Beyond Fair Trade

by Mark Pendergrast

  Soon afterward, John Darch went to the Philippines. He and the Canadian ambassador to the Philippines were flown by helicopter to a mountaintop village, in hopes of explaining the benefits of the mine. Promising to mine only 10 hectares at any given time, Crew also planned to replace topsoil, replant trees, supply cheap fertilizer and power, and dispose of the tailings far off, deep in the ocean.

  Inside the jam-packed assembly hall, the moderator told Darch, “Just explain your position to the people.” For ten minutes, Darch tried to do just that, but the crowd shouted over him in various languages, including English, “Give us back our land! We don’t want you here!” The ambassador whispered to Darch, “Let’s leave. Don’t stop walking.” The crowd parted, and they were able to depart safely, but it had been a tense and hopeless meeting. Back in Manila, Darch met with Philippine president Gloria Macapagal-Arroyo, who was sympathetic but said she could not reissue the mining license, since she would be accused (unjustly) of corruption.

  At the next annual general meeting of Crew Development, a group of Norwegian shareholders tried to oust Darch and move the company to Norway. In 2002, he bowed to the inevitable and stepped down from the Crew Development board, though he continued to run a subsidiary, North Pacific Geopower, which held the South Meager geothermal project. He sold his shares in Crew over the next few years, but he continued to pursue other, unrelated projects.

  “From 1997, when we first started Crew Development, to 2001, Crew was massively successful,” Darch said in retrospect. The company had projects on which the sun never set, and they were diversified. “We had raised $44.3 million, had $40 million cash in the bank, and an income stream from South African subsidiaries. That’s not bad for a four-year-old concept.” Years later, it still pained him that the new management dismantled much of what he had accomplished.

  The thought of what might have been in the Philippines was particularly galling to Darch. “That nickel mine would have helped the Mangyans, the indigenous people. We would have created wealth, employment, and given them new opportunities to elevate their lives. The project would have brought much-needed infrastructure, health, and education. It’s a myth to think that poor people in those remote areas enjoy their poverty, ill health, and early death. They do want improvements. Our goal was the opposite of exploiting the local people.”

  Deciding to Help the Akha

  BY THE TIME he drank green tea with Wicha Promyong in Bangkok in 2006, John Darch was fifty-nine years old and had lived a full life, but he still had more to give. Before she gave up keeping a calendar, Louise documented that he had once traveled for 300 days in one year. She may have missed him when she wasn’t traveling with him, but she had nothing but admiration for him. “John is the most compassionate, gentle, positive, honest, intelligent, caring individual I have ever known,” she said. Her only complaint: “I wish I could get him to retire.”

  The Akha are not beggars. What Wicha said to Darch that day stuck with him. “That tied in with my idea that charity, while absolutely necessary in an emergency, doesn’t really help anybody in the long run.” The Akha were not begging for money. They wanted an investment. It was similar to mining in a way, Darch thought. They had a promising idea, but until someone spent the money to explore and develop the idea and bring the product to a broader market, it would remain just a promising idea. He told Wicha that the next time he was in Thailand, he would go up to Doi Chang and have a look.

  CHAPTER 6

  The Creation of a Canadian Coffee Company

  AFTER HIS MEETING with Wicha, Darch flew back to Vancouver full of excitement. He called Wayne Fallis, who had served with him on the Crew Development board of directors for many years. Fallis, then in his early seventies and retired from a career as a grocery importer, assured Darch that he could help him with the new coffee venture and might even be interested in investing.

  Darch talked to various other colleagues and friends about the coffee project, and one of them, Jeff Weaver, put him in contact with a roaster in Calgary named Shawn McDonald. Darch asked him to test some of the Doi Chaang green beans he had brought back.

  McDonald was, fortuitously, already familiar with decent arabica beans from Thailand, having previously imported some from Paradise Mountain, a coffee farm to the northwest of Chiang Mai. He had by then sold his roasting business, so he called a former competitor, Jeff Farris, who owned Joffee Roasters, and arranged to do the sample roast there. He was pleasantly surprised and called Darch with the good news. “They’re really top-notch,” McDonald said. “I thought maybe they were Kona beans. They’ve got that same kind of high overall quality and balanced acidity and flavor.”

