Demystifying the value chain

Opening the black box for a sustainable coffee future

Supplying more than a third of the world’s coffee production each year, developments in Brazil have the potential to affect coffee markets worldwide. And due to its sheer size as a coffee producing powerhouse, the country has earned – rightly or wrongly – a reputation for quantity over quality. But the reality on the ground is a different picture as producers respond to market pressures by setting their sights on specialty, rather than a race to the bottom.

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Henrique Dias Cambraia, the current generation of a century-old family tradition and Head of Fazenda Samambaia is one of the early pioneers of specialty coffee in Brazil. In 1999, he established San Coffee with a focus on scaling up quality to add value for members of Santo Antônio Estates by expanding and upgrading its production and processing facilities.

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Today, San Coffee represents twenty co-operative members who collectively produce more than 200,000 bags of coffee each year. Utilising these economies of scale, San Coffee now has a state-of-the-art milling and warehouse facility in the heart of the coffee producing region of Minas Gerais. Many of its members have earned a reputation for achieving national and international recognition in the Cup of Excellence competitions amongst other categories.

General Manager of San Coffee, Fabrício Andrade, says that as the global market reaches an inflection point where demand begins to outstrip supply, a focus on sustainability will help to drive future trends in the coffee industry: “Although knowledge is our biggest asset it is widely spread and easily accessible. Using advances in science and technology to become more sustainable will play the most important role in the shift from the third to a fourth wave movement in coffee”, he predicts.

In response to the challenges of a changing climate, tighter operating margins and rising expectations around quality each year, San Coffee have now shifted their strategic direction to working towards achieving greater sustainability in their business and production practices.

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“Improved farming techniques, research into varietals, processing methods, logistics and more effective and efficient management systems; our principle is to keep ourselves in a state of progress so that we can continue to reduce costs and provide a great service,” he adds. “We believe that good business relies on sustainability and transparency. That’s why we need to look at how the value is distributed along the supply chain. If we are able to convince the consumer to purchase a coffee at a higher value, then we need to offer the consumer a coffee that is higher quality through good farming, harvest and post harvest techniques – while traceability individualizes the coffee lot that gives recognition to the producer”.

Fabrício goes on to highlight another challenge in specialty markets: “Certification is a good thing but consumers want to go beyond that. Even if you want to trade directly there is too much paperwork and many roasters don’t have the time to handle the logistics. That is why our partnership with algrano is a perfect fit as transparent trade will be the backbone of a sustainable value chain of the future”.

Although it may be uncomfortable for many intermediaries along the supply chain, Fabrício insists that opening this ‘black box’ on special interests in the coffee trade is necessary for this change to happen. “Everybody is talking about it,” he says, “we can’t escape the downward pressure that the big coffee companies are pushing on growers to improve yields, but we are reaching the biological and physical limits. Change is happening so fast, and we need to adapt if we are to continue to add value to our growers.”

One way that San Coffee is doing this is through their Beyond Borders project that aims to offer the same model it offers its members to other like-minded growers in neighbouring regions. The initiative provides training to help support producers with the practical knowledge to improve quality and productivity, while providing a service during and post-harvest. This can range from the milling, drying, and quality control, to other crucial aspects of the supply chain such as documentation, warehousing, container loading and providing finance to producers.

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João Marcos, a producer from the Small Growers Association (AFASA) in Santo Antonio do Amparo, who participated in this project, says: “The new opportunities provided through this business platform allow for a direct transfer of added value to the producer. This has real impact on our capacity to reinvest in the farm and therefore stay in coffee growing for the long-term”.

Fabrício concludes by adding that algrano is the first service provider to open the ‘black box’ for buyers: “We approach, motivate and empower growers to produce quality consistently as a single origin, helping to tell their stories to specialty buyers through platforms like algrano. Through a mindful connection and different approach to business through transparent relationships, we can help to open the black box for them. That’s how we convince the consumer why transparent trade helps to distribute value more evenly throughout the supply chain – and ensure this extra value reaches the growers”.

 

This article was commissioned by algrano for the blog series Demystifying the Coffee Value Chain

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Demystifying the value chain

We are what we drink

Although times have changed since his grandfather and father ran a coffee house more than three decades ago, Honorio Garcia Delgado of Cafetaza has became one of the early pioneers in specialty coffee in the Basque country capital of Northern Spain, Vitoria.

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“My father taught me about coffee culture”, says the current Spanish Barista and Micro-roaster Vice-Champion. “In Spain, we still drink torrefacto coffee and robusta – a lot of robusta. Yet, thirty years ago my grandfather and father had cafés and would only serve 100% arabica coffee, nothing else. This paved the way for my life in coffee”.

Honorio followed in his father’s footsteps and opened his first cafeteria at the age of 19 before taking up the craft of roasting. “When I started to roast nine years ago on a small 2kg Toper, the experience was very positive”, Honorio adds. “I was roasting in public so that my customers could see it, and they loved it.”

