COFFEE CIRCLE: LEARNINGS FROM 7 YEARS OF CONSCIOUS COFFEE
"If it doesn't taste good, you can do good wherever you want, but people will not buy again." -- Martin Elwert, co-founder & CEO Coffee Circle
For this juicy episode, Claudi ventured out to meet Martin Elwert, co-founder of Coffee Circle (@coffee_circle), who are a certified B-Corp. If you’re not sure what a B-Corp is, there’s a cool video explaining the whole concept down in the shownotes.
SOME QUICK FACTS ABOUT COFFEE CIRCLE
Coffee Circle is all about high quality, single origin, organic coffee sourced directly from the highlands in Ethiopia - and meanwhile also from lesser known coffee nations like Laos or Myanmar. They follow strict principles and pay the farmers prices far above the world marke. And they invest 1 Euro per kg of coffee into social projects in the growing regions, with 100% of all donations going into the projects.
So far, Coffee Circle had a positive impact on more than 39.000 people in the growing regions, raising 500.000 euros for their projects. They’re really transparent about this, you can read about each single project on their website. And they deeply believe in entrepreneurship as the driving force for development, which is also a key focus of our interview.
The green coffee is then shipped to Germany and roasted fresh here in their new roastery in Wedding, which is where we are right now. I tell ya, it smells damn good. The wild Wedding is definitely one of Berlin’s most contrasting and therefore also most exciting neighborhoods. I love to come up here. It’s much rougher than other neighborhoods - but it’s home to a nicely down down-to-earth artist & alternative scene. Perfect for roamers and explorers seeking for an authentic, pre-gentrified vibe, a bit more off the beaten path than Kreuzberg & co.
Not only is coffee sth that many people in the world drink… It’s also one of the commodities that created the biggest imbalance between the wealthy nations and the developing world, AND at the same time coffee is without a doubt one of the most famous and widely spread Fair Trade products in the world. So it’s a great idea to build a social business around that and magnify its possibilities to alleviate poverty. Which is exactly what Coffee Circle is doing.
WHAT IS SOCIAL BUSINESS?
It’s a business that is dedicating its entire purpose to solve a social problem. It’s not about profit, money is just the means to drive the business and its mission forward. It’s also often defined as new way of conscious capitalism. What excites me about it, is that it really has the power to address the most pressing problems of humanity, without being dependent on donations or fundraising. Now there’s lots of different models and definitions out there. I highly recommend reading “Building Social Business” by Muhammad Yunus, who is kind of a luminary in this field. He’s founded the Grameen Bank, a bank run exclusively for and by the poor.… even though you may not agree with 100% everything - if you wanna learn more about the idea of Social Business, then check it out in the shownotes.
As for Coffee Circle, the impact these guys had within the last 7 years has been remarkable. One of the key take aways from our chat was, that if you are running a sustainably-oriented business that serves a social purpose, you have to be not only as good as conventional businesses - you have to be better.
IN THIS EPISODE, YOU'LL ALSO LEARN ABOUT:
- Some major traits that all social entrepreneurs should have
- The power of travel in boosting your confidence to change the world
- How to have the greatest impact per euro invested
- The crucial difference between social business and NGO's
- The notion of dignity in social business
- The challenge of building trust and credibility - and how to solve it
- Why Coffee Circle decided deliberately against Fair Trade
- Where to find the biggest potential for future social entrepreneurs
- What exactly is the idea behind 3rd wave coffee (and what’s 1st and 2nd wave)
- Which role Berlin played in kicking Coffee Circle off the ground
- How the startup scene in Berlin is shifting
- Why it’s so important to get expectations right
- The biggest crisis Coffee Circle had to face last year
- The importance of being humble & appreciative of the people around you
And so much more! Okay guys, you see there’s a hell of a lot to take away here, so let's not hold back any longer. Without any further delay: time to get into the show NOW!
LISTEN TO THE EPISODE RIGHT HERE:
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COFFEE CIRCLE - INTERVIEW TRANSCRIPT:
CLICK HERE TO READ THE TRANSCRIPT:
C: Hey Martin, warm welcome. Really nice to have you on the show today. How are you? Ready to share some inspiring stories?
M: Well I’m good thank you, it’s Monday morning...
C: Haha, yeah - ready to share some inspiring stories?
M: Of course!
C: I've just been in Portugal last month and met your co-founder Robert at a friends wedding...
M: Christoph's wedding...
C: Exactly, Christoph Fahle, the founder of betahaus - they’re really good friends. Yeah, and Robert actually was also the one who connected us (Thanks Robert)...
At Coffee Circle, you guys are doing SO much: you sell coffee, you roast coffee, you educate about coffee, you give workshops, you tell stories… and, most importantly, you share your profits directly with your farmers in Ethiopia, Columbia…. For me, you really pushed the social business movement - especially here in Berlin you were one of the first ones I could think of who really showed: you can create amazing products, that taste delicious, grow a brand around it AND really build bridges and leave a positive impact.
Now you opened up a roastery up here in Wedding, an open place where people can come and pick up their coffee and geek out on all things related to that delicious bean. We gonna talk about all that in a bit….
