important to the Eastern United States, such as Riesling and Cabernet Franc, and exploring the impact of novel production strategies on fruit juice qualities.
Dr. Ramón Mira de Orduña's current research is focused on wine microbiology. With the aim of enhancing wine quality from a chemical and sensory point of view his studies deal with microbial physiology and growth, specifically the amino acids and carbonyl metabolism of wine lactic acid bacteria and yeast. He teaches winemaking theory and practice within the Cornell University BSc degree in Viticulture and Enology. Dr. Orduña also conducts research to assist wineries in reducing microbiological spoilage, the occurrence of wine defects, and the need to add preservatives, all of which would provide valuable insights into winemaking in Ethiopia.
Other Project Contributors / Supporters: Sandhya Deshetty, Goizueta MBA Student Alexis Herschkowitsch, Fearless Critic Tom Lynch, Founder of Worthwhile Wines David Rabinowitz, Deloitte Consulting John T. Vaughn, Analyst at Cherokee Investment Partners
29
Appendix B1. Revenue and Cost Projections for a OneHectare Vineyard
Summary in SARYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 ‐20
RevenueYield (Tons/Hectare) 0.00 0.00 4.67 5.34 6.00 6.67Price ($/Ton) SAR 3,224 SAR 3,224 SAR 3,224 SAR 3,224 SAR 3,224 SAR 3,224Total Revenue SAR 0 SAR 0 SAR 15,053 SAR 17,203 SAR 19,353 SAR 21,504CostsNet Planting Costs SAR 10,414 SAR 13,774 SAR 0 SAR 0 SAR 0 SAR 0Net Cultural Costs SAR 783 SAR 422 SAR 1,119 SAR 1,289 SAR 1,289 SAR 1,289Net Harvest Costs SAR 0 SAR 0 SAR 102 SAR 156 SAR 164 SAR 164Total Costs SAR 11,197 SAR 14,197 SAR 1,222 SAR 1,445 SAR 1,453 SAR 1,453
Profit/Loss ‐SAR 11,197 ‐SAR 14,197 SAR 13,831 SAR 15,758 SAR 17,900 SAR 20,051
Discount Factor 14%NPV (Per Acre) SAR 74,037
Summary in ETBSAR 1.00 2.3300 ETB
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ‐20Profit/Loss (ETB 26,090) (ETB 33,078) ETB 32,226 ETB 36,717 ETB 41,708 ETB 46,718Social Premium (at 5%) ETB 0 ETB 0 ETB 6,930 ETB 13,860 ETB 13,860 ETB 13,860Total Profit/Loss (ETB 26,090) (ETB 33,078) ETB 39,156 ETB 50,576 ETB 55,568 ETB 60,578
Discount Factor 14%NPV (Per Hectare) ETB 172,506NPV (Per 1/4 Hectare) ETB 43,126 (Wine Grapes only)
Discount Factor 14%NPV (Per Hectare) ETB 238,878NPV (Per 1/4 Hectare) ETB 59,719 (Wine Grapes plus Social Premium)
Tef BenchmarkSAR 1.00 2.3300 ETB
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 ‐20Profit/Loss ETB 10,000 ETB 10,000 ETB 10,000 ETB 10,000 ETB 10,000 ETB 10,000
