I posted some questions here in June regarding the standards for communication in Direct Trade. Today I come back to those specific queries, which are not clearly addressed in the prevailing Direct Trade standards for communication. Last week I summarized of some of emerging Direct Trade standards for quality, price and transparency. Here are the public commitments made by leading Direct Trade roasters regarding the frequency of their visits to the farms where their coffee is grown, again culled from their respective websites.
These statements all refer to the nature and frequency of direct, in-person roaster communication with growers or smallholder farmer organizations. But in publishing these statements, the roasters are making these same commitments to their customers.
Some make firm minimum commitments, like Intelligentsia: “representatives must visit the farm or cooperative village at least once per harvest season” (italics mine). Others are less precise, like Cuvee: “a considerable amount of time.” Still others, like Mad Cap, seem to be stating a principle rather than defining a clear performance objective — “We purchase as much of our coffee directly from the farmer as possible” — and acknowledging that they don’t source all their coffees directly. They hold up mere traceability as a kind of substitute for direct trading relationships when they are unable to visit the farms where their coffee is grown — a significantly lower standard, in my mind.
By some standards the Mad Cap statement may be considered the weakest of the commitments identified here. But I admire its candor and honesty. And I suspect this statement of Direct Trade principles may be a more accurate characterization of the approach to coffee sourcing among the growing ranks of roasters who refer to themselves as “Direct Trade.” My original post on this issue was inspired by the realization that roasters positioning themselves as direct trade and creating the impression that they source all their coffee directly aren’t necessarily doing so.
Why am I staying after this issue so persistently? Because I think that direct relationships between coffee growers and roasters may be the most important single aspect of all approaches to sustainability in trade. And because when roasters gain advantage in the marketplace on the basis of their trading model and their claims about the “directness” of their trading relationships, I think they should make good on those claims. Or use language that more accurately reflects the degree of directness in their trading relationships.
8 Comments
Michael,
I enjoyed this post. We met in Houston. I am trying to get in touch with you to discuss purchasing coffee from the Nicaraguan cooperative that we had met with.
I was recently in Peru and we purchased coffee directly from a group of farmers in the village of Cococho. This was our first direct purchase of coffee. We met these farmers through a Peruvian minister. The village has no phone or internet service and the nearest major highway is 5 hours away on dirt roads.
The farmers had been taken advantage of before our arrival. Their coffee was being purchased by a local gatherer that paid them substantially below market prices.
We have several goals in working with these farmers: purchase their coffee at or above market prices, re-direct a portion of the profits back to the community to provide the farmers with coffee education and micro-loans, assist the local medical clinic.
Our long term goal is to work directly with farmers and villages in 10 different countries. It would be great if we could add Nicaragua to our list.
Thanks,
Ed Wethli
Ed:
Thanks for the comment and congratulations on the new trading relationship in Peru.
Thanks, too, for your continued interest in sourcing from some of our partners in Nicaragua, where as luck would have it I am visiting today. I will be sure to follow up with the partner you met at SCAA and with you offline.
Hope to be able to help you meet your goal of 10 direct trading relationships.
¡Adelante!
Michael
Michael, I’ve been reading and enjoying your direct trade posts. I’m a peace corps volunteer in Honduras. I’ve been working with a coffee co-operative for 2 years and have naturally gravitated towards the idea of direct trade simply because, in my mind, it is the most ‘fair’ and correct way for the trade of commodities (agricultural) to take place.
I’m writing my masters thesis while I am down here. It will be discussing the move from conventional exportation through intermediaries to direct trade on behalf of the producers (or co-operatives). It proves to be an interesting paper.
Thanks,
Owen
Owen:
Thanks for the note and glad to know you have been finding the Direct Trade posts helpful.
I agree with Peter Giuliano, who wrote here that “Fair and Direct are not mutually exclusive terms.” And I think I have gravitated personally toward the idea that trading relationships that are both Direct and Fair represent the (all-too-often elusive) ideal for smallholder farmer organizations.
The minimum social and economic commitments of Fair Trade are fantastic. But I have not seen a lot of evidence to suggest that roasters who order Fair Trade coffee off an importer’s offer sheet and don’t engage at origin have been meaningful catalysts of community development in the coffeelands.
I consider the three defining characteristics of Direct Trade to be (1.) personal engagement with growers at origin, (2.) quality-based price premiums and (3.) quality obsessed sourcing. The personal engagement with growers may be the most important aspect of any trading relationship from a developmental perspective. And the incentives for quality put more money in the hands of farmers who need it. But the quality-obsession that is also a defining element of Fair Trade may limit the reach and social impact of this approach.
That leaves socially committed Direct Traders and the Direct Trade Fair Trade roasters as the ideal trading partners for smallholder farmers. If only there were more of them. Despite the growth in the ranks of both these categories, this is still a pretty small market, meaning that most cooperatives need to move beyond this circle to engage commercially in relationships that may offer less promise for social and economic development.
I look forward to learning more about your work and reading your paper when it is finished.
Michael
When I saw the title for this post I thought it would also discuss “to what extent are Direct Traders buying direct?” (as in acting as their own importer) and “Does that matter?”
As you’ve alluded to previously Equal Exchange is both “trading directly” (as in spending lots of time at origin, developing strong long-lasting relationships, etc.) and is a Fair Trader in the formal sense, too.
But we also import our own coffee. Maybe the Direct Traders are all doing this, as well, or may be doing it sometimes. It’s not clear.
But more importantly I’d like your opinion on how much, or how little, you think this matters. And – if it is a meaningful element to better trade relationships – would you like to see more roasters begin to take on this part of the supply chain?
Rodney:
I tend to agree with Peter Giuliano that Direct Trade is in many important ways a splinter of Fair Trade that evolved from the approach pioneered by Equal Exchange and others, which was based on direct contact with coffee farmers. Over time, Fair Trade evolved in such a way that even being a 100% Fair Trade company doesn’t require even a single trip to origin, let alone direct coffee sourcing. All a roaster needs to do is order only Fair Trade Certified coffees from importers’ offer lists. In other words, Fair Trade may be direct or indirect.
Direct Trade, by contrast, has “direct” in its title, which suggests it can’t be anything less. I was focused in this post on physical presence at origin, which is what I think Direct Trade evokes with its language. Turns out that even when coffee biographies use language that suggest an intimate relationship with origin, it doesn’t necessarily mean they have visited.
The issue you raise is a critical structural one — even if the roaster DOES spend lots of time at source transferring knowledge of coffee quality and processing, it may have a highly intermediated model in which exporters and importers charge fees that reduce the amount of the FOB price that farmers and farmer organizations see. While all of the “Big Three” Direct Trade roasters — Counter Culture, Intelligentsia and Stumptown — do their own importing, I understand that most Direct Trade roasters do not.
Michael
Michael
Hi Michael,
Thanks for your response. It conforms to what I had thought.
But my Q reminds (at least I’m kinda block-headed & missed it):
“I’d like your opinion on how much, or how little, you think this (being both importer & roaster) matters. And – if it is a meaningful element to better trade relationships – would you like to see more roasters begin to take on this part of the supply chain?”
Thanks,
Rodney:
It seems that your question got a bit garbled there, but I get the sense you were trying to politely suggest I hadn’t really answered your question.
In trying to respond more directly, I will use an example from the other end of the coffee chain, where I feel like I am on more comfortable footing. As you know, lots of primary cooperatives export their coffee a second-tier organizations. I have been involved in discussions with a number of primary cooperatives that were considering whether they should withdraw their membership in their respective second-tier coops, and assume the milling and export functions themselves as a way to capture more of the final value of their coffee. On paper, it seems unobjectionable. In practice, it was always more complicated.
Many of these coops were small. Few reached 10 containers a year in exports and some hadn’t ever exported more than one full container. In short, they had little margin for error. None of them had direct experience managing the processes of coffee collection, milling, warehousing, cupping or export. None had ever directly managed relationships with coffee buyers. Suddenly, what seems like a no-brainer on paper becomes a head-scratcher in reality. Taking on these additional responsibilities suddenly seemed like a highly risky strategy that had the potential to generate extraordinary returns, but was more likely to lead to ruin. At the very least, moving in this direction would require the acquisition of a range of new skills and distract the cooperatives from their core business of growing great coffee.
From what I understand on the buying end of the chain, there are good reasons for roasters to stay out of the importing business that are analogous to the ones I have seen on the growing end.
So, at the risk of sounding evasive, I would reiterate the point I tried to make the first time around — consolidating the importing and roasting functions can create efficiencies that can be passed on to smallholder coops — and say that I think the answer to your question depends on the circumstances in which each roaster finds itself.
Michael