This document discusses Nespresso's AAA sustainability program. It aims to secure high quality coffee supplies for Nespresso by partnering with farmers to improve yields, quality, and sustainability. Currently, coffee meeting Nespresso's standards represents only 1-2% of total production. The AAA program provides farmers investment and training to increase productivity and quality to AAA standards over 3 years in exchange for purchasing their crop. This creates market advantage for Nespresso by increasing sustainable supplies while reducing carbon emissions through efficiency gains across the coffee supply chain. Appendices provide sensitivity analysis of program impacts on prices and carbon trading.
2. AGENDA
- Coffee, Value and Current Situation.
- Triple A Meaning.
- Market Players & Non Market Players.
- AAA-Celerate Program.
- Our Proposal & Examples.
- CO2 Reduction Benefits.
3. COFFEE, VALUE AND CURRENT SITUATION
Currently coffee that meets Nespresso’s
standards represents only 1% to 2% of
the total production.
Which is challenging for the company in
terms of the long term sales increasing
and the raw material securing.
With the tight production of AAA coffee,
which increases the market competition,
Nespresso needs to secure the future
purchase of the crops, the quality, the
quantity and the sustainability.
Nespresso is one of the leading brands to
become the first corporation that obtains
an almost 100% of supplies through its
sustainability program, creating enormous
value for Nespresso and their high loyalty
clients segment.
The overall value chain of the AAA
program is dedicated to provide
Nespresso with a MARKET ADVANTAGE
comparing to their competitors, where
increasing the reach of the program to
more acres worldwide is a key for the
development of the program and
Nespresso.
4. AAA Nespresso
Farm
CO2 Reduction
Water Usage Reduction
AAA Processing
Facility Water Reduction
Drying Process
Energy Efficiency
Diminish Nitrogen Volatilization
Transportation from farms
to processing facilities
Decrease in CO2
emmissions
Agricultural
Supplies
Transport
to Lousane
Decrease in
CO2
emmissions
5. TRIPLE A MEANING
A
• Quality: Farms that produce coffee meets Nespresso’s
requirement can be part of the AAA – it helps farmers to
continuously improve their quality through a better farming
practices.
A
• Sustainability: The partnership with NGO’s and Rainforest
through the AAA program sets rigorous environmental and social
standers. This sustainability includes several criteria's such as
the soil erosion, water management, biodiversity conservation,
safety and working conditions.
A
• Productivity: it is a key for improving farmer’s net income. AAA
tools, technical support and specific project financing contribute
to addressing the yield improvement challenge together with a
range of partners.
6. MARKET PLAYERS
• Interested in securing supply from top producers
• Build up brand image
• Return in kind from initial upfront investment
COFFEE
CORPORATIONS
COFFEE TRADERS
& WHOLESALERS
FARMERS
• Primary dealers and market makers
• Different integration along the supply chain
• Suffer price fluctuations and volatility
• Interested in increasing quality and yield of crop
• Lack liquidity for investments
• Tend to integrate phases in supply chain
7. NON MARKET PLAYERS
COFFEE
ASSOCIATIONS
1
GOVERNMENT2
NGOs3
CLIMATE
MITIGATION
AGREEMENTS
4
• Acquire production from farmers “garancia de compra”
• Implement logistics services and scale economies on behalf of
associates
• Promote social programs and well being of associates
• Issues market and environmental regulation
• Activates market protection measures: tax barriers, excise duties
• Assess the environmental impact of supply chain on local basis
• Promote social branding and responsibility for involved stakeholder
(e.g. “Fairtrade” label)
• Supervises implementation of Clean Development Mechanism in non-
Annex countries, according to Kyoto Protocol commitment periods
• Coordinate actions and tools to fight climate change and CO2
emissions
9. AAA-CELERATE PROGRAM
- Year Zero the farm will receive an initial investment.
- Since the crop of Year One and Year Two doesn't’t fulfill
AAA grade for Nespresso, Farmers Could sell to Nestlé at a
discounted price or the farm can sell it in the market.
- Year Three crop will be sold to Nespresso at Premium
price.
- Farmers will increase land productivity in 10-15%
approximately.
- Every new farm will be accounted for a direct
decrease in the CO2 footprint and water
consumption.
10. OUR PROPOSAL
Year 1 Year 2 Year 3Year 0
Crop 1 Crop 2
Audit Audit Audit Audit
Crop 1 Crop 2 Crop 1 Crop 2
AAA< AA< AA
Final User
Coffee
Quality
Investment
Buyed
production
Periodical
Review
11. TWO EXAMPLES
• Upfront marketing investment of: USD 10,000
• Coffee wholesale price: USD 165 / 100lb (as of: 27/01/2015)
• Farm size: 30 Mt annual production
50 ha of land (Small Farm)
• Coffee crops being sold from the farmers to Nestlé: 3.5% over 2 years
• Upfront marketing investment of: USD 40,000
• Coffee wholesale price: USD 165 / 100lb (as of: 27/01/2015)
• Farm size: 60 Mt annual production
100 ha of land (Medium Farm)
• Coffee crops being sold from the farmers to Nestlé: 5.0% over 2 years
12. CO2 REDUCTION BENEFITS
World Coffee Market
2% 5%
1 Kg AAA Coffee = 1.6 kgs / CO2 1 Kg < AAA Coffee = 1.93 kgs / CO2 *
Top
Quality
2% 7%
Top
Quality
2% 10%
Top
Quality
CO2 Reduction = 3.1%
$12.8 M Euros
CO2 Reduction = 5.1%
$12.6 M Euros
CO2 Reduction = 8.2%
$12.2 M Euros
Scenario 1
Scenario 2
Scenario 3
14. TEAM ORGANIZATION
Sammary of
Experience
• ExxonMobil, B2B
territory manager to
west area.
Education
• Colegio de Estudios
Superiores de
Administración, BA in
Business
Adminstration.
Noor
Al-Abdulrazzaq
Filippo
Del Grosso
Andrei
Gaggion
Camila
Mejia
Summary of
Experience
• Commercial Bank of
Kuwait, FX Trader
• Gulf Bank of Kuwait,
Relationship Manager,
Corporate banking.
Education
• College of Basic
Education, Fine Arts.
Summary of
Experience
• Dell Computers,
customer
service analyst.
• Sykes enterprise, OMD
supervisor.
Education
• Fidélitas University,
Industrial Engineer.
Summary of
Experience
• Energy professional.
• PwC and KPMG,
consultant
• Terna, Assistant project
manager.
Education
• Bocconi University,
Economics.