Discount Factor 14%NPV (Per Hectare) ETB 67,855NPV (Per 1/4 Hectare) ETB 16,964
Per Hectare
30
Appendix B2. Adjusted Vineyard Cost Model28
28 See http://coststudies.ucdavis.edu/current.php.
NORTH COAST – Lake County (Red)Year 1 Year 2 Year 3 Year 4 Year 5
TOTAL PLANTING COSTS 4,456$ 4,572$ ‐$ ‐$ TOTAL CULTURAL COSTS 1,104$ 686$ 1,871$ 1,871$ TOTAL HARVEST COSTS ‐$ ‐$ 203$ 330$ TOTAL 5,560$ 5,258$ 2,074$ 2,201$
NORTH COAST – Lake County (White)Year 1 Year 2 Year 3 Year 4 Year 5
TOTAL PLANTING COSTS 4,458$ 4,572$ ‐$ ‐$ ‐$ TOTAL CULTURAL COSTS 1,093$ 625$ 1,346$ 1,813$ 1,813$ TOTAL HARVEST COSTS ‐$ ‐$ 317$ 454$ 502$ TOTAL 5,551$ 5,197$ 1,663$ 2,267$ 2,315$
LESS IMPLIED LABOR AND MACHINE (IN CULTURAL AND HARVEST)
NORTH COAST – Lake County (Red)Year 1 Year 2 Year 3 Year 4 Year 5
TOTAL PLANTING COSTS 4,456$ 4,572$ ‐$ ‐$ ‐$ (less survey and layout and planting labor) (1,014)$ (18)$ ‐$ ‐$ ‐$ NET PLANTING COSTS 3,442$ 4,554$ ‐$ ‐$ ‐$ TOTAL CULTURAL COSTS 273$ 170$ 463$ 463$ 463$ (less irrigate) (13)$ (26)$ (47)$ (47)$ (47)$ NET CULTURAL COSTS 260$ 144$ 416$ 416$ 416$ NET HARVEST COSTS ‐$ ‐$ 32$ 51$ 51$ TOTAL 3,702$ 4,698$ 447$ 467$ 467$
NORTH COAST – Lake County (White)Year 1 Year 2 Year 3 Year 4 Year 5
TOTAL PLANTING COSTS 4,458$ 4,572$ ‐$ ‐$ ‐$ (less survey and layout and planting labor) (1,014)$ (18)$ ‐$ ‐$ ‐$ NET PLANTING COSTS 3,444$ 4,554$ ‐$ ‐$ ‐$ TOTAL CULTURAL COSTS 286$ 164$ 352$ 475$ 475$ (less irrigate) (28)$ (28)$ (28)$ (38)$ (38)$ NET CULTURAL COSTS 258$ 136$ 324$ 437$ 437$ NET HARVEST COSTS ‐$ ‐$ 36$ 52$ 57$ TOTAL 3,702$ 4,690$ 360$ 488$ 494$
AVERAGED (RED AND WHITE) AND CONVERTED TO SAR AND TO HECTAREYear 1 Year 2 Year 3 Year 4 Year 5
Net Planting Costs SAR 10,414 SAR 13,774 SAR 0 SAR 0 SAR 0Net Cultural Costs SAR 783 SAR 422 SAR 1,119 SAR 1,289 SAR 1,289Net Harvest Costs SAR 0 SAR 0 SAR 102 SAR 156 SAR 164TOTAL SAR 11,197 SAR 14,197 SAR 1,222 SAR 1,445 SAR 1,453
31
Appendix B3. South African Wine Grape Prices29
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 5‐year
Minimum
Cab. Sauv SAR 5,423 SAR 5,458 SAR 5,605 SAR 5,476 SAR 4,212 SAR 3,428 SAR 3,026 SAR 3,196 SAR 3,984 SAR 4,073 SAR 3,026
Merlot SAR 5,285 SAR 5,331 SAR 5,477 SAR 5,327 SAR 3,963 SAR 3,186 SAR 2,960 SAR 3,077 SAR 3,651 SAR 3,667 SAR 2,960
Shiraz SAR 5,106 SAR 5,111 SAR 5,294 SAR 5,036 SAR 3,907 SAR 3,027 SAR 3,255 SAR 3,329 SAR 4,090 SAR 4,212 SAR 3,027
Chardonnay SAR 2,896 SAR 3,075 SAR 3,567 SAR 3,733 SAR 3,841 SAR 3,711 SAR 3,630 SAR 3,739 SAR 4,185 SAR 4,224 SAR 3,630
Chenin Blanc SAR 1,074 SAR 1,093 SAR 1,735 SAR 2,032 SAR 2,198 SAR 2,141 SAR 2,352 SAR 2,349 SAR 2,813 SAR 2,785 SAR 2,141
Sauv. Blanc SAR 3,399 SAR 3,380 SAR 3,705 SAR 4,166 SAR 4,439 SAR 4,561 SAR 4,580 SAR 4,668 SAR 5,165 SAR 5,279 SAR 4,561
Other Reds SAR 3,677 SAR 4,214 SAR 4,663 SAR 4,575 SAR 4,205 SAR 3,622 SAR 1,916 SAR 2,993 SAR 4,033 SAR 3,799 SAR 1,916
Other Whites SAR 1,715 SAR 1,687 SAR 701 SAR 738 SAR 935 SAR 707 SAR 799 SAR 927 SAR 1,481 SAR 1,486 SAR 707