But first, something that I’m burning to know: You come from a very different background: you were climbing up the ladder to success as business consultant, big money... Then you followed your co-founder Moritz who took a sabbatical in Ethiopia - and a few months later there was Coffee Circle. Can you take us to that moment that changed everything - what happened in you that made you quit a super high paying job to start a social, purpose driven business like Coffee Circle?
M: First of all, wow! When you describe it that way it sounds like it was all planned and figured out right before we started. Which is absolutely not the case. I don’t know, when we started, we were in consulting almost 4 years. And you get to a point where you think “alright, now I know a lot, I’m very experienced” and you wanna change. It was still an intriguing job as you described it, but nevertheless…
We had that opportunity with Ethiopia. And being there with Moritz for 2 months, we figured out that there did not so much actually happen there in the last decade. It was still one of the poorest countries we had in the world. We’ve seen some other countries before, but people earned....
Nowadays they earn about 700 dollars. Back in those days, they earned about 340 dollars. Per year. It’s very obvious in daily life how poor people are. So that added definitely to the motivation to do something with Ethiopia.
We were there for an NGO, a charity project, which was really nice. It’s called Project E and Moritz’s brother initiated it a few years ago. And we then thought about what can we actually do which is not a charity, not an NGO. Because, I don’t know if you remember, back in the 80’s they had this huge famine. And they had Bob Geldof, the Live Aid Concerts. And you had the kids shown with their hunger bellies…
So even though there was lots of money given to the country, we didn’t see any real change. Then, adding this with our background, which was business - and I’d say a lot of self-confidence combined with naivety - we thought “okay, we can somehow do something here in Ethiopia, let’s find something that we can trade, we can produce…” We wanted to figure something out that we can do, which first of all, is a business - because that was our belief, that we can economically drive something. To foster entrepreneurship so we can support people somehow on a small scale. Because this is what we learned, that it should in the end increase income, increase wealth and then somehow lift countries out of poverty.
C: Yeah, it’s a new way of doing business. I would have asked you that as well - why did you start it as a social business instead of a non-profit or donation-based to help people in Ethiopia…
M: We were convinced that it’s somehow possible. But nevertheless, I didn’t know the terms of social business back then. I learned about it two, three years later through, I think Muhammad Yunus…
C: Ah, I’m just reading his book.
M: Yeah, but I didn’t know it at that time. We were just sure that we are good enough… we thought we could sell something which can create a great income for us - we wanted to build a big company. It’s not that we wanted to launch a nice little project, as we’ve got lots of great, yet small projects around here. No, we wanted to go for building a company, earning money with it, but nevertheless do things right. And somehow we were convinced we could do that.
Then we figured out it should be coffee, because, I mean, why did we pick coffee in the end…
C: Exactly, why coffee? Have you always been a coffee addict, did you have heaps of knowledge about it…?
M: No 🙂 [both laugh]... We drank apparently a lot of coffee. But I grew up with supermarket typical coffee, like how we all grew up through our parents, there was always some kind of brand.
Anyway, I didn’t know about coffee. Neither of us knew about coffee. But thinking like very analytical consultants, we knew two things: First, it’s the number one export product of Ethiopia - at some point we also figured out that it’s the origin of coffee. It’s very present in daily life there. And second,
<< the Germans drink a lot of coffee. We drink it more than beer and mineral water. >>
C: What?? Wow…
M: Yes! What we didn’t know at that time was that Germans love to drink extremely cheap coffee - but that’s another challenge. So this were the basic reasons why we decided for coffee.
And Robert, who you just mentioned… We came back to Munich (we lived all in Munich back then). We came back and said “Robert, we have this wonderful idea, we gonna do coffee”. And he looked at us like “Guys, did you have a too hot shower or what’s wrong? There’s coffee everywhere and now you just wanna enter a saturated market”. And we were like “yeah, yeah, it’s a wonderful idea!” - and at some point we convinced him…
C: Alright, so first he had his doubts - how about your environment, your friends and family, when they heard that you wanna ditch your job as a consultant and start a coffee business? How was that?
M: It’s two things. First, from the outside you see: his job is consultant. And all of us actually went through the same path - why do you start working as a consultant? Most of the time, not because you wanna have that clear consulting career… No, it’s because you don’t know what the hell you should do 🙂
When you become a consultant, you have the chance to learn a lot within a very short period of time, because you just work a lot. And second, you always have project work. So you see different companies, different markets, different countries. And that makes this opportunity so interesting. But it’s not because you want to stay a consultant forever.
Of course, parents or older generations, who are more security oriented - I mean, they asked me more questions than others. I think in general, everybody thought we are nuts. But everybody said “yeah, great idea! I love it! Wow, you take this decision, you’re so brave” and so on…
Nowadays, seven years later, when I ask those people “what did you really think”? Everybody tells me “Martin, I thought you’re completely crazy, it’s not gonna work out. I really didn’t know why the hell you were doing this”. This is actually quite funny to see.
C: Haha, it is. But it’s actually great, because they were still giving you all this background and support by not saying honestly what they think back then. And you prove them wrong.
M: Yes, now it’s easy to talk about it. But also, we didn’t set that pressure so high. So if it didn’t work out, we would have been “okay, it’s no big deal, let’s try something else then.
C: Yeah, just go out and try. Just moving back one step: what triggered you in the first place to join Moritz in Ethiopia?
