More perspectives on Direct Trade
Last month at SCAA, I had the pleasure of accompanying a few smallholder farmers who had never been to the big show. To help prepare them for the experience, we collaborated with our friends at Cooperative Coffees to create a farmer’s guide to SCAA. I also combed the list of exhibitors to create a short list of don’t-miss companies along with a description of each one. I spilled more ink on the direct traders than anyone else.
I struggled to synthesize the Direct Trade approach into a coherent and balanced paragraph. How to draw enough of a distinction with other “sustainable” and disintermediated approaches to sourcing to articulate Direct Trade’s unique value proposition without exaggerating the extent to which Direct Trade departs from other models? How to convey the way that Direct Trade companies position themselves in the marketplace while also doing justice to the thoughtful critiques of the model? How do Direct Trade relationships emerge? Whew. Here is what I wrote:
The emergence of the “Direct Trade” model was driven by a desire to help coffee companies get greater control over the coffee chain, and to expand and sustain access to truly exceptional coffees. While there is no centralized standard, most Direct Trade approaches include the following elements: direct relationships with coffee producers (smallholder, medium and estate), an overwhelming focus on quality control throughout the chain, and a pricing system that creates clear incentives for quality, with premiums that generally exceed the guaranteed minimums for Fair Trade Certified coffees by 25 percent or more. Direct Trade companies work directly with smallholder farmers to ensure access to lots that satisfy their rigorous quality standards, and often seek exclusivity in these relationships.
An important critique of the model is that the selective purchase of exceptional micro-lots deprives farmer organizations of their best coffees and weakens their organizational structures by going around traditional sales channels and creating divisions between members. In some cases, the quality of Direct Trade coffees reflects years of investment by farmer organizations. It is not clear how or whether Direct Trade companies compensate cooperatives for these investments.
In the end, I was not confident that I had “gotten it right” and not sure how helpful my description was for the CAFE Livelihoods project participants I was accompanying. The truth is, I myself am still working to understand Direct Trade and how we should advise smallholder farmers to approach it as a development agency working to promote more sustainable and fair trading models.
I came into the specialty coffee fold as the director of the CRS Fair Trade Coffee Project in the company of fully committed Fair Trade roasters — a crowd that hasn’t traditionally shown a whole lot of love for the Direct Trade approach. It was in these circles that I first heard concerns expressed around the impact of direct sourcing of small lots of extraordinary coffees on local cooperative structures — something I have continued to hear from other thoughtful people who aren’t necessarily hard-core Fair Traders. I suppose I had developed a kind of mild predisposition against Direct Trade before I had ever encountered it on the ground. For better or worse, the “100-percent Fair Trade” standard was my point of comparison for Direct Trade or any other approach to sourcing coffee.
Since then, I have had some (limited) interactions with Direct Trade chains, from farmer organizations at origin to roasters in the marketplace, and have been moving toward a more informed perspective. Most of all, I have been favorably impressed by the depth of engagement of Direct Trade companies with the farmers who grow their coffee and their sensitivity to the challenges of producing Direct Trade-caliber coffees. That hasn’t led Direct Trade buyers to lower their quality standards, and to be sure, some groups have fallen out of the Direct Trade ranks when they have been unable to maintain quality over time. But the intimate contact does seem to influence the way they engage and invest at origin. In most cases it has led to support for developing key production and business skills; in some cases it has also led to additional social investment.
Furthermore, I think that there are additional benefits to farmers in the Direct Trade system that are underappreciated. In building a narrative around exacting focus on quality single-origin coffees sourced directly from farming communities, Direct Trade roasters invest in telling the market about the farmers who grow their coffees. In building their own brands, Direct Trade roasters build the equity of the cooperatives they source from — an asset those groups can trade on in the marketplace. These benefits are not generated by your average roaster, even the quality-obsessed roaster that manages to source some distinctive coffees.
Are these benefits exclusive to Direct Trade? No. That small community of deeply committed Fair Trade roasters I mentioned earlier (think Cooperative Coffees, Equal Exchange, etc.) has been paying more than 25 percent above Fair Trade minimums for many years and working as a matter of principle for decades to bring their producer partners out of the anonymity of coffee commodity systems. But Direct Trade roasters do better than most on these counts.
Direct Trade’s long-term impacts on smallholder cooperative structures seems to be one issue on which the verdict may still be out.
In sum, I feel like the Fair Trade v. Direct Trade debate — to the extent that people are still having it — is fueled by caricatures of each approach that may reflect some grain of truth but ultimately misrepresent the realities of both. Fair Trade’s focus on issues of social and economic justice have fueled the idea that Fair Trade quality is marginal. Roast Magazine‘s recognition of Fair Trade roaster Kickapoo Coffee as the 2009 microroaster of the year seems to be pretty strong evidence that the social-justice-or-quality dichotomy is false. And Direct Trade’s primordial focus on quality has led to charges that its commitment to social justice is thin. The social concern of the Direct Trade companies I have encountered, as well as the durability and positive economic impact of many Direct Trade relationships on farm families, makes me think that some of the critiques of this approach are similiarly distorted.