A common desire and a passionate line of questions always seems to come up in introduction to roasting classes. They will ask, “How can I get started with Direct Trade?”
The answer is usually pretty clear: DON’T!
That may sound a bit harsh, but it may be the advice that saves their business. They would then ask a follow up question, “But I want to help change the life of a farmer and tell their story to my customers. Why shouldn’t I do that?”
The answer is usually pretty clear: YOU SHOULD!
These are not contradictory answers, they are uninformed questions. This article, I hope, will explain the best way for a roaster to meet the goal of helping farmers, telling their story, and remaining profitable so they can continue to do it more than once!
If you take a distant view of the supply chain it looks pretty straightforward: Farmer – Mill – Exporter – Importer – Roaster – Retailer. With this simplistic view it would be easy to jump to the conclusion that if one were to get on a plane, fly over to the farm, shake hands, write a contract and bring the coffee home, you could cut out all of the expense of those greedy guys in the middle.
The problem is twofold: First, it doesn’t actually work that way. Second, it will cost you 10 times more to do it that way!
A closer look at the supply chain presents an inefficient, convoluted, confusing array of tribal relationships, border and customs laws, and bad roads. And yet, over the decades, there IS a system, and it works for each area the way it needs to for their circumstances.
An Example: In North Sumatra around Lake Toba, five groups of farmers were asked if they could describe what happens in order to get their coffee to the exporter in Medan. There were five different answers and none of them made really any sense at all to someone trying to find efficiencies in a system. The ‘average’ answer went something like this. “First, we pulp the coffee at the farm. Sometimes we ferment the coffee in buckets. The coffee is put in a bag and placed by the road where someone will come collect it. Sometimes that is the same day, sometimes not. Then the coffee is sold to a company that has a big truck, and my coffee is mixed with many others. The truck people sell it to the collector, who is buying several trucks worth of coffee and then they start drying it on the patio. The coffee gets to about 14-18% moisture content and then it is put through the huller to get the wet parchment off. That company puts it in a really big truck and then sells it to an exporter in Medan. The entire process usually takes a couple weeks. The exporter finishes drying the coffee, sorting it, and gets it ready for sale on the open market.”
When asked why they don’t just take it to the collector themselves the answer was usually something like, “The guy that owns the truck is my cousins husband.” And there ends the attempt at finding efficiencies in the system.
The question that needs to be asked here is how would a direct trade work? Do you now drive up to the farm and get wet parchment? What do you do with that? If you buy from the collector, how do you trace the coffee back to a farmer to pay him more and tell his story? You can’t.
This example may seem extreme, but it plays out similarly all over the world. MOST farmers pick cherries and either sell cherries or parchment. They don’t sell green beans and therefore that ‘Direct Trade’ has to be defined differently. You won’t know the circumstances until you go there and find out. This can be expensive to do!
Let’s assume for a moment you are committed to this Direct Trade concept. Here is what you are in for:
1) Hire a dedicated employee that won’t get divorced because she is flying all over the world and on the road 45-50 weeks in the first year and more than 20 weeks per year thereafter.
2) Travel expenses for being on the road 45-50 weeks per year travelling to 20 different countries.
3) Cash to buy 12 month supplies on-the-spot from the farmers.
4) Money to air freight the coffee out and another ½ time employee to deal with government regulations and insurance to bring the coffee on shore.
5) A warehouse space to store a year supply of coffee or rent space from another warehouse.
You get the idea. The average assumed cost for each origin is 2 weeks of time and $10,000. If you have 25 origins that is $250,000.
OR YOU COULD BUILD A RELATIONSHIP WITH AN IMPORTER!
Importers have a staff of people that deal with this on a daily basis, cover all the growing areas of the world, AND they will have both samples and stories available for you to use. When you have enough people to split up the work and cover more countries, areas, and farms, you will end up with opportunities not remotely possible to you even with a dedicated employee.
This is not even the highest value for you. Possibly the best thing they do for you is to absorb the risk and hassle of moving coffee from origin to you. They deal with the coffee that gets in the container that doesn’t match what was supposed to be in it. They deal with the insurance claims due to a ship that sinks in transport. They deal with the Port Authority and homeland security that rip open the bags looking for drugs and bombs.
You don’t realize any of this because they are doing it for you. They are your most valuable employee and you don’t even realize it. They save you $250,000 per year.
Is this a direct trade? Not really. Can you know who the farmer is and tell their story? Yes. Is the farmer going to get rewarded for this? Yes. Your off-the-books-employee will make sure of it!
Rocky Rhodes is an 18 year coffee veteran, roaster, and Q-Grader Instructor, and his mission now is to transform the coffee supply chain and make sweeping differences in the lives of those that produce the green coffee. Rocky can be reached at