Coffee Traceability and sustainability across the coffee value chain
Coffee, one of the world’s favorite beverages, has been around for centuries. Legend has it that around the 9th century A.D., a goat herder in the Ethiopian plateau discovered the coffee plant. He noticed that his goats were unusually energetic after consuming the red berries from a tree. From its humble beginnings in Africa, coffee has come a long, long way.
As the coffee bean traversed across the Arabian Peninsula, crossed over to Europe, overthrew tea in America, and then conquered Asia, it makes even the Crown’s vast conquests seem diminutive.
The journey to Indian soil was via Baba Budan, a Sufi saint from Yemen, in 1670. The initial records show that coffee was planted in Chikmagalur, Karnataka, at the time, and since then, it has spread across the South of India.
It is quite a paradox that while we can trace the origin of coffee hundreds of years ago, we are unsure of the source of the coffee in our cups each morning. Every bean has a story, and we owe it to our consumers to tell them the entire tale of the journey from the crop to their cups. This is easier said than done.
The coffee industry is booming, and is the largest agricultural commodity traded globally, surpassed only by crude oil and precious metals. The retail coffee industry, in the U.S. alone, is worth $18 billion annually. The global market projects to grow at a CAGR of 6.7% by 2025. Coffee consumption is estimated to be around 2.2 billion cups a day.
What makes this beverage one of the most traded global commodities is the enormous global demand for it. The newly associated health benefits from moderate coffee consumption have been a significant demand accelerator. Apart from this, coffee has become increasingly popular among young adults.
A staggering 55.6% of 16-25-year-olds choose coffee as their favorite drink, while 24.1% of 18-29-year-olds want to try different types of coffees, coffee recipes and want diversity in the coffee industry.
Emerging countries like China and India see a rise in coffee shops and cafes due to the association with coffee as a status symbol. Instant coffee products are also on the rise, caused by consumers’ fast-paced lifestyles, which has led to the demand for more convenient forms of coffee that can be prepared in minimal time.
Still think it is relatively simple to trace your coffee origin comes from?
To answer if coffee traceability is possible, let us dive a bit deeper into the long list of processes, risks associated with coffee production, and the complex coffee value chain.
Coffee Value Chain – Process & Risks
The coffee value chain involves numerous processes to transform it from bean to cup.
- Processing & Milling
- Packaging & Transporting
A lot of factors need to be taken into consideration during coffee production. There is a critical dependency on climate, soil type & fertility, seed quality, topography, inter-plant spacing, manure, and water requirement for the cultivation stage. Harvesting is mainly done manually and is a time-consuming process.
Post this, the beans are processed, hulled, cleaned, sorted, and graded before shipped domestically or internationally. At the roasting stage, the intensity needs careful deliberation since it can impact the final output’s flavor, color, and aroma. Subsequently, the beans are then segregated by type, then packaged and transported to retailers, cafes, and in some cases, to the end consumers too, and might require to be ground and filtered, as per demand.
The entire process is lengthy and involves many stakeholders, resources, and a whole lot of coordination across countries and parties to get you that one cup of Joe.
Added to this, the industry is plagued by multiple risks:
- Approximately 12.5 million Smallholder farmers in remote tropical regions produce 70% of this coffee, holding less than 5 hectares each. Since most of the produce is sourced from smallholders, even large corporations need to source the coffee bean and coordinate with hundreds and thousands of farmers to get a substantial amount of coffee beans.
- There are several players across the value chain: coffee farmers, cooperatives, coffee millers, exporters, importers, roasters, suppliers, retailers, and contractors. This amounts to approximately 100 million people are involved in the E2E coffee value chain.
- The coffee quality has a huge list of dependencies that are not uniform across the value chain players. Area of origin, soil, topography, climate, altitude, processing type, bean type: Arabica or Robusta: all affect the farmers’ quality and income.
- Logistics and inventory issues across the industry prove to be a significant chink in the value chain due to the complexity of the market size and the number of players.
- According to the Water Footprint Network, the average water footprint of a 125-milliliter cup of coffee is 132 liters. Unprocessed waste from coffee mills that use the wet processing method can also enter surrounding water bodies, contaminating them.
- Lack of sufficient information about best practices often results in incompetent post-harvest handling, leading to contamination, spoilage, or even exposure to diseases like red-berry & coffee wilt, resulting in a loss of quality that can be averted.
- Farmers and Collection houses are often blind-sided when it comes to the quantity of their produce that was certified for sale and the percentage of their produce that was sold.
