Building Bridges: The Path to Direct Trade

On March 7, 60 cof­fee pro­fes­sion­als and 17 Costa Rican farm­ers gath­ered for Terra Bean Coffee’s pilot Direct Trade Event, at the Joe Pro Shop in NYC, pro­vid­ing roast­ers with an oppor­tu­nity to build direct trade rela­tion­ships with farm­ers. The roast­ers attended in per­son and the farm­ers via Skype. The goal – bridg­ing the knowl­edge gaps between those who grow the cof­fee and those who roast it to build capac­ity and develop mutu­ally ben­e­fi­cial and sus­tain­able relationships.

The atmos­phere was full of excite­ment about new direct sourc­ing oppor­tu­ni­ties and the chance for roast­ers and farm­ers to share the expe­ri­ence and learn from each other. The roast­ers cupped the cof­fees and spoke directly with the farm­ers, at ori­gin. The farm­ers were given a unique oppor­tu­nity to mar­ket their own farms, instead of depend­ing on an exporter to sell their coffee.

Transparency leads to greater account­abil­ity and cre­ates new oppor­tu­ni­ties for entre­pre­neurs, both farm­ers and roast­ers. Change that requires over­com­ing cul­tural dif­fer­ences and dis­par­ity of infor­ma­tion will not occur overnight how­ever, it begins with a con­ver­sa­tion, such as the one that started at the Direct Trade Event.

How did the Direct Trade Event come about?
I learned about cof­fee from the farm­ers. As a Peace Corps vol­un­teer, I was inspired by the entre­pre­neur­ial spirit of the famers; and espe­cially those who started their own micro-mills. They had invested time and money into their farms in order to take greater con­trol over pro­cess­ing their cof­fee and the sup­ply chain. However, they were unable to extend their busi­nesses beyond a cer­tain link in that chain due to a lim­ited under­stand­ing of their mar­ket, the cof­fee cul­ture of the cof­fee drinkers and the supply-chain logistics.

One farmer, in par­tic­u­lar, took me under his wing. Javier Meza, owner of the La Cabana micro-mill, taught me every­thing I know. I shad­owed him, par­tic­i­pat­ing in every part of the process. We spent hours pon­der­ing the con­di­tion of the Costa Rican cof­fee indus­try and brain­storm­ing new oppor­tu­ni­ties to break out of the tra­di­tional mar­ket structure.

Fast for­ward to today…
The Direct Trade Event required an enor­mous amount of col­lab­o­ra­tion on the part of the farm­ers. My phi­los­o­phy going into the project was that I would only take on the chal­lenge if the farm­ers demon­strated their com­mit­ment, as well. They did, exceed­ing expectations!

In January, I trav­elled to Costa Rica to meet with the farm­ers… Peace Corps-style. Javier spread the word about the meet­ing amongst the micro-mills before I arrived. Would any­one show up? One of my biggest chal­lenges was re-adapting to the cul­tural dif­fer­ences. The meet­ing started at 3pm… 3:30, only 2 micro-mills showed up. 3:45, oth­ers started trick­ling in… Phew!

We gath­ered around my lap­top as I pre­sented my pro­posal to them to host an event in NYC focused on build­ing direct trade rela­tion­ships between farm­ers and roast­ers. They were excited about the con­cept of direct rela­tion­ships and the oppor­tu­nity to speak directly with the roast­ers. The excite­ment in the air grew as a plan was laid out where the farm­ers’ are in con­trol of their own busi­nesses and no longer depen­dent on exporters. While price is an incen­tive, the empow­er­ment from feel­ing in con­trol is invaluable.

The farm­ers were thirsty for infor­ma­tion about the cof­fee indus­try beyond their farms. Oftentimes, they are only pro­vided with the infor­ma­tion that they need to know, with lit­tle under­stand­ing of, or access to, infor­ma­tion about what hap­pens next. We spoke about the fac­tors that con­tribute to roast­ers’ buy­ing deci­sions and how cof­fee is served in cof­fee shops… espresso drinks, drip cof­fees, pour-overs.  We spoke about the dif­fer­ent types of North-American cof­fee drinkers, the spe­cialty cof­fee cul­ture and the atten­tion being given to single-origin coffees.

To help them under­stand the sup­ply chain and pric­ing, we spoke about the func­tion of exporters and importers and what addi­tional fees are incor­po­rated into the cost of the cof­fee before reach­ing the roaster. We spoke about how most roast­ers buy on spot. We spoke about the risks and lim­i­ta­tion of buy­ing directly from farms and brain­stormed ways to mit­i­gate those risks. We spoke about the lim­i­ta­tions to buy­ing directly for small roasters.

As word of the project spread, other farms tracked me down. I spent the rest of my trip vis­it­ing the farms and micro-mills and speak­ing with the farm­ers on an indi­vid­ual basis.

Alliance for Coffee Excellence

Contact Name: Susie Spindler

Website: www.cupofexcellence.org
Location: Various Coffee Growing Countries
Email Address: susies@cupofexcellence.org
Phone Number: 406−542−3509

Project Description

The Cup of Excellence is the most strin­gent com­peiti­ton for top qual­ity cof­fees in the world. It awards a country’s best cof­fees and sells them to the high­est bid­der dur­ing a global inter­net auc­tion. It is open to all farm­ers equally with­out a fee and the rules are struc­tured to allow any farmer that pro­duces excep­tional qual­ity to win regard­less or eco­nom­ics or gen­der. These win­ning cof­fees are cho­sen by a select group of national and inter­na­tional cuppers.

Coffees of this exem­plary qual­ity are rare. These cof­fees are per­fectly ripe, care­fully picked with well devel­oped body, pleas­ant aroma and a lively sweet­ness that only extremely high qual­ity spe­cialty cof­fees con­tain. Each win­ning cof­fee has its own fla­vor sig­na­ture from the earth where it grows and all have been hand­crafted in such a way as to enhance these unique char­ac­ter­is­tics. The competition’s extrememly strin­gent qual­ity selec­tion pro­ce­dures with a focus on bal­anced acid­ity and per­fect sweet­ness have set a global stan­dard for those cup­pers look­ing for top cof­fees. Roasters that have these beau­ti­ful cof­fees on their shelves find that their cus­tomers are more engaged and are more likely to appre­ci­ate the dif­fer­en­ti­ated fla­vor pro­files that only top cof­fees can that generate.

The Cup of Excellence pro­gram has had huge impacts on both the farm­ers and on the spe­cialty indus­try world­wide. Before there was Cup of Excellence much of the world’s cof­fees were blended together, there­fore caus­ing a commodity-like same­ness even in the spe­cialty indus­try. The result of the now 75 Cup of Excellence com­pe­ti­tions has been to rein­vent an indus­try that is now focused on unique qualti­ties, micro cli­mates, vari­etals and on con­stant dis­cov­ery of qual­ity pro­tec­tion and farmer recognition.While the fear was that the com­pe­ti­tion would cherry pick the best cof­fees and leave the rest, it has had the oppo­site effect, and has actu­ally increased the total amount of qual­ity cof­fees exported at a pre­mium from COE part­ner countries.

The cof­fees that have been dis­cov­ered and sold at auc­tion have allowed a new group of spe­cialty roast­ers focused on extremely high qual­ity cof­fees and buildng rela­tion­ships with farm­ers to thrive. The open auc­tion for these award win­ning cof­fees has sup­ported a restruc­tur­ing of top pric­ing and reset what is pos­si­ble for farm­ers that pro­duce incred­i­ble cof­fees. The fact that the COE pro­gram forces trans­parency, chain of cus­tody and a large finan­cial reward to the win­ning farm­ers has given thou­sands of farm­ers a rea­son to know the value of their cof­fees– to learn to cup– to har­vest more care­fully and to feel more secure that if they work hard there will be eco­nomic sup­port. It has also given their chil­dren an excit­ing rea­son to stay on the farm as proud cof­fee farmers.

Who Benefits From This Project?

The Cup of Excellence fun­da­men­tally changes what we know is pos­si­ble in an exem­plary cof­fee. This ben­e­fits the entire cof­fee chain because it engages the con­sumer in a dis­cus­sion cen­tered on the joy of qual­ity coffee.Often these award-winning cof­fees are so good that con­sumers expec­ta­tions of what a cof­fee can taste like are def­i­nitely exceeded.

Many roast­ers and importers have relied on the COE results to find the high qual­ity farm­ers their busi­nesses depend on and have found a new demo­graphic of cus­tomers who appre­caite qual­ity and are will­ing to pay for it. Cup of Excellence is an impor­tant vari­able in the Direct Trade movement.

The ben­e­fit to the win­ning farmer is obvi­ous but the entire region ben­e­fits from the recog­ni­tion as buy­ers visit all of the sur­round­ing farms as well. The pay­ment to the cof­fee farm­ers for their cof­fee is more than Fair. The vast major­ity of the auc­tion pro­ceeds go to the farmer, the rest to the organ­inz­ing com­mit­tee. ACE does not make money on the auc­tions. There is no other pro­gram that is as excit­ing for the cof­fee lover, the roast­ers and espe­cially the farm­ers whose mon­e­tary reward often changes the lives of their entire fam­ily and the rural com­mu­ni­ties where they live.

Cup of Excellence builds inter­na­tional rela­tion­ships and coöper­a­tion in many forms. Coöperation is the key to suc­cess, appre­ci­a­tion is the mantra and friend­ships and last­ing part­ner­ships are crit­i­cal. It is one of the few pro­grams that puts its main focus on indi­vid­ual empow­er­ment, train­ing and edu­ca­tion with no con­sid­er­a­tion of gen­der or eco­nomic status.

How Can I Help?

Become a mem­ber of Alliance for Coffee Excellence. Register on line. Sign up for sam­ples, join a jury, or sim­ply sup­port ACE with your mem­ber­ship. A small fee to sup­port a global non-profit orga­ni­za­tion mak­ing a difference.

An ACE mem­ber­ship with sam­ples and auc­tions gives the inter­na­tional cof­fee
com­mu­nity the oppor­tu­nity to bid for award-winning cof­fees which in turn
pro­vides the sup­port to farm­ers ensur­ing qual­ity for the future.
Visit www.cupofexcellence.org to view mem­ber­ship benefits.

Support your local roaster. Look for and buy Cup of Excellence roasted cof­fees from your favorite cafes and roast­ery world­wide.
Most impor­tantly, brew and drink COE Coffees and reflect on the farm­ers who make it pos­si­ble for ACE to change the world of cof­fee. Thank you for your kind consideration.

Have the Spin Doctors Cured Us of “Sustainability?”.… The Core Conditions Persist

Our cof­fee import­ing busi­ness has been around long enough to have rid­den the com­modi­ties roller coaster over a cou­ple moun­tain tops. After pass­ing the peak in 1997, we rode the mar­ket down into the 2002 val­ley of death like the “charge of the light brigade.” Many small pro­duc­ers did not sur­vive, those work­ing with us in Mexico sur­vived because of our unique quality-based busi­ness model. After the most recent mar­ket peak last spring, it appears that we are fac­ing new chal­lenges; not only are the com­modi­ties being jos­tled by all the usual sus­pects, but now we also have major inter­na­tional bank­ing woes and seri­ously ris­ing costs of fuel and fer­til­izer. As these con­di­tions again stretch the sus­tain­abil­ity of cof­fee, our com­pany increas­ingly finds itself head­ing in the direc­tion of the intrin­sic sus­tain­abil­ity offered by a “Direct Trade” model.

One can learn a lot about sus­tain­abil­ity in gen­eral by enter­ing “The Politics of Sustainable Development, Susan Baker”1 into the Google® search win­dow to get an eye­ful. She shows that we’ve come a long way from the seem­ingly sim­ple con­cept where “sus­tain­abil­ity is improv­ing the qual­ity of human life while liv­ing within the car­ry­ing capac­ity of sup­port­ing eco-systems”2: we now have schol­arly works that inves­ti­gate the idea of sus­tain­abil­ity from all of its myr­iad envi­ron­men­tal, social, and eco­nomic aspects, as well from every polit­i­cal view­point. Is there spin? You bet!

To become more “sus­tain­able” in the cof­fee busi­ness we need to pro­mote alter­na­tives to com­modi­ties pric­ing for small cof­fee grow­ers. Why is this? It is because com­modi­ties pric­ing guar­an­tees the buyer the low­est pos­si­ble price based on avail­abil­ity, but unfor­tu­nately simul­ta­ne­ously guar­an­tees the seller a price that has noth­ing to do with his cost of pro­duc­tion. Although many large pro­duc­ers have the resources to “fly­wheel” over this short term “incon­sis­tency” in price as sup­ply and demand reach equi­lib­rium on a time-scale mea­sured in years, the small pro­duc­ers take the hit. Small pro­duc­ers are in the great major­ity world­wide and gen­er­ally have few resources and lit­tle access to mar­kets. They also have lit­tle access to credit or hedge accounts and need an alter­na­tive to sus­tain their liveli­hoods on a time-scale mea­sured in weeks.

Small pro­duc­ers rep­re­sent a very large pop­u­la­tion world­wide; in Mexico alone, 88% of the pro­duc­ers have less than 2 Ha in cof­fee (5 acres) acres in cof­fee and pro­duce about 55% of Mexico’s cof­fee . It is esti­mated that less than 25% of these small hold­ers have the oppor­tu­nity to hedge their cof­fee with con­tracts against the “C” market3. This means that about 40 % of the cof­fee pro­duced in Mexico (about 1.5 mil­lion 69 kg bags) is sold with­out pro­tec­tion from mar­ket volatility.

What’s more, notwith­stand­ing the few with pro­tec­tive hedges, it is esti­mated that the total amount of cof­fee sold against com­modi­ties pric­ing schemes is over 90% of Mexico’s production.4 “….Mission con­trol, we have a problem.”

I believe that we urgently need to seek and pro­mote strate­gies that con­sis­tently bring more money into cof­fee pro­duc­ing com­mu­ni­ties, simul­ta­ne­ously increas­ing access to credit, rais­ing the level of edu­ca­tion, and reduc­ing reliance on com­modi­ties pricing.

Judging by the increase in the num­ber of com­pa­nies now offer­ing “Direct Trade” cof­fee, many have reached sim­i­lar con­clu­sions. Direct Trade offers buy­ers an oppor­tu­nity to short cir­cuit com­modi­ties pric­ing and guar­an­tee pro­duc­ers enough money to cover their cost of pro­duc­tion along with a mod­est profit. For this to work, pro­duc­ers must be able to guar­an­tee buy­ers a con­sis­tent source of con­sis­tent qual­ity, fully trace­able cof­fee. It is this exact point where there exists the great­est ben­e­fit for both par­ties, because pro­duc­ers are forced to adopt prac­tices and process con­trols that per­mit them to make this promise.

It is our expe­ri­ence that with increased process lit­er­acy and with process con­trols in place, cof­fee auto­mat­i­cally becomes fully trace­able. The process ori­ented “cul­ture” that pro­duced the cof­fee, taken with the con­comi­tant doc­u­men­ta­tion trail makes it rel­a­tively easy for the pro­duc­ers to obtain nearly any certification.

We have found that the order and trans­parency that process con­trols force in to the sys­tem increase access to credit; bankers are much more likely to loan to those who can show where and how the money is being used; sim­ply said, there is much less risk all around.

Process con­trols force trans­parency and trace­abil­ity into the sys­tem at it’s base, e.g. between the cof­fee plan­ta­tions and the exporter. The rest of the route to roaster cus­tomers is already pretty well con­trolled. This is sig­nif­i­cant because it means that adop­tion of a Direct Trade com­mer­cial model does not change the route that cof­fee takes from pro­ducer to the con­sumer, it only forces process con­trols, trans­parency and trace­abil­ity into the entire chain, end to end. It is exactly this end-to-end trans­parency and trace­abil­ity that is con­sid­ered essen­tial for solid eco­nomic growth.

We have been suc­cess­fully using a Direct Trade model in Mexico for fif­teen years and have worked with our Mexican asso­ciates at Cafes Sustentables de Mexico, S.A. de C.V. to develop the FincaLab cof­fee qual­ity con­trol sys­tem. The FincaLab is a portable Laboratory with process con­trol soft­ware that pro­vides all the nec­es­sary con­trols and trans­parency, as well as prints bar­code labels with ser­ial num­bers on each bag that per­mit our cus­tomers to trace the cof­fee to it’s ori­gin at www.trackyourcoffee.com. Our expe­ri­ence has been that the increased earn­ings that result from our model taken with along with the FincaLab have allowed the pro­duc­ers to develop their coop­er­a­tives, build infra­struc­ture, and to gain the con­fi­dence to apply for their own pre-harvest financing.

We have been suc­cess­fully mak­ing cof­fee more sus­tain­able for our Mexican associates.

Jim is the Company founder. He estab­lished work­ing rela­tion­ships with Mexican coop­er­a­tives in Nayarit, intro­duc­ing a unique pro­gram of quality-based profit shar­ing. He guided com­pany devel­op­ment as a broad based dis­trib­u­tor of qual­ity cof­fees with an empha­sis on directly traded, exclu­sively mar­keted, and fully trace­able cof­fees from Nayarit, Mexico. He devel­oped the FincaLab, a portable lab­o­ra­tory and qual­ity man­age­ment sys­tem with pro­pri­etary soft­ware and a pro­pri­etary new, “hands off” pre­ci­sion sam­ple roaster, and a lab­o­ra­tory huller for cof­fee sam­ple prepa­ra­tion. The FincaLab is the core of a com­plete cof­fee process con­trol sys­tem that out­puts bar codes and ser­ial num­bers for all processed cof­fee that results full in Internet trace­abil­ity through www.trackyourcoffee.com.

Sources:
1 The Politics of sus­tain­able devel­op­ment: Theory, Policy and Practice within the European Union, Susan Baker (1997)
2 Caring for the Earth: A Strategy for Sustainable Living, Gland, Switzerland. (2009)
3 Silvia Guttierrez, AMECAFE, per­sonal com­mu­ni­ca­tion
4 Ing. Manuel Higuera, CONAYCAFE, per­sonal communication.