SASKATOON, Canada — Coffee is an important commodity globally, but its main markets are the rich, developed countries in Europe and North America. In 2019, the global coffee market had an estimated value of an astounding $102.15 billion. The production of coffee beans is climate-specific and the plants are grown in developing countries in South and Central America, the Caribbean, Africa and Asia.
The entire process of cultivating and producing coffee impacts the lives of more than 120 million workers and their families. It is closely related to rural development and poverty. The coffee industry also has an important role in the economies of bean-growing countries. In Honduras, Ethiopia and Guatemala, the export percentage of coffee “makes up an enormous share of their export earnings.” However, there are inequities in distributing the profit in the coffee industry, which disproportionately affect the coffee farmers. Some organizations and companies are attempting to change this in different ways.
Is Fairtrade the Future for the Coffee Industry?
The importance of fairness for farmers in the coffee-producing industry has become more prevalent since the late 1980s. Fairtrade is a commonly known coffee certification throughout North America and Europe and was started to prevent drastic price changes from impacting farmers. The certificate was necessary for many farmers due to fluctuations of global coffee supply and demand. This was an important step towards providing economic stability to farmers who attained the certification because smallholder farms would be provided with compensation at a set minimum to cover the cost of production.
Fairtrade also states that one of its core values is to end poverty. Purchasers pay an additional subsidy per pound of coffee. Though farmers do not receive the subsidy directly, communities spend it on development projects that the cooperatives’ member farmers agree upon. Fairtrade certification has brought awareness to the issue of sustainable, fair coffee production. However, the model may not address fair trade and poverty in the most productive way possible.
The Coffee Value Chain
To understand why Fairtrade may not be the most sustainable method to address the coffee industry’s impact on poverty in origin countries, one must first understand the coffee value chain. In an interview with the founder of Wild Coffee, Endre Vestvik explained to The Borgen Project the different steps of the coffee value chain:
- Planting coffee trees, maintaining them for about three years and then harvesting coffee cherries annually.
- Selling the cherries to buyers or cooperatives for processing or processing the cherries at the origin.
- Processing the cherries by either drying them with the fruit pulp or washing them by removing the outer fruit layer and then drying them.
- Milling, cleaning and sorting the coffee by size before exporting.
- Exporting the green coffee beans, the vast majority to the Global North.
- Transporting the coffee bean to an importer warehouse after reaching its destination country.
- Roasting the coffee and going to retail.
The coffee value chain actually has little to no impact on farmers’ lives, according to Vestvik. “There is a lot of talk in the coffee industry about helping the coffee farmers. But, concrete results are hard to find.”
What Fairtrade doesn’t achieve
One article in the Stanford Social Innovation Review cited research that finds distinct limitations to the Fairtrade model. High coffee prices have made the incentive of wage stability less appealing since selling to the open market can offer much higher wages despite the potential for fluctuations. The primary beneficiary of the model is the landowner, who often uses migrant workers for harvesting. However, they do not qualify for the Fairtrade cooperative or receive benefits even though they are often the poorest members in the coffee value chain.
The extra subsidy may also not have any direct link in alleviating poverty as the Fairtrade mission intends. Records of cooperatives show that landowners often do not use the subsidies for community development but rather nicer facilities and more office staff. Overall, Fairtrade can positively impact the lives of farmers but falls short in its attempt to make the coffee industry truly fair.
An Alternative Path Forward: Wild Coffee
When speaking to Vestvik, he said that his hope for the future of the coffee industry is to leave behind the colonial roots of the industry and see the producing countries dominate, control and benefit from the value coffee creates. Unequal distribution of value and risk among the various actors in the value chain characterize the coffee industry. Wild Coffee’s goal as a company is to change the coffee industry profoundly with two main steps.
- It has eliminated all middlemen in the coffee value chain by buying coffee directly from farmers and selling directly to consumers.
- It does the entire value chain processes at source in Uganda. All jobs, including processing, IT development, sales and marketing and account and product development, stay in Uganda.
This has allowed Wild Coffee to pay a minimum of “100% above the market price” for all coffee exported. And as a Ugandan company, a large share of the value returns to the origin, creating more jobs, development and economic sustainability.
As Wild Coffee is a relatively small and new company, its impact has yet to flourish. Overall, the concept of direct trade between farmers and roasters by removing the middlemen is also relatively new. A cross-case analysis of connective businesses that allow direct trade between smallholder farmers and roasters came out in 2015 and showed promising future results. The study found that each connective business analyzed ensured high levels of transparency throughout the chain. As for the distribution of value, there was an increase in the total value producers receive by 13%. The study concludes that connective businesses allow for a much higher-end value for smallholder farmers and facilitate the benefit of direct market access.
There is a lot of potential for connective businesses to expand and improve upon the coffee value chain to achieve outcomes that serve the origin country and alleviate poverty in rural areas. The intentions of Fairtrade are admirable and have indeed improved the lives of many smallholder farmers, but new companies such as Wild Coffee show possible improvements. Vestvik suggests to consumers that to help improve the industry, one should ask coffee brands to include a breakdown of their value chain. In most cases, he says it is quite shocking to hear how little money actually goes to farmers. Buying coffee that does support the country of origin is another excellent way to improve the industry for a sustainable coffee future.
– Charlotte Severns