Encouraged by the positive reaction that he received, the 43 year-old started his first specialty coffee project called Cafetaza; a third wave coffee shop where he has been roasting specialty coffee on a small scale for customers and retail: “I now work with all the coffees myself; from finding green beans providers, developing the roast profile, and production roasting. In the last year, my second project is a coffee lab called Trike Koffee Roasters with the addition of a 6kg capacity Jensen. This allows me to roast coffee in larger quantities and we are now roasting approximately 60kg per week”.

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His intense focus on quality and a desire to compete at a national level for a number of years has brought Honorio into the orbit of the SCA and Spain’s own coffee association – Forum Del Café – where he actively contributes to the organisation of coffee championships in the country each year. Honorio cites coffee roasters, Emilio and Marisa Baque, as instrumental in helping him to hone his craft and understand quality control better.

“I’m directly involved in coffee professionally and personally so it is important to work with others to enhance quality – and the one thing that I want to develop is higher quality. I don’t want to roast commercial grade coffee and I don’t want just good coffee – I want to have the best coffees. That is my quest. At Trike Koffee Roasters, we firmly believe in changing coffee quality in spain and we believe that education is the key to improving this”, he comments.

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As a specialty roaster and coffee shop owner, Honorio’s recent trip to visit coffee farms in Colombia has ignited his interest in direct trade. Although he regards the geographical distance from origin as a barrier to fully understanding the value chain at the production level, he sees this as an opportunity to learn more and reach the grower directly.

“My limitation is that I’m not a grower. But I want to get closer to origin so buying green coffee and roasting it allows me to understand much more than if I was simply buying simply roasted beans and brewing it. When it comes to roasting, I dedicate myself to the cup quality, to fine tune the device and  reach a certain quality. It’s a game that makes me alive and professionally; it gives me very good sensations so of course I love it!”

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His Colombian field trip has been an eye-opener and he has already committed to collaborate with a producer directly: “I realised in Colombia that there are problems with the payment to the growers. They get about eight percent of the cup’s value. This means that the supply chain has to better share the value. I now have an agreement with a producer to commit to buy her entire production of six bags in order to help stabilise her finances. We will also help her to set up a mill”.

Pleased by its ‘impressively strong’ chocolate flavours in the cup, Honorio also recently bought a naturally processed Costa Rican coffee from Finca El Chayote through the algrano platform which he describes as a ‘triumph’ for his customers. It is a purchasing decision that has already helped Honorio to meet his goal of collaborating more closely with growers as he seeks out more transparent trade relationships in Costa Rica, Colombia and elsewhere.

When considering the prospect of offering more delicious coffees through direct, transparent trade, he turns his attention back to Vitoria: “Cafetaza is a place with a lot of demand. It has already raised attention because we do things differently. People in Spain are used to bitter-tasting coffee, especially torrefacto which is bad quality. Things are getting better but there is still a lot of work to do”.

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However, Honorio remains philosophical in his outlook: “Somos lo que comemos, y somos lo que bebemos (we are what we eat, and we are what we drink),” he concludes. It comes as no surprise that many Vitorians will be happy to raise a cup of coffee to his specialty approach to philosophy in life.

 

This article was commissioned by algrano for the blog series Demystifying the Coffee Value Chain

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Demystifying the value chain

Tim Tim makes a direct comeback

When Dutch traders introduced the Typica cultivar to Indonesia in the 17th century, coffee production underwent a rapid expansion. This was aided by a particularly favourable microclimate near the equator and mountainous regions across its many islands. But in the late 1880s, disaster struck when coffee leaf rust swept through large swathes of the country; virtually wiping out the varietal with the exception of the higher slopes of Sumatra. In response, the hardier Robusta coffee plant species was cultivated in much of the low-lying regions and the species flourished to account for nearly three-quarters of the Indonesia’s total coffee total coffee production today.

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However, standing tall amongst the twenty or so varieties that have been introduced over the centuries and are still grown commercially in the country, there is one varietal that can be described as uniquely tied to Indonesia’s rich coffee heritage. Discovered on the island of Timor in the 1940s, Hibrido de Timor – or more affectionately known as TimTim – is a natural interspecies cross between c.arabica and c.canephora (Robusta).

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Known for its resilience to coffee leaf rust and characteristic bold cup profile that makes an excellent complement to high acidity coffees, TimTim has become a preferred ‘parent’ plant for many other hybrids. It’s genetic resistance to disease is widely acclaimed by scientists, botanists and producers who regard it as a hardy and a high yielding crop.

Geologist and Founder of Pinesia coffee estate, Gary Sjafwan, began cultivating Hibrido de Timor himself when he was researching the geological features of Java nine-years ago: “I love nature”, he says. “I like to experience the forest, go hiking, and see how growing coffee is also making a better life for the earth. I started planting coffee in Java and Sumatra and was interested in not just the coffee itself; but how the culture in every region is different, just as the character of the people and the way farmers grow it is also different”.

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The estate now comprises of more that 800 smallholder farmers across Sumatra, Aceh and West Java who have joined forces to achieve greater economies of scale as they seek to access specialty coffee markets worldwide under the umbrella of Pinesia Family Estates.

