The Crop Software Behind Your Daily Cup of Coffee

(Bloomberg Businessweek) --

“Buscamos a mis enemigos,” says Raul Perez, jogging toward his coffee fields in the mountains of western Guatemala—let’s go find my enemies.

His farm, Finca La Soledad, sprawls across 220 acres. Trees planted to shade the coffee plants—yucca, Inga, mango—stud the landscape, the whole green mass of which is sheathed in a silvery mist. Behind Perez looms Volcan de Fuego, Central America’s largest active volcano and the source of his farm’s rich soil. In front of him, a Samsung Galaxy phone displays the nostrils and toothy smile of Norbert Niederhauser, the Austrian-born chief executive officer of Cropster, a startup fashioning data-tracking and communication tools for the farmers, importers, roasters, and sellers that make up the global coffee industry.

Niederhauser is tagging along via Skype as Perez makes his daily rounds through the fields, searching for signs of botanical distress. A reedy 38-year-old with chiseled features and hipster hair, Perez holds the phone up to a branch. “Notice the discoloration in the leaves,” he says, indicating Hemileia vastatrix, the fungus known as leaf rust and Enemy No. 1 of the coffee farmer. He moves on, training his camera on the clusters of tight green buds that will give way to bright white petals and, eventually, to cherrylike fruits. “We’re waiting for the flowers. They’re late by more than a week,” Perez says. “And the flowers wait for the rain.”

Humanity consumes a half-trillion cups of coffee every year worldwide, almost double the number a decade ago, and Perez is among the more than 20 million farmers who supply the habit. And yet the industry—particularly the farmers—faces dire economic and environmental pressures.

The global coffee supply chain is preposterously complex. Beans can change hands a half-dozen times as they move through the process of harvesting, drying, fermenting, storing, importing, and roasting before they’re brewed into a cup of joe. “There’s very little transparency in an industry so fragmented,” Niederhauser tells me. Yannis Apostolopoulos, director of the Specialty Coffee Association, says that “the system comes from colonialism. For centuries, the wealthy global north has been consuming coffee produced by the global south. That severe power imbalance still exists.”

Compounding these complexities are increasingly volatile growing conditions in the Coffee Belt, a region that spans about 21 degrees north and south of the equator. “Over the past four years, our production went from 200,000 pounds one year to 70,000 pounds, then back up to 140,000, then back down to 65,000,” says Perez. The problem is new environmental pressures: excessive heat, drought, invasive fungi, insect infestations, shifting seasons—all symptoms of a warming planet. “Producing good coffee crops under normal conditions is hard,” says Niederhauser. “Producing them in the climate change era is harder.”

Of the two major types of coffee plants, robusta and arabica, the latter are more flavorful and require intensive physical labor to harvest and process. They also command much higher prices, which makes the labor worth it—or at least, it used to. In the past decade, massive new coffee farms in Brazil and Vietnam have flooded markets with supply. The commodity price of arabica has plummeted, from $3 a pound in 2011 to about $1 a pound today. At the same time, consumers are more willing than ever to pay $5 or $6 a pop for oat milk lattes and nitro cold brews. Nearly all of those profits go to the traders, roasters, and retailers. “It’s a crazy disconnect,” Niederhauser says. “Farmers are making less and less money, while coffee is becoming more and more valuable.”

Niederhauser started Cropster in 2009 to serve producers such as Perez. The first product was a data-management app for farmers to track everything from soil nutrients to bean harvesting and processing. The growers would pay a subscription fee of around $15 a month to access the software via tablet or smartphone. They’d use the software to log their plant varietals, fertilizer and herbicide applications, irrigation and rainfall patterns, shade and humidity levels, ripening and harvesting dates, storage methods, and other agronomic variables that determine the volume, quality, and consistency of their product.

Perez is an exception among growers—and also, says Niederhauser, “a model for where they’re headed,” which is why he’s tracking Perez’s progress. Finca La Soledad has grown coffee since 1895, soon after Guatemala began producing the crop. A fifth-generation coffee farmer, Perez runs the operation with his father, Henio. By certain measures, business is better than ever: They sell their bourbon and typica, among other coveted arabica varietals, to high-end roasters such as Intelligentsia and George Howell, which pay three or four times the standard commodity price. Raul Perez gives Cropster credit for that—the added consistency and transparency give him leg up at a time when his production is under so much stress.

Still, volatility has shrunk Perez’s workforce by half. He was down to 60 employees last year from his usual 120. “All those who aren’t getting work, they are becoming immigrants to your country,” he tells me. Many of his neighbors are leaving coffee altogether for macadamia nuts or avocados, which are easier to grow. Perez’s response has been to double down on tech, he says: “Data is becoming the lifeblood of the farm, especially as our risks intensify. It helps us make order out of chaos.”

Cropster’s data-management software may be useful, even crucial to some producers. But it's the roasters who’ve become vital to the startup’s success. The revenue Cropster was able to generate from farmers was hardly enough to keep it alive, so in 2011, Niederhauser and his team began building tools for other parts of the coffee supply chain. They created an app for importers and exporters to manage inventories and monitor bean quality and consistency and an online “hub” to connect traders with farmers. They developed software that helps manage everything from the temperature and timing of the roast to assessing and cataloging the flavor profile of the beans.

Thousands of roasters, including suppliers to Starbucks, Dunkin’ Donuts, and Whole Foods, now rely on Cropster software, which can cost them more than $1,000 a month. Niederhauser won’t disclose Cropster’s annual revenue but says that it’s more than doubled in three years, and more than 70% of it derives from roasters.

