If you’re curious about certifications, this series is for you: Over the course of several blog posts, we’re exploring some of the existing certifications that are available for specialty green coffee, including taking a look at their mission, standards, and whatever auditing or other requirements are important for you to know. You can read the previous posts about organic, Fair Trade/Fairtrade, Rainforest Alliance, and Non-GMO by visiting cafeimports.com/blog.
Direct Trade at a Glance
Before we begin, here’s a run-down of the most commonly found aspects of a direct trade program.
The Origins of Direct Trade
The mid-to-late 2000s saw the emergence of “direct trade” as coffee-sourcing concept that was designed to be something of an evolution of the certification programs that already existed in coffee at that time, specifically Fair Trade/Fairtrade. The benefits of those certifications seemed evident—organic certs provide environmental protection, Fair Trade provides financial protection—but lacked a component that was especially significant to specialty-coffee companies: cup quality.
The three roasting companies that are thought to have pushed the envelope of direct trade were Intelligentsia Coffee and Tea in Chicago, Counter Culture Coffee in Durham, NC; and Stumptown Coffee in Portland, Ore. These three roasters were quality-driven as well as sustainability-focused, and they sought a way to capture the social and ecological components of existing certifications with something that would incentivize and reward exceptional quality. The thinking was—and largely still is—that if a producer could earn more money for better-tasting coffee, then they are able to re-invest in their farm and in their practices in order to continue improving. If the buyer continues buying from that producer, then there is a mutual investment that winds up being beneficial overall.
While each had its own vision and “personality” in the specialty-coffee sphere, these three companies shared several key aspects to their sourcing philosophies:
Counter Culture, established its internal direct-trade certification in 2008, becoming the first company of the three to create third-party verifiable standards for its own market actions. CCC released its first Direct Trade Transparency Report in 2009, and it offers a good look at what their approach looked like at that time. (Full disclosure: The person writing this blog, Cafe Imports education director Ever Meister, was an employee of Counter Culture Coffee from 2008–2015.)
To see Intelligentsia’s Direct Trade program highlights, which includes a breakdown of their fixed-pricing structure you can visit their website. Stumptown Coffee’s website, meanwhile, says that direct trade is “our way of saying ‘we’re in it for the long run,” explaining that they reserve the term for coffees they’ve sourced for at least three consecutive years, and that they also pay higher, transparent prices based on cup quality.
Well, a lot has changed in the nearly 20 years between the time these three companies popularized direct trade and where the industry stands with it today, but the one fundamental thing that hasn’t changed—and which makes direct trade different from the other certifications in our series—is that it remains globally unstandardized, and your mileage may vary from label to label, logo to logo, and “certification” to “certification.”
What You Need to Know
One of the greatest myths of direct-trade sourcing is that it quote-unquote “cuts out the middleman.” This statement seems to imply that the coffee is somehow, magically, the result of a simplified supply stream that eliminates the need for intermediaries between the farmer and the roaster, which is untrue. Coffee will always need to be exported, and it will always need to be imported: These are the types of middlemen who are necessary to the supply stream no matter who buys the coffee, from where, or how. In fact, many of The Big Three’s first direct trade coffees were sourced with Cafe Imports: We have always considered our job to be akin to playing matchmaker between our producer friends and our roaster friends, and we encourage all of our customers to develop lasting, mutually beneficial relationships with the farmers in our network. Additionally while some large roasters have the capacity to do their own importing, almost none are also able to export.
However, using the term “the middlemen” in this way does imply one of the major purposes of direct trade, which is to remove any obstacles preventing the roaster and farmer to have more close contact. Typically, that means negotiating the price of the coffee with the producer and arranging the purchase and transportation of that coffee via an exporter and importer. This is in contrast to the buying practice of looking at an importer’s offer sheet and purchasing coffee there based on cup characteristics, list price, and/or volume alone.