Average of TopSix Varietals SAR 3,224
29 See www.sawis.co.za/info/download/Grape_Prices_2010.pdf (page 19).
32
Appendix B4. Sampled Yields from South African Vineyards
Varietal Tons/
HA
“Quote” Source
Chardonnay 8.0 Yield: 8 Tons per hectare http://www.wine.co.za/directory/wine.aspx?WINEID=20477
Pinotage 4.0 Yield : 4 ton/H http://www.wine.co.za/Directory/Wine.aspx?WINEID=24667
Many 7.4 pruned to keep yields down to 2.8‐3.2 tons/acre (49‐56 hl/ha)
http://en.wikipedia.org/wiki/South_African_wine
Sauv Blanc 10.0 with yields averaging 10 tons per hectare.
http://www.mmdusa.net/BrandKit.php?Brand=22
Cab Sauv 7.0 we harvest around 7 tons per hectare.
http://www.riwine.com/specialoffers/the_goose.html
Shiraz 6.0 we produced about 5 tons per hectare. In 2008 we would also hope for 7 tons/ hectare X 7 hectares = about 50 tons.
http://www.riwine.com/specialoffers/the_goose.html
Sauv Blanc 6.5 The average yield for this block is 6.5 to 7 tons per hectare
http://www.spiceroutewines.co.za/
Many 6.0 Pinotage, Merlot and Cabernet Franc yield approximately six tons per hectare (4 000 lit/ha)
http://www.sawinesonline.co.uk/Kanonkop.asp
Cab Sauv 4.0 the Cabernet Sauvignon yield is on average four tons per hectare (2 600 lit/ha).
http://www.sawinesonline.co.uk/Kanonkop.asp
Shiraz 9.8 YIELD: 9.8 tons per hectare http://corkandoliveonline.com/wine‐blogs/
Many 7.0 Crop yields range between six to eight tons per hectare
http://www.voorpaardeberg.co.za/vondeling.html
Many 5.0 and crop at 3.5–6.5 tons/hectare
http://www.wineanorak.com/morgenster.htm
Sauv Blanc 8.5 The Average yield per hectare was 8.5 tons.
http://twgrape.com/ …
Cab Sauv 4.0 Yield of 4 tons per hectare http://twgrape.com/ …
Chenin Blanc 5.5 Yield is 5‐6 tons per hectare. http://in.wine.co.za/Directory/Wine.aspx?WINEID=21339
Many 8.0 to ensure quality, rather than quantity, harvesting is limited to eight tons per hectare.
http://www.wineanorak.com/hiatt_cape.htm
Average 6.7
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Appendix C1. Revenue and Cost Projections for a 2,000 Case (5,000 Gallon) Winery
Summary in USDYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 ‐20
RevenueTotal Sales Revenue ‐$ ‐$ 138,599$ 277,197$ 277,197$ 277,197$
Variable CostsWeighted Channel Costs ‐$ ‐$ (82,466)$ (164,932)$ (164,932)$ (164,932)$ Maintenance Costs ‐$ ‐$ (1,252)$ (1,252)$ (1,252)$ (1,252)$ Laboratory Costs ‐$ ‐$ (1,260)$ (1,260)$ (1,260)$ (1,260)$ Variable Costs (excluding channel and grape cost) ‐$ ‐$ (23,053)$ (23,053)$ (23,053)$ (23,053)$ Grape Costs (assume 767 liters per ton) ‐$ ‐$ (10,686)$ (10,686)$ (10,686)$ (10,686)$
Total Variable Costs ‐$ ‐$ (118,718)$ (201,184)$ (201,184)$ (201,184)$ Net Revenues ‐$ ‐$ 19,881$ 76,013$ 76,013$ 76,013$ Fixed CostsTotal Equipment Cost: ‐$ (125,206)$ ‐$ ‐$ ‐$ ‐$ Total Building Cost: ‐$ (71,845)$ ‐$ ‐$ ‐$ ‐$ Labor Cost ‐$ ‐$ (7,665)$ (7,665)$ (7,665)$ (7,665)$ Land Cost: ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Total Fixed Costs ‐$ (197,051)$ (7,665)$ (7,665)$ (7,665)$ (7,665)$
Profit/Loss ‐$ (197,051)$ 12,216$ 68,348$ 68,348$ 68,348$ Social Premium (at 5%) ‐$ ‐$ (6,930)$ (13,860)$ (13,860)$ (13,860)$ Net Profit/Loss ‐$ (197,051)$ 5,286$ 54,488$ 54,488$ 54,488$
Discount Factor 18%NPV (As of Year 2) 43,156$
ETB 733,660
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Appendix C2. Adjusted Winery Cost Model30
30 Phil Kenkel, Rodney B. Holcomb, and Amanda Hill. 2008. Feasibility of a Co‐operative Winery. Journal of Agribusiness, 26, pp. 199‐215.