- Coffee farmers often get only a tiny cut of the actual revenue that the end product receives, often even unable to take care of production costs. This leaves them depending on contractors for most processing since they cannot afford the necessary equipment.
- Coffee producers, exporters, processors, contractors are all impacted by price instabilities, albeit in different intensities. On a similar note, farmers are the most challenged when it comes to availing credit facilities due to the high interest rates at which they are offered. But players in the coffee value chain closer to the end-consumer benefit from accessing credit facilities from the same lending institutions.
To truly visualize the coffee market, imagine an intricate web with multiple knotted ends. More often than not, this makes communication progress across the end-to-end value chain complicated to track and value hard to measure.
Can Coffee Traceability address the risks of a complicated coffee value chain?
To answer the question posed earlier about the simplicity of tracing the coffee bean: with a Traceability solution, it CAN be easily done. Traceability allows companies to track and record the movement of produce through every production stage, from cultivation to the end consumer, through technology solutions.
In the agriculture industry, players across the value chain can identify and trace raw materials, processing related inputs, packaging, and the entire journey. The coffee industry faces many challenges due to its complexity and size of operations. Let us look at how Traceability can address these issues for each of the involved players.
- Farmers & Producers
With Coffee Traceability, farmers can access detailed information about their produce across the value chain. They are also privy to best practices, relevant market information, and opportunities that help improve the quality of produce. Communication of supply and demand also takes place in real-time, enabling them to plan their batches. Since Traceability enables sustainability, which brands can claim with pride and charge a premium, this, in turn, raises the prices the smallholder farmers get for their crops.
Coffee Traceability also creates recognition for farmers who produce top-quality seeds and can trace the end journey to consumers in different countries. The most significant outcome for farmers is that this transparency significantly improves their scope for fair compensation and strengthens their credit claims from cooperatives/commercial banks.
- Processors, Roasters, Millers
Coffee Traceability brings uniformity to a great extent since inputs like water, temperature; drying time are regulated. This drastically lowers the chances of wastage or the produce being rejected for sub-standard quality. It also enables roasters and distributors to provide comprehensive information to the next actor in the value chain about the coffee they are purchasing and provide proof of product quality. Processors can interact more efficiently with the rest of the value chain using comprehensive, real-time data access.
- Traders, Exporters & Importers
Data related to productivity and quality is captured and aggregated on a single application by field staff, allowing traders to control which farm batch is assigned to which customers. Coffee Traceability also will enable exporters to verify their sustainability and quality claims while ensuring compliance with existing regulations. Such verified data help expand export opportunities with even the most challenging markets.
In addition, traders can identify and recall targeted products that are damaged during shipment promptly, reducing losses that would have been incurred if all batches were destroyed.
Brands can use Traceability to have a real-time view of their coffee’s origin and end journey, ensuring compliance with regulations and sustainability assurances. Traceability also gives brands a competitive advantage since 50% of consumers are willing to pay a higher price for products with a positive social and environmental impact on the supply chain. In comparison, 34% of consumers aged 16-24 would pay an extra 20% or more for an ethically sourced product.
Providing Traceability makes brands more appealing to global consumers and eases acquiring additional accreditations and labels.
Consumers across the world are increasingly interested in the origin and journey of the products they purchase. They are even willing to pay premium prices for ethically sourced, environmental-friendly, quality coffee. Traceability helps meet this demand by providing end-to-end transparency to end consumers since the entire voyage of the product is recorded and compliant with sustainability goals and regulations.
A traceability solution aids end-to-end transparency and efficiency. This can significantly help brands reduce their carbon footprint and take a step closer to sustainable operations. One way this is facilitated is by documenting and regulating the raw materials that are used during the cultivation and processing stages. That includes water, energy, and fertilizer consumption. Another route is recording the impact from the disposal of contaminated and damaged produce and product disposal by the consumer at the end of the product life cycle.
Mapping the bean to cup journey
Coffee Traceability solutions will keep evolving with technology. There are solutions to trace the end-to-end journey of the bean that can solve many of the risks mentioned earlier. Above all, it helps businesses produce Sustainable Coffee. Aligning to many of the United Nations Sustainable Development Goals is possible and more manageable by making the value chain as transparent as possible.
Adopting traceability technologies, directly and indirectly, improves resource efficiency by training farmers in sustainable agricultural practices. Climate action, Good Health, and Well-being, Responsible Production & Consumption are achievable goals because these systems create the foundation for reporting performance related to sustainable practices.
Here is where we fit into your value chain. TraceX is transforming the agriculture industry with product traceability solutions based on blockchain technology. Our service enables end to end transparency, supply chain optimization and helps businesses meet compliance standards.