Yet the big vision, says Niederhauser, is still to build the digital infrastructure for a global food supply chain that can help keep small agriculture alive. What goes for coffee also mostly goes for tea, cacao, and other high-value specialty products such as tropical fruits and nuts. More than 2 billion people, about a third of the global population, live in the dry tropical regions that produce most of these coveted crops. According to David Lobell of Stanford’s Center on Food Security, these regions are vulnerable to the worst impacts of climate change. “If you look at climate models, the conditions are projected to intensify here more than in most other climatic regions,” he says. “So the already hot, dry climates will become really hot and really dry, relative to their current state.” Just imagine coming to grips with all this without the help of your usual morning coffee buzz, and you’ll begin to appreciate what’s at stake.

If Jaime Lannister and Brienne of Tarth had a son, he might look like Norbert Niederhauser. Forty-three years old, strong of jaw and large of brow, with floppy blond hair and a rule-driven nature, Niederhauser began his career in mission-driven entrepreneurialism at age 10. His first place of business: the Catholic Church of Altmuenster, the tiny farming village where he was raised in northern Austria. He volunteered to lead a local initiative to support Nicaraguan coffee farmers that had been started by church leaders in a nearby city. He set up a booth by the church entrance; as villagers streamed out of Sunday mass, he sold them bags of fair-trade Nicaraguan coffee, collecting the profits and sending them on to Catholic relief workers, who distributed the funds to farmers.

Niederhauser went on to a technical high school, where he learned electronics and programming, then spent five years as a community organizer with the Catholic Church of Austria, collaborating with social justice groups in India and Congo and throughout Latin America. After that, he attended the University of Applied Science in Vorarlberg, Austria, where he got a B.A. in computer science. The school had a strong international job placement program, and a professor suggested Niederhauser for a research position in the Land Use and Climate Change Unit at the International Center for Tropical Agriculture in Cali, Colombia. He worked there from 2003 to 2008, creating databases and online management systems for the terabytes of information on coffee crop health and growing practices collected from Colombian farms.

The work involved lots of farm visits, which taught Niederhauser the basics of coffee agronomy: the importance of soil quality and the fertilizers, shade, and humidity needed for different varietals. He experienced the back-breaking work of harvesting the fruits of the coffee plants, known as cherries, observed the de-pulping, washing, and fermentation process of the seeds, their drying into beans, and the subtle art of knowing when they’re ready to be stored. “I felt a personal connection and responsibility beyond the project to serve the farmers,” he says. “I decided, research isn’t enough.” Niederhauser called up Andreas Idl, a friend from university and a whiz of a programmer. Within weeks, Idl had relocated to Cali, and they started coding.

During Cropster’s early years, Niederhauser traveled throughout Latin America “like a preacher going from farm to farm, co-op to co-op, saying, ‘OK, this is how agronomic data can help you improve quality and yield,’” he says. He remembers visiting the homes of celebrated coffee producers in Nicaragua and Honduras. “They were like the equivalent of the best winemakers in Austria or France,” he recalls, “but their living conditions were extremely humble, and their kids were so busy in the fields there was no time for school.”

The experience deepened his outrage at the skewed distribution of value in the coffee supply chain, but it also helped him see that he couldn’t generate revenue from producers who were so financially disempowered. Most smallholder coffee farmers at the time had neither phones nor tablets, and they didn’t weigh their yields, let alone apply algorithmic rigor to their growing practices. “Even today, very few farmers take even basic measurements for quality control,” says Geoff Watts, vice president of coffee at Intelligentsia, who first met Niederhauser in Colombia when he was doing research and Watts was traveling in search of suppliers. “For example, the moisture of the green coffee when it goes into storage has a huge impact on quality and flavor. It can be measured with simple sensors, but most farmers measure it with their teeth. They take a bite and say, ‘Mmm, I think it's ready.’”

“We had two options,” says Niederhauser. “We could become an NGO and try to pump philanthropic money into these farming communities. Or we could start further up the supply chain and eventually work our way back down.” They opted for the latter, on the grounds that philanthropy is a short-term salve, not a long-term solution.

By this point, it was 2010. The so-called First Wave of big-brand coffee, driven in the 1950s by Maxwell House and Folgers, had long since given way to the Second Wave, driven by such chains as Starbucks and Peet’s. Now the Third Wave was beginning to build. Boutique brands such as Intelligentsia, Blue Bottle, and Stumptown were selling even higher-cost, single-origin, and artisanal coffees produced by craft roasters. Niederhauser saw that the roasters had two things going for them: the need for more precise tools and the ability to pay for them.

“I just do a straightforward slurp, I guess,” says Niederhauser. “You kind of breathe the coffee in—sharp inhale—and it’ll coat the inside of your mouth. That should give you all the information you need to identify the flavor profiles of each batch: sweetness, body, acidity, aftertaste.” He and Watts are both at the Specialty Coffee Expo in Boston, and at this moment they’re in the middle of what’s known as a “cupping” session, the coffee world equivalent of a wine tasting. Some 12,000 people are at the Expo from all around the world, but this private event is just for the coffee elite.

“This Kenyan is exciting—bright, citrusy starburst!” crows George Howell, a pioneer of the Third Wave whose cafe chain was purchased by Starbucks in the 1990s. These maestri claim that coffee is the world’s most complex beverage—more so than beer, whiskey, or even wine. Flavor notes can range from tangy lemon and orange to sweet blackberry and currant, from caramels to nutty chocolates. And almost no flavors of the final product are evident in the raw material.