the best Coffee
comes from farmers who are paid a fair margin.
make an impact by making educated purchases:
- The Farmer
- Their Farm
- Their Labor
- The Quality
- The Process
- Coffee Pricing
- Fair Trade: The Good, the Okay, and the Definitely Not as Good.
- Supply Chain
By encouraging more people to buy coffee from our roaster partners, we in turn encourage demand to shift towards the smaller coffee farms that focus on these ^ topics.
Here's a breakdown on History, Fair Trade, Third Wave, Commercial Activity, and Our Mission.
The coffee cherry seed is a commodity that is viewed to be historically underpriced, especially as it became roasted, globally indexed, commercially viable, and contractually commoditized.
Over the history of its commercialization, coffee has definitely lost some of its natural quality due to over-roasting, lack of freshness, and a focus on quantity via the natural economies-of-scale process that takes place when production at a large scale begins to decrease cost per produced unit. This can take place through using cheaper labor, lackluster or more efficient processing, cheaper or more efficient equipment, and/or innovation, among other inputs. This occurrence doesn't necessarily need to be a negative one. Unfortunately, there are some industries, including parts of the food & beverage sector, where scaling production at the expense of input quality is not feasibly nor holistically beneficial to the ecosystem, i.e. the demand side of the economic equation.
The quality-focused coffee farmer may not have as much legislative say in this natural economic cycle, as other suppliers can and often will compete and reduce costs by practical means in order to sustainably satisfy demand and reach a profit. Small business owners don't want to lose business. Quality, labor, wages, and sustainability can sometimes suffer as an outcome. However, this doesn't necessarily have to persist.
Is Fair Trade.. Fair? 🤔
Fair Trade Coffee and Fair Trade Certified Roasters certifications became established as a standard for coffee growers to maintain with their contracts, implying a minimum price of $1.40/lb of coffee ($1.70/lb for organic/premium). $.10/lb goes to Fair Trade organizations, and another $.20/lb goes to collaborative/education efforts, i.e. best practices in farming. As a result of coffee's seasonality, likelihood of shortages and surpluses, and its commoditization, standardization has become important for trade. The goal of Fair Trade is to work on poverty in the regions that grow coffee, establishing price rules, banning child labor, and alleviating other labor issues. There are arguments for and against Fair Trade; a few are given here:
- Economically, Fair Trade implies a price ceiling or floor on pricing. For some farmers, this can obviously be great. For others, it may actually incentivize them to sell lower quality beans at the higher price set by Fair Trade just because they can. On the other hand, expensive beans that remain priced above Fair Trade could be perceived as even more expensive. Pricing set above Fair Trade could force that coffee to not be set as Fair Trade. Specialty roasters that source those beans may not be able to list certain roasts as Fair Trade as a result, and customers may believe (without reading more) that their roaster is not Fair Trade certified.
- Logistically, putting a blanket standard on all participants may not be the best solution. A variable rule may work better, as we are aware that purchasing parity against the U.S. Dollar is different in every country, and that it changes daily, even rapidly for some countries. Some of the best coffees are produced in third world countries. The hyperinflation that takes place in a subset of these parts of the world could run farmers out of business due to rigid pricing rules, and the roasters who source from their farm's inability to be flexible would not help (Venezuela is a perfect example, with inflation in the tens of thousands of percent). One could say that this would happen anyways and coffee isn't critical. In another interpretation, growers in these countries are "crowded out" due to their own economics against Fair Trade policy; either that, or they and their roaster partners default on Fair Trade.
- To counter these arguments, look at the phrase "Fair Trade" itself. The words "Fair Trade" have become very popular in today's world of coffee, opening more folks' eyes to the importance of sustainability in coffee but also the food and beverage industry. This is beneficial because any decrease in demand for lower quality and/or increase in demand for higher quality is a benefit. Another counter is that although standardization may harm some markets, from a cost-benefit analysis it may open new doors and/or re-open previously closed down practices due to the new baseline of pricing. In this argument, more doors might be opened than closed, preserving more quality than before Fair Trade.
the Third Wave movement
Recently, the "Third Wave" of coffee is quickly becoming popular, with brands that offer specialty, premium-focused beverages in large cities alongside digital subscription brands that sell from independent roasters. Even Venture Capitalists are becoming attracted, including well-known TV personalities Rohan Oza & Mark Cuban (Shark Tank), experienced VC Mike Ghaffray (Canvas), historic TPG, and very popular early stage VC firms Pear Ventures, True Ventures, Slow Ventures, among others. Specifically, institutional VC investors are fiduciarily obligated to generate large returns by boosting the current assets on balance sheets of technology business that typically have low-COGS, high-OpEx income statements. The future valuation of these businesses is supported by large rounds of financing in order to provide the capital to boost growth in demand and supply in their market with respect to their innovative product or service, i.e. solution. The financial profile of these companies effect large future valuations, driving IRR through liquidity in preferred shares back to the investors' funds and the funds' investors themselves.
Seeing VC activity in this space is encouraging for the coffee trade in a way, as it shows that there are some innovation-driven investors who believe in a near-term (possibly less than 7 to 10 years), large, positive future outcome for a historically traditional line of business. This may signal that, with practice and practicality, we all can support the process of reverting coffee to what it should be.
For us, this matters, because we care about matching purpose with profit, not just profit. If we can have even a miniscule impact on the quality of life for ~50% of Americans (U.S. daily coffee drinkers), in addition to the farmers and their respective responsibilities, we're in.
Even the buyer at a large, well-known specialty coffee company mentioned "it's about getting it in people's hands..."
That is Our Mission: to get premium coffee in more hands.
Only then can you truly feel and taste the difference. It's quite an experience.
Supporting the true specialty coffee roasters who care about sourcing, the process, and the quality equivocates to supporting the beginning of the coffee supply chain, the farmer. By supporting the farmer, you support the folks who harvest the cherries and process the beans, the quality of the farm including where the coffee trees are grown, and the sustainability and longevity of his practice, including the obsolescence of the farmer's need to cut corners in order to satisfy large coffee chain brokers.
We have and will continuously hyperlink the bullet points above to published resources, as they clarify and qualify these challenges with a more broad view.
Thank you for reading and reach out if you're interested.
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julian at vibrantry.com