- In 2018, Amazon’s food and beverage category saw rapid growth, generating over $4.75 billion in sales
- Coffee alone contributed over $140 million to this total
- For better or worse, Amazon provides coffee producers with direct access to consumers while skipping intermediary stages of the supply chain
FOR THE most part, online sales channels have become the domain of coffee roasters. However, there’s nothing stopping producers from stepping into the digital ring, too.
In addition to their own channels, businesses up and down the value chain have started to use Amazon. This is for good reason. In 2018, Amazon’s food and beverage category was its fastest-growing segment, with more than $4.75 billion in sales. Of this figure, coffee accounted for over $140 million.
In the last year alone, the average revenue for coffee sales on the platform has increased significantly, with a 23% increase for ground coffee and a 29% increase for whole bean coffee.
Small and medium-sized brands now make up 55-65% of coffee sales on Amazon, surpassing larger companies like Starbucks (11-13%) and Lavazza (8-15%).
It therefore makes sense that actors upstream in the supply chain are interested in exploring this area of growth – especially as it’s proving to be accessible for the smaller trader. Producers who usually sell green coffee to exporters, importers or cooperatives are now seeking to enter the world’s biggest digital marketplace to sell their coffee directly to end consumers.
The motivations behind this are clear. Producers who sell directly to consumers can avoid many of the intermediary stages of the supply chain that take varying (but sometimes relatively large) portions of coffee’s final value.
It also provides opportunities for enhanced brand visibility and a deeper reach into consuming markets – as producers put their coffee in front of the retail giant’s enormous audience.
Furthermore, it gives producers access to Amazon’s warehousing facilities and distribution networks. “Fulfillment by Amazon” means sellers can store coffee in fulfilment centres, and Amazon will handle packaging and shipping from there.
But while the benefits are clear as day, potential downsides lurk in the background.
Can they do it alone?
In many cases, importers and other intermediaries play a valuable role for coffee producers. Especially in the specialty coffee sector, importers are critical in managing the many uncertainties that affect market volatility – from weather and harvest issues to demand fluctuations. This is on top of their experience in bringing a coffee to market.
Rather than being a depletive part of the supply chain, many intermediaries add value for producers.
However, intermediaries have long received widespread criticism. Studies in major coffee-producing countries have shown that farmers trading through “middlemen” often have lower access to services and infrastructure than their direct trade counterparts. Consequently, these farmers usually earn less because they cannot retain as much value.
“We had the fortune with Madre Selva to start our business model before the pandemic lockdown and we have been forced to make all of our sales online, so selling on the internet with our products is natural for us,” says Daniel Zapata, head of marketing at Comercializadora Cumbres.
“Exploring another sales channel is always a challenge, but Amazon was a wave that we can manage pretty well.”
Some suggest that producers may not be able to find the same level of exposure for their coffees without the marketing power of intermediaries. As such, selling coffee online is only suitable for producers who have the necessary expertise and access to infrastructure required for ecommerce.
Additionally, the ethically conscious consumers that are common in specialty coffee may be hesitant to purchase their coffee from Amazon. With ongoing criticisms about the company’s labour practices, impact on small businesses, and tax avoidance, producers should also consider how receptive their audience is going to be.
Nevertheless, the overwhelming trajectory of the retail landscape is headed towards online marketplaces. For Daniel, selling on Amazon is a no-brainer.
“It is the way it works the world right now, and even the producer has to adapt the ways he works in order to impact every consumer in a good way,” he says.
Bringing attention back to coffee producers
Despite Amazon being “an area ripe with opportunity”, some are left with a pervading sense of unease about reverting to the platform.
Indeed, it could be a signal of how unmanageable the market has become and, more generally, how the industry has failed to provide coffee producers with feasible alternative options.
Since Covid-19, the coffee industry has faced a number of significant challenges. Rising costs across the board have left producers very little to work with. It’s no wonder they are seeking their own means of distribution and accessing consuming markets.
On the other hand, this change might also be a way forward for the industry – shifting away from the conventional supply chain systems that have seen the outlook for coffee farmers and producers become increasingly bleak.
Indeed, if producers can roast and package a finished product, and bring it to market in a comprehensive online marketplace – while leveraging Amazon’s scale via its wider distribution networks – it could certainly align with the convenience-oriented and commercial direction the sector is headed towards.
And while values such as convenience don’t threaten to entirely eradicate the core principles of specialty coffee, such as traceability, they do potentially minimise their importance. As such, this type of model could be a step into the future while bringing attention back to producing countries.
“Desperate times often lead to innovative solutions and a perfect way to work, so we don’t see it as a bad thing,” says Ricardo León Restrepo Palacio, general manager of Comercializadora Cumbres.
“The coffee industry is pointing back to origin, and the producer is winning more ground day by day. Eventually, with a lot of effort, time and knowledge, producers will find their way to the spotlight.”
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