Initial Investment (5,000 gallons)Study Ethiopia
Production equipment 10,980$ 10,980$ Laboratory equipment 700$ 700$ Storage equipment 50,923$ 50,923$
Packaging/bottling equipment 5,675$ ‐$ Tasting room equipment 3,825$ ‐$ no tourism play in foreseeable futureOffice furniture and equipment 1,921$ ‐$ bare bones
Equipment Cost 74,024$ 62,603$ Installation 74,024$ 62,603$ assumed to be 100% of the equipment cost
Total Equipment Cost: 148,048$ 125,206$ Total Building Cost: 71,845$ 71,845$ Land Cost: 2,000$ ‐$ assumed free from government
Total PPE Cost: 221,893$ 197,051$
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Appendix C3. Sample of Fair Trade Wine Prices31
Producer Varietal Retail Price Calesa Cabernet Sauvignon $ 19.19 Fairhills Cabernet Sauvignon $ 15.00 Fairhills Chardonnay $ 15.00 Fairhills Malbec $ 15.00 Fairhills Merlot $ 15.00 Goue Vallei Red $ 12.49 Goue Vallei White $ 10.98 Los Cowboys Malbec $ 7.99 Los Cowboys Malbec $ 9.99 Los Cowboys Malbec $ 9.91 Los Cowboys Torrontés $ 9.91 Los Cowboys Torrontés $ 7.99 Los Cowboys Torrontés $ 9.99 Soluna Malbec $ 22.49 Stellar Organics Cabernet Sauvignon $ 12.66 Stellar Organics Cabernet Sauvignon $ 12.48 Stellar Organics Cabernet Sauvignon $ 11.90 Stellar Organics Cabernet Sauvignon $ 15.99 Stellar Organics Chenin Blanc $ 10.80 Stellar Organics Chenin Blanc/Sauvignon Blanc $ 12.99 Stellar Organics Merlot $ 10.14 Stellar Organics Merlot $ 10.64 Stellar Organics Merlot $ 9.24 Stellar Organics Merlot $ 12.99 Stellar Organics Pinotage $ 12.49 Stellar Organics Pinotage $ 12.49 Stellar Organics Really Ravishing Red $ 10.66 Stellar Organics Rose $ 11.99 Stellar Organics Shiraz $ 10.95 Stellar Organics Shiraz $ 10.57 Step by Step Cabernet Sauvignon $ 8.99 Step by Step Cabernet Sauvignon $ 9.93 Step by Step Sauvignon Blanc $ 8.49 Step by Step Sauvignon Blanc $ 8.99 Step by Step Sauvignon Blanc $ 9.93 Step by Step Shiraz $ 11.44 Vinedos de la Posada Malbec $ 12.99 Vinedos de la Posada Pinot Grigio $ 9.99 Vinedos de la Posada Shiraz $ 12.99 Vinedos de la Posada Torrontés $ 11.49 Wandering Grape Sauvignon Blanc $ 9.99 Lower $ 8.94 Average $ 11.83 Upper $ 14.73
31 Listed on www.eticawines.com; www.organicwinetradecompany.com; or http://getinvolved.transfairusa.org. Prices were taken from www.wine‐searcher.com.
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Appendix D1. Oromia Coffee Farmers Cooperative Union
Oromia’s bylaws and the figure below outline the structure of the Union. These bylaws serve as a strong foundation upon which Oromia has been able to build a thriving business. They describe the purpose of the Union, the duties and term limits of its respective governing bodies, and the responsibilities accorded to each employee. For instance, the General Manager is tasked with (among other things) ensuring the supply of clean coffee to the market, promoting the mission of the Union, ensuring the merit‐based recruitment of employees, dealing with the press, the government and other influential organizations, encouraging good work ethic and proper techniques and facilitating communication between all Union entities. The bylaws provide similar expectations for the Deputy Manager, the Secretary, and various members of the Union. It also specifies the limits to lending and approving credit for cooperative members.
