Coffee Capitalism at Work in Rwanda
It’s been a challenging year for capitalism. Vilified by many in America, especially in an election year when inequality of outcome in a system based on competition is exploited for political gain, capitalism is either viewed as what’s wrong or right with America.
In the retail world, the principles of free enterprise are evident every day as some retailers and suppliers compete more effectively for shoppers’ dollars. The system has served the American consumer well, and Westrock Coffee Co. CEO Scott Ford is a fervent believer in, and beneficiary of, capitalism. So, too are the small East African farmers that helped launch the Westrock company and brand. The forces of free enterprise have been embraced in Rwanda, where farmers are benefiting from the increasingly popular brand they helped create.
Little Rock, Ark.-based Westrock Coffee doesn’t have the brand awareness of Starbucks, Dunkin’ Donuts or Folgers, but chances are good that anyone who drinks coffee has tasted coffee that Westrock touched, whether they knew it or not. Following the acquisition of S&D Coffee & Tea from Cott Corp. in January, Westrock gained the ability to roast, grind and package more than 220 million pounds of coffee annually, and is now one of the nation’s largest tea suppliers.
“We believe we are the largest custom roaster in the U.S.,” Ford says.
Multi-Stakeholder View
That’s not a well-known fact in the consumer goods world, due to the company’s unique origins and Ford’s unlikely ascent as a coffee mogul. His plan at the time of the S&D deal was to create a fully integrated company whose scale could be used to offer the most innovative beverage solutions with competitive pricing to a global customer base. But to do so, he took a farmer-first approach and provided a premium price to growers while educating them on agronomy practices, business principles and the merits of giving back in their own communities, which is his multi-stakeholder view of capitalism.
Ford became an unlikely coffee and tea industry executive after his career took an improbable turn 15 years ago. The University of Arkansas graduate began his career at Merrill Lynch and Stephens Inc., where he earned a reputation as a deal-maker. In 1996, he joined Alltel, a company co-founded in Little Rock, Ark., by his father, Joe. Coming aboard as an EVP, the younger Ford became president a year later, COO a year after that, and, by 2002, CEO.
In 2005, he took his family on vacation to Rwanda, and while they were there, President Paul Kagame got wind of the wealthy businessman’s presence. Ford received a dinner invitation that he initially turned down because his young children were on the trip as well and Alltel wouldn’t be able to offer telecommunications services in Africa. He relented though, and while the children of Ford and Kagame played soccer with the security team in the president’s basement, Ford and his host discussed economics.
“We were talking about what it takes to attract capital to a developing nation and what would have to be different for Rwanda to be successful, compared to what most of its neighbors had tried,” Ford recounts. “We ended up in a discussion that went way into the night, and I became convinced he was serious about trying to let the free market get them out of poverty. He was going to do what he could to make it a place where investors could invest and the benefits of that could flow to the people of the country.”
That struck a chord with Ford, whose own parents endured a hardscrabble life in Arkansas during the Depression, growing up with no running water, shoes or electricity. His father was the only one of three sons who survived.
“Capitalism is what brought that family from struggling to keep one of three children alive to a point where my father became a wealthy and successful person,” Ford notes. “That system is what Kagame was trying to get his mind around the first night we had dinner.”
Fast-forward several years to 2007, when Alltel was sold for roughly $28 billion. Ford was only 46, independently wealthy and planning to take a year off to evaluate what to do with the rest of his life.
Rwanda Beckons
After the sale of Alltel, Ford headed back to Rwanda with a small group of other executives intent on uncovering an investment that could help the nation’s economy grow. The group looked at all types of medium-sized businesses that, with an infusion of cash, could create opportunity for Rwandans.
Unable to locate a suitable opportunity, Ford was having a cup of coffee at a café and thought, “This is some of the best coffee I’ve ever had in my life.” The coffee was grown locally, but Ford soon learned that the farmers were struggling financially, because the price they received was roughly half of what those in neighboring countries were paid, due to supply-chain challenges and a lack of modern roasting infrastructure.
“That’s how it started: an innocent conversation over a cup of coffee,” Ford says of Westrock’s origins.
There were only two roasting mills in the country, and when one of the dilapidated facilities came up for auction, Ford bought it. Westrock was now in business, and the lives of farmers were about to change.
“We started in one Kroger store in Little Rock, and now we are in about 4,000 points of distribution, and we are going to keep chipping away at securing additional distribution,” Ford asserts.
Continuing Impact
The Westrock brand, with its origins in East Africa is only one aspect of the company’s business. As a roaster, Westrock sources coffee from 20 countries and enjoys widespread distribution, often in the form of others’ brands sold throughout the hospitality, convenience and retail industry, or leading national brands that offer blended products.
“We are a supplier, and we also have a brand that fits a slightly different price point and flavor profile, but I don’t know if Westrock will ever be a national brand,” Ford said.
He’s OK with that, because national brand or not, the impact of the company will continue to be felt as it scales and helps more farmers through a range of development programs.
“The volume through the system is what gets money down to the farmer, which is the heartbeat of why we built the business,” Ford explains. “You can see it in the actual numbers in our three- year training program focused on agronomy, business and community development skills, where we teach farmers how to take the profits they make in their business and build communities so their children have a leg up to advance their relative standard of living. That’s how capitalism works.”
Westock can document huge increases in farmers’ incomes, which it measures at the individual level, and so far, more than 30,000 farmers have completed the rigorous two-and-a-half year training program. Meanwhile, the company continues to invest, and in 2019, it built and opened the Mwito pre-primary school in a western province of Rwanda, capable of serving 320 students. That school is adjacent to an existing one with more than 600 students, where Westrock has invested in providing continuous access to clean water.
There’s a lot of debate in the United States about the merits of an economic system that led to the creation of the world’s largest economy, which Ford notes causes bewilderment on the part of some in Rwanda.
“When I go to Rwanda, people are talking about competing and growing their business,” Ford notes. “There are winners and losers in capitalism, but it is the only system that lifts the poorest of the poor out of poverty. That’s what is good about it.”
