Specialty coffee gives too much credit to direct trade

  • Many specialty coffee roasters proudly adopt a direct trade model
  • In venerating direct trade, supply chain intermediaries have often received criticism
  • This is a reductive approach – and specialty coffee has a role to play in bringing greater nuance to the conversation

SINCE THE early days of specialty coffee, “direct trade” has been a core principle that not only guided sourcing practices, but also arguably revolutionised how people perceived producers and the systems behind the entire supply chain. 

The direct trade model has certainly added value to origin countries. Many farmers who trade directly with roasters often receive higher incomes without intermediaries involved in the value chain. Beyond the financial benefits, some roasters offer additional support with financing, training, and access to infrastructure.

However, there are relatively few roasters with the resources to do this, and instances of long-term investment from roasters directly into producing countries are rare – especially when considering the wider coffee industry.

At the same time, “direct trade” has become somewhat of a loose term. The fact that it’s an uncertified label means that some roasters are able to capitalise on its value among consumers – in the knowledge that coffee labelled “direct trade” is likely to sell better – without having to validate its legitimacy.

This has led to some roasters moving away from categorising their coffee as direct trade because a lack of regulation and co-optation by “free riders” is devaluing the term.

It’s also a top-down label developed by coffee roasters, rather than farmers. While it may have been developed to draw attention to inefficiencies and inequities in the supply chain; it could also be viewed as a means for roasters to add value to their product.

Even more importantly, in the process of celebrating “direct trade”, a negative and overly-reductive perception of supply chain intermediaries has pervaded the specialty coffee community. 

Some hold the view that intermediaries, such as importers and exporters, are almost parasitic – extracting more value than they contribute. But most of the time in the specialty coffee sector, this is simply not true.

Managing risk

For starters, intermediaries play an immensely valuable role in managing and mitigating risk for coffee producers.

For example, they can provide an early warning of events that could impact coffee quality, such as weather and pests; they facilitate investments in training and infrastructure; they often hold buffer stock to mitigate any unexpected shifts in demand; they enable small-scale farming through cash flow support; and they can add overall flexibility to supply chains that might otherwise breakdown under the pressure.

“There are so many details that are sometimes so time-sensitive that they may be out of our control,” says Serena Beze, sales executive at green coffee importing company Mercon Specialty. “When you’re working with an intermediary, it helps take on the risk for both sides and ensure that everything is fulfilled.”

It’s usual for intermediaries to shoulder the risk between buying the coffee at farmgate and selling it to roasters. As such, they often have an interest in identifying and addressing any problems at origin to avoid the costs of shipping defunct coffee overseas, which could then be rejected.

This means that, while roasters aren’t invested in the coffee until they accept it at port; importers have an interest in ensuring a producer’s coffee retains its value as soon as it leaves the farm.

“Whether driven from philanthropy or self-interest, we are heavily invested in trying to mitigate any risk that may materialise through the supply chain,” says Konrad Brits, founder and CEO of the specialty green coffee trading company Falcon Coffees.

“A significant amount of our work in origin is really trying to ensure that the coffee matches its contract quality and is moved intact, timeously, according to the sales contract terms –  to protect both the farmer and ourselves, and the roaster ultimately.”

Bridge a gap

At the same time, intermediaries fill a gap that the majority of roasters simply can’t. 

Instances where direct trade is actually feasible are limited. For the millions of smallholders who lack access to roasters with a footprint at origin, intermediaries make it possible for them to sell their coffee. On the other side of the coin, many roasters don’t have the resources to source directly, and intermediaries help bring the two sides together – facilitating a relationship that would otherwise not exist.

“There are so many micro and nano-roasters around the world who pay fantastic prices for really good coffees who, by the very volumes they roast, simply couldn’t buy from origin directly,” Konrad says.

“I think direct trade is an important sourcing model as it speaks to roasters connecting with the communities that provide them with coffee. This sourcing model should not have to mean that no intermediary played any role as this would really limit the number of roasters who could make this claim.”

Specialty coffee gives too much credit to direct trade

Specialty coffee importers

This doesn’t mean that all intermediaries unequivocally add value to the coffee industry. Some large trading houses, established many years ago, were built on exploitative models rooted in colonial structures. While the coffee industry has evolved over the past century, these foundational systems can be difficult to shift.

Historically, traders aimed to purchase coffee at the lowest possible price, sell it at the highest price, and claim the inflated margin. Intermediaries could operate like this in the past with a relative level of impunity.

And while some continue to function in this way, specialty coffee’s advocacy for a transparent supply chain has significantly reduced their window of opportunity.

This has also given rise to a new generation of specialty coffee-focused traders that view coffee as more than a commodity. It’s therefore important to distinguish between traders that operate on these outdated models, and others that are shifting the narrative and making a considerable effort to add value at origin.

An important clarification

Good or bad traders aside, some believe that “direct trade” does nothing but promote the positive values of specialty coffee.

“I like the term,” says Konrad. “I like roasters who want to use it as it is an effective communication tool to say, “I have met the people who grow this coffee”. This implies care and integrity and by association, quality. To be able to own that claim, we in the trade need to be made to disappear from that narrative. In truth, we are usually present in some way. I think it’s ok to leave us out of the brand story.”

However, it could be argued that the discussion around direct trade is more nuanced than the specialty coffee sector originally gave it credit for, and more attention should be paid to that.

In this light, specialty coffee shops and roasters are well-positioned to reinvigorate this conversation – especially due to the sector’s focus on consumer education.

By communicating about the essential part intermediaries play in a sustainable supply chain – and how they often bridge a gap that roasters can’t – it’s possible to demystify the prevailing reductive perception of intermediaries. In turn, this could go a long way in helping customers better understand the higher prices associated with specialty coffee.

“Just like there’s been an evolution of transparency between the roaster, intermediary and the producer, it’s going to have to be a similar evolution for the consumer,” Serena says. “I don’t think it’s going to happen overnight.”

While some roasters may find this difficult – having tooted the direct trade horn for some time – it’s an important clarification to make, and one that could help bring greater equity along the supply chain.

Coffee Intelligence

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