Everything you need to know about the latest trend in sustainably-sourced coffee.
Over the last couple of decades, you may have heard the term “direct trade” come up in conversations around coffee.
First introduced in the ‘90s and early 2000s by pioneering specialty roasters like Intelligentsia, Stumptown, and CounterCulture, the direct trade coffee movement is still in its infancy. The term direct trade has yet to be adopted as an official certification within the coffee industry, but it’s applied broadly to describe a firsthand partnership between the buyer and coffee farmer. In a direct trade partnership, the buyer bypasses the middleman and works directly with the grower to decide on a fair purchase price for the beans. Central to the direct trade relationship is traceability and transparency of information, where both parties (and consumers) have free and open access to clear records of a farmers’ agricultural practices, how much coffee the farm sold, at what price, and to whom.
Because the direct trade movement is so young, there remains some confusion and cynicism surrounding the term. To help clear up the concept of direct trade coffee, we’ve created a guide to its origins, principles, benefits, and more.
Direct Trade: An Overview
Direct trade is a sourcing model practiced by certain specialty chocolate makers, tea sellers, and an increasing number of coffee roasters. Direct trade connects producers with buyers with as few intermediaries as possible.
The philosophy behind the direct trade sourcing model is that it allows buyers to build a mutually beneficial relationship with the producer. With direct trade, buyers have an opportunity to work hand-in-hand with farmers and share the risks inherent in trading agriculture.
For example, Colombian coffee farmers have traditionally sold to co-ops or multinationals that pay the market rate, which has hovered around the cost of production for the last few years. For many, coffee farming is risky and not very profitable.
Farmers who are paid the market rate are forced to grow beans under belt-tightening circumstances with low profits and falling wages. Direct trade farmers, however, can set their own price for coffee without being forced to accept a lower market rate. This results in higher profits for the farmer, higher wages, and a better quality of life for growers, and ultimately yields a superior quality product.
Direct Trade vs. Fair Trade
Even if the concept of direct trade coffee is new to you, you may be more familiar with the term “fair trade.” These terms tend to get tossed around by specialty coffee marketers and confused by consumers. While they share similarities, fair and direct trade refer to two distinct sourcing models.
When people say fair trade, it typically refers to Fair Trade Certification, which is awarded to producers who meet certain labor, environmental, and production standards. Fair trade-certified farmers who comply with the minimum standards are paid an above-market, “fair trade” price.
The purpose of the fair trade model is to make sure farmers receive a fair price for their coffee regardless of coffee price fluctuations in the market. The idea is that receiving a fair price will help farmers invest in the quality of their product, eco-friendly practices, and their families’ health and education.
On the other hand, direct trade is not a formal certification, nor does it include a set of minimum standards. Instead, direct trade is used to describe a relationship—specifically, one where the roaster buys coffee straight from the farmer. Rather than following a set of specific rules, direct trade is intended to encourage an open and mutually beneficial partnership between the buyer and grower.
The direct trade model is designed to address some of the problems many roasters had with Fair Trade Certification. Critics of the fair trade movement say that the certification falls short when it comes to ensuring quality or fair labor practices. Direct trade was introduced as a way to give coffee roasters a way to provide exceptional quality and fair labor practices firsthand.
The Benefits of Direct Trade Coffee
Now that we’ve given an overview of what direct trade coffee is (and what it isn’t), let’s take a deeper dive into some of the benefits associated with direct trade coffee sourcing.
- Traceability. In the context of coffee, traceability helps verify sustainability claims associated with coffee beans. This ensures that there is good practice and respect for people and the environment all the way along the supply chain.
Traceability is increasingly important for the global coffee market. The direct trade model makes it easy for consumers to learn the story of their coffee beans and the farmers behind them.
- A mutually beneficial relationship. The direct trade model gives coffee buyers the opportunity to work with a coffee grower of their choosing. Building a personal relationship with growers opens up the possibility of forays into different growing techniques, processing methods, and varieties of coffee.
For coffee growers, the direct trade model connects them with a consistent, loyal customer. By distancing the price negotiation from the commodity rate, growers are afforded the security to reinvest in their farms and ultimately produce higher-quality coffee that fetches a higher price.
With the certainty of a profitable harvest, farmers feel more confident investing in infrastructure like coffee processing equipment, irrigation systems, and eco-conscious initiatives as well as social programs in their community. In addition, through close relationships with their buyers, coffee growers get insight into market trends developing overseas and can shift their focus to potentially more profitable areas of production as necessary.
- Better communication. Direct trade opens up the floor for direct communication between producers and roasters. Price negotiation, problem-solving, and discussion of important issues can help both parties understand shared realities and issues and facilitate the setting of common and attainable goals.
- A greater sense of purpose. The direct trade model encourages both the buyer and grower to emotionally invest in their product. Having developed a strong, personal partnership with their buyers, growers may experience an increased sense of commitment to meeting or exceeding expectations. Similarly, buyers may feel more willing to pay higher premiums because they are given a glimpse of how their higher purchase price impacts production and the social conditions of the buyer’s community.
At Lifeafar, we’re proud to partner with the Green Coffee Company (GCC), a unique company designed around the principles of direct trade. As the former director of sourcing and sustainability for Stumptown, the GCC’s senior sales advisor Gabriel Chait is one of the pioneers of the direct trade coffee movement.
Based in the iconic coffee-growing region of Salgar, Colombia, the GCC is involved in nearly every step of the coffee supply chain—from cultivation to distribution—which allows them to cut out middlemen and achieve significant premiums for outstanding, award-winning coffee.
If you’d like to learn about investing in this direct trade initiative, please visit the Green Coffee Company investment page. Our initial coffee offering successfully raised $5.7M in commitments to acquire, improve, and expand three farms in Colombia’s iconic coffee region of Salgar, home of the world’s best Arabica coffee.
As one of the largest consolidated coffee producers in Colombia, the latest offering gives investors an unprecedented opportunity to generate significant returns from one of the world’s most timeless and in-demand commodities.
You can also fill out the form below and someone from our investment team will be in touch with more information.
Subscribe to our newsletter and stay up-to-date on new investment opportunities and residential properties for sale, exclusive investor travel packages and conferences, and special rental discounts.