M: Erm, Project E was a project where there were mainly students. It was about buiding and opening a school for orphans, for girls actually. And we lived close to each other in Munich, went out on weekends and we were friends. So then Moritz started to talk with me about it… Then, it was 2008 and he said, okay I’m gonna take a sabbatical. And I took all my vacation, which added up to two months and said “I can join you”. Why not? It was Ethiopia, it was something I was interested in, there was something to do… That was actually the reason why.
C: I understand, personally. Something always draws me to Ethiopia when I think of Africa. It’s this part of the world where you can really find some kind of adventure, but also learn a lot, I guess, about yourself and also about how the world actually works.
I am personally a big advocator of traveling - even though sometimes in the green scene I’m getting these odd looks because of flying, CO2 etc… But I so strongly believe in travel - not mass tourism of course - but really deep travel…. How do you think about that?
M: I think of travel as one of the strongest - and maybe one of the only - ways to open up your mind to new ideas, to reflect on yourself, who you are and maybe also, what you can do. I mean, I grew up in Germany, so I was extremely lucky. I went through a wonderful education. But it was not before I… I think the first time I truly went out of Germany was when I went to New Zealand in 2000… well, that’s a long time, 17 years ago. I travelled through New Zealand, also a lot in Asia and at some point also in Africa. I also lived in China for two years. So this is when you start learning about yourself and put yourself into perspective. And I think this also gives you the confidence to say, okay I can do something. Which you may not be able to look at when you just stay in your own environment, where everything’s set up.
I think this is very important, if you don’t travel you’ll never have these kind of experiences. It’s also about being helpless at some point. Being able to laugh about yourself, because you’re just in a situation where you don’t speak the language, you don’t know what the hell you’re doing… you’re just helpless.
C: Just getting out of your comfort zone, that’s it! That’s probably something that helps you a lot also as a founder and social entrepreneur. What would you say is one of the biggest strengths of you as that founder? Things that you needed, that you developed and that really helped you?
M: It’s always difficult to talk about my own strengths…
C: Hehe - okay, what would you say if I’d search your advice and ask “Martin, what do I need to be a social entrepreneur”
M: I think you must have a relentless drive to achieve something. And you should not really stop - you should not be the one being resistant. Somehow you always need to go forward. And you will have failures all the way, you will go and do a lot of mistakes. This is just normal. But if you kind of calibrate yourself to a point where you say
<< it’s alright to make those mistakes - actually, I must make them >>
...then I think you have the base for growing. I learned so many things, I wouldn’t know where to start. I think that drive is still there, and also that we’re convinced that what we’re doing is worth it and that we can change stuff.
It’s also about accepting that it’s extremely hard work - and when you not really want to work for years for a materialistic low income, but also in a not very comfortable environment… It’s not very professional in the beginning. It’s not that you have all the perfectly trained staff who can do all the administration. You have to set up basically everything by yourself. That must be very clear I think, in the beginning.
And then, of course, you also must be a bit lucky. You must know or meet the right people and just be able to keep learning. That persistence in combination with a bit of luck…
C: What you just mentioned about resistance, it’s something I keep pondering about and I was just listening to the summary of the War of Art. And the author keeps mentioning that one point is definitely resistance and overcoming that resistance, which is really confirming what you just said.
Now we’ve talked about some of the starting points and the foundations of you as a social entrepreneur, but I also wanna talk, of course, about all the amazing impact that Coffee Circle has and...
Seriously, looking at your website is impressive! It’s so full of coffee knowledge, you really don’t keep anything secret. There’s tons of insights, from how coffee is roasted, to how to brew the perfect coffee with every kind of coffee maker! Why was that so important to you, to put so much work and effort into creating all that free content?
M: Different reasons. It’s not just because we love to do it. I think it also comes to showing numbers and what we do and how we do stuff. I think that transparency is the key to building up credibility. In the end, we are building a brand. So if you want to be credible so that people come back and, in the first place, pay three to four times the money they would pay for a supermarket coffee, you need to appear credible.
And with being online... I mean, we do not run a café - at least not yet. So it’s difficult for us to convince people without them being able to touch and smell and taste the coffee before they buy it - I think that’s a challenge we will always have. So we decided for us that transparency is very important.
And, to put it in a nice way: people understand it and it’s easy to digest. We think about coffee 24 hours a day. They might think about coffee 2 minutes a day and still we need to get some messages to them somehow. I think that’s really important.
On the other side, we have a lot of traffic on the website. The first time somebody visits coffeecircle.com, he wants to know more about how to grind coffee the perfect way, or how to brew it the perfect way. By then, you as a visitor might already have your own coffee at home, but when we transport a nice image, then they might at some point also buy our coffee. So, there is a commercial idea behind it. But of course, it’s to argue, because we spent so much time for years into producing that content that by now, we must have the biggest website for coffee knowledge in Europe!
C: I’m pretty sure. There’s so much added value by openly sharing all this extra knowledge. It also shows that you really celebrate that product COFFEE. It’s not just a cheap commodity that you quickly wash down… This is integrity, you really live what you do, I love that….
Tell me, what is it (apart from the coffee) that makes you jump out of bed every morning and get to work?
M: I think the most important thing for me is having the chance to work in that kind of environment, that is mainly the team members. It’s a luxury to have built up that team. And now, I mean management level we’re not that big. But let’s say our Head of Marketing, our CTO, the Head of Coffee…. I work with some of those people already six years, or at least more than three years. So they grew as a kind of team which makes me happy to see growing. This is on a daily basis the reason I get up every morning.
