Specialty coffee: A case for sustainable development
I still remember my very first sip of espresso. It was a warm summer day. I was 18, fresh out of school, and keen to enter the workforce. I was being interviewed for a dishy position at a café tucked away in an alleyway in Brisbane city; the barista, excited after dialing-in a tasty new Colombian coffee, kindly offered me some to try. He obviously reasoned that as a Colombian, surely, I’ll appreciate this.
Would you believe that this young Colombian lad had never liked coffee before? Why would I? All the coffee I had had until then had been really dark roasts that just tasted bitter and burnt, and here’s this guy telling me this coffee has notes of vanilla and candied raspberry?
I gave it a go. My untrained palate struggled to down that small but powerful shot of espresso without pulling too many faces, but I did my best to reassure him that it was good. I think to myself now that I’m sure it was — later that year he won the state barista championship — so he probably knew what he was doing. But did I? How come it took me 18 years to run into good coffee from my own backyard? What had I been offered all these years by my coffee-before-bed-drinking abuela? It took the universe conspiring for me to cross roads not just with this espresso, but with the evolving undercurrent of globalised trade that brought it before me: the movement of specialty coffee.
What is specialty coffee you ask? Is there more to it than trendy hipsters that can’t help being obnoxious coffee snobs? There is vast literature exploring specialty coffee and I’d be a fool to think I can cover it all here. For the sake of brevity and clarity, let us do our best to set aside any associations and build from a fresh start; one where we consider coffee in its many dimensions, states of matter, and the key actors that play a role in its processing from seed to cup. Only when analysing its supply chain can one start painting the bigger picture behind this ‘product’, the paths it forges, and the political and economic implications of its trade and consumption.
Because coffee is a primary commodity, its market is sensitive to short-run supply and demand fundamentals. This means it’s perfect to study some of the national and international implications of its trade, and by extension, the globalised commodity trade.
In many ways, the fabric of coffee trade is intimately weaved with that of globalised trade, yet a key distinction is to be found at the seam which will be our point of departure: coffee understood as an industry of ‘commodity’ and one of ‘specialty’. Coffee as commodity is basically coffee consumed for its utility, taken as a relatively homogeneous raw material and freely traded as such.
But coffee is highly demanded. Daily consumption worldwide is estimated at nearly 2.5 billion cups of coffee; and because coffee is a staple, we expect it to only cost so much. If in theory a coffee retailer were to raise their price above the general price, we as utility-maximising, self-interested, rational consumers would increasingly be inclined to take our business elsewhere. The goal is therefore to ‘differentiate’ products to justify any price differences.
Coffee retail is thus consumer-geared, and the entire supply chain — cafes, roasters, importers, exporters and producers — is shaped by this monumental, utility-focused, undiscerning demand. Consumers are primarily after their chemical fix — it’s all the same — and as long as they can fix the bitterness with some sugar and it gives them a buzz, they’re happy. This is good news for some in the supply chain and there is plenty profit to be made if producers can create the perception of value while cutting the costs of production.
It’s a race to the bottom.
This dynamic of value-adding and cost-minimising grants considerable leverage to those who buy the raw beans and add value to them. More specifically, those who prove most efficient at marketing and up-selling their product, while cutting costs and compromising quality to maximise output. Their profits enable investment in productivity to further cut costs and increase output capturing an ever-increasing share of the market and gaining power over competitors.
Sprinkle in a handful of economies of scale and a teaspoon of cartel-like behaviour and you’ve got four multinational firms — Nestlé, Kraft, Procter & Gamble, and Sara Lee — purchasing 50% of the world’s supply of raw coffee beans.
Coffee is thus standardised as homogenous, cheap, bitter, and burnt. This is what justifies practices like introducing additives to compensate for flavour, or like compromising quality in the name of maximising convenience. From full-blown sugary milkshakes with 5% coffee content to the infamous Nescafe Blend 43 and everything in between. This race to the bottom by coffee processors built an artificial image of coffee as the very least it could be and negated its potential by doing so.
Big whoop! So what? Get off my caramel-macchiato case!
You may have noticed in this model there is no room for political or moral considerations, not because they aren’t relevant or important, but simply because the market takes primacy. If consumers are satisfied and business is growing, what could be so bad?
Let’s go further.
Coffee sales each year exceed $70 billion globally. However, coffee producing countries only capture $5 billion of this value. This is because the supply-side of raw beans is fragmented over fifty countries and millions of producers. Since there are more sellers than buyers, the world coffee market thus functions largely as an oligopsony, where buyers of raw coffee have power over the market price. Thus, buyers want high volumes at low prices and sellers have to compete with each other to satisfy this demand.
