The MaRS Centre for Impact Investing is proud to announce the 2015 Fall Cohort for the Impact8 Program. Initially launched in 2013, Impact8 helps to close the gap between growth-stage impact based ventures and investors interested in opportunities to fund business with a social benefit. By providing mentorship and targeted workshops, Impact8 increases the pipeline of […]Read More ›
The Story of CAIC and Camino: Financing Fair Trade (Part 2)
CAIC extended a $50,000 loan to the La Siembra co-operative in 2001, which was fully repaid in 2008. The co-operative successfully executed its fair-trade cocoa marketing business and returned to CAIC in 2010 for another loan. For more details on the initial deal, read Part 1 of this post.
La Siembra’s product line is no longer limited to chocolate (although Camino remains the flagship product), and returned in 2010 for another loan to once again grow & expand operations to include more fair trade products.
This request was based on ‘ambitious financial projections’ by La Siembra, which made CAIC a little hesitant about granting the loan, considering market factors and the business feasibility. As larger organizations, such as Loblaws, entered the fair trade business, the competition grew more intense and the margins became tighter than ever before. In addition, La Siembra no longer enjoyed the niche in the retail confectionary business that they used to. (Click here to read a Toronto star feature on fair trade in Canada.)
Not only had the business environment changed, but so too had La Siembra. The original business partners had been replaced with a new management structure, which indicated that the company had matured. CAIC however, continued to have a strong ongoing relationship with La Siembra as they were always aware of changes in management; which was, from their perspective, steady, controlled and seamless. Another indication of its expansionary plans was a promise to diversify its funding sources and raise capital from multiple lenders, not only CAIC. These plans required greater validation, and as a result, CAIC made a conditional loan offer to La Siembra: they had to prove that their projections were feasible and that the numbers added up. As this post is being written, the loan is going through as La Siembra has been able to successfully prove business viability.
CAIC’s loans have played an important part in providing and leveraging the capital needed for this fair trade worker cooperative to grow its top line, improve its margins and keep overheads under control to sustain long term profitability. According to a press release by the Ontario Co-operative Association, when CAIC were recognized for their work in 2010:
“CAIC’s financial support allowed La Siembra Co-operative of Ottawa to purchase its first shipment of Fair Trade and organic Cocoa Camino chocolate bars that launched its business. That support helped pave the way for other partners, says Jennifer Williams, co-executive director of La Siembra.“
This was echoed by Williams in a letter as well:
“Not only did La Siembra receive the necessary financial support at a crucial time for its growth and development, CAIC also lent their extensive expertise and knowledge of their staff and board members to La Siembra as we developed as a business. We frequently called on CAIC for information that was not always directly related to our financing and in a true co-operative spirit CAIC came to the table with information and support required to support our business.”
Lessons for Impact Investors
This case study provides the following lessons for impact investors:
- Developing a long term relationship is critical in sensitive deals.
- Business viability is important – impact investing is not a strictly charitable venture.
- Market conditions can change, so both entrepreneurs and investors have to be flexible.
- Budding social enterprises can, and often do, require more than simply financial support.
Impact investing is an important component of the support needed by the nascent but growing fair trade movement in Canada. By helping ensure that producers are appropriately compensated, impact investors can play an important role in improving the livelihoods of farmers and their families.