When you then think every half year or every Christmas “what the hell am I doing in general in life?”, of course, you think about the impact you had, what you achieved that year… That impact is very abstract when you’re here in Berlin every day, going through your operational things. And then to always have in mind that every month, we create say 15,000 euros or more for Ethiopia just by doing what we do… It’s difficult to think about that as a motivation everyday. But if you reflect it’s there.
<< We just passed the 500,000 euro investment into Ethiopia… It keeps growing just by you growing the company. That’s the beauty of the model we have >>
C: Wow, 500,000 euros investment in the projects? That’s incredible! I’m gonna come to that again in a little bit. But quickly, because you just mentioned your team: what I really loved when I flicked through your website is that, right underneath you, the CEO and co-founder, there are the people who roast the coffee! Not your sales guys, not marketing… But the roasters. Do you see them as your heroes?
M: Hahaha, I don’t know if there was any thought behind it - but of course, it’s at the core of what we’re doing. We started our own facilities about a year ago and it changed a lot the entire perception of who we are. So it was very important for all of us to have it now here in house. I mean, we roasted on different facilities before. Hannes, the Head Roaster, roasted here before. But that’s different.
And coffee is at the core. It’s about selecting the origins we work with, picking the right coffees, creating roast profiles and then also roast them every day and every week, keeping up the quality of it - which is at the core.
<< If it doesn’t taste good, you can do good wherever you want, but people will not buy again. >>
Exactly! There’s so much behind it… And I think it should be the essence - and I love that you say that - of sustainably oriented businesses. Not just making something sustainable and then hoping that people buy it just because of that. But of course, it has to taste good to really make an impact. And then on top being sustainable
M: I think you mentioned something really important. And that discussion I have very often within that social entrepreneurship scene.
"It’s not enough to define your business as a social business and then you have a USP" - Martin Elwert, co-founder @coffee_circle
This is just true in very rare cases actually. In the end, you have the challenge to provide a better service than “normal” businesses. You must have a superior product. You must do everything right, as all the other businesses. But at some point, you put something on your shoulders where you are more ethical… To break it down: you pay more money. Or invest more time, which costs money in the end. So you need to just be a lot better in order to achieve that valid sustainability or social consciousness.
This is something I come across unfortunately very often. That people have a lot of motivation to do the right thing, but haven’t figured out yet that it’s not that, just because you define that you’re doing something good, people are going to buy it.
We have that argument all the time: how much emphasis do we put into communication about what we do in Ethiopia vs. how much do we put on videos about “How to prepare a Cappuccino”.
<< To be very honest, if you put something out about how we built a school for 1,000 kids in Ethiopia vs. 5 Tips for a perfect Latte Macchiato, you will have ten times the clicks on the Latte Macchiato vs. the school >>
So this is the reality. And there are several reasons - I fully understand that not everybody wants to be involved with all those poor people in other parts of the world. So you must be very sensitive in the communication and you also must be very sensitive in what to expect from the social aspects or environmental aspects that you include in your business model. And, in my experience, this is never a key success factor.
C: That’s super, super interesting actually. You have to be always that notch better and put so much effort into it. And I agree that I think this is how many sustainable projects fail. They think about their mission and their cause. But if they don’t think about the right ressources, the right skills, the right people and create an awesome product that people want, not just for that sustainable factor - that’s what’s keeping it in a small, small niche instead of bringing it to the masses.
M: I mean there are other areas where you have USP’s. This is when it comes to people. You can hire the best people and they really want to work for you, because you have a great cause. Even though in the end, they build a perfectly commercial product, but they know what they’re doing it for. So you have a USP in talent that you attract.
You can also have a different standpoint when it comes to financing. You have different sources to finance your company. There are not many, but there are more and more social impact funds. So also there you have access to.
Especially in Germany, there are a lot of family businesses who invested a lot in charity in the past. And they see the appeal of social impact investments. Then there is more money that you can attract when you do it right.
But when it comes to product and service, people usually don’t buy it because you’re fair.
C: True. But as you say, there are more and more funds and more and more people who want to be involved in creating a great product while also being fair and sustainable. I think generally, it’s headed down a good path.
I just wanted to shift gears again and talk about your impact in the world, where the coffee comes from: 1 Euro per kg of coffee sold goes to social projects - what kind of projects are they, how do you choose them?
M: We actually have three areas: one is health, which also includes water, so sanitary and hygiene projects where we were very active in the past. One is education. And the third one is value chain. That means training farmers to improve quality.
I mean, we started with building a well. That was a very small project. Then we equipped some small health posts in Ethiopia. Learning by doing - we also do a lot of mistakes. I hope the well is working… Anyway, the first larger project was building a school. That was already 4 years ago. We also equipped it with electricity. Now, within the last 3 years, we did one larger project which, in total, will cost us 680,000 euros. It’s a WASH project for almost 20,000 people…
C: A WASH project?M: Yes, that’s “Water, Sanitary & Hygiene”, sorry. We developed wells and we installed pipes in four communities in South West Ethiopia. That will be finished by the end of this year. So it’s going to be amazing to see it. I didn’t see much of it yet, I just saw the well. We’ll go there in 2 months, at the beginning of December and see it. That’s gonna be very cool.#
And now we added more, we started the first larger project in the value chain: we gonna work with 10,000 farmers, also in Ethiopia, over three years in order to train them in agriculture practices, how to improve quality in yield. And also in accounting, leadership, so that the management of the cooperatives gets better. That the payments are clear, cash flow flows the right way, but nevertheless, that they get more for their coffee.
