The market
In 2009, the world consumed 126 million bags of coffee, representing 7.5 million tons of green beans ready for roasting. Few people realize that harvesting, processing, roasting, and preparing coffee releases approximately 99.7% of the biomass. While only 0.2% acquires value on the market, the rest—rich in caffeine—is wasted. An estimated 12 million tons of agricultural waste rots, generating millions of tons of methane and contributing to climate change. This makes coffee one of the most wasteful consumer products.
The global mushroom market—according to Professor Shuting Chang, Hong Kong's leading mushroom scientist—exceeded $17 billion in 2008 and has been growing steadily ever since. Demand for mushrooms, especially tropical varieties with names like shiitake, maietake, and ganoderma, has seen double-digit growth for decades. Driven by consumer preference for cholesterol-free and saturated-fat-free foods, average per capita consumption of tropical mushrooms in the US and Europe is expected to rise from 175 grams to 500 grams within a decade. That's good news for an additional $2.3 billion in revenue. If the West consumed as many mushrooms as Hong Kong (17 kg per year), we expect a staggering $120 billion. Tropical mushrooms would overtake coffee as the world's largest commodity within a generation. Americans would significantly improve their diet.
Innovation
Growing mushrooms requires bacterial control at a high energy cost. However, either through on-farm fermentation to hull the beans or by exposing ground beans to hot water during brewing, bacteria are reduced to a minimum, allowing the mushrooms to digest the fibers. Thus, growing mushrooms on coffee is 80 percent more energy-efficient than a standalone, energy-intensive substrate preparation process, thereby harnessing the free energy needed for coffee production.
High-quality tropical mushrooms are cultivated on hardwoods like oak. The hardwoods are harvested, ground, and processed into artificial pellets. It can take up to nine months to grow a fruiting shiitake or a ganoderma. Shoots, husks, pulp, and grounds are byproducts of coffee production, which is also a caffeine-rich hardwood. While cows or pigs are stressed by caffeine, this biochemical stimulates the mycelium to such an extent that mushrooms emerge as early as three months after sowing. This generates better cash flow and offers a competitive alternative to traditional techniques.
The third innovation is that the leftover mushroom harvest is enriched with essential amino acids, including lysine, a highly valued enzyme traditionally derived from sugar beets. In this way, a previously unproductive by-product is transformed into a high-quality feed for livestock on the farm or for pets at home. Professor Ivanka Milenkovic (University of Belgrade, Serbia, published by Elsevier Science) provided the scientific evidence supporting the financial rationale for cascading nutrients and energy from agricultural waste to mushrooms, and then to animal feed.
The first cash flow
Carmenza Jaramillo, the Latino entrepreneur, and Ivanka Milenkovic demonstrated this business model by creating their own commercial mushroom farms. The strategy of taking coffee waste and converting the methane-producing biomass into income-generating mushrooms proved to be a viable model. After more than a decade, tropical mushrooms have created new markets from Colombia to Serbia. Unsurprisingly, by 2009, more than 100 companies had imitated this business model in Colombia's El Huila coffee region. Anyone with access to caffeine-rich or fiber-rich hardwood biomass, or both, now has the opportunity to start cultivating mushrooms competitively. This generates jobs, ensures food security, and creates income while eliminating the need to increase the number of hardwood trees and the resulting logging due to growing demand from vegetarians and gourmets.
The second way to generate initial cash flow is by creating a business whereby cafes and restaurants that currently pay to dispose of coffee waste could pay a nominal fee to entrepreneurs who transform that waste into delicious mushrooms to sell to local restaurants. The real opportunity, however, lies in designing a business model based on "waste branding." The term "waste" has always carried negative connotations, and no company wants to associate its name with a specific waste stream that causes harm or is perceived as a nuisance. That's different now.
The opportunity
Waste is not simply wasted. It generates high-quality food at a lower cost, eliminating transportation, providing locally sourced fresh produce, and reducing the burden on landfills. Cafes and restaurants could be delighted to see their image extended to include the quality of mushrooms grown on their waste, while simultaneously creating jobs. If fair trade and organic coffees like Max Havelaar were the raw material, imagine the added value that could be generated for all partners on the farms or in the cafes. The entrepreneur benefits from a low barrier to entry, as city-center restaurants and cafes pay to dispose of the raw materials and then pay to feature these delicacies on their menus, as La Place in the Netherlands does thanks to the initiative of Jan-Willem Bosman Jansen of the startup GRO.
California-based coffee wholesaler Equator, led by Helen Russell, is taking things to the next level. Helen and her team have created a special blend of beans called Chido's Blend, named after Chido Govero, the young Zimbabwean orphan who trains women on coffee farms to grow mushrooms from coffee waste, ensuring food security and creating jobs. This reduces abuse and helps contain the spread of AIDS. Chido uses the funds to train the orphans in food security, and once they have their food, abuse is not tolerated. The business model is designed to contribute to the personal and professional development of marginalized people in Africa.
Meanwhile, Ecuadorian clients like Peet's Coffee are offering their waste in the San Francisco Bay Area to BTTR Ventures, the startup founded by Nikhil Arora and Alex Velez, two graduates of Berkeley University's Haas School of Business. Nikhil and Alex were the first in the US to brand mushrooms grown from coffee waste. It's no surprise they were selected by Newsweek as one of the 25 Under 25 Entrepreneurs of the Year in 2009. The following year, they became runners-up in the BBC World Challenge. Helen Russell now generates more business for herself, more money for Chido, and facilitates growth for Nikhil and Alex, while the coffee waste gains a brand that commands an additional revenue stream.
This new business model has been flourishing since Amsterdam, Paris, Seoul, Mexico City, Sydney, and Berlin, with some fifteen initiatives in city centers around the world in 2012. Agricultural projects have spread from Latin America to Africa and Asia, and Chido Govero is committed to making a difference. Now, if it works with coffee, we can expand to other agricultural byproducts such as tea in Kenya and India, apple orchards in South Africa, and Chile, where businesses are struggling to compete in this globalized market by focusing on cost reduction and labor productivity. The Blue Economy team's scanning and screening identified no fewer than eight additional cash flows in South Africa, while also having the potential to double the number of jobs. All these projects and initiatives share a common thread: the need for entrepreneurs to rise to the challenge of utilizing and adding value to what is available locally.
