The following post is the first in a three-part series that looks at how the coffee industry can become more circular and direct across the supply chain.
By Dr. Terry Tudor and Dr. Nicholas Head, SusConnect Ltd
The global coffee industry is growing. However, it is important that there are measures taken to ensure that this growth is circular and that small farmers and producers benefit along the way.
Sales of coffee, tea and other hot drinks are predicted to rise at a compound annual growth rate (CAGR) of 6.4% between 2017 – 2021 globally, and reach a total value of over $261 billion annually.
In the UK, direct turnover across the coffee industry grew to $5.5 billion in 2017, representing an annual average growth of 7% during 2012 – 2017.
On average, there are now 95 million cups of coffee consumed each day in the UK, total consumption both in and out of the home, and has grown from 70 million cups per day in 2007.
It is important that this growth takes place in a manner that:
- Is ‘circular’ (i.e. moving away from a ‘take-make-dispose’ model, to one that seeks to recover value from resources)
- Enables traceability to ensure quality
- Ensures small farmers and producers adequately benefit
Despite the anticipated growth in the coffee industry, many of the small farmers and producers still lack adequate market access, as well as the resources and capacity to do so. Coffee supply chains, as well as negotiating contracts and payments can be complicated and paper intensive. Small farmers and producers often lack the ability to conduct due diligence on their buyer. Thus buyers can compete on payment terms, and offer lower prices, lowering competitiveness and prices, as growers go to larger multinationals and incumbents who have less risk of default.
Traceability of the coffee from source to end points can also be challenging. Sustainability certification is often too expensive for small farmers, and in many cases does not deliver significant financial value to them. Payments for the delivery of coffee beans can be delayed and is subject to market fluctuations.
This is also indicated by the recent crash in global market prices, and the significant impact that it has had on the industry, particularly small farmers.
A direct trade model, which takes account of circular business models, along with the use of blockchain technology, offers the opportunity to realize these goals.
Part 2: What Does Direct Trade Coffee Mean?
Dr. Terry Tudor and Dr. Nicholas Head are directors of SusConnect Ltd, a UK company that provides ‘circular direct trade’ services in the coffee and tea industries. For more information visit www.susconnect.net, follow @Susconnect, or email: email@example.com