Global Coffee Platform (GCP), IDH and Solidaridad have commissioned a series of studies examining the distribution of value in the coffee supply chain.
The study “The Grounds for Sharing: A Study on Value Distribution in the Coffee Industry” conducted by the independent company BASIC based on current public data on the German coffee market points to a discrepancy between prices for farmers and consumers.
BASIC developed a model to estimate the distribution of value along the coffee value chains. This involved using data on costs, taxes and net profit margins from coffee farmers in Brazil, Colombia, Ethiopia and Vietnam to retail customers in Germany.
By mapping the value creation at each stage of the supply chain, it not only provided insights and results for the report, but also provided a starting point for considering further ways to promote farmer prosperity.
This study finds that value creation is often concentrated not on farmers but further down the supply chain with importers and retailers. It also details that labour costs, which represent the largest share of agricultural costs for smallholder farmers, are often underpaid and undervalued.
“The current distribution of value makes coffee production economically unviable for most farming families and the planet,” says Annette Pensel, director of the Global Coffee Platform.
“This challenges the coffee industry’s claim to sustainability. We call on the coffee industry to rethink its value system and act together to secure its future.”
The organizations behind the report encourage coffee companies to explore alternative value distribution processes and agree on common trading principles with the aim of positively impacting farmers’ incomes.
Given the lack of mechanisms in place within the industry to address the issue, it is hoped that the findings will encourage the sector to take action to obtain commitments from coffee companies to better distribute value.
Tessa Meulensteen, Director of Agri – Commodities IDH, stresses the importance of value redistribution for the future of the sector.
“Two key actions are needed: first, the commitment of the sector to adopt procurement practices that enable value redistribution, and second, supply chain partnerships that design and implement mechanisms for value creation, value creation and value transfer,” she explains.
“With the right mechanisms in place, companies can more easily fulfill their due diligence and reporting obligations and ensure a sustainable coffee supply in the long term.”
Going forward, Global Coffee Platform (GCP), IDH and Solidaridad will seek to partner with industry leaders to encourage them to participate in the conversation and commit to establishing value sharing principles that take into account the diversity of coffee farmers and origins.
You can read more details in the full report here.
