Blog 10: Cooperatives In Costa Rica

Cooperatives are a way for several companies to pool together resources in order to maximize production or efficiency. Coffee companies often form cooperatives for this reason, and a lot of them have been very successful. An example of a cooperative in Costa Rica is Coopedota, which was formed in 1960. This cooperative is comprised of 900 farms from the Tarrazu region, which is noted for its high altitude and steep cliffs. As a cooperative, all of the farms vote for a general manager and the farms all have the same voting power regardless of size. The manager and executive board helps lay out the standards that each of the farms have to follow. All of the farms send their red cherries to one central mill and the milling process is determined by the quality, but most coffee is wet processed and heat dried. All of this coffee is then produced under the Coopedota label and sold, with 90% being exported as green coffee and 10% being roasted on site. There are many different advantages and disadvantages to producing coffee as a cooperative.

Cooperatives provide advantages to farms and producers across the industry. One of these advantages is the fact that it makes coffee production cheaper, since each farm only has to grow and pick their coffee. This means that farms do not have to worry about washing and roasting coffee. This saves them a lot of money on research and expensive equipment. At Coopedota, the central plant handles all of these costs so the indivual farms do not have to worry about. Another advantage is the visibility a cooperative receives. It is very difficult for small companies to earn large contracts, because they cannot differentiate themselves from the competition. Plus, companies are more likely to make contracts with bigger suppliers, since they have a more stable flow of coffee. For example, Coopedota has large contracts with companies like Starbucks, which would be hard to get as an induvial farm. Lastly, a cooperative allows for a lot more product differentiation, because they are constantly receiving different qualities and strands of coffee from different farms. This allows companies to produce several different forms of coffee to sell and market to customers. Coopedota takes advantage of this, selling several different levels of quality, from their lower quality Café Quetzal brand, to their high-quality Café Reserva Especial. This allows them to reach different markets and make more money. Overall, cooperatives provide several different advantages to companies, however there are some disadvantages.

These disadvantages effect different entities across a cooperative. For example, with regards to individual farms, they get the same amount of say in terms of the cooperative, regardless of their size. This can be a major disadvantage for larger companies, who could make it as their own company making their own decisions a lot easier. On our tour today, this was mentioned as the main reason why large plantations chose to leave the cooperative. Another disadvantage is that coop farms can only sell to the cooperative, which could possibly hinder their future growth since they cannot take other opportunities. In addition, members must pay dues to the cooperative and are under regulations that govern what they do, so they lose some of their overall freedom. In my opinion, these differences are nothing compared to the advantages, and Coopedota realizes this.

Overall, Coopedota would not be the same, or even exist at all, without a working cooperative. Without this cooperative, Dota would have to compete with all of the individual farms in the reason in order to sell Terrazu coffee. In my opinion, competition in this region would be lethal to all of the small farms in the region. Competition would drive prices way down, and farmers would not be able to make a decent living. This means that farmers would most likely consider different options, and leave the coffee industry to pursue a different profession. Then there would be a lot less coffee in this region and farmers would lose the incentive to produce higher quality and sustainable coffee. In conclusion, a cooperative in this situation is necessary to the longevity of quality coffee in the region.

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