A shared vision to improve the economic sustainability of coffee

Leading coffee roasters and traders have laid out a shared vision and roadmap with the International Coffee Organization on how to improve the economic sustainability of the coffee industry.

COVID-19 has been a spanner in the works of the global economy and the coffee sector isn’t immune. While many venues, cafés, and roasters lost business or closed their doors on the consumption end of the coffee supply chain, a large number or coffee producers were in a bad economic position before the pandemic even began.

Since late 2016/early 2017, the coffee industry has struggled through a “price crisis”, where commodity market prices have largely sat below the cost of production. In September that year, the International Coffee Organization (ICO) committed to promoting dialogue among all stakeholders in the coffee value chain to ensure the economic sustainability of the coffee producers.

José Sette, Executive Director of the ICO, tells Global Coffee Report collaborative action will be necessary to achieve industry-wide results.

“The private sector already does quite a lot on an independent basis. Many companies, both roasters and traders, have programs to support farmers or their suppliers, but the truth is, these programs only have a limited reach,” Sette says.

“We want to go beyond what these worthwhile initiatives can achieve, find ways to support the more than 120 million people that depend on coffee growing for their livelihoods, and tackle some of these larger collective problems with both the public and private sectors.”

Over 2019 and 2020, the ICO has connected with key players in the coffee industry and structured this type of dialogue. At its first CEO and Global Leaders Forum in September 2019, 12 leading coffee roasters and traders signed the London Declaration, committing to improving the economic sustainability of coffee production and the forming of a public-private sector taskforce.

These signatories include ECOM Trading, illycaffé, Jacobs Douwe Egberts, Lavazza, Mercon, Nestlé, Neumann Kaffee Gruppe, Olam, Starbucks, Sucafina, Tchibo, and Volcafe.

“These very important companies have signed up and agreed to participate in our work and it gives weight and credibility to the whole process. We are very grateful to them, but know we this is only the beginning and there is a long way to go,” Sette says.

“Global Coffee Platform and the Sustainable Coffee Challenge have also been important partners for us. They are multi-stakeholder initiatives and have really spread the word throughout the private sector.”

At the second CEO and Global Leaders Forum in September 2020, held virtually due to COVID-19, this pledge was taken to the next level. A communiqué was released, and endorsed by the International Coffee Council in October, detailing a shared vision and roadmap towards making the economic sustainability of coffee a reality. 

“The communiqué is a signal of everybody’s willingness to work together and move forward. Now, we hope to translate some of these nice thoughts and words into concrete action,” Sette says.

“The roadmap, from 2020 to 2030, looks to implement a variety of actions to achieve a more prosperous coffee sector, especially for smallholder farmers.”

A core part of this roadmap will be identifying the living income of smallholder producers in different regions. The roadmap’s goal is for 80 per cent of ICO member producing counties to reach prosperity by 2025 and 100 per cent by 2030. This will begin with direct support to living income pilot projects in four to six producing countries.

“It’s no use having a supply chain as efficient as we see in coffee, when – some would say – it is so efficient that the ‘little guy’ actually producing the coffee is squeezed so tight they do not receive adequate remuneration for their work,” Sette says.

“Providing farmers with a prosperous income is at the basis of all this work.”

Sette says this one of several technical workstreams outlined in the communiqué currently in progress. These technical workstreams are intended to go beyond “quick fixes” and address the systemic issues contributing to the price crisis.

Another, for example, is a partnership with the International Food Policy Research Institute to develop a warning system that predicts upcoming market volatility and instability.

“For many of the other actions, we need resources, and mobilising those is an important part of the next few months’ work for us,” Sette says.

“We will also work to better address how to directly involve more growers’ associations, alongside the governments the ICO represents and large private sector companies we have onboard. This is a big challenge because these are usually structured on a national level, so we have to reach out individually in every country.”

2020 hindsight
In 2020, uncertainty over supply problems and consumption declines due to COVID-19 dealt coffee farmers with fluctuating and volatile prices. However, even at their high points, Sette says it meant little benefit to producers.

“Coffee prices were very volatile at the beginning of the pandemic, going up and down very fast. Since then, the volatility has dropped somewhat, but in truth, the prices were still operating in the same range they’ve been in over the last couple of years,” Sette says.

“COVID-19 has created an unprecedented situation, with impacts on both production/supply and consumption/demand. In terms of production, the coffee sector has shown its resilience and ability to adapt. The question is much more on the impact on demand – I see several reports that expect the out-of-home segment to not fully recover until 2022.”

Despite this, Sette believes coffee prices could see an uptake in the near future, even if it’s not to sustainable levels.

“In late-November, early-December, we heard news about possible impacts on the Arabica crop from the drought in Brazil and hurricanes in Central America. These kinds of events tend to be supportive of prices,” Sette says.

“My evaluation is there is not much downside to prices, and if the impact on the crop is significant, we might see some price increases, mainly in Arabica coffee.”

Much of the ICO’s analysis of the coffee value chain from last year – through COVID-19 and in relation to prices – will be published in its 2020 Coffee Development Report. The ICO intends to release the second edition of its flagship economic publication in January.

“It’s interesting work and will add to the discussion on all of these factors,” Sette says.

He adds the ICO’s work and consultation over the last two years has made it clear that the coffee sector is facing challenges beyond the capacity of either the public or private sector to deal with on their own.

“We have to work together and this is where the ICO can play an important part as an honest broker where all parties can come together,” Sette says.

“Many of the issues we are dealing with are deep seated, structural problems. There’s no one simple solution and it will take time. We have to be realistic and the timeframe is years, not months.”

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