Apart from that we’ve also been to Colombia to do some quality improvement projects. We built a lab for them - because they’re much further developed. Building a school in Colombia is not an issue, education, nor is water supply. So << we try to figure out how to have the greatest impact per euro invested >> And of course, then you end up investing more in Ethiopia compared to developed countries.
C: Amazing. That’s very exciting. You just mentioned that you’re excited to actually go and see it and I guess, you’ve done that in the past with projects that have been finished… How is that? You initiate a project from Berlin and when it’s finished you go there… How does that feel to be there with the community? What kind of reaction do you get?
M: How we came up to define this project I think is important. It’s not that we go and say “we are rich, you are poor. You can’t afford a school and we are sooo nice, here is a present”. NO. It’s understood - and that’s very important, it’s also a major difference to “normal” development work - it’s understood as part of the compensation for the great coffees they produce before. Especially when it comes to how we build schools or do the WASH projects. So, it is already their project. Of course, we channel the money back. But it’s also understood that, without them producing those great coffees, there wouldn’t be a school in the end.
And this makes a big difference in the end how it’s perceived. First of all, the commitment to the project, the participation of the people - I mean, we always expect something from them, whether it’s stones, sand, transport, any kind of help with construction. I think it’s the only, I think, dignifying way. The dignity they feel in creating it themselves vs. we come and say “you’re so poor, so we give you something”.
This is something we do not really push, but this is what we see. And << I’m actually most proud of when there’s not only the school, but when it’s run and operated by them. They look after it and keep developing it >> This is the core, which we didn’t expect in the beginning, but that’s just dignifying…
Totally, it makes so much sense! That’s also linked to the empowerment model that’s possible through social business. It’s not just “we give you lots of money and let’s quickly fix something”. I think that’s also what Muhammad Yunus is really advocating. Empower people to learn skills so they can actually improve their lives on their own. It totally hurts dignity if it’s just this “here we are, the wealthy white man, and this is what we do for you”. It’s really amazing that you take this approach as well.
M: One story when we built the school, for example… It’s a probability. So you never know, when you come back, who’s gonna use it… And during the building we didn’t have enough funds transferred. Cause that’s sometimes a problem, too, to channel the funds. So we asked if they can basically pre-finance the construction. The responsible teacher went throug the community and collected money from the farmers and everyone, and actually pre-financed some kind of construction! Just by the word that we’re going to pay you back!
And this is something, I already talked to NGO’s and told them that this happened and they were like “What?! This is just absolutely insane, it’s not gonna work” - but it worked already. Then we opened the school and the government had to send teachers. Because we don’t wanna create any dependencies. So for the teachers and staff, it’s already clear before investing that they send them. And then of course, the confidence of the farmers who built that school is like “ey guys, you promised you gonna send teachers now”. We didn’t need to do anything, because they were so confident, they kind of demanded what they were promised.
Then I went with my sister and her husband… I mean, usually you come and there’s a great celebration and I really like that because it’s nice, it’s for everybody kind of a cool symbol. But what for me was worth more personally, was coming with my sister like four weeks after, not telling anybody that we’re coming. You have to hike there for an hour from the last street… so we went there and we said “ok, what’s gonna happen now?”. Is there somebody in the school? Is it not used? And we arrived and all the classes were running! There were teachers in there… That was like, wow, it seems to work even if we’re not there 365 days a year in order to control. That was powerful for me.
C: Wow. Just when you tell me, it really goes into my heart…
M: I mean it would have also been really embarassing for me in front of my sister if it didn’t work [laughs]
C: Okay, cool. Now you were already mentioning empowering farmers by sharing skills in terms of yield and everything - I just quickly wanna talk about Fair Trade. There are labels - I don’t know, is your coffee Fair Trade?
C: No, exactly. And there is always this whole discussion about Fair Trade or the “Bio” label. And people look “is this Fair Trade? No? Ah no, I don’t want it.” For me there is this story that small farmers often can’t afford it… And this is a huge problem that people don’t see that some are still using the same principles, it just doesn’t have that label on it. How do you go about that challenge?
M: Yeah, of course we try to explain a lot. And we decided against Fair Trade, for several reasons. Fair Trade is not made for the kind of quality we do. It’s for mass market production. I think the most valuable thing Fair Trade did in the past was setting a minimum level comparing to the world market. They regulate that, whenever the market falls below $ 1.40 per pound of green coffee, everybody who’s Fair Trade certified gets $ 1.40. Whether it’s there or below. I think this is the most powerful thing.
On the other hand I would say they have lots of inefficient ways. It’s not the right incentive that Fair Trade sets for farmers. In our case, and I’m really talking about high quality coffee and not about plantation coffee in Brazil for example. The quality aspect is not the focus in Fair trade.
