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Hawaii, Puerto Rico Form Coffee Cooperative: Military Deal A Boost For Industry
January 20, 2004
Hawai`i coffee already is served in the White House. Now local growers have landed a bigger buyer: the military.
Groups of farmers in Hawai`i and Puerto Rico have banded together to win a $2 million agreement to sell coffee to East Coast military installations during the next year through Columbia, Md.-based distributor U.S. Foodservice Inc., said representatives for Hawai`i and Puerto Rico farmers.
Given the government's large demand for coffee, the farmers say the long-term benefits could be substantial, said Sotero Agoot, Kona Pacific Farmers Cooperative general manger.
Under the arrangement, the Hawai`i and Puerto Rico farmers have formed an inter-regional cooperative in a deal that's particularly attractive for them, he said.
Farmers in the past would sell their coffee to coffee roasters who then would sell to suppliers or government agencies, with the roasters keeping a cut for themselves. Now, the farmers will be selling their coffee directly to a government supplier.
"The farmers will recapture some of the margins that's going to the coffee roasters," Agoot said. "We're hoping this will help boost the coffee industry statewide."
The agreement also helps the U.S. government meet domestic, small and minority-owned business procurement goals, said Miguel Becerril, a director in the Puerto Rico Federal Affairs Administration. To secure the sale, the cooperative agreed to roast its coffee at a minority-owned business in Maryland.
The inter-regional farmers cooperative resulted from the Puerto Rico government's interest in selling coffee, Puerto Rico's third-largest agricultural commodity, to the U.S. government. To secure sales, the territory's farmers needed to offer government officials two domestic sources of coffee, Becerril said.
So last fall farmers from Puerto Rico visited Hawai`i to meet with local coffee farmers. Hawai`i is the only state with a commercial coffee industry.
After agreeing to jointly market coffee to the U.S. government, farmers from Hawai`i and Puerto Rico last year traveled to Washington, D.C., where the U.S. Department of Agriculture helped facilitate a deal with U.S. Foodservice.
Eventually, Puerto Rico hopes to sell about 1 million pounds of coffee a year or roughly a quarter of the country's annual production to the government. Hawai`i's goal is to eventually sell about 800,000 pounds of coffee or 10 percent of the state's production, to the U.S. government each year, according to Agoot. Accomplishing that goal will require cooperation from farmers statewide, not just those in Kona, he said.
The Kona farmers cooperative has formed a separate company called the Hawaii Products Marketing and Fulfillment Group to sell coffee from growers statewide, Agoot said.
"We know there's farmers out there that have inventory that may want to be part of our group," he said.
In addition to their sales to East Coast military facilities, Hawai`i coffee farmers soon will be selling to U.S. military dining halls in the Pacific region, said John Tisue, a marketing and logistics specialist with the Defense Logistics Agency.
Last week Pearl Harbor hosted a taste test of Hawai`i coffees, one of which will be selected by the military within weeks, he said. The initiative is designed to support U.S. coffee farmers while offering service personnel more variety, Tisue said.
"That's our goal, to put 100 percent Hawaiian coffee on those dining hall menus," he said.