Vanuatu coffee producer Tanna Coffee has secured a $656,000 investment from impact investors in a milestone deal for the region. Facilitated by The Difference Incubator (TDi), the significant private capital injection will help grow Tanna Coffee’s output five-fold, supporting more than 750 farmers and their families on the remote island.
The investment was made possible by the Pacific Investment Readiness Pilot, a partnership between TDi and the Department of Foreign Affairs and Trade (DFAT), which helps create investable opportunities for impact investors. The investment is the second capital injection into the Pacific made by the Genesis Impact Fund, set up by TDi’s partner Benefit Capital.
As part of the pilot, TDi’s team is helping businesses such as Tanna Coffee to do good and make money, ultimately contributing to sustainable economies across the Pacific and reducing aid reliance.
What exactly does Tanna Coffee do?
Tanna Coffee grows, farms, processes, roasts, and distributes premium single-origin coffee on its beautiful plantation 400 metres above sea level, nourished by Vanuatu’s rich volcanic soil.
Two years ago, the plantation of 750,000 coffee trees was almost totally wiped out when tropical Cyclone Pam devastated Vanuatu’s 84 islands.
Despite this setback, the company has rebuilt its operation and produced its first significant harvest since Cyclone Pam and now plans to directly re-engage all of the smallholder coffee farmers, many of whom lost everything during the cyclone.
The $656,000 investment will be used to develop 200 hectares of land and to increase Tanna Coffee’s production from 20 to 100 tonnes of roasted coffee annually. The land will be distributed in one-hectare plots to 200 farming families for them to grow coffee.
TDi worked with Tanna Coffee over twelve months to help build the business and secure capital from impact investors. This process included developing their business model and a framework to measure their impact, as well as negotiating the business’s valuation and terms of the investment.
Tanna Coffee’s managing director Terry Adlington said that this major investment would not only amplify the company’s overall impact on the livelihoods of 750 farmers it works with, their families and communities on Tanna Island, but would also ultimately have a significant and positive effect on Vanuatu’s economy.
“When I arrived in Vanuatu to work with Tanna Coffee 20 years ago, farmers were being paid 20 vatu (AUD$0.25) per kilogram of coffee cherry. By changing our processes to add more value to the end product, we are now able to pay farmers 270 vatu (AUD$3.20), which we see flowing directly back into the local community,” Mr Adlington said.
“We have worked with TDi on a plan for sustainable growth to increase coffee production to 100 tonnes over the next five years. We also anticipate farmers’ income will increase by 20 per cent as a result of the investment, increasing their living standards, improving lifestyles and providing the ability to afford consistent education for their children.”
How Tanna Coffee caught the eye of TDi
TDi deputy CEO Anthea Smits and the TDi team met with more than 80 businesses in Samoa, Tonga and Vanuatu as part of the DFAT-sponsored program. They then selected businesses with the greatest potential to deliver a positive social and environmental impact and a market-rate return for investors to work with more intensively, including Tanna Coffee.
Ms Smits said while many people looked at investing in the Pacific and saw challenges, TDi and DFAT saw great opportunities to build Vanuatu’s economy and independence through private capital investments.
“In the long term, a sustainable economy in Vanuatu will reduce the nation’s reliance on foreign aid, including the $62.5 million in aid the country is estimated to receive from DFAT this financial year,” Ms Smits said.
“We have worked with Terry to develop innovative farming methods to secure the future of Tanna Coffee’s crops. For example, we noticed that after Cyclone Pam, younger crops survived whereas older crops were lost, so we are rehabilitating and developing crops at different stages to ensure a regular supply.”
Caleb Jarvis, trade and investment commissioner at Pacific Trade Invest Australia, has worked with Tanna Coffee since 2009 and introduced the company to TDi in 2015. Mr Jarvis said a shift from aid to trade was essential for sustainable improvements to Ni-Vanuatu livelihoods.
“This investment will help grow Vanuatu’s private sector, resulting in improved livelihoods for local farmers and flow-on trade benefits to the surrounding community,” Mr Jarvis said.
“This is ground-breaking for the Pacific Islands, and has the potential to help Tanna Island achieve long-term trade independence and improve the sustainability of the economy.”