The cooperatives have to pay for being certified. And we did this with the organic certification, we have some organic certificates. But then, you end up with… you meet cooperatives - not in Ethiopia, because they don’t have the money - but in Colombia, you see cooperatives who have eleven certificates. Eleven!
I mean, there is Fair Trade International, there is Fair Trade Japan, there is Fair Trade Europe, there is Organic Europe, there is Organic Japan, there is Organic Korea, Organic US, then there is bird-friendly, there is woods, there is Rainforest Alliance… you don’t even know where to start. And they have to pay for the certification themselves, in order to be certified. So you can imagine what kind of huge investment that is. And in the end, it’s just a Marketing thing.
Because, I mean we pay… I don’t know, this is something I actually don’t agree with when people do it: when you see Fair trade coffee in the supermarket, you pay, I don’t know, 3 euros for it, maybe more. But there is no quality in there. And that’s really why we don’t go into the Fair Trade system. There’s a defined fee that goes to the Fair Trade organization. And the organization is just responsible for the premium section of the pay which comes to the farmer - which is again a small share. So we’re not talking about euros, we’re talking about 50 cents or so. So I think this premium in Marketing - and this is also really contradictory somehow - that premium is not going to the farmers. Most of the premium you pay for the coffee goes to the supermarkets…
So it’s a thin line. It’s good - I do not wanna argue against it. I just think more transparency and questioning if it’s still the right model would be wise. It would also be important to establish a proper model where you consider country by country. It doesn’t make any sense to say, this is the world market price and one-fits-all. Because every country has different cost structures. The production per tree is completely different - Ethiopia is about ¼ of trees in Colombia. So you have to imagine you have to go to 4 trees instead of one for picking the same amount of cherries. All of that comes together when we talk about price.
It’s a start… but it’s not the future. It’s just the future because I think lots of brands will, when they wanna do fair trade, go the easy way. And the easy way is buy a certificate.
C: You just mentioned the future. Taking in all the different things that you do - where do you see a big potential in the future? For you as Coffee Circle, and maybe also on a wider scope, for people wanting to create social businesses, projects that make a difference out there….
M: I think in general, before I come to coffee, I think in food is a lot of potential. I mean, it was a one-way communication. It was supermarkets with the brands built up one way. If it comes to coffee Dallmayr Prodomo with “vollendet veredelter Spitzenkaffee” (perfectly refined top quality coffee) - it’s the same slogan, and surely it’s not the best coffee you can get… Actually the quality increased over the last three decades, but anyway.
I think in food, there is a lot of potential. Not only new food, but also to rethink food. It will, of course, become much more expensive for all of us.
C: Yes. But I think, in general, it’s just been too cheap. Especially in Germany, people just got used to this. Look at our crazy discounter culture.
M: Absolutely. I think the awareness of people in terms of food will increase. They question more and more and realize that there’s just a different way to go by. And when it comes to coffee, there is one movement, which we call the third wave of coffee.
We had the first wave, that was the mass market coffee available everywhere - cheap, extremely low quality. This is the supermarket coffees I was talking about. Then we had that second wave starting in the 1990’s which was massively driven by Starbucks, so Espresso based drinks - Cappuccino, Latte Macchiato and all of that…
C: Ah that was Starbucks?
M: Yeah, interesting, right? And now we’re talking about a third wave of coffee. The first two rather focussed on either roast or especially price. And now it really comes to a culture where, in every step in the value chain - from crop planting, agronomy, picking, preparation, there are different preparations of coffee, sundried, not sundried and some new ones… I forgot to mention the plant varieties, which also play a role… to roasting, to serving, everything along that chain - to really think about quality first.
Which creates in the end an entirely different experience in your cup. It’s not about those dark eshy roasts that comes in a cup which we know from the big brands. It’s about origins. It’s about how Kenyan coffee tastes different from coffee from Indonesia. How the roast affects the sweetness. It’s something that we deeply think about, we experiment. And this is at a very early stage still. We see that the US is about 5-10 years ahead of us. We see specialty roasters like Blue Bottle, Stumptown, Counter Culture Coffee… We are about 10 years back in Europe. But this is a development we see and the nice thing is we are just at the beginning.
The base of coffee is about 800 aromas. Wine doesn’t even have half of it. So when we look into the supermarkets into the wine offer and you have… I don’t know the Rewe that just opened for sure has 400 different wines - and in wine it’s also important where it comes from, how it was prepared, what year, all of this. And these are exactly the same reasons why coffee tastes also different: it’s the year, it’s the soil, it’s the sun. It’s how you prepare it, how you roast it and how you brew it. If that parallel holds up for the next years, I think we can expect a major shift in coffee consumption everywhere.
Nevertheless, we will have to pay much more for our coffee. But today, you can also buy a bottle of wine for 2 euros and one for 50. Some will pay 10 or 12 and some will still be happy with the 2 euro one. So I think there’s a major shift that will also affect the coffee industry. It does already. And when people actually start to spend more and start to question what’s behind the coffee…
100% Arabica is just no sign at all for quality, it’s a marketing thing, there are extremely, extremely bad Arabica’s out there. This is still this kind of marketing I was talking about before of those old brands, who have established an African Blue or Dallmayr Prodomo… I mean, coffee grows every year and those brands exist for 30 or 40 years, so of course, it’s always changing coffee in there. So they try to engineer that the coffee always tastes the same. So it’s about realizing that it tastes different and then the consumer maybe decides what he wants or not.