Oromia’s Best Practices
Utilizes a clearly‐defined organizational structure and responsibilities of specific roles (as outlined in the Oromia bylaws) to foster transparency, buy‐in and exercise of democratic principles.
Trains cooperative and union boards, contractors and members of cooperatives. Employs retired cooperative managers to help communicate best practices to farmers. Invests its Fair Trade premiums in community development projects. Established Oromia Cooperative Credit Union (47 branches) and created a complementary mobile banking system so that farmers do not waste valuable time traveling to one of the Credit Union branches. Bank goes to the farmer.
Oromia’s Main Challenges
Receives only 20% of farmers’ coffee at harvest. The remaining 80% of coffee goes to private companies who can give up‐front loans to farmers.
The cost of growing, transporting and packaging coffee is completely unrelated to the price set by buyers in United States.
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There is a fundamental disconnect between consumers (in United States) and producers. Consumers do not know the true story of the coffee bean.
Still has limited bargaining power relative to rest of the market. Struggles to satisfy the needs of the poor.
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Appendix D2. Vineyard Cooperatives32
Benefits
Ownership and democratic control – Cooperatives are organized, owned and run by members, who are incented to participate fully and collaborate with other members.
Standardization and increased efficiency – A cooperative supplies an overarching umbrella of technical and management skill that allows for greater consistency. Standardized processes also result in increased productivity.
Improved cultivation practices – Training conducted by cooperative management, the government, NGOs and other organizations helps educate members about improved agricultural techniques. This leads to greater yields and therefore profitability.
Access to capital – Cooperatives provide members with access to additional resources, like loans for equipment and supplies. Some cooperatives (like Oromia) create separate credit unions to serve this purpose.
Economies of scale – Cooperatives lower transaction costs for members and improve members’ bargaining power for acquiring inputs.
Better prices – Cooperatives negotiate higher and more stable prices for members. Community development – Ethiopian cooperatives are required to allocate 1‐5% of their profits to social funds, which are used to build schools, acquire medical resources and invest in water sanitation.
Potential Drawbacks / Risks
Lack of quality orientation – Members are often paid by the ton and are therefore not incented to produce at high quality.
Lack of cooperative managers – Cooperatives struggle to find professional managers as a result of inadequate training and limited resources. This limits the growth of individual cooperatives and the long‐term success of the cooperative movement.
Inadequate training – Cooperative managers and members sometimes receive inadequate training and information regarding the running of a cooperative and their role within the cooperative.
Lack of access to long‐term credit – Limited resources results in an inability to invest in major projects that would benefit cooperative members.
Lack of infrastructure and timely market information – Poor infrastructure (roads, transportation, and communication) in some rural areas impacts cooperative productivity. This is sometimes compounded by a lack of timely market information.
Lack of regulatory stability – The changing structure of cooperative bodies at the federal, regional and global levels can adversely impact the development of cooperatives.
32 Sources: (Chambo, 2009); (Develtere, 2008); (Mitchell Group, 2005); (Simpson,1999); (Veerakumaran, 2007); (Wine Economist, 2009).
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Appendix E. Ethiopian Restaurants in the United States
City (Ranked)
Ethiopian
Restaurants
(Urban Spoon)
Example
Bottles of
Ethiopian Wine
Sold per Month
(average)a
Bottles of
Non‐Ethiopian Wine
Sold per Month
(average)b
Washington(8) 52 Meskerem 20 20
San Francisco(13) 30 Zeni 40 40
Seattle(15) 27 Habesha 25 20
Atlanta(9) 18 Desta ‐ ‐
New York(1) 13 Massawa 100 90
Philadelphia(5) 9 Kaffa Crossing 0 0
Chicago(3) 8 Ethiopian Diamond 20 30
Dallas(4) 8 Addis Ababa ‐ ‐
Boston(10) 8 Asmara 0 ‐
Los Angeles(2) 7 Nyala ‐ ‐
Minneapolis‐St. Paul(16) 5 Fasika ‐ ‐
Baltimore(20) 5 Dukem 25 0
Houston(6) 3 Blue Nile ‐ 0
San Diego(17) 3 Muzita ‐ ‐
St. Louis(18) 3 Meskerem ‐ ‐
Detroit(11) 2 Blue Nile 30 20
Phoenix(12) 2 Cafe Lalibela 20 30
Tampa(19) 1 Queen of Sheba 48 72
Miami(7) 0 ‐ ‐ ‐
Riverside(14) 0 ‐ ‐ ‐
Total = 204 Average = 29.8 Average = 29.3 a Answer to “How many bottles of Ethiopian wine do you currently sell each month (on average)?” b Answer to “How many bottles of non‐Ethiopian wine do you currently sell each month (on average)?”
