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Coffee traders waking up to sustainable practices

Laurie Budgar

April 24, 2008

4 Min Read
Coffee traders waking up to sustainable practices

The world's two largest coffee trading companies have agreed to promote sustainable coffee production worldwide. The move is widely seen by the industry as a favorable, just-in-the-nick-of-time development. Coffee, the world's second-largest commodity (oil is first) has seen dramatic price cuts in the last 10 years, which threaten to impoverish the 25 million families worldwide who depend on coffee exports for their livelihoods. Environmental and socioeconomic advocacy groups attribute the slump to high-volume, profit-driven farming practices.

Coffee is traditionally grown under shade trees at high altitude, producing a varietal known as arabica. Technological advancements in recent years have led developing nations to grow lower-quality robusta coffee more cheaply and more efficiently at lower altitudes. While this would seem desirable as a business approach, it requires clear-cutting of tropical forests and results in magnified soil erosion and greater run-off of fertilizers and pesticides. It also creates a glut of supply that has driven the commodity to its current price of about 59 cents per pound.

The World Bank, headquartered in Washington, D.C., has said that coffee prices last year reached their lowest point in 30 years and, in inflation-adjusted terms, hit their 100-year nadir in 2002. "In almost all coffee-producing countries, such prices are unable to cover production costs and have led to serious social and economic problems, including increased poverty, indebtedness and abandonment of coffee farms," says a report on the group's Web site,

Vietnam, the world's second-largest coffee producer after Brazil, said in late May that it would destroy one-fifth of its coffee plantations by 2005 in an attempt to reduce worldwide inventory and raise prices. Vietnam exploded onto the coffee scene a few years ago and, using cheap labor and chemically intensive farming practices, has surpassed even Colombia in coffee production.

The Rainforest Alliance, a New York-based nonprofit conservation group, is just one of many international development and lending groups seeking to implement fair-trade and sustainable practices in coffee production. "Everybody is coming up with their own sets of standards and verification systems," said Sabrina Vigilante, marketing director for the Rainforest Alliance. By signing memorandums of understanding with Switzerland-based Volcafe Group and Germany's Neumann Kaffee Gruppe, the Rainforest Alliance hopes to bring a more unified effort to the coffee crisis.

Together, Volcafe and Neumann dominate about 25 percent of the global coffee-roasters market. "They are an entrée to large coffee roasters," said Vigilante. She said recent media pressure has led roasters and traders to seek out sources of sustainably developed coffee. "Big companies often don't know where a product is sourced," she said. "We give them traceability and transparency in the supply chain. They can trace it back to the farm." The Rainforest Alliance will play a crucial role in matching farms using sustainable practices with roasters looking to support them.

In compliance with their memorandums of understanding, the traders will consult with growers on best practices and work to create guidelines for sustainable farming practices. They also intend to develop co-branding and marketing agreements. Once coffee farmers see that environmentally sustainable practices are also sustainable in economic terms, fewer will be tempted to use chemicals and other factors that drive down the price of coffee.

Retailers who choose to carry sustainable coffee may have to educate consumers about why they should pay more for their daily cup o' joe. But natural foods retailers are likely to find that their consumers have a conscience and will gladly pay the premium to offset poverty and rainforest destruction, said John Roberts, president of the National Association for the Specialty Food Trade. "A significant portion of the population, possibly as high as 30 or 40 percent, would pay a reasonable amount more, and another 10 to 15 percent would pay substantially more for fair-traded coffee, according to the information I've seen," Roberts said. "This [corresponds] with what we know about other products that have some kind of a claim, be it kosher or natural or organic or ... having some aura, image or actual identity of being better because of the materials or processing or packaging."

Coffee, in particular, is ripe for that kind of distinction, said Roberts. "In a field like coffee, which is very large with a large base of consumers, you're going to find a significant number of people willing to pay more, and the differentiation that this could cause would certainly make it a worthwhile effort."

Natural Foods Merchandiser volume XXIV/number 7/p. 7

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