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What began as the dream of three university graduates in international development is now a “little multinational”—a worker-owned co-operative that buys organic, fair trade products in 11 countries, many of them in South America, and markets them throughout Canada, while mulling an international marketing strategy.
Jennifer Williams, La Siembra
chief executive officer
After nearly a decade selling its products in the United States, La Siembra Co-operative was hit hard by the rising Canadian dollar and had to pull out and rethink which international markets to sell to, and how to penetrate them, says Jennifer Williams, the chief executive officer.
Williams, 38, grew up in Burlington, Ont., studied anthropology and political science at the University of Western Ontario (now Western University) and found herself drawn to entrepreneurial work associated with international development.
La Siembra (“sowing” or “planting time” in Spanish) has 13 employees in the Ottawa-Gatineau region, and its products, including chocolate, sugar and coffee, are sold in 3,000 retail outlets across Canada. Williams, who joined the company nine years ago, considers herself a “second-generation founder.” La Siembra got its start in 1999.
What makes your product attractive in the global marketplace?
They’re products that you feel really good about eating and giving to your family. There’s a growing demand, as populations age and people become more health conscious. There’s been a massive uptake of organic within Brazil. It’s not just a North American and European phenomenon; it is international. There are a lot of health trends across economies, from gluten to diabetes, that high-quality natural products could respond to.
Even if you take away the story, the ethics and the integrity, the products are fantastic.
Tell me what happened to your U.S. exports.
In 2003, the Canadian dollar was probably 80 cents U.S., so there was enough room with exchange rates and conversions and margins to make everything work. We made a hot chocolate and a cocoa powder under a private label and shipped them to the United States. As time went on, and the Canadian dollar rose to par, those economics completely deteriorated. There was pressure on us to take less margin. We were getting down to 8% margins and when you looked at the costs associated with that, it was starting not to make a lot of sense.
What is the challenge you need to overcome to succeed in returning to the United States?
We’re like a little multinational. We do about 75% of our purchasing in U.S. dollars but almost 100% of our revenue right now is in Canadian dollars. So we have a really big exchange rate deficit. We need to fix that. It’s also Swiss francs because our chocolate bars are manufactured in Switzerland. We have a real need to offset some of that exposure with foreign currency revenue.
The U.S. market in natural health is such that the typical way to enter is with six months of free-fill. It’s very risky—you provide free product for six months to get all of your stuff on the shelf, to get people to carry you, to get people to discount you. You basically buy your spot, but it’s expensive.
How much would that cost?
Probably about $500,000. And at the end of that, you’re not necessarily guaranteed that you’ll keep that spot. There are other ways to do it where you carve out the northeastern seaboard rather than seeking national distribution. We’ve been really busy keeping up on the Canadian business. And we’re 13 people. We’re in strategic-plan development right now and we’re assessing all those different opportunities. There’s interest from some of the European markets and some of the Asian markets. We need the time to focus on each one of those and figure out which makes the most sense.
Have you thought of bringing in a big global marketer?
Yes, we’re coming to the conclusion that’s basically what we’re going to need to do. We have talked to some international marketing firms.
When you said you’re like a little multinational, what did you mean?
We manage an international supply chain. We have all the complexities of an international supply chain and exchange rate and hedging contracts, but we’re really just this little $7.5 million Canadian company.
How do you do your due diligence on all these different producer co-operatives in all those countries?
We use the International Fair Trade Certification System, which is based in Germany. The diligence is really done in two ways: one, by visits and getting to know the co-operative and getting to understand who they are; and second, by references. It’s a relatively small community. Within Peru, most of the co-operatives know each other and we work with many of them, so I can spend some time sussing out the different co-operatives by talking to other folks and getting a good sense of who they are and how they operate.
How does a small business afford the travel?
We have been a little bit strategic in some of our projects and we’ve worked with some of the development agencies to share the cost. The Canadian Co-operative Association does some international development work and we help them in identifying partners overseas. Then we share some of the travel costs with them. We’re not travelling in five-star hotels.
What spurred the original founders to get started?
They realized that if you were going to change lives in developing countries, there was a lot more opportunity through trade than through aid models. They were throwing around ideas. Should we do fair trade bananas, or maybe gift baskets? One of them went to order a hot chocolate at a café in Kingston and was like, “Wait a minute, cocoa and sugar are as exploitative of producers as are coffee and tea.” They also felt it was important to get families and kids involved, because kids have a strong sense of justice. So they took this concept of a hot chocolate and developed a recipe. Our second-generation founders outsourced the hot chocolate manufacturing, and launched fair trade and organic chocolate bars. We grew by 423% in that one year.
Could you explain what a worker-owned co-operative model is all about?
The people who work here, after a certain period of time, become shared owners in the business. There are certain types of decisions made by everyone as a shared owner, but there are other types of decisions made by our management structure. So we do also have a traditional management structure. The co-operative concept allows businesses to stay focused on their community and it allows the assets and the profits of the business to be shared equally among the members of the co-operative. In our case, dividends would be shared equally; profit returns would be shared equally among the worker-owners based on their contribution to the co-operative.
What did the original founders mean when they said that “trade works better than aid?”
I’ll tell you a story about Manduvira Co-operative in Paraguay. Their members were growing organic sugarcane and selling it to the local sugar mill, which was privately owned. That mill didn’t pay attention to quality. We received four containers of sugar that were absolutely unusable. The farmers found a sugar mill 90 km away that was not being used and rented it for 20 days a year to process the bulk of their sugarcane harvest.
This co-operative is made up of 1,000 rural farmers. These are people who live in red brick houses with thatched roof. In 2009, they bought land within a five-km radius of their members to build a sugar mill. They went out and got financing of $14.5-million to build this sugar mill. These rural farmers will own and operate their own sugar mill, and in Paraguay the sugarcane industry has been controlled by eight families since eternity.
This interview has been edited and condensed