The state of the coffee supply chain

This is a guest post written by Tyler Heal from Coffee Grind Guru

Like various states of the union and similar political addresses from politicians the world over, there is a substantial percentage of the demographic that may be left wondering, “Who cares?” Or, “So what? How does that impact me?”

And so it goes with the state of the coffee supply chain.

Many folks may frequent their favorite large chain retail store to grab the cheapest bag of coffee on offer while others may make it a particular point to buy the most exclusive single-origin and micro-lot whole bean coffees for use in their AeroPress and French Press. Is there a difference in these coffees, though, when it comes down to the taste, mouthfeel, and caffeine content following any of the abovementioned brewing methods?

Connoisseurs of this mighty little bean (a seed, actually) say so and will usually add that their locally sourced bean is organic, fair-trade certified, and bird-friendly. Those just looking for a jolt of the wake-me-ups may counter that they are more than happy paying a little less and getting just about the same.

But who is right? Answer?

Neither.

And it all comes down to logistics, farming, selling, demand forecasting, shipping, and the overall supply chain that gets a little bean from the heart of the coffee country to a consumer’s cup.

History, or: Again, who cares?

Every step along the supply chain comes at a cost. This cost is most evident in the highly lucrative commodity of oil. Like crude, the small-but-mighty coffee bean is subject to several ‘touches’ throughout its journey from plan to cup. Instead of rigs and derricks, however, the bean travels as follows:

First, there are groups of local suppliers that sell the seeds (better known as beans) to smallholders or local farmers. These sellers, smallholders, and family-owned businesses are often located in extreme climates and countries that comprise what is oft referred to as the coffee belt. This region just so happens to overlap with many of the most disadvantaged nations in the world and lies between the Tropic of Cancer and the Tropic of Capricorn.

Second, the smallholds either enter into a new cycle of coffee cultivation (NOTE: one cycle, or harvest, occurs annually) or they introduce new flowering plants to their stakes with an expected return on investment in four to five years. OUCH! It is important to note that nearly 25 million people are dependent on annual yields that need to meet or exceed 70% of the world’s coffee demand.

Third, traders, or middlemen, help the farmer to find a buyer. The buyers can be huge multinational corporations, small-batch producers, or even smaller coffee shops. These same persons often negotiate on shipping, which takes place in bulk by sea.

Fourth, and final, should smallholds not find an immediate client or buyer through these middlemen, they usually must sell to exporters who again send the seeds by the sea where they dock in coffee consuming countries and await roasting, packaging, still more overland shipping, and ultimately retail time.

With each step, a cost, or value, is assessed and extracted. And like oil, the more refining that is required, means the more you pay at the pump, er, store!

The same works in reverse and is where the true crux of coffee costs and sustainability rise. Consider, the price of a bag of coffee. One might be forgiven in his or her assuming that the smallholds get the majority of the ‘cut’ or profit, but here is how it breaks down:

• Smallholds: 10%

• Middlemen: 3%

• Exporters: 4%

• Retailers: 13%

Again, one might question, “Who cares?”

Present-day trends

It is not too far of a reach to tie coffee cultivation with other global issues like violence, poverty, terrorism, or lack of access to education. This is not to say that buying organic, fair-trade certified, or bird-friendly products will necessarily result in a decline in any of these; just the opposite.

In other words, and despite the growing trend toward the easy solution of slapping fair-trade labels on packs of coffee, there is just not enough profit flowing back to the smallholds.

End of story.

Or is it? Can this current state become more? Can beans be used to break the cycles of violence and poverty in these developing countries?

The answer is that it must.

There are very few solutions beyond the realm of employment, economic empowerment, and education that can so effectively improve the lives of so many.

Future trends, or: How to make a difference

The issue, then, becomes, “Well, how?”

Some might argue that empowering smallholds is an ideal long-term solution and that the coffee-drinking world needs to buy directly from the farmer. But really, what does that mean and what does that look like?

There are numerous case studies and academic approaches that claim smallholds need to adopt new technology and Western e-commerce practices to improve their businesses. These approaches, while optimistic, are unrealistic for the vast majority of subsistence farmers as many case studies assume those same disadvantaged, low-power or disadvantaged persons have reliable access to electricity, phones, Internet, and the like, which is not always the case.

In the absence of such infrastructure though, there are better, more long-lasting approaches to improve not only the coffee smallholds but other agro-businesses, not least of which is education.

As an example, consider the excellent work that Mondelēz International, Inc., Nestle, and Ecome have done in such places as Cameroon, Vietnam, and Ivory Coast. Each of these ‘evil’ multinationals taught smallholds about grafting, fertilizer use, watering control, and pricing negotiation, which can be cross-shared with maize, tomato, and other types of farmers in the region.

Thus, and instead of sending nothing back down the supply chain, a reverse logistics loop takes hold wherein goods flow in one direction, and education and information flows in the other.

This is precisely where the coffee supply chain can become more significant than just the sum of its parts and educate vulnerable peoples about price shocks, risks to coffee demand, environmental issues, and building consumer relationships. Such simple subjects will eventually yield discussions about how to grow beyond agro-based businesses that may include e-commerce drop-shipping courses, lessons on how to garner investment from abroad, and partnerships that comprise any number of technologies like the use of mobile phones, solar panels, or blockchain loans.

Conclusion, or: Do you care now?

Many of these changes are sure to be slow and will require years of steadfast dedication from all members of the supply chain, not least of which will be the consumer. While external investments of time and money from corporations will continue to be critical for smallholders, the ultimate deciding factor in whether empowerment through education can lift regions out of brutal cycles of poverty, violence, and overreliance on exports is the customer.

Just like the farmers in the above discussion, the coffee drinker is also in need of education by way of the coffee supply chain. He or she can no longer focus exclusively on their next cold brew or vanilla latte all the while ignoring the effects that certain purchases have on smallholds.

Thus, and in summary, every member of the supply must make a conscious effort to empower one another through increased information sharing. Only in this supply-driven way will coffee producing regions eventually escape the vicious cycles of poverty and marginalization.

This is just our one, humble step toward doing so. That said, thank you for reading and thank you for (hopefully) caring a little bit more about your espresso or simple coffee.

Ciao!

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