As demand for Hybrido de Timor outside Indonesia increases, their production of 700 tons in Sumatra is now dedicated to the sole cultivation of TimTim for both commercial and specialty customers. Although the bulk of their shade grown coffee is washed, fermented for ten hours and double soaked, they also have the facility to offer natural process sun-dried coffee in small quantities.

This stable supply of coffee cherry has provided a bedrock for the estate to branch out into further research and development into other varietals such as the Dutch-introduced ancestral Typica, Maragogype, including the addition of a nursery dedicated to the production of Geisha. Gary says that their research facility on the 100-hectare farm in Flores is a planned effort to meet demand in the specialty coffee segment across Indonesia and further afield.

“The specialty market in Indonesia is increasing but our main target is to sell coffee outside of the country. For commercial markets, we want to keep our our quality stable as we expand the farm into specialty areas,” Gary adds.

A chance meeting with algrano at World of Coffee in Budapest earlier this year has already born fruit and a promising partnership now means that the Estate’s Typica and TimTim, amongst other varietals, is now directly available to specialty coffee roasters in Europe. It is also the first offering of coffee from Indonesia on the transparent trade platform.

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This new offering – a quality product of hundreds of smallholder growers represented by Pinesia Family Estate – is yet another opportunity for producers to command a fair price for their coffee that is helping to support their families and communities: “We are not just growing the coffee itself, we are growing the community in the coffee farms – it is the farmer and his family that is our biggest asset”, insists Gary before confidently adding: “Indonesia is a big country and we have a lot of different flavours depending on the character of each region. There is no good or bad coffee, mistakes only happen in the process after harvest. That is why we are taking steps to be consistent in our processing to bring out the unique character of our coffee in every cup”.

This article was commissioned by algrano for the blog series Demystifying the Coffee Value Chain

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Demystifying the value chain

Digital dialogue in transparent trade gathers steam

To catch a glimpse into the coffee value chain of the future, let’s take a quick look at some of the pioneering developments that are dramatically reshaping the landscape today. In a digital age of big data, powerful algorithms, just-in-time logistics and more interconnected communities globally than ever before, a revolution in coffee is taking place – and it is gathering a powerful head of steam.

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In a climate of consolidation where eight major trading houses now control more than half (60%) of the world’s coffee bought and sold on the global market, there has been a tectonic shift in the supply chain that now seems unstoppable. Driven by the power of digital technologies fuelled by increased consumer demand, a new era of transparency and traceability is changing the conversation about coffee.

In the eighties, there were lots of agencies in the supply chain so roasters had very little idea of coffee production at origin. The traders offered coffee on a delivery basis to the factories from the warehouse, not necessarily from the farm gate. The internet changed all that and opened the door to establish direct contacts at origin built on trust; and above all, coffee is about trust.

Behind the macro-trend of consolidation in bulk markets, specialty coffee has been confidently moving in the direction of craft beer. A new generation of customers want to know the story behind the single origins and they demand greater sustainability which means fair prices at the farmer level. They want to participate at a deeper level and have confidence that their coffee is traceable and traded transparently.

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No one can dispute that digitization is laying new tracks in the way physical coffee is being traded; particularly in specialty markets where price is largely disconnected from the world market and provenance is highly prized.

This shift that we are seeing in the supply chain will change the role of traders. As growing transparency in price and pressure on margins increases, traders will become more like data analysts as roaster’s search for the most cost efficient and transparent system to buy and market their product. Service providers such as algrano with digital platforms that connect the buyer and seller directly are challenging the way coffee has been traditionally traded.

And as the third wave in speciality coffee roasteries and independent coffee shops continues to gather pace, the mainstream market is now paying more attention to the journey from the crop to cup. Through its award-winning platform, algrano is responding to this need by helping to bridge the gap between growers and roasters. The platform also helps to overcome the enormous logistical challenges and risks of moving large volumes from one continent to another.

Whether it is a micro-lot or a full container’s worth of green coffee, growers want access to an open digital market space where they can sell their coffee online to the world. They want to tell their story and show their varieties or processing methods to potential buyers. This awareness is empowering greater knowledge sharing as producers can now compare directly with their neighbours – or even other countries. Technology is underpinning these new capabilities as people at both ends of the value chain have the tools to access more information and become more informed.

The head of steam in the engine room of the coffee trade is building, and story is moving. It’s about access to quality, transparency and traceability for roasters and new markets for producers. For a fairer and more sustainable value chain, this is definitely the direction that coffee needs to go. Since algrano was launched at World of Coffee in Gothenburg in 2015 – when we scooped an award for tech innovation – the online community has now grown to represent more than 400 growers and cooperatives from across ten coffee producing countries in central, south America. Over 500 roasters have joined to source coffee that is directly delivered to their door.

Next stop is East Africa and Asia as producers from Ethiopia and Indonesia plan to get on board later this year.

This article was commissioned by algrano for the blog series Demystifying the Coffee Value Chain

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