This is the first Hilo transparency report. It is a very short version of what it will be in the future. We hope to give you a short overview of the aspects, which we think are important in the context of transparency for you. Our system is built on trust, given by you to us as a supporter of our Hilo system. Our goal is to show you how we contribute to make a difference by compensating the coffee producers and how much we invest in the support of social projects in the rural community.
The price for coffee in 2019 has been very low in the market. The producers work hard but can hardly survive with the current market price. We want to create a system where they are an integral entity of the value chain. With this report, we want to show you how we, Hilo, make this happen. The numbers below show that we mean what we say. But beyond that, we believe that money is not the only answer to solving the problem. So we need an alternative system.
Surely you want to know just exactly where the money goes? This report aims to show you just that. We want to share our cost structure and provide you with insight on what happens to the money. We would like to give you a few key figures to show how we invest in better education for the Jardín community.
Payments to Farmers
We have a cooperation agreement with the Giraldo coffee farming family located in Jardín, Colombia. In this agreement, we commit to paying them 700,000 COP per 125 kg (carga) for their parchment coffee to cover the cost of production. The Giraldo family received 4,200,000 COP in May 2019 to pre-finance their harvest (747.7 kg). In addition, we have been compensating the family with a monthly income of 142,857 COP per carga since May 2019, which will total 3,428,571 COP for 6 cargas from the Giraldo family for the year 2019. To read more about their first experience with the Hilo system was read the Interview with the Giraldo family.This will be added up to an income of 7,628,571 COP, which equals 2,211 EUR*. If we take the whole year of 2020 and their full harvest of 3,500 kg parchment coffee, it will be an annual payment of 43,600,000 COP (12,638 EUR*).
Parchment Coffee Payment
Hilo Cost Structure
We are in the very early stages of our start-up and hence, many numbers are forecasts. We started in May 2019 with a shipment of 500 kg roasted coffee from Colombia, which was ultimately more costly in terms of logistics, roasting, and packaging as it would have been for larger quantities. So far we pay only a monthly income to the farming family and the social project staff in Colombia, and the work in Germany has been entirely voluntary. The costs for establishing the Hilo network and inputs into the operational expenses are not yet based on realized values but rather on best-informed guesses. We think it will still give you an adequate overview of how the Hilo money is spent. This will be filled with solid inputs for fiscal year 2020. If you wish to have more information please contact us info(at)hilo.cafe.
As supporters of the Hilo system, we would like to show you how much of your money spent on our coffee has been returned to the farmers and to the country of origin.
In May 2019 we signed a cooperation agreement with the Giraldo family located in Jardín in the state of Antioquia in Colombia. We started off by purchasing 747.7 kg parchment coffee. This coffee was milled, pulped, roasted, and packed in Armenia, Colombia. It received a score of the Specialty Coffee Association SCAA of 82+. Based on all these process steps in Colombia we calculate a Return-To-Origin (RTO) of 26.49%. If we include the Hilo payments for the social projects in the farmer’s community as the core of our new system to generate trust and tackle the coffee crisis from a holistic perspective, then the RTO is 51.34%.
To be able to compare us with other specialty coffee on transparency platforms for the 2019 transaction, we calculate a “green bean” Freight-On-Board (FOB) price of 5.31 EUR/kg (2.68 USD/lb), this includes the payment for the green coffee harvest and the monthly income from May to December 2019, as well as the transportation to the harbor. To compare, the FOB average 2019 price on the commodity market was less than half at 2.49 EUR/kg.
We are currently on the way to join the pledge to increase transparency and,
Read further here to see the current specialty coffee B2B and B2C price levels.
Summary on the key facts of Hilo coffee
We want to reduce our carbon footprint as much as possible. We are looking into improving our value chain. To be honest, we are far from where we want to be and it will be a major focus for 2020. One initiative we have in mind is the following: For every 1 kg coffee (the finished product), about 4.5 kg of CO2 are emitted. For the 2020 harvest, we aim to offset this amount by planting new trees in the municipality of Jardín. If we assume one tree can offset 22 kg CO2 a year and we are planning to ship 3,500 kg, this will add up to 160 trees to be planted. Moreover, we are trying to bypass the last mile in shipping. Therefore, we also encourage you to develop a better supply chain together with us.
Please contact us info(at)hilo.cafe or via Instagram @hilocafe.co.
We compensated the administration and educational project planner 6,000,000 COP and another 6,000,000 COP (3,478 EUR*) to the educator of this project. The literacy program for children in the rural community of Jardín is called Municipio lector, and is run by Patricia Arroyave. This important initiative brings a new perspective to the new generations by promoting a passion for reading. The project visited four educational institutions in San Antonio and reached 1,400 students ranging from grades 0 to 11th grade and a further two schools in rural areas in the Municipality of Jardin, which reached another 25 students ranging from 1st to 5th grade. Please read more about it in this blog entry: Municipio lector.
*We used a rate of 3,450 COP / EUR.