Ideally, a successful coffee industry is run with cooperation from inputs across all stakeholders: producers, processers, public sector or regulatory agencies, private sector competitors, financiers, and most importantly, the end-user consumer. A well-functioning industry will boast a value chain that maximizes efficiency by working together towards an optimal outcome or goal. The coffee value chain is no different. Collaboration amongst all key stakeholders is needed to minimize costs and maximize the quality and quantity of the final product, and to create security, stability, and structure within the industry.
As illustrated above, coffee has many stages and
channels which it passes through before getting into a cup. The first stage may
start with funding, land holdings, infrastructure, and machinery. Often times
the small farmers and small businesses do not have the necessary resources for
initial investment – they therefore are highly dependent on the public sector
or government bodies, either through direct funding, loans, or the allowances
of exemption from tariffs & duties. Without access to land which is suitable
for coffee growth, coffee farming will never even begin. Without suitable
infrastructure allowing for the safe and comfortable ‘goings and comings’ of
workers, delivery truck, etc., coffee farming would never be economically
sustainable. Finally, without subsidization of machineries, many farmers may be
unable to afford machines essential to early processing.
The same can be said of every stage along the value chain. No part functions without the other. Extra care and detail should be given to allow for a mutually beneficial relationship for all stakeholders.
Starting with governance, authorities and regulatory bodies play a crucial role in creating fair and even collaboration within the industry. This is done through regulation and standardization. The creation and regulation of industry-wide standards is one of the most essential pro-competitiveness tools that can be implemented. In fact, many aspects related to the design and formulation of standards can be expected to have positive impacts on the competitivity within the sector—particularly at the producer level. For example, standards can improve the ability of the market to communicate information and with it, the ability of individual players to compete on the basis of free-market fundamentals rather than information advantage or market placement. Similarly, it might be argued that such standards could help preserve the diversity of producers currently serving the coffee market by improving stability and productivity through improved management practices.
Coffee, being one of the most popular commodities in the world, has benefitted from a centralized body, the International Coffee Organization, overseeing the standard pricing and production quotas of coffee beans. Standardized pricing has prevented larger organizations from preying on smaller farmers. As well as limiting larger producer countries from using their greater production capacities to squeeze smaller producer nations out of the market.
Collaboration between companies—joint projects that go
beyond their usual course of business with the goal of generating significant
long-term improvement—is especially appealing for the consumer packaged goods
(CPG) industry. With COVID-scarred customers impacted by inflation and rising
prices, retailers may be tempted to shift the pain upstream to their suppliers
by passing on price cuts and pushing them to pay an increasing proportion of
expenses. On the supply side, however, manufacturers are finding it
increasingly difficult to absorb extra expenses as variable material prices
compress margins and the marketing effort necessary to differentiate branded
products from private-label competitors rises.
The final price of the product has tended to mostly
benefit resellers, roasters, and retailers. Whilst they do handle a greater
share of the investment costs, producers are barely breaking even.
Collaboration should also entail a willingness to pay producers a consistently
higher cost. Making the work gainful for producers is an integral part of
future-proofing the industry giving producers the ability to invest in better
technology and land improvements to secure crops against hazards and increase
efficiency.
The most important part of collaborations is
communication. Fostering open communication amongst key stakeholders in the
coffee industry is paramount to any collaborative efforts. This is most
efficiently done via town hall meetings in the rural communities charged with
coffee production or industry expositions/forums. In these professional fora,
members of the industry can strike deals, discuss issues at hand, and build a
common understanding of what needs to be done to meet everyone’s needs.
In general, it is greatly advised that transparent,
multilateral discussions are continued to be had to ensure equity in
international and domestic trade. A key forum for advancing multi-stakeholder
discussions on pricing issues related to standards or other collaborative
mechanisms is the International Coffee Organization. As an intergovernmental
body, the ICO has the capacity and mandate to take decisions related to market
and pricing issues within the coffee sector at large. The ICO could conceivably
adopt, and thus validate from a competition policy perspective, measures
related to price and other standards. Collaboration is needed to protect the
more at-risk members of the value/supply chain and increase the overall health
of the industry.
Contact your local authorities, co-operatives, private
sector organizations, and/or other regulatory bodies to get involved in open
talks like these to benefit your business and the overall coffee industry!
Click here for a list of contacts relevant to your country and region.