This leads us to the small-scale farmers who are in turn pressured to cut costs to make a profit, but with little room to add any real value. For struggling farmers who are all in similar situations, the same practices prove to be most effective at guaranteeing profits: seeking cheaper labour, mechanising where possible, compromising quality for quantity, etc. However, their growth is capped because coffee buyers have most of the bargaining power. Competition is fierce, and only industrial farmers who prove able to cut costs can remain in the industry.
Small-scale producers are thus caught in a volatile price fight against industry giants, and they struggle to survive before giving in to absurdly low prices at heavy losses lest they lose their hard-earned harvest altogether.
Farmers can’t afford cherry picking.
It’s not a coincidence that most coffee-producing countries share a colonial history. Much like sugar and cotton, the establishment of these industries relied heavily upon cheap labour to make profit. It comes as no surprise that the market structure outlined above naturally benefits those with leverage, and direly undermines the livelihoods of those without, and this is especially true for pickers.
Because harvest is impossible to mechanise in many regions and the window for picking is only a fraction of the year, work is generally seasonal, unstable, precarious, paid per volume picked, and directly subject to fluctuating coffee prices. Not only do pickers and their families depend entirely on the success of the harvest, this precarious dependence also represents a trap as they seldom have access to credit, healthcare, education, or insurance against uncertainty.
So people are struggling. Who’s in charge again?
According to The World Bank, 95 out of 140 developing countries depend on commodity exports for around 50% of their export income. “Commodity-dependency” is a reality for countries like Burundi and Uganda, for instance, where coffee represents 75% and 54% of their total exports respectively.
Coffee producing countries have long attempted to form a joint-effort arrangement since the 1930’s in an effort to give themselves more leverage and thus stabilise prices. However, not only would this take more organisational resources than are available to them, given the scale of the task, any efforts made are also generally heavily resisted by the ‘first world’ which imports 90% of the global harvest. Though it took decades, this changed for the first time after Fidel Castro and his guerrillas took power in Cuba in 1959.
Cue in Cold War geopolitics.
Cuba was a coffee-producing economy, and just as Mao and Che Guevara had theorised and practiced, the countryside gave momentum to its revolution. Looking after the exploited countryside across the pond was now in the White House’s best interest.
In an effort to ‘fight against communism’ through foreign policy, the US expedited support for the Global South’s long-sought quota agreement. With their support, both exporting and importing countries signed the International Coffee Agreement (ICA) in 1965 which facilitated the monitoring and enforcement of a quota scheme which was aimed at keeping prices high. This proved one of the most successful commodity treaties in history, raising prices by 73% and transferring 8 billion dollars from consumers to exporters.
This honeymoon ended in July 1989 with the implosion of the communist world and the steady percolation of neoliberalism. With the collapse of their Cold War enemy on one hand and the rationale that high prices were hurting consumers on the other, Chicago economists revised and advised withdrawal from international commodity treaties. The White House withdrew its support for the agreement, and between 1988 and 2001 the price of coffee beans fell by 75 percent to an 89-year low of 50 cents per pound. Would you dare having a rough guess of who benefited and who suffered the consequences the most?
Anyone heard of Colombia?
Say you’re a small farmer, a campesino in Antioquia, Colombia, in 1988 when the coffee price was around US$1.30/lb. You’ve been growing coffee since 1977, prices were steady enough and business was reasonably profitable. Although you had diversified your crops with avocados and bananas when you started just in case, you made a name for yourself growing good coffee and had been specialising in it because it paid more. There are some guerrilla forces growing in your region, but you’ve managed to pay your protection fees with hard work.
It’s now October 1989 and the price has fallen to US$0.70/lb. These are trying times and you struggled to make ends meet; this harvest might not produce a profit, god knows how you’ll pay your pickers. The guerrillas are pressuring you to grow coca leaf for them instead because it would be much more profitable. You consider it but would rather steer clear of cartels and drug wars if you can help it. You’re hopeful coffee will provide.
It’s now August 1992, the price of coffee is US$0.51/lb. After 3 years of losses and growing hostilities, you and your family have been forcibly displaced from your own land so the guerrillas can grow their coca, a more profitable crop that is still, ironically, sensitive to the whims of an indulgent Western world. Countless other families have suffered kidnappings, killings, expropriations, extortion, and you’re one of the lucky ones who didn’t have to go through that. Instead, you’re on your way to the nearest city, Medellín, where most forcibly displaced people end up living in poverty in the dangerous, cartel-plagued communes.
