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Coffee: Theagainst Poverty

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Coffee: Theagainst Poverty Author: Basic At the junction between civil society and the research community, the Bureau for the Appraisal of Social Impacts for Citizen information (BASIC) takes an innovative approach to analysing the societal costs and impacts associated with our production and consumption methods. Objectives: • Enable an improved understanding of societal issues currently faced by economic stakeholders and individuals; • Encourage the development of effective solutions to these challenges. BASIC is a cooperative social company (SCIC) as well as a Young Innovative Enterprise. For more information, visit www.lebasic.com Sponsors: The French Fair Trade Platform Founded in 1997, the French Fair Trade Platform promotes and defends fair trade in France and abroad, to support social and ecological transitions in production and consumption patterns. The platform brings together around 30 French organisations in the sector: committed companies, labels, distribution networks, consumer and education for global citizenship organisations, international solidarity organisations and research and education stakeholders. It also agitates for greater equity in all economic relations in order to promote social justice, human rights and environmental protection. Find out more at www.commercequitable.org/ The "Rethinking Value Chains" Collective This network brings together civil society actors – including NGOs, trade unions and academic institutions – who are experts on issues regarding the value chain and the empowerment of workers and local communities faced with the economic effects of globalisation. Its objective is to provide a platform for diverse organisations to have in-depth discussions on the prevailing economic system (neo-liberalism) and ways of working together to implement sustainable alternatives, which prioritise people and the environment. Max Havelaar France Association Max Havelaar France is a member of the international Fairtrade movement. This movement is establishing, through the Fairtrade Max Havelaar label, fairer trade conditions aimed at giving small- scale producers and agricultural workers in developing countries the means to fight for themselves Coffee: Theagainst poverty. Hidden Max Havelaar France's Crisis mission is to raiseBehind public awareness regardingthe fairSuccess trade and build the commitment of economic and institutional stakeholders throughout French territory. Find out more at www.maxhavelaarfrance.org Study on Sustainability Within the Coffee Industry Research Report A report For 1 Authors: Basic Editors: Max Havelaar France, The French Fair Trade Platform, the "Rethinking Value Chains" Collective, BASIC Acknowledgements: Jos Algra, Jean Pierre Blanc, Elise Bouedron, Morgane Daeschner, Christophe Eberhart, Samir El Ouaamari, Nicolas Léger, Joao Mattos, Nicolas Mounard, Mildred Niebles, Merling Preza, Katarzyna Renie, Bertrand Swiderski, John Velez Henao and all those who answered questions as part of this research study. Published with the support of: This publication was produced with the financial assistance of the European Union. Its contents are the sole responsibility of BASIC and do not necessarily represent the views of the European Union. 2 Table of Contents Introduction 4 List of Abbreviations 6 Glossary 7 Coffee industry technologies 10 1. The global value chain for coffee and its impacts 11 1.1. Consumption methods, distribution channels and brands/roasters 11 A market dominated by sales of coffee in capsules and pods in major food retailers 16 A stronger oligopoly, dominated by subsidiaries of foreign groups 19 Meanwhile, an industrial structure based on artisan roasters has developed 21 1.2. The traders 21 The coffee trade: a historically concentrated sector 21 French merchants, mirroring the global sector 24 1.3. Coffee production, which is becoming more polarised in order to respond to demand and is faced with major negative effects 24 1.4. An ever more unequal global value chain creates significant social and environmental challenges. 33 1.5. Faced with rising stakes, alternative models have been developed (fair trade, organic & 'sustainable' labels) 45 1.5.1. Evolution of certifications in the global market for coffee consumption 46 Certifications in the fair trade sector 47 Certifications in the sustainability sector 49 Roasters' internal procedures 50 1.5.2. In France, a development in the spread and number of independent certifications for coffee 52 Fair trade certifications in France 52 Sustainable Certifications 53 2. Analysis of three specific value chains and the changes resulting from alternative approaches 53 2.2. Analysis of the Colombia to France value chain 86 2.2.1. Colombia is a coffee growing country, a major stakeholder on the international market which the government forced to organise itself around a national federation (FNC) 86 2.3. Analysis of the Ethiopia to France value chain 114 3. Comprehensive cross-sectional study 142 4. Recommendations and levers of change 159 Methodology appendix 165 3 Introduction Over two billion cups of coffee are consumed every day, generating revenues close to 200 billion dollars per year1, mainly in Europe, the United States and Brazil, but also increasingly in Asia, where its consumption goes hand in hand with the rising standard of living of the middle classes2. The coffee market generates significant revenues for economic stakeholders situated further down the chain. The success of coffee pods, in particular, which now represent over 11% of global coffee sales and whose revenues are expected to grow by 45% by 2020, has enabled most of the traditional leaders in the sector to significantly enhance their sales: whereas in France a 250 g pack of ground coffee costs about 2.50 to 3.00 euros in the supermarket (i.e. 10 to 12 euros/kg), Nespresso-compatible capsules sell for up to 60 euros/kg or more. Produced primarily in Brazil (32% of volumes - 4/5 Arabica and 1/5 Robusta), Vietnam (19% of volumes - primarily Robusta), Colombia (9% of volumes - primarily Arabica) and Indonesia (7% of volumes - 3/4 Robusta and 1/4 Arabica),3 coffee is grown by approximately 25 million farmers in over 80 countries located on both sides of the equator, mostly on small farms of less than 5 ha 4. In 2017, 9 million tonnes of coffee (60% Arabica and 40% Robusta), almost 3/4, were traded on world markets with coffee ranked among the most valuable agricultural products listed on the stock exchange (in 2015, its export value amounted to 18 billion dollars)5. However, the coffee sector has been characterised, especially since the end of the last International Coffee Agreement (1989), by greater price volatility, lower overall incomes for producers and the concentration of power in the hands of buyers and large international brands. All these trends question the sector's economic sustainability. Furthermore, for the past few years, coffee production – especially Arabica – has been impacted by rising temperatures and altered rainfall patterns due to climate change: resulting in uncertain yields, damage caused by pests and diseases and problems in maintaining quality. Recent studies estimate that without a concerted effort to combat climate change, the global area suitable for coffee production could be reduced by 50% by 20506. In 2080, wild coffee, a major genetic resource for farmers, could become extinct7, calling into question the coffee market and its diversity as they currently exist. Faced with this situation, many companies, particularly coffee sector leaders, have initiated action programmes in the field to limit the impact of climate change and improve the situation of coffee producers, some through certification and/or independent labels8. Programmes that have been added to sectors established over the past 30 years by Fairtrade stakeholders (companies, NGOs, cooperatives, committed consumers) in order to improve the living and working conditions of coffee producers. Given the reassuring messages that some multinational coffee companies use when communicating with consumers, it might be reasonable to ask if (all) the current initiatives can overcome the challenges faced by the coffee sector. More broadly, the question which arises concerns the conditions that would enable the 1 Potts, J. et al., The state of sustainability initiatