The Inclusive Business Fund invests in Star Café

Bertil van Vugt
By on January 30, 2015

The Inclusive Business Fund has invested in coffee processing company Star Café Ltd. from Uganda. The investment enables the enterprise to select premium coffee beans and sell them at a better price. Some 5000 farmers in the Mount Elgon area in Uganda will benefit from the investment.

Star Café buys coffee from farmers in the Mount Elgon area and sells coffee both on the local market and internationally. The company produces instant coffee which is sold in local supermarkets. In addition, Star Café sells coffee through various points of sale, such as petrol stations that exploit the Star Café coffee machines. At an international level, Star Cafe exports coffee beans to Europe.

The European market is diversifying from a mainstream product market towards a more specialized, gourmet quality coffee market. In this particular market Star Café identified the opportunity to sell premium coffee. So far, all qualities of coffee beans from the Ugandan Mount Elgon area were mixed. Star Café has developed a business plan to establish a coffee washing facility at the coffee farms allowing farmers to improve the quality and distinguish between high and low quality coffee beans.

High quality beans for Europe

Star Café works with an Association of coffee farmers that will take up the process of ‘coffee washing’ resulting in overall increase of the quality. After washing, the farmers will select the high-quality coffee beans. These high quality beans will be exported to Europe and generate a significantly higher income.

Star café receives a loan of 325,000 Dollar to start the washing station needed to select the best coffee beans. Besides, Technical Assistance is provided. The farmers will be trained in good agricultural practices, in organizational development for the Farmers Association, quality control and value addition, savings and loan management, marketing and, last but not least, bee keeping.

Why bee keeping? Coffee only generates an income during 6 months per annum. With the introduction of bee keeping Star Café helps the farmers to secure a year-round revenue stream and synergies are created by using the same channels for marketing, sales and distribution. Moreover, the honey production is entirely managed by women thus securing their income and improving their livelihood.

Improving the lives of 5000 farmer households

High-quality coffee beans will be exported to Europe at a higher price. Star Café works currently with approximately 500 farmers which number will gradually increase over the next five years to 5000 farmer households connected to a Farmers Association. By establishing long term relationship with the farmers through the association and processing coffee at rural level, the IBF deal contributes to more inclusivity allowing the farmers to improve their annual income by some 10%. Furthermore, income security over the year will improve significantly.

Star Café has an excellent and reliable management team, a healthy balance sheet and diverse activities and distribution channels to spread the risk.

Star Café’s managing director is also chairman of the Africa Agricultural Academy. He has a profound understanding of the agricultural market as well as of the local and international markets. Star Café has proven itself as a profitable and solid enterprise. Moreover, the establishment of the local washing station is a co-investment of the enterprise and the IBF underlining the trust Star Café has in the profitability of its business plan.

From a business perspective, Star Café knows that a solid and long-term relationship with the farmers will result in a more profitable business for all. The Farmers Association receives technical assistance from Star Café. In return Star Café can improve the overall turnover and profitability. A win-win for all!

The Inclusive Business Fund was set up by Rabobank Foundation, ICCO Investments and BoP Innovation Center. The fund invests in social enterprises in Africa and other regions with a focus on nutrition and food security, as well as access to basic facilities.

This article is republished with permission. View the original article on the IBF website.