ORGULLO LATINOReading time: 8 minutes
Author: Rachel Keen for Perfect Daily Grind
There are many actors involved in the coffee supply chain. From producers to traders to roasters to baristas, every industry professional adds value to the coffee sector.
However, there are also a number of intermediaries in the coffee supply chain, including those who mill, transport, and export coffee in producing countries.
And while these actors can certainly play an important role, their presence in the supply chain can often mean that producers end up receiving a smaller percentage of the final price of each cup of coffee.
This is especially important to note. According to the International Trade Centre’s Coffee Exporter’s Guide, producers often retain as little as 10% of the final retail price of coffee. Conversely, other supply chain actors, such as roasters, retain much more value.
In light of this, we have seen direct trade become much more prominent in specialty coffee over the years. This is a model which allows producers to work more closely with roasters in a manner which is mutually beneficial. As part of this, farmers can receive higher prices for their coffee.
However, when it comes to “relationship coffee”, there is much more to consider than just paying a higher price. To find out more, I spoke with Oscar Daza, a producer in Colombia, and Martin Mayorga, founder and CEO of Mayorga Coffee. Read on to find out what they had to say.
What is Direct Trade in specialty coffee?
Under more traditional trade models, farmers with no or little access to a local mill will sell their coffee as cherry. This means they often receive lower prices because less value is added to the coffee at the time of sale. This is especially pertinent as according to data from Enveritas, some 5.5 million smallholder coffee farmers currently live below the poverty line.
There is no formal definition of “direct trade” in the coffee industry. However, many roasters and producers understand the term as working in direct partnership with each other in a way that provides mutual benefits. Ultimately, the idea is to build a stronger and more resilient supply chain for all involved.
A large part of this revolves around roasters paying producers higher prices for their coffee. However, price isn’t everything – direct trade also often means more open communication between producers and roasters, as well as more transparency with consumers.
Communication and partnerships
“Communication is a key part of any relationship,” Martin tells me. “In the coffee supply chain, it’s even more important because some intermediaries can create barriers between producers and other supply chain actors, as well as being selective with the information they pass along to buyers.”
Martin adds that Mayorga’s direct trade model focuses on partnering with producers, rather than just buying from them. He emphasises that they work closely with producers towards achieving a shared vision of improving quality, sustainability, and financial security.
“Mayorga Coffee only engages with producers when there is mutual agreement on quality, pricing, and contractual terms,” he explains. “We share information with farmers about how we operate, which provides them with a better perspective of our business.
“Producers can then talk freely with us about their needs and the challenges they face so that we can help one another to achieve our shared goals,” he adds.
Why is "Relationship Coffee" about more than paying higher prices?
We often talk about relationship coffee in the specialty coffee sector, but what does it actually mean?
While industry professionals and consumers alike agree that producers need to receive higher prices for coffee, the concept of “relationship coffee” is much more holistic.
Similar to direct trade, there is no formal definition of “relationship coffee”. However, the term generally refers to working relationships between roasters and producers which are developed over years.
The idea behind these partnerships is to encourage long-term buying, rather than roasters making a smaller number of one-off purchases. At the same time, roasters often commit to a higher price for coffee, but as we’ve established – this isn’t the only thing which characterises a healthy direct trade relationship between farmer and buyer.
Ultimately, working relationships like these can mitigate the risks associated with the volatility of the C market, helping producers to earn a more sustainable income.
Part of the reason that producers struggle to retain as much value in origin is because the coffee industry was built on colonial structures which are hundreds of years old. To overcome these inequities, better empower coffee producers, and alleviate systemic poverty, we do need to pay more for coffee – but we also need to talk about stability in a much wider context.
For instance, when a producer is assured that a roaster is committed to buying some of their coffee each year, they have more capacity to experiment with new farming practices or processing techniques, or invest in new machinery and equipment.
While it will take a substantial amount of time for the benefits of these investments to pay themselves off, there is less risk involved when farmers have a stable, committed long-term trading partner.