There has historically been a lot of skepticism around exporters and importers in the industry—and in many cases, rightfully so—due to the lack of transparency regarding price structures, a long attachment to the C-market to establish prices, and other trading strategies that were not exactly designed to put the farmer first. However, while some companies maintain that there can be no exporter/importer involvement in a direct trade relationships, your mileage may vary: Many of our customers, for instance, develop relationships with producer partners whom they have met through us, and continue to source coffee from those farmers through our channels, but on more of their own terms. We encourage our roaster partners to make long-term commitments and transparent financial arrangements with the farmers in our network, which is why we established the Resource coffee sourcing program, which enables roasters of all sizes and styles to interact with producers in a meaningful, mutually beneficial way that we see as investment into the future of sourcing.
One of the other prerequisites that many companies state for their direct trade program is exceptional quality. Historically, since the model has been based on incentivizing quality improvements at the farm level, there is a built-in expectation that the resulting coffees will be outstanding. In a perfect world, this would always be true, but the world we live in is not perfect, which brings us to one of the most significant elements of a functioning direct trade relationship: risk sharing.
The intersection of long-term relationships, a price structure based on quality, and an expectation of improved quality year after year creates a bit of a sticky situation for some roaster-producer partnerships, just due to the nature of agriculture: Sometimes, for reasons outside of a farmer’s control, the crop just isn’t as good as expected. It might be caused by the weather, a down year in the cycle of production, delays at the mill or in shipping, a dip in quality after farm renovations, growing pains for a producer—the fact of the matter is that nothing in coffee is absolutely guaranteed, regardless of the amount of work or investment that goes into it. So, what happens to the direct trade relationship if the crop one year is substandard? Does the roaster reject it and compromise both the relationship and the credibility of their direct trade program? Or do they buy it and risk turning customers off with a noticeable decline in quality?
These are the risks that roasters and producers share in direct trade relationships, and this risk-sharing is an incredibly important part of the buying model: Producers ultimately want and need reliable buyers for their coffee, and direct trade can help them find the security in a long-term partnership that eliminates the need to find new buyers every year. However, in order for those partnerships to work, there must also be an understanding of what a roaster can and can’t accept in terms of quality and price, and those terms need to be clearly communicated and adhered to by both parties.
This brings us back to the somewhat arbitrary enforcement of direct trade standards. Without credible third-party certification, there is a limit to consumers’ ability to evaluate the success or the consistency of a direct trade relationship for a given roaster, and without standardized requirements behind the “direct trade” label, two companies buying direct-trade coffee from the same producer might have completely different expectations, buying behaviors, and outcomes.
For some roasters, that lack of a standardized set of regulations and requirements has meant being able to tailor a sourcing program to meet their own needs and vision, which can be very empowering. It also means there are fewer costs associated with “becoming certified.” On the other hand, it also creates the potential for confusion to the consumer, who may or may not realize that there is no universal set of guidelines, minimums, or protections in place with coffees that carry an official-looking “Direct Trade” seal.
We have many roaster-partners who consider the relationships that they have made and maintain through Cafe Imports to be the basis of their direct-trade sourcing, and we will always stand in support of roasters who are committed to making long-term commitments and pay producers higher prices in order to create a sustainable supply stream. While there is no official auditory process that goes along with these types of business arrangements, we are happy to work with our clients to help them find meaningful connections with the farmers in our network, and can offer our assistance in setting up these transactions with them.
Again, there is no official direct-trade certification, so there is no registration form to fill out, no paperwork to submit for auditing, and no regular re-evaluations of your business practices in order to maintain this seal.
However, interested roasters can take the time to write out their own direct-trade requirements and standards, and to hire a third-party organization to review documents, write reports, and assist with upholding internal expectations for a proprietary company seal.
Is Direct Trade Coffee Better?
There is much debate about whether direct-trade coffee is beneficial to producers, and many voices raised on both sides of the argument. While we are not in a position to necessarily declare direct-trade coffee better or worse than coffees sourced through other methodologies, we do hold a few things to be true in our experience of more than 27 years of working directly with coffee farmers:
Can I sell Direct Trade Coffee?
One of the blessings and curses of direct trade is that technically anybody can sell “direct trade” coffee, but if you are committed to transparency and are interested in developing your own set of verifiable, quantifiable, and relevant standards, we salute you and we are happy to help you in any capacity that we can, toward the pursuit of a more equitable coffee industry for all.
Still have questions? We’re always happy to talk about this or any other certification and compliance! Feel free to reach out to your sales representative or e-mail email@example.com for more information.