As it is already happening in other industries like food and fashion, more and more consumers are demanding clear information about the origin of the products they buy.
In coffee, this is translating into a movement that ultimately seems to put a special focus on the prices paid to producers. Many importers, roasters, and coffee shops are pushing (and feeling pushed) to share the dollars per kilo received by each of their coffee suppliers at the farm level.
Transparency.coffee, a newly born initiative led by some of the most influential specialty coffee companies in the world, is asking other industry businesses to share a minimum of data-driven parameters from their green coffee purchases. When joining their pledge one must “state the producer/producer organization the coffee was purchased from” and “state the Free On Board (FOB) price paid for the coffee”, as well as other attributes like quality score, purchase volume and years of relationship.
Being transparent, and in particular being transparent about producers’ earnings, is important not only for the conscious buyer’s peace of mind but for the sustainability of our product and the economy around it.
If the consumer knows that with their purchase they are helping someone to make a decent living, they may choose to continue drinking that coffee. If the roaster knows that the farmer can re-invest part of some profits on the farm, they may choose to continue the relationship because the coffee quality will improve over the years. If the farmer knows that the price received is over the average, they may choose to keep growing it instead of ripping the coffee plants and substitute them with coca or bananas.
However, we still wonder whether sharing FOB/Farm-Gate prices in the form of a list or on each bag label is our best option, as it potentially invites to a quick comparison between coffees from very different origins and contexts. Some complexities may be overseen or disregarded by the consumer who, unintentionally, measures the “goodness” and makes a decision based on these individual numeric values which fall short on revealing fundamental details about each story. These are what we consider the main issues:
The managers of the Duromina Cooperative (Ethiopia) and Reuben discussing the latest changes to the mill station #2 in 2017
1. Supply chain
The supply chain is complex and coffee passes through numerous hands, from grower to barista. There is generally a whole lot of middle-people involved in the transaction, and this is especially true for some countries where many obscure steps are needed to market the coffee from the washing stations to the international logistics companies.
Larger farms may be able to skip steps (marketing agent, one or many exporting brokers, international importing companies, etc.) because of their power and connections. But micro-producers, for example in the middle of the Ethiopian rainforest, need a network of tradespeople to make their coffee available for potential good buyers.
To make things even worse, it is very uncommon that the numerous parties involved are recorded in the books by somebody. Unfortunately, bookkeeping and accounting are generally far from accurate in most of the origin farms.
2. Taxes and import/export agreements
These vary for each country, and so does their impact on the coffee price. From levies to volatile trade laws, each origin is a world in itself. An effort on showing transparent prices for each coffee should, ideally, provide some context on how the different bureaucratic systems affect the price composition.
3. Free On Board (FOB) price
FOB price exist somewhere in the middle of the harvest-to-cup journey, and describe the price of the coffee purchase just before leaving the country of origin. What this doesn’t account for is the amount we (roasters) pay for in shipping and logistics, and it is not the pay received by producers - remember all those middle-people?.
One of the reasons why FOB prices may have been extensively used when talking about transparency could be its relative accessibility, benchmarking them against the commodity market and Fair Trade prices.
The Specialty Coffee Transaction Guide is a well-documented research project that is working to create a FOB price benchmarking system that adjusts depending on the quality score, volume of purchase and country of origin. It aims to provide a deeper context for price discussions as an alternative to the universal single value of the commodity price.
As volatile commodity prices continue to hover at historically low levels, industry leaders at various points along the supply chain are talking about the need to differentiate the women and men who grow specialty coffees from price references that come from commodity markets. Researchers at Emory University are using this [green coffee transactions information] to create annual Transaction Guides that report on the distributions of recent FOB prices for green specialty coffees.*
Transparency Guide
However, FOB prices are still a number in the middle of the journey.
4. Farm-Gate price
Farm-Gate prices may not tell the whole story either, as each farm operates differently. From cooperatives to small family-owned and private estates with dozens of workers, each has its own system. These values (net price paid for the green coffee as it leaves the farm) are not easily available at this stage unless one has the capacity to deal directly with the producers (generally large roasters and large and privately owned farms). Most importers have reservations about sharing them, or simply don’t know these figures.
Even knowing them, the important question is what do they truly mean for each coffee farmer? Some may keep more profits and pay a smaller amount to their workers; others may pay each cooperative member a portion, putting part of the profit into community projects. Some may make their living just harvesting coffee; others may need additional sources of revenue because their “farm” has only 50 coffee trees.
When we see a list of Farm-Gate prices for different farms, what else do we need to know so we can judge if they are decent and fair? How can we compare values from different countries, say, between Kenya and Peru?
5. Personal data and privacy protection
Would we agree to share publicly relevant financial metrics like revenue about our own business? Are we ready yet to advertise our salaries, our staff rates and our costs of production on social media?
If we feel hesitant about this and need a bit more time to think about it, why are we jumping so quickly to vent sensitive information about our producers? Do we have their full consent?
6. What if transparency went further than prices?
Communicating what a farmer is getting is a step, but does this allow us to tick the “transparency box”?
While the industry seems to focus on public access to these numbers, it is worth stopping to think about what else describes an ethical transparent practice. For example, the environmental impact of each coffee processing method; the carbon footprint of each coffee bag; the number of secured contracts for next year purchases; and if the coffee roaster was paid over the award and had access to workers’ compensation.
We think that the journey to transparency goes further than prices indeed, and our reporting efforts should incorporate details and stories that help our customers to make stronger, well-informed decisions.
From little things…
OUR VISION
While there are still many questions and certainly many challenges, we accept these and believe that in confronting them, and being open about our limitations, we are taking a powerful step towards transparency and better business.
Telling the story of each of our producers and how selling to the specialty market has impacted their economy has been key for Sample Coffee from the very beginning. Through conversations, coffee cards and individual web pages for each of our coffees, we’ve tried to convey meaningful details about its origin and the positive impacts derived from this premium trade.
This is the first year we are seriously putting an effort into chasing numbers. We want to join the global “transparency” conversation. We think that pushing for more clarity in the price structure and the supply chain composition is a very important step towards the sustainability of coffee as we know it.
Saying that, we are still unsure about what the best practice is in terms of communicating it. Considering all the challenges presented above, we feel that publishing individual FOB and farm-gate prices per producer doesn’t make us any more transparent or credible. We believe this approach needs more context to bring real value and understanding to our customers and the people we work with.
OUR APPROACH
Instead of publishing a detailed table list for each of our coffee producers, we are sharing those transparency metrics in an alternative format.
We have gathered, processed and summarised the data parameters pledged by Transparency.coffee. Represented in a series of graphs, they offer relevant information about our green coffee buying practices from last Financial Year. These, in our opinion, are easier to understand by our peers while still make us accountable for what we do.
Together with the information gathered in our Impact Report, our journal entries and the individual stories from each of our coffees, we hope to contribute towards the building a bigger picture.
This is the path we are taking until we all figure out a better way to communicate our small steps towards transparency in coffee.
Written by Ainhoa Martinez from Sample Coffee
Edited by Angus Taylor from Digital Storytellers
Or read our 2018 Impact Report here.
If this topic is of your interest, you may also enjoy the following reads:
Specialty Coffee Transaction Guide: read the report
2018 Cafe Imports Kenya Origin Report: complexities on traceability
Melbourne Coffee Merchants parallel thoughts on transparency and prices
Nadine Ingram from Flour and Stone about their “expensive” croissants