  Darch wanted a second opinion, just as he would have wanted for a new mining prospect. McDonald recommended Kenneth Davids of Berkeley, California. He ran an online outfit called Coffee Review, which billed itself “The World’s Leading Coffee Guide,” and he had also written three books about coffee. Davids validated McDonald’s opinion in his review: “A quiet but interesting coffee: soft, low-toned, with hints of cedar, warm spice, chocolate, and a low-acid fruit that suggests banana. The chocolate notes become more explicit in the impressively long, resonant finish.” He gave it a score of 89 out of a hypothetical 100 (few beans hit the low 90s), which was not off the charts but still well above the score of 80, the accepted cut-off point for what would be considered specialty coffee. Doi Chaang was, Davids noted, a “coffee that rewards patience and attentiveness.”

  First Time up the Mountain…

  WITH THESE ENCOURAGING assessments, Darch returned to Thailand in June 2006, with his eldest son, John A. Darch.* When they arrived in Doi Chang, they were astonished at what they saw. “I couldn’t believe what they had done,” Darch Senior recalled. A small cement building held the ancient German roaster, with an adjoining room that served as both office and packing area. On the right side was a small bamboo hut with a thatched grass roof, in which a small fire had been set, with a pot simmering a dinner of rice, greens, and chicken, with sauces in small bowls ranging from mild to fiercely hot.

  Just below the roasting hut, a small plot of land had been cleared for a drying patio. A group of Akha was pouring the concrete for it when they arrived. Nearby was a small wet processing facility, where the freshly harvested coffee cherries would be pulped and fermented, then spread to dry on the new concrete patio.

  Just after a downpour (this was the rainy season), Wicha and Adel took the Darches for a tour of the coffee fields. As they drove slowly along the muddy road through the trees, they saw men wielding machetes, pruning the coffee shrubs. Others were climbing the shade trees to lop off a few limbs, allowing the proper amount of sunlight to filter down. Further along, still others were spreading rotted compost made from fermented coffee pulp.

  They stopped the truck and got out. They ventured off the road, down a steep hill, to talk with some of the men who were pruning. Adel translated from Akha to Thai, and then Wicha told the Darches in English what the worker said. “Yes, of course, we have to be careful with the machete, or we can hurt ourselves. But few get hurt. We cut off this part here,” he said, indicating a sucker growing between two sturdier branches, “so that the tree will produce more cherries.”

  Clambering back up to the road, Darch Senior had to pull himself up by the trunks of the trees and found himself out of breath. He thought about how difficult it must be to harvest all these cherries. They were small and green now but would swell and ripen by the fall. He pondered all the labor involved, even in the off-season. But look at where they get to work, he thought, as he caught his breath on the road, looking out over the valley to the surrounding mountains. This was one of the most beautiful places he had ever seen. Yes, the people were poor—beyond poor, according to Wicha, since you had to have something in order to be poor—but they were obviously intelligent, hardworking, and incredibly friendly. I’m going to do this, Darch thought. I’m going to get involved. He thought of the poster his mother had given him, and
that he still kept on his office wall: “I shall pass through this world but once. Any good therefore that I can do or any kindness that I can show to any human being, let me do it now. Let me not defer or neglect it. For I shall not pass this way again.”

  Over dinner in the grass hut, he told Wicha that he wanted to be a part of the initiative, that Wayne Fallis knew how to import and sell grocery items, and that Shawn McDonald would roast the beans. He proposed that he start a Canadian roasting company especially for the Doi Chaang beans.

  “That sounds wonderful, Khun John,” said Wicha, “but we’ve had others, Japanese and Koreans, who wanted to go into partnership with us, and we’ve turned them down because they wanted to own 51 percent or more of the company. The Akha will not give up ownership. They want to keep control.”

  “That shouldn’t be a problem,” Darch said. “How about if we give the Akha 50 percent of the roasting company? We would make no demands on you to change your operation here in Thailand, and we would pay a good price for the green beans we import to Canada. In return for that, we would have the right to purchase up to 75 percent of your premium coffee beans and to have exclusive rights to them in North America and Europe.” It was an extraordinary, unique offer, allowing the Akha farmers to keep full ownership of their Thai operation, while receiving half the equity in the prospective Canadian firm. The Akha would not share in any losses the Canadians might sustain, but they would reap half of the profits.

  And so it was agreed, around the fire under a thatched roof on top of a mountain in northwestern Thailand. “We will be like a family,” Wicha said. “It’s beautiful. But—” he paused dramatically. “We must stand strong together. Are you strong enough?” He grasped Darch Senior on the shoulder. “If not—” he said, and dragged his finger across his throat. “If not, we all die.” Then he laughed and slapped Darch’s leg.

  That night, the Darches slept in a grass hut a mile or so up a mountain road, as strange insects explored their bodies. The next day, they met with the village elders, including Adel’s father, Piko, to formally cement the deal, which seemed to meet with universal approval. Darch Senior had seen Piko’s turbaned visage on the Doi Chaang Coffee packages, but now he and the other elders were wearing what appeared to be fedoras. They looked quite dapper, Darch thought. Yes, this was a good thing. He would help the Akha by selling their fantastic coffee in Canada, then he would expand into the United States and Europe. No problem.

  A Family Business

  BACK IN CANADA, Darch Senior contacted his lawyer, George Brazier, and told him to begin drafting papers for the incorporation of the Doi Chaang Coffee Company, to be funded privately but with half the ownership going to the Akha farmers of Doi Chang village through a shareholder arrangement in which they were represented in several loosely organized associations.

  “Are you sure that’s the way you want to do it?” the astonished lawyer asked. “Yes, that’s exactly the way I want to do it,” Darch said in his mild but definitive manner. Brazier shrugged and drew up the papers. Darch had had enough of public companies, share price swings, and boards of directors, so the new entity was a private corporation. It was also a family affair. Darch Junior, a former banker and professional photographer, signed on to the new project as the chief financial officer, although he recalled, “My title was somewhat deceiving. I did take care of the books, but I also did a little of everything else. We all did.”

  His younger sister, Katharine Darch Regan, also joined them, coordinating the first marketing strategy and developing their website. Politically, she and her father had their differences, but she recognized that he had a big heart. And he had taught her two important principles, both of which he was now putting into practice: 1) The best investment you can make is to create a healthy society; and 2) Question everything. Just because someone says that’s the way it is, doesn’t mean it is necessarily so.

  Katharine had plenty of questions for her father. “He was a mining executive who had raised tons of money for new operations. But this was a grassroots effort, not some big boardroom deal. And Dad didn’t know anything about coffee.” Still, after asking many questions about Doi Chang and doing extensive research on the hill tribes and their problems, Katharine joined the effort to help create a healthy Akha society halfway around the world. Working part-time as a young mother, she would create the firm’s website and coordinate marketing efforts.

  The new company, officially launched in April 2007, had a main office in Vancouver, where the three members of the Darch family worked with Danielle Bower, Louise’s niece, who handled sales and marketing, and Tanya Jacoboni, a receptionist with no family connection. The separate roasting facility remained in Calgary, 600 miles to the east, where Shawn McDonald supervised a staff of four at the Joffee Coffee roasting facility, two sales people, and a delivery vehicle.

  Calgary Conundrum

  WITH GREAT ENTHUSIASM—AND what turned out to be profound naïveté—Darch committed to buying four containers of Doi Chaang green coffee beans from the 2006–2007 harvest season (November–February). “I asked Wicha what price he needed in order to move forward with all the programs he envisioned,” Darch remembered. Wicha not only had ambitious plans to buy a new roaster, he also wanted to create an Academy of Coffee, where the Akha farmers could learn about agronomy and other subjects, and eventually he wanted to build a school where hill tribe children from surrounding villages could learn, regardless of whether they had a Thai ID card or not.

  Wicha had asked for $6 per kilo, or $2.73 per pound—well above the C-market rate of $1.00 a pound. The C-market was the price for average coffee, and Doi Chaang beans qualified as specialty gourmet beans that should command a premium, but that was still a very high price, especially for unknown beans that were just being introduced into an established market.

  In addition, Darch Junior had advised his father that for environmental, social, and marketing purposes, their beans should be certified as both organic and Fair Trade. “We knew that the beans were truly organic, since the Akha used no chemical fertilizers or pesticides,” the younger Darch said, “so it was just a matter of getting certified.” Fair Trade guaranteed a base price of $1.26 a pound for green beans at the time, so the certification would make no difference to the price. But being certified as Fair Trade was becoming increasingly important in the specialty coffee market, where the logo signified that the coffee farmers were being paid a fair wage.

  Pursuing both certifications meant that the new roasting company would have to pay to permit auditors to visit the farms and make sure that the Akha farmers of Doi Chang qualified. That brought Darch Senior’s costs to almost $3 per pound.

  The first four containers of coffee that shipped from Thailand to Vancouver carried a total of 150,000 pounds of beans. When roasted, coffee beans blow up to twice their size but lose about 20 percent of their weight, so that translated to 120,000 pounds of roasted coffee, or the equivalent number of retail units if sold in traditional one-pound bags. But because they had decided to sell Doi Chaang in half-pound bags (to keep the retail price of the unit lower), they would have to sell 240,000 bags. They planned to retail each bag for $10, which would yield gross sales of $2.4 million dollars, if they could sell them all. Of course, there was also a great deal of overhead.

  The new company sponsored motivational speaker, educator, and author Stedman Graham to give inspirational speeches to launch the coffee product at gala events in Calgary and Vancouver. Graham, who was on a book tour, was a powerful speaker, focusing on how determined, resourceful underdogs (the Akha among them) could achieve greatness. He didn’t drink coffee, but his partner, Oprah Winfrey, did. Darch hoped she would sample it and promote Doi Chaang in the United States, but although she apparently enjoyed the coffee, she never promoted it.

  To cover the initial costs, John Darch Senior and Wayne Fallis each invested a million dollars in Doi Chaang Coffee. Fallis had assured Darch that he could handle imported coffee beans, just as he had sold contai
ners of imported oranges, but McDonald warned Darch that they had committed to an extremely ambitious amount of coffee to start with. “Coffee is not a short-term business,” he warned. “It’s going to take at least three years for you to turn a profit. It’s not easy to launch a new coffee brand.” Fallis remained optimistic. “I’ve been doing this for fifty years, kid,” he told McDonald. “You just watch.”

  Darch Junior designed new bags, modifying the Thai version. He retained Piko’s face as the logo and put it on a handsome black plastic one-way valve bag, explaining the story of the Akha on the back. Even though the beans all came from the same place, there were varied offerings: dark- or medium-roasted, “signature” (a combination of dark and medium), decaf, and peaberry (single rather than double beans).

  McDonald had a network of loyal customers in Alberta from the time he owned Planet Coffee Roasters (his former company, with six associated coffeehouses), and he was able to get roasted Doi Chaang beans into prestigious places like the Banff Springs Hotel and Lake Louise Ski Resort. Sysco, the giant food distributor, agreed to carry Doi Chaang, and the Darches also hired a broker, SunOpta Grocery West, to help place the coffee in new outlets. However, a broker takes anywhere from 10 percent to 25 percent of the profits depending on the service level.

  But as 2007 bumped along, it became clear that Wayne Fallis had been overly optimistic, to say the least, and McDonald couldn’t begin to sell that much roasted coffee. Calgary wasn’t a thriving coffee hub, and McDonald’s hordes of customers never materialized. Even after an expensive, time-consuming penetration of two Costco outlets in Calgary, the Darch team was able to sell only a tiny percentage of the beans they purchased. “It was like getting pregnant, and now what do we do with the baby?” Darch Senior recalled. They were forced to dump the remainder of the green beans at a loss. That first year was a disaster, with gross sales of only $73,000. “The reality was that I knew zero about coffee,” Darch Senior admitted. “I didn’t really care if we were selling tea or cacao or something else. I just wanted to help the Akha. We didn’t know what we were doing.” As Darch Junior had realized and had been frantically trying to tell his father, coffee wasn’t like oranges or many other commodities. You couldn’t just sell it straight from the container in bulk. And the overheads were significant.