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Appendix F. Fair Trade and the Importance of an AntiPoverty Mission
There is a common (and justifiable) belief that the primary factors impeding initiatives that might lead to economic advances in Africa relate to a lack of finance, industry knowledge and market access. This has led to a reliance on large‐scale investments led by foreign corporate and private interests. This analysis emphasizes another way to gain access to these critical resources ‐‐ a strict adherence to the basic tenets of Fair Trade.
The basic mission of Fair Trade organizations and the associated movement is to connect disadvantaged producers with consumers, to promote fair trading conditions, and to empower otherwise marginalized producers.
TransFair estimates that since it started certifying in 1998, farmers have received almost $200 million more than they would have without Fair Trade status. More than 1 million producers and workers in 58 developing countries now benefit from global Fair Trade sales. And these impacts are growing. According to a study by GlobeScan in 2008, “In the last five years, the sales of Fair Trade certified products have been growing on an average of almost 40% per year. In 2008, Fair Trade certified sales amounted to approximately €2.9 billion worldwide; a 22% year‐to‐year increase. In 2009, U.S. consumers purchased about $1.2 billion in Fair Trade products.
Ten years ago, coffee was the only Fair Trade commodity. Now there are more than 6,000 certified products available in the United States, including wine.
Many wine producers are socially conscious and try to improve the welfare of their workers and families by having a story about their wine, but they do not seek certification or logos.
This is a crucial development because “most of the wine produced in the Global South and sold in the US comes from vineyards where growers are paid poverty wages for their work and are exposed to dangerous pesticides.”33 According to Etica co‐founder, Tiffany Thompson, “grape
33 See www.greenamericatoday.org/programs/fairtrade/FairTradeWine.cfm.
According to the Transfair website (www.transfairusa.org), Fair Trade principles include:
Fair price: Democratically organized farmer groups receive a guaranteed minimum floor price and an additional premium for certified organic products. Farmer organizations are also eligible for preharvest credit.
Fair labor conditions: Workers on Fair Trade farms enjoy freedom of association, safe working conditions, and living wages. Forced child labor is strictly prohibited.
Direct trade: With Fair Trade, importers purchase from Fair Trade producer groups as directly as possible, eliminating unnecessary middlemen and empowering farmers to develop the business capacity necessary to compete in the global marketplace.
Democratic and transparent organizations: Fair Trade farmers and farm workers decide democratically how to invest Fair Trade revenues.
Community development: Fair Trade farmers and farm workers invest Fair Trade premiums in social and business development projects like scholarship programs, quality improvement trainings, and organic certification.
Environmental sustainability: Harmful agrochemicals and GMOs are strictly prohibited in favor of environmentally sustainable farming methods that protect farmers’ health and preserve valuable ecosystems for future generations.
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farmers and workers in developing countries are dependent on low incomes that often do not cover labor and production costs. The Fair Trade system allows farmers to become more sheltered from the effects of suppressed, unpredictable, and distorted world prices.”34
“Retailing magazine Off License News reports that even with the recession, fair trade wine sales have increased over 89% in the UK since last year. Here in the States fair trade wine is still in its infancy, but like everything else fair trade, its reputation is growing.”35 Sam’s Club has recently begun to offer the club’s first Fair Trade Certified wine.36
Whole Trade wines are sold at Whole Foods stores in the U.S. Sustainably‐produced South African wines are sold through Worthwhile Wines. Etica distributes a range of fair trade wines priced from $9‐$13 per bottle.
All of these projects will only succeed in the long‐term if they deliver a consistent product; this is a wine that is both of quality and value. Grower cooperatives are needed to make our Fair Trade proposal work, but if cooperatives yield bad results because of their incentive structure, than that has an ill‐affect on the future of Fair Trade.