C: That’s definitely a good point, that the consumer wants to decide what they want, what they drink, what they consume. And I love that you mention that big potential on food, because I totally see that and I’m very passionate about everything that comes to rethinking the way we eat and how things are grown.
M: And I just see how much power we as consumers. Now, there’s so much knowledge out in the internet, you spread lots of knowledge through your website… I think the more traditional food industry players really have to change A LOT.
It’s gonna be very difficult for them. Especially, food is one thing, but I think the combination with technology we actually have already. How we use the website in order to be transparent, this is I wouldn’t say true technology, but the internet… But yeah, food tech… This is what we see in coffee, the next step would be that they analyze on a chemical and biological level what makes a good cup of coffee. And then you can go back to what kind of variety and origin could be grown here and there in order to create a better flavor in the cup in the end. So it’s something where you can actually go down the chain and use technology to improve the taste. And then also having more money in the chain, cause you fit more the taste for the customer.
C: Yeah. I mean food and tech, that’s also gonna be something very interesting for Berlin and I know, last week there’s just been the 1st Food Tech Summit, Berlin is a startup city, there’s a tech scene - and combining that with food I think there’s gonna be a lot happening.
Speaking of Berlin, I wanna switch the direction just one more time. I really wanna know what role did Berlin play in kicking Coffee Circle off the ground?
M: So many aspects. I mean, we moved for Coffee Circle from Munich to Berlin, because somehow we felt that innovative ideas fall on a much better ground here. Second, it was much more affordable, I think that’s still the case. Third, you have more innovative people working here.
And Coffee Circle specifically, I mean, we started in betahaus - we just mentioned Christoph Fahle before - which is one of those places where creativity has a platform and comes together. So this is where we benefited and we were there for almost two years. Back then, the startup scene was relatively new. It was mainly e-commerce companies driven by business guys. Now it’s more, let’s say for three years now, there is much much more tech coming in. Much more international people and also money coming into Berlin.
I think it is a very good development - and still needs attraction I’d say. If you would have asked me five years ago, I probably would have said “I know about 80% of the people working somehow in the startup scene in Berlin. We had a few events and you always met the same people. Today: not at all anymore. Probably I know a maximum of 5% of people. I think that changed a lot.
<< And it’s still one of the most attractive places you can be in to start a company >>
C: Yeah! I mean from here, you really grew into a little empire, I mean your coffee is available in many other cities - and obviously online. In Berlin, I think there’s over 100 places where people can either drink or buy your coffee - also some of my favorite places: Daluma, betahaus, Haferkater…. I’ll drop the link into the shownotes so people can check it out.
But in 2014, you moved actually up from hip Kreuzberg here to Wedding, then opened up the roastery…. Why Wedding? And what did that change?
M: Yeah, Wedding… the ever-coming Wedding (Berlin joke). No, we were actually looking for a really nice building and we found it here. We were looking for three floors with around 300 sqm each. We wanted to have one for production, one for logistics and one for the office and it was difficult to find something which is easy to reach. In the first place we thought “Wedding? Why Wedding?” and then we decided that we just gotta be the first mover, it’s alright. And it turns out now, Wedding is indeed coming 🙂 Looking in our neighborhood, it’s actually quite interesting.
C: Totally! I just recently ran a Circular Economy Tour through Wedding and we discovered so many exciting projects. Of course, it’s very different than over in Kreuzberg, but it’s kind of exciting to venture into that. And I think you’re also involving himmelbeet - the urban garden that’s quite close to here - you’re bringing over your coffee grounds and they use it as a dung… So I think you’re really building up something and being one of the first movers here is definitely something unique.
Just to spark a bit of that Berlin passion - what is it that you love most about the city?M: The long history. And actually also the very recent history - I’m talking about 20, 30 years. I do think that created the kind of vibe which makes Berlin still changing. It’s not all set, it seems to reinvent itself all the time. That is one of the things I truly like about Berlin.
C: I agree. I don’t wanna stretch your time too much longer, so let’s just switch to the final little bit. There are four questions that I ask all my guests. Looking back on 6, nearly 7 years Coffee Circle - I’m sure it’s been a crazy roller coaster ride - what was your biggest learning/ aha-moment that you wanna share with us?
M: [chuckles] well if you wanna have an aha moment… First of all, it was all a development, also with me. So I wouldn’t say this is one key moment. I think a key moment was at the very beginning, when we figured out this 1 Euro per kilogram model and thought we gonna do projects… At some point, you need the communities in Ethiopia. And I remember this very cheesy moment: we came into the cooperative, walked by the mountain and the leaders of the cooperative were sitting below the tree on benches waiting for us. We didn’t know exactly what kind of questions we gonna ask them, but we wanted to figure out what kind of projects we should do with them and if they understand our model.
They actually understood it very well, it was very easy and we were like “they really understand what we wanna do here, and we can come back and invest something more” - and then we asked the first question and asked “okay, what do you want us to build?” And they said: “a street!”. You know, we were just at the beginning and a street is like… I don’t know a 7km street… We tried to explain to them “look, this is quite small, we have about 1,000 euros, could you think about something else than a street?”. And then actually a doctor in the community said “think about a well because we don’t have access to clean water”. And then everybody’s like “well, that’s a good idea”. We figured this out and it was kind of easy and I think this was a moment where we knew it can work. But that was at the very beginning.