Fast forward to now, what could possibly be done to prevent such social dislocation?
Now that we’ve established that market pressures affect people’s welfare through impersonal trade within the supply chain, a possible device of mitigation arises when one considers the forgotten agency of the consumer. If states struggle to regulate this supply chain because it transcends their jurisdictions, the corresponding device of regulation must then also not be bound by national laws. An agreement like the ICA outlined above was aimed at regulating the supply-side of this complex equation; but it was only effective insofar as it was enforced and monitored by a powerful economy — and so long as this economy felt the treaty was in its own, best interest. But what if we address instead the demand side, the consumer?
In this context, ‘specialty’ is not necessarily just a more luxurious coffee product. At its core, it simply implies that a lot of people went to a lot of trouble to bring you, the consumer, an exceptional product. Why? Because coffee can be incredibly tasty and complex, but even the most powerful multinational corporation could never add this sort of quality to a bean.
It must be added at origin.
This means that by focusing on providing this added value — as means of satisfying a demand for this value rather than meeting the supply needs of a predatory multinational— farmers can charge multiple times above the general commodity price of coffee and actually make a decent living, thereby emancipating them from their subjugation to price volatility.
In the face of this reversal of the supply chain, the consumer’s concern for ethical quality is passed on to the coffee roaster, the green coffee buyer, and processor. Since the consumer now demands value directly from the producer, the roaster has to supply it and no longer has as much bargaining power or as much room for cutting costs; it has to ensure the most ethical quality at the least expense. It is therefore in the roaster’s best interest to build a direct, mutually beneficial relationship with the producer or a cooperative of producers, so as to minimise any intermediary costs. In this way the roaster — much like my employer Padre Coffee — is able establish a more sustainable model of supply and capitalise on it.
Through a standardised process of quantifiable quality, coffees at origin are evaluated and rated against a 100-point scale, with specialty grade being awarded to those with 80 points or more. The achievement of this grade, aside from considerations of coffee varietals, necessitates first and foremost the very best harvesting practices in a coordinated effort towards quality. The beans must be cherry picked by experienced pickers, sorted by skilled sorters, processed by seasoned processors, packaged by diligent packers, roasted by expert roasters, and brewed by competent baristas.
Every dedicated hand that touches each bean therefore adds real value to the end product, and everyone involved in this coordinated effort thus gains some leverage through their work and is more likely to be appropriately remunerated for their efforts. This dynamic systematically rewards craftsmanship instead of engendering alienation.
Wealth transfer from the first to the third world.
This remuneration of course has to come from somewhere. In this case, in the name of quality the consumer is prepared to pay more for the value added. But it should be noted that this is directly related to the consumer’s higher purchasing power gained through a higher national exchange rate relative to the producer’s. In other words, Australia is well off, and for Australians $4 for a cup of coffee is feasible, pocket change expense. This stands in contrast to Colombia where I was charged $9000 Colombian pesos for a cup of specialty coffee, or the relative equivalent of $9 for Australians. This is why my coffee-before-bed-drinking abuela could only offer me — with all the love in the world — a not-so-tasty coffee.
Specialty cafes are rare in Bogotá but commonly found in Brisbane. Good coffee costs less in Australia as a proportion of income, and as demand is defined by the price people are prepared to pay, the specialty coffee movement and its practices can only gain momentum through first-world consumer support. This is how this quality-driven industry transfers wealth from the ‘developed’ to the ‘developing’, increasing overall welfare in the process. And, by the same token, similarly sustainable trading practices can only gain momentum if able consumers exercise their global citizenship by their consumer behaviour within the sovereignty of the market.
Because all specialty coffee is understood to be of exceptional standard, consumers mostly differentiate according to taste and not necessarily according to cost. The rationale of ruthless competition is hence thwarted by a rising tide that lifts all boats; a tide in which all those small-scale farmers aren’t drowning and lost in a sea of homogeneous coffee beans, but instead float and gain differential value through the brand which they develop for themselves. War-torn Colombian farmers have a feasible alternative to growing coca, and their regions benefit and heal through their economic success.
This is why you see single origin coffees offered in specialty cafes in the format of ‘country — farmer/community’, because through your consideration of the value of their work, they gain independence from profit, freedom, and life.
