Global Coffee Platform (GCP), IDH, and Solidaridad have commissioned a series of studies exploring the distribution of value in the coffee supply chain.
Conducted by independent firm BASIC using current public data from the German coffee market, ‘The grounds for sharing; a study of value distribution in the coffee industry’ reports a disconnect between farmer and consumer prices.
BASIC devised a model to estimate the distribution of value along coffee value chains. This included data on costs, taxes, and net profit margins, from coffee farmers in Brazil, Colombia, Ethiopia, and Vietnam to retail customers in Germany.
Showcasing the value created at each stage of the supply chain not only provided insights and outcomes for the report, but also a starting point to consider additional ways to work on farmer prosperity.
According to this research, value is often concentrated away from farmers and further down the supply chain to importers and retailers. It goes on to detail that labour, the largest share of farm costs for smallholders, is often underpaid and undervalued.
“Current value distribution makes coffee production economically unviable for most farming families and the planet,” says Annette Pensel, Director of Global Coffee Platform.
“This challenges the ambition of the coffee industry to become sustainable. We invite the coffee sector to rethink the value system and act collectively to secure its future.”
The organisations behind the report are encouraging coffee companies to explore procedures for alternative value distribution and agree on common trading principles, with the aim of positively impacting farmer incomes.
With a shortage of mechanisms within the industry to address the problem, it is hoped the findings will initiate action from the sector in securing commitments from coffee companies to enable better value distribution.
Director of Agri – Commodities IDH Tessa Meulensteen emphasises the importance of redistributing value for the future of the sector.
“Two key interventions are needed: sector commitments on sourcing practices that enable value redistribution, and supply chain partnerships that design and implement mechanisms for adding, creating, and transferring value,” she says.
“With the right mechanisms, companies can more easily comply with due diligence and reporting requirements and ensure a sustainable supply of coffee in the long run.”
Going forward, Global Coffee Platform (GCP), IDH, and Solidaridad will seek alliance from industry leaders to take part in discussions with a commitment to establish value distribution principles that account for the diversity of farmers and origins.
For further details, you can read the full report here.