As a producer, Oscar says that building trust is key to making these working relationships successful and sustainable in the long term.
“Through shared trust, relationship coffee allows information about production, harvest, origin, processing methods, and more to reach the final consumer,” he says. “Paying farmers a higher price is not always the most important thing – it’s also about the relationships that supply chain actors build with each other.
“For instance, Mayorga Coffee’s direct trade model helps to empower coffee producers in Latin America because it improves sustainability in the long term,” he continues. “Producers know that by growing high-quality coffee, roasters like Mayorga will always be willing to buy their coffee because they trust us.”
Martin agrees, saying: “Like any relationship, it starts with human interaction and having genuine interest in the other person and the realities they face.
“These relationships can’t develop after visiting farms a few days a year,” he adds. “You need to learn the language or hire a local person to assist with talking to producers.”
In turn, producers and roasters are able to communicate more openly and effectively.
“Ask uncomfortable questions like ‘how much interest do you pay for financing?’,” Martin says. “If we don’t learn the realities of the problems which farmers deal with, we’ll never be able to fix them.
“This is critical: be humble, learn, listen, and then work together,” he adds. “It’s not the job of roasters to save producers – instead they are there to be part of a necessary shift in how we talk about and trade coffee.”
Why should more roasters buy direct trade coffee?
When using more traditional trade models, it becomes more difficult to effectively trace the origin of a specific coffee, especially for end consumers. Roasters, meanwhile, may know roughly where the coffee comes from, but might not be able to explain who grew or harvested it.
However, with more and more consumers looking to learn about the people who grow their coffee, transparency and traceability are more important than ever.
In turn, roasters and baristas have started to disseminate more information about coffee production. This includes:
- Different varieties
- Processing techniques
- How terroir and altitude affect flavour profiles
Open communication between farmers and roasters can help to provide as much information as possible about coffee. Furthermore, as part of developing closer working relationships, roasters are able to discuss a number of factors with producers.
For instance, a roaster can explain how well a particular coffee has sold or what kind of sensory profiles their customers are looking for. As a result, producers can diversify and focus on different farming practices or processing methods to cater to these preferences.
More open communication channels also work in a similar way for producers. They can tell roasters which farming practices or processing methods are the most profitable, as well as which ones aren’t suitable for them.
When implemented effectively, relationship coffee can have a number of benefits for farmers.
“Mayorga Coffee has helped to rebuild homes, establish better financing models, create new opportunities for farmers through crop diversification systems, provide more formal education with the help of agronomists and, most importantly, be a long-term, consistent customer for them,” Martin explains.
Raising awareness of complex issues
However, he emphasises that it’s essential for roasters to not see themselves as “saviours” in these situations.
“Too much of the direct trade model is marketed as a means to support producers, while in reality, it’s a way for coffee companies to gain credibility,” Martin says. “Some companies present more simple ‘solutions’, like paying more for coffee or claiming that blockchain will solve producers’ problems.
“These ‘solutions’ are out of touch with the reality that many producers are facing,” he adds. “It’s not possible to create simple solutions to a very complex problem that has been active for over 200 years.”
Oscar tells me that relationship coffee and direct trade models can provide farmers with more security, too.
“There are many factors that sometimes complicate coffee production,” he says. “These include unpredictable weather conditions, price volatility, logistical problems, or political instability.
“Ultimately, trust between supply chain actors helps coffee production to be sustainable in the long term,” he adds.
It’s clear to see that historic inequities continue to influence the realities of farmers across the coffee industry. At the same time, we also know that one solution which is often proposed is to simply pay more for each bag of coffee.
However, in order to address these issues in a comprehensive way, we must do more than pay a higher price for coffee. A holistic approach focused on healthy, stable, long-term trading relationships will support and empower smallholder coffee farmers to invest and improve in the long term.
The original article was published in Perfect Daily Grind