From Farmer to Cup: The Coffee Value Chain Re-imagined

Did you know that a coffee farmer receives on average a single penny from every cappuccino sold in a café?

In fact, a coffee farmer today is getting exactly the same amount for their kilogram of coffee as they did in 1976! Yet, this is an industry which has enjoyed above 5% growth rates annually over the years and is projected to achieve double-digit growth in some of the next 10 years.

How is it then that a farmer in the developing world who diligently cares for the coffee tree all year round keeps getting poorer in an industry that has generated so much wealth for those in developed countries? The answer lies perhaps in a value chain that is structurally designed to benefit the consumer facing participant while giving the farmer just about enough to produce the same amount next year.

Over 25 million farmers in developing countries are involved in coffee farming, contributing 80% of global coffee production (Bitzer, Francken and Glasbergen, 2008). In total, 125 million people in these developing countries consider coffee farming activities as their primary source of livelihood according to the Fair Trade Foundation. Hardly any of the farmers are participants in or benefit directly from the activities in the coffee global value chain beyond their farm-gate but are expected to shoulder the biggest share of sustainability costs.

The contribution of the coffee component to the latte goes beyond the 20 grams that has been used by a barista in the espresso machine. Hot milk alone served in the loveliest café environment would have a hard time attracting anyone through the door. Surely the aroma of freshly ground coffee beans coming into contact with hot water is the primary attraction to the coffee shop.

Artists and other creatives receive royalties for their art and craft whenever it is consumed in the secondary market. Why then should the coffee farmer be left at the farm-gate when his or her craft is generating more wealth further up the value chain? If that wealth cannot be priced into the farm-gate price, is there another way for the farmer to be more involved at the consumer-end of the coffee they produced?

These are just questions but surely there is a better way. A sustainable way of allowing the end consumer, from Milan to New York, to continue paying the current price for a latte while ensuring the farmer receives a bigger share of what they pay for their favourite beverage. This new way can be crucial not only in reviving coffee industries of countries like Zimbabwe who have reeled under decades of economic decline but in redefining the global coffee value chain. It is a new way where the coffee industry embrace coffee farmers as equity partners or shareholders in consumer facing operations. A global coffee shop chain with farmers as shareholders is possible. Such an arrangement could potentially bring innumerable benefits to the entire value chain.