What is Direct Trade? (part 2)

If you missed part 1 of our article on direct trade, you can find it here.

Firstly, a little re-cap:

Definition of direct trade:

Direct trade is an attempt by coffee buyers to shorten the coffee supply chain (for example, by acting as buyer-at-origin or as direct importer), in order to achieve a better result for both parties (for example, the buyer saves money because they don’t have to pay various middlemen, while the farmers receive a larger proportion of the sale price).

Criticisms of direct trade:

There are two main criticisms of direct trade:

  • That some “direct trade” is more marketing hype than an effort to help coffee producers.
  • That genuine direct trade arrangements remove the cream of the crop from growing regions, leaving the majority of producers even more disadvantaged.

I’m going to leave these criticisms hanging for now. I think you’ll see by the end of the article that both are valid in a handful of cases, but that there are some great examples of direct trade that genuinely helps producers.

What direct trade are we involved with?

We have been sourcing most of our coffee through three suppliers. One of them we use occasionally and they supply some great coffee through standard supply chains. The other two suppliers both source their coffee through what you might call “specialty” channels. What that means is that instead of being sourced through large national exporters in the countries of origin, most of the coffee is bought directly from farms, estates, mills or co-operatives. In most cases, we can infer that the farmers were paid well because of the incredible demand for coffee of such high quality. This arrangement accounts for the majority of the coffee that we buy.  It’s not really “direct trade” according to my own definition, but it’s certainly a more ethical supply chain than most commodity grade coffee.

[Interesting aside: generally, the higher the quality, the better the farmer gets paid. Unfortunately, there are plenty of farmers without the knowledge to create a high quality product - which is where educating farmers is a key element of direct trade.]

Some of the coffee we buy is genuine direct trade coffee. Some examples are given below:

Sumatra Gultom Estate:

Sold to us by MTC Group (Sydney/Brisbane), who have a direct relationship with a small family exporting company (CV Yudi Putra), in particular their contact Dody Sayhrum. The coffee comes from 360 farmers around the town of Parapat in the Sipangan Bolon region. Yudi Putra collect and mill the coffee, offering advice on improving quality to the local farmers. MTC Group deal directly with Yudi Putra, acting as importer and wholesaler. Yudi Putra have created a great reputation for their coffee and now have excellent demand from around the world.

[reference]

Sulawesi Toarco Jaya:

Sold to us by Cafe Imports (USA), who deal directly with PT Toarco Jaya to bring a number of microlots to the US market (we nabbed some of the coffee while it was warehoused in Melbourne en route to the US). Similarly to Yudi Putra in Sumatra, Toarco Jaya both produce coffee themselves and process coffee from other farmers in the region. The company has received large investment from a Japanese company since its inception in 1976, from when it focused on “producing coffee of exceptional quality” for sale into the Japanese market (where a fair bit of the world’s ultra-premium coffee end up). Again, there is huge demand for Toarco Jaya’s coffees.

[reference]

Thailand La Mai:

This is a coffee we are very proud to be associated with. A New Zealand non-profit agency, Bright Hope World (BHW) has teamed up with agencies in Northern Thailand (La Mai region) to help farming communities transition from growing opium poppies to growing coffee. BHW then buy the coffee and sell it into the US, New Zealand and now Australia. Investing in these communities means improving the quality of their coffee, giving the farmers a better return for their beans over the years. Previously, many of these farmers were forced to sell their daughters into the Bangkok sex-trade. All of BHW’s coffee profits go into rescuing girls from prostitution and helping them return to their communities. We have committed to being involved with this amazing project, so look out for coffee from Thailand from April/May.

[reference]

Summary:

Since we began buying green coffee, just over half (53%) of what we’ve bought has been direct trade (according to my definition in this article). In some cases it’s hard to verify the exact supply chain – in which case we have to trust what our suppliers tell us. We’re happy to do that because we have good relationships with our suppliers and trust their ethics.

Of the remaining coffee, a further half (25% of total) has been sourced through what I would call “specialty” supply lines. As explained above, we can’t necessarily tell whether or not the producers were well paid for their efforts, but we do know that there is a good market for their product which should assure them a good return on their work for years to come. The other 22% of our coffee was sourced through conventional supply lines. These are coffees about which we know very little in terms of the ethics of production. In the next 6-12 months, we hope to eliminate our usage this kind of coffee entirely. We also hope to increase the amount of coffee we buy that is direct trade.

What are some exemplary direct trade projects?

There are many coffee companies around the world doing fantastic things with direct trade. Here I’d like to name one that I think is particularly brilliant.

Crop to Cup’s Whole Crop Burundi Buhorwa Project:

Crop to Cup (C2C) is a wholesale roasting company based in the US (New York/Chicago). Their aim (as stated here) is to bring consumers “closer to the crop, to introduce you to the people behind the beans that you brew”.

This is a great example of a project that resoundingly answers both the main criticisms levelled at direct trade. Firstly, it’s not all marketing hype: you can see videos of interviews with the farmers who sell coffee to C2C and you can check out the development projects being undertaken by C2C’s non-profit arm. Secondly, the Whole Crop Project in Burundi guarantees to buy every single lot of coffee produced in the region.

We have made a pledge to build sustainable markets not only for each year’s top lots (which essentially sell themselves), but also for the lower grades that this station – like every coffee community – will inevitably produce and which farmers must often sell to local traders at below-cost prices. [from C2C blog]

Furthermore, farmers are given an incentive to improve the quality of their product in that the higher the quality (as assessed by a third party), the higher the bonus that is paid to them.

I personally think this is the epitome of direct trade and I applaud Crop to Cup for realising this project!

I’ve put links to three other notable examples of direct trade getting it right below. These three companies essentially invented the term “direct trade” (if not the practice of it!) and now each have great systems for ensuring that money is getting to the farmers and that their relationships at origin prosper year after year.

Stumptown Coffee Roasters

Intelligentsia Coffee & Tea

Counter Culture Coffee

That’s about all I have to say about that!

If anyone has any further questions about direct trade in general, or about how we source our coffee, I’d be happy to help out. For clients, we’ve got heaps of info on all our directly traded coffees so that you can trace the beans back to origin.