34 See www.greenamericatoday.org/programs/fairtrade/FairTradeWine.cfm. 35 See http://earthdivasblog.com/2010/03/23/what‐you‐need‐to‐know‐about‐fair‐trade‐wine. 36 See www.foodchannel.com/stories/1112‐fair‐trade‐certified‐wine‐an‐excellent‐value.
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Appendix G. Potential Resource Providers
USAID – www.usaid.gov/
Mission: USAID is an independent federal government agency that receives overall foreign policy guidance from the Secretary of State. Our work supports long‐term and equitable economic growth and advances U.S. foreign policy objectives by supporting:
economic growth, agriculture and trade; global health; and, democracy, conflict prevention and humanitarian assistance
Background in Ethiopia:
The central areas of focus for USAID in Ethiopia are primary education, preventative medicine, conflict mediation, risk management and economic enhancement. The primary area of focus for this project is their economic enhancement which incorporates the Africa Global Competitive Initiative and the Feed the Future Initiative that fights hunger and poverty as well as participation in the Safe Drinking Water Alliance and Ethiopia’s Productive Safety Net Program.
One example of support comes from the Tariku Midergo Coffee Enterprise in which Mr. Midergo was able to attain a 5,000,000 birr ($371,727) loan under USAID’s Development Credit Authority Program to found his own coffee company more than a decade ago. Due to this loan taking effect Mr. Midergo has helped achieve road and infrastructure development, waste run‐off collection initiatives, and job creation for over 280 employees since the inception of the loan in 1998.
Another example comes from Mr. Tadesse Meskala, founder of the Oromia Coffee Cooperative located just outside of Addis Ababa, Ethiopia. One of the central roles played by USAID in this initiative was bringing in the Non‐Profit ACDI/VOCA to train the farmers and administrators on how to effectively operate a cooperative. The result is both economic independence for this collection of high‐end coffee farmers and the creation of schools, community centers, and roads across areas of rural Ethiopia that would not have otherwise had these opportunities.
These two focus areas, loan advancement and cooperative training, are pivotal to the creation of a successful wine cooperative in Ethiopia. One of the key issues with creating a successful wine cooperative is quality control. Unless that issue can be mitigated through effective trainings, it will be a clear challenge to attain buyers for the wine.
Whole Foods’ Whole Planet Foundation – www.wholeplanetfoundation.org The Whole Planet Foundation’s mission is to create economic partnerships with the poor in those developing‐world communities that supply our stores with product. Through innovative assistance for entrepreneurship – including direct microcredit loans and tangible support for other community partnership projects – we seek to unleash the energy and creativity of every human being we work with in order to create wealth and prosperity in emerging economies. Whole Planet Foundation’s Approach
Whole Planet Foundation, a private, nonprofit organization established by Whole Foods Market, provides grants to microfinance institutions in Latin America, Africa and Asia who in turn develop and offer microenterprise loan programs, training and other financial services to the self‐employed poor.
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Whole Planet Foundation is authorized to work in developing countries where Whole Foods Market sources products. Priority is given to projects that demonstrate financial leverage and potential financial sustainability over time. We look for strategic partnership opportunities in areas of relative political stability.
(This foundation does not accept unsolicited applications and proposals.)
A Glimmer of Hope Foundation – www.aglimmerofhope.org A Glimmer of Hope Foundation received a $500,000 grant from the Whole Planet Foundation for its initiatives in Ethiopia. A Glimmer of Hope is run like a business and it measures its success like a business. It is in operation to turn a profit – a Social Profit.
A Glimmer of Hope’s mission is truly a heartfelt one: To help the rural poor of Ethiopia lift themselves out of poverty yet it understands the best way to achieve this is to operate entrepreneurially and expect results from its social investments. And the best way to achieve these results is through Integrated Community Development. This is a strategy that combines multiple initiatives to create sustainable development within a targeted community. It combines several key interventions that are required to help the rural poor lift themselves – and keep themselves – out of poverty. The three key elements can be described as Humanitarian, Development and Enterprise.
Enterprise: Refers to Income Generation and Micro‐finance programs that provide a hand up to farmers, women and small and medium sized enterprises (SMEs) to lift themselves out of poverty by way of agricultural and entrepreneurial income creation programs.
Development: Addresses Health Care and Education. The foundation has completed a major hospital rehabilitation project and built more than 150 clinics. Education is a key to breaking the cycle of poverty and A Glimmer of Hope has funded over 300 education projects (schools, classrooms, educational materials, furnishings, etc.).
Humanitarian: Addresses the basic need for clean drinking water. A Glimmer of Hope constructs three types of water projects: hand‐dug wells, spring protection schemes and bore‐holes. To date, it has funded almost 3,000 water initiatives throughout Ethiopia.
Venture Capital for Africa – www.vc4africa.com/profiles/members/ This website is an online community for investors and entrepreneurs dedicated to building businesses on the continent. It allows people to post their projects and potential investment opportunities. It has over 3,000 members.
(This might be a good place to post our report to see what feedback we get.)
CocaCola Africa Foundation www.thecocacolacompany.com/citizenship/foundation_local.html Established by the Company in 2001, The Coca‐Cola Africa Foundation (TCCAF) is the entity that coordinates our corporate social investment programs and implements community initiatives in Africa . The Replenish Africa Initiative (RAIN) is the Foundation’s flagship water program and is the umbrella under which all future water programs will fall. Launched in 2009, RAIN is a public‐private partnership made possible through a six‐year, $30 million commitment from The Coca‐Cola Company. The initiative will provide sustainable, clean water sources, hygiene education and sanitation services to millions of people throughout Africa. The Foundation also supports many
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other community initiatives throughout Africa, including HIV/AIDS & malaria prevention, access to education, job creation and humanitarian assistance.
TCCAF develops projects based on the needs of the community. To determine whether a request for community support aligns with our global priority areas and to respond in a more timely and efficient manner, the Company has introduced an online grant application system. Starting September 2009, all applications should be submitted through the online grant application system.
Cooperative Development Foundation – www.cdf.coop/GrantGuidelines
The Cooperative Development Foundation is a 501 © 3 charitable family of funds that advances economic development through cooperative enterprise.
Georgia Power Foundation – www.georgiapower.com/community/charitable_home.asp
While much of the funding is localized, as the 5th largest charitable donor in Georgia, the Georgia Power Foundation has the potential to support some aspects of the wine feasability study through its emphasis on cultural diversity, education and environment. It has given away $100 million since its inception and has given $14 million over the past 5 years.
Georgia Pacific Foundation – www.gp.com/gpfoundation/
The Georgia Pacific Foundation puts a strong emphasis on the “four E’s”. These include: Education, Environment, Enrichment, and Entrepreneurship. These are all localized in their approach and have more of a focus on high‐school students than college‐based education, but there could be a long‐shot tie to the foundation through Emory’s Institute for Social Enterprise.
United Nations Foundation – http://www.unfoundation.org/ourimpact/storiesofimpact/empoweringwomengirls/unfoundationineverycornerofethiopia.html
From fighting Malaria with mosquito netting initiatives to attacking water‐scarcity issues, the UN Foundation claims in the article cited above that it is in every corner of Ethiopia. Recently, the foundation brought American Idol Winner David Cook to Ethiopia to highlight some of the work that they have been doing for women and children. One cited mission is,
“The UN Foundation connects people, ideas, and resources to the UN to help reduce child mortality, empower women and girls, create a new energy future, secure peace and human rights, and promote technology innovation to improve health outcomes.”
Sustainable development, through tourism and employment, could be a great avenue into support from this foundation.
(This foundation does not accept unsolicited applications and proposals.)
Cunningham Foundation – www.cunninghamfoundation.org/
This is a foundation based almost entirely on helping children and families in Ethiopia. Even if this is not a supporter in the long run, it could be a great connector.
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Wegene Foundation – www.wegene.org/ Wegene Ethiopian Foundation is more specifically focused on helping the destitute in Ethiopia, but because it does focus on empowering the less fortunate, it could be an opportunity for small amounts of support and possibly a foundation interested in the project.
Praxis Ethiopia Foundation – www.praxisethiopia.org/ The mission of the Praxis Ethiopia Foundation is, “Promoting and supporting community‐driven, sustainable poverty reduction in Ethiopia and sub‐Sahara Africa.” Key foci are food security, healthcare, education, and technology.
Ethiopian American Foundation – www.ethiopianamericanfoundation.com/ While the scholarship awards are only for $500‐$1000, this could provide an excellent opportunity to further our network of American‐Ethiopians with personal ties and sense of allegiance to their home country.