3 Great Ways The Blockchain Can Completely Revolutionise The Coffee Supply Chain
I think you will agree with me when I say that the current coffee supply chain is not only inefficient but unfair. The problem is that a high number of unnecessary middle-men agencies clog up the chain and demand profits for doing so. This leads to costs being pushed outwards from the centre of the chain until they reach one end or the other; that is until they reach you, or the farmer.
This guy.
Why is it like this? Simple, because yourself and the farmer have the least power in the chain. You’re both acting as individuals in a system that empowers large organisations. However, with just a few changes, and the removal of these middle-men agencies, the coffee supply chain can be entirely rebalanced to favour the two most important parties in the chain; that’s you and the farmer.
In this post, I would like to introduce you to Co-fe. The newest blockchain project on the block. At Co-fe, we are coffee, without the Farmer Exploitation.
The Co-fe project aims to revolutionise the coffee supply chain by introducing an online marketplace that connects consumers directly with farmers and roasters. Consumers are able to purchase raw beans directly from the farmer, as this removes almost the entire supply chain, the cost paid here would be considerably cheaper than the price paid in the supermarket. The consumer then chooses a local roaster on the network to have their beans processed at. The beans are distributed from the farmer to the selected roaster where they are processed and then sent directly to the consumer.
All transactions on the marketplace will be recorded on the blockchain. This means that all transactions occurring between consumers and farmers are direct and transparent. In the current ‘fair-trade’ supply chain, the farmer only receives, on average, 10% more than in non-fair-trade instances. To us at Co-fe, that doesn’t sound very fair, but the fairtrade organisations still claim that they are successfully achieving fairtrade. However, since transactions recorded on the blockchain are inherently transparent, and the consumer is dealing directly with the farmer, everyone can verify that the trade is in fact, fair-trade.
So that’s a brief run-down of what Co-fe is, now let me get back to the title of the post and tell you exactly the three issue of the current coffee supply chain that the implementation of the blockchain by the Co-fe project can solve.
1. Consumers pay far too much
Ask anyone the easiest way to cut down on your living costs and they will tell you that the easiest way is to cut out things like Starbucks. The price is insanely high for what is probably about 90% simple H20. I completely agree with that too, however, what I don’t agree with, and I don’t think I’m the only one here, is the notion that ‘at home’ coffee is somehow cheap. I probably spend about $10 a week on coffee for the house.
That is far too much to pay. I mean, I probably drink too much coffee but that’s neither here nor there. The real issue is the bloat in the current supply chain. In fact, there are on average 15 intermediaries between the farmer and the consumer, each one puts the price up, so naturally, each one removed puts the price down.
Just think how low the price could go if you removed 60% of them.
That is what the Co-fe project is proposing to do. Something as simple as an online platform which connects the two ends of the chain, a universal currency which both these parties have access to, and a means to transact in a trustless manner, means that the only intermediaries left are the truly necessary ones. This would naturally decrease the price massively, however, as the online platform would work as a completely open market, normal economic principles would apply and complete competition would drive the price even lower.
With just a few tweaks you’ve gone from a system that works together to drive the price up, to one that works together to drive the price down. This, of course, is done without negatively impacting the farmer as the majority of this price competition comes from the roasters, who receive a number of financial benefits for contributing to the network (just a side note — when writing I started to hijack this post to talk about the range of benefits to the roaster of operating within the Co-fe network but decided against it — there is a post coming on this topic very soon, or if you can’t wait read the Co-fe whitepaper now)
2. Uncertainty of Fairtrade
Market studies on the coffee industry have shown that a large proportion of consumers are confused by the proliferation of fair-trade labels, organisations, and claims. Why does there need to be more than one? And what is the difference between each one? Which is the fairest? Are any of them actually fair?
Confusion naturally breeds uncertainty, and the very same studies have shown that uncertainty breeds an unwillingness amongst consumers to pay the extra price for fair-trade coffee. So in effect, fair-trade labels are potentially harming the farmer.
So what id there was just one fair-trade certification?
Better yet, what if there was no fair-trade certification?
The blockchain can be used to create a completely fair-trade coffee supply chain that requires zero trust in a third-party or middle-man. Transparent transactions which can be viewed by anyone, anytime, mean that everyone can ensure the system is fair, every time.
3. Unbelievably long lead-times.
Just as a bit of background, lead time in this sense refers to the time it takes for coffee to complete the production process; so here I mean from the time the farmer first picks it, to the time the consumer first touches it. In the current supply chain, coffee beans can have an average lead time of 6 months. Each middle-man agency prolongs the process and the coffee beans get less fresh. Now for those who care about the quality of coffee, this is of crazy importance. Coffee gets worse with age, and flavour and quality lost through age can never be recovered, no matter how fancy your machine is. I think it’s kind of funny actually, in a depressing way, using six-month-old beans in an expensive coffee machine is similar to using watered down petrol in a Ferrari. From the outside, it looks pretty sexy, but on the inside, it is a whole different story.
As the blockchain allows for the removal of a significant number of the intermediaries in the supply chain, it also allows for a significant shortening of the chain. Consequently, the lead time is reduced and the coffee beans are fresher. In fact, at Co-fe, we estimate that the Co-fe network could reduce lead times by around 75%.
The coffee supply chain could be revolutionised by the blockchain. Let’s just recap the above in one single sentence, are you ready?
The blockchain can result in cheaper, fairer, better coffee, every single time.
The impact this will have on both parties will be huge. Immeasurably huge for the farmer. I’ve talked a lot about the benefit to the consumer because let’s face it, the majority of us are the consumers, but spare a moment to think about the farmer; the person in the supply chain with the least power. Connecting them directly with the consumer gives them commercial independence. Giving them a universal currency to enact fairer transactions gives them financial independence, which in turns gives them, and their family, greater social independence.
The Co-fe project aims to be the first successful and scalable implementation of the blockchain as a solution to the broken supply chain. We want to reform the heart of coffee, let’s remove the farmer exploitation and the fake fair-trade. Let’s make coffee better, for everyone.
If you’re interested in learning more you can find our website at www.cofe-project.com or you can of course read our whitepaper. We have all our social links on our website so be sure to join the community and discuss with us, we would love to hear from you!
