Direct Trade, how to create more value in the coffee chain with fewer intermediaries
We believe that this is the way to go to ensure a fully transparent value chain directly sourcing the coffee from farmers. But, how does it work? Read the article below to get to know more about it!
“I think you meant Fair Trade, No?” No no, it is correct; Direct Trade. But what the fork is this? Well, let us explain:
What is the actual Trade?
Trade: The act of buying and selling goods and services
Direct: Without intervening factors or intermediaries
This basically says it all. Direct Trade is a method within trading that thrives to cut out all the unnecessary intermediaries, buying DIRECT-ly from the producers. As a result, the portion of money which goes towards them is higher. This is exactly the way Wakuli is trading its coffee.
Besides that, as Wakuli, we want to create long-term relationships with the organised farmer groups that we work with as a foundation for our overall impact goals. Building this trustworthy relationship gives a better input to our other goals, such as working towards a sustainable income for the farmers we are connected with. This all links to our overall goal of being the ignition towards the coffee transition, to create a sustainable coffee sector, with better quality coffee, less harm in all parts of the chain (including producers AND environment).
We hear you thinking: “But aren’t there already initiatives that kinda do the same?”
Yes, correct, there are initiatives in the industry that thrive to make a difference. Often through the different sustainability certifications. The first initiatives started in 1988 to change the sector, but the price (based on FOB level, so not what the farmer gets) is currently (in 2020) the lowest it has been in 40 years! We don’t see change quick enough and thrive to change the system. Starting with building a long-term relationship and getting to know the faces behind the coffee you are drinking. It is not easy to change a system that is so entangled and complicated. In certain countries, we work together with one of our partners for export. We make sure they have the same values as we have, for example, ThisSideUp. You can read more about their mission and vision by clicking here. On average there are 5 intermediaries throughout the supply chain of supermarket coffee from farmer to supermarket. Compared to maybe one in our case.
Sometimes it is the farmer who pays for your cup of coffee, but how?
As stated before, the outcome of direct trade includes the intermediaries being cut out of the chain. This then leaves more in the value chain for the farmers, who can then raise their own quality of life. At the moment, farmers earn less than their costs.
“So, you mean that the coffee farmers do not even earn enough to survive?” Correct! Weird right?
“But what happens to the intermediaries?” Good and fair enough question. These intermediaries are usually not the local people that you think of, but often they are foreigners who want to create a business by keeping the biggest portion of revenue. For instance, the annual value of the global coffee trade is estimated to be $200 billion. However, less than 10% of this value remains in the producing countries (Coffee Barometer, 2018).
Also, while most sustainability certification costs money, Direct Trade doesn’t and through it, Wakuli aims to guarantee a more equal distribution of the value of coffee and to be fully transparent on pricing to consumers. A very powerful tool for transparent communication is the price breakdown. This tool allows consumers to see the percentage of the retail price and make a more aware consumption choice. Direct Trade also creates a traceable supply chain that allows customers to know exactly where their coffee originates and through which hands it has travelled.