What I just learned - and this is quite general - getting expectations right from everybody is, I think, the key learning I had in the last years. And I’m talking about the employees you hire - you promise something. I talk about any kind of stakeholders, especially also farmers. I mean promising you come back and build a school and not doing it - not cool. But I’m also talking about investors. Getting all those expectations right, I think makes you much stronger in everything. It also prevents you having to make decisions without a proper base in the end. If you promise too much, you run for something which might not be healthy. So this is the key learning in growing Coffee Circle.
C: That's definitely a strong one. Now, if you could change one thing in Berlin within the next 24 hours - what would it be?
M: I would probably put Berlin next to a mountain and next to the sea.
C: Haha, I love that, I support that. That’s the only thing that’s missing.
M: Yes. I mean I grew up next to the alps… Wouldn’t it be awesome?
C: Yeah, let’s just dream of it. What question should I have asked you but didn’t 🙂 ?
M: Ah! That’s a good one. You mean the one that I didn’t want to answer? Hmmm, I mean you didn’t ask me for… You said that everything about our development is great, but of course, it isn’t. So you didn’t ask me what was actually not great.
C: Tell me…
M: Actually, the truth is, what you sell and what is so positive - of course, we have a nice development - but behind the scenes, there is always a lot of pressure. What you didn’t know maybe. We had to cut down our people in 2013/14. So expectations were not managed right for me, not at all. We tried a lot of things, spent a lot of money and went almost bankrupt. And then had to fire so many people. We went down from 40 to 11 people.
This has not been a nice experience. Because you promised to those people, which you then have to let go…
C: How did you stand up from that?
M: I think just continue working. I mean, when you know what it is you can say “ok, that’s it now, let’s see what we can do with the situation”. And then we kept on working hard on it and we turned it around. And then you grow, you’re much stronger than before - but you’re also somehow much more humble. You also appreciate more what people do for Coffee Circle. You don’t always push “let’s go for it, let’s go for it”. You really rethink and strengthen what you are capable of… I think that made us a much more valuable company in the end…
But for everybody, because most of the people working for Coffee Circle didn’t actually work for another company before. So you can imagine, it was even harder to understand for them - and all of that I think was an experience I don’t want to miss. Of course, I would have loved to realize it before having to fire so many people and spend that much money. We were talking about expectations from investors, expectations to yourself… And I think most entrepreneurs have been through such kinds of situation and I expect most of them to say exactly the same kind of thing. That it was worth it, even though it really hurt.
C: I love how you put this, because I can totally feel and imagine… you’re sitting here and talking about this deep negative experience but now, looking back it’s been a valuable experience. It makes you even more what you are now and I think that’s awesome.Now, final question: If there was one thing you could pass on to the GreenMe tribe, the people out there - what would it be?
M: Maybe don’t take yourself too serious all the time. I do take myself serious to be very honest. But still, I think sometimes to just realize: okay, it is important. But somehow, get it calibrated.
C: Yeah! I totally, 100% sign that. Brilliant take-away to finish. Martin, thank you so much for really letting me dig deep here and being so open about everything… It’s been an absolute pleasure for me to chat to you & hear more about all those amazing things that you and your team create here. It’s just so inspiring to see how much you care!
Very excited to follow your journey and see what comes next - hope many many people out there get inspired and motivated that our future is actually pretty awesome and everyone can have an impact out there. At least that’s what you clearly prove. So please keep up your energy & all the best for you and your team!
THIS IS COFFEE CIRCLE
Roastery in Wedding
Checking for best taste and quality - new coffee arrivals from Laos and Myanmar
Building relationships in the fields
Boy oh boy oh boy… There is quite a lot to digest here, it’s been great to chat to Martin. Hope you also could draw a lot out of this interview. There is still so much more to find out about the what’s, how’s and why’s of Coffee Circle. So DO Watch out for lots of awesome videos and brilliant content on their website and social media platforms. That’s what they’re really strong at.
I’d be super curious to know what you think about the whole idea behind social business, and the way Martin and Coffee Circle live it and put it into practice. Or do you even have an idea in mind for your own social business? I really really wanna know it, so please get in touch, leave a comment right underneath this post here, or write me on Facebook, on Twitter, or an email. Social business - what’s your take on it?
COFFEE CIRCLE - SHOWNOTES & LINKS MENTIONED
- Connect with Martin & his team on the Coffee Circle website | Facebook | Instagram | YT
- Video: Coffee Circle - Our Vision Of Direct Trade
- Projects realized by Coffee Circle (in German)
- Book: Muhammad Yunus “Building Social Business”
- betahaus Berlin (Coworking Space)
- Project E (NGO in Ethiopia)
- Book: Steven Pressfield “The War of Art”
- Coffee Circle partner cafés: Google Map
- Blue Bottle Coffee, Counter Culture Coffee
- Circular Economy Tour Prenzl’Berg, 9th November -> get your ticket
- Circular Economy Tour Wedding, August 2017 -> photos
- GMBP013 soulbottles - a soul-driven startup against plastic waste
- GMBP03 himmelbeet - how an urban garden builds a green hub for everyone
- Video "What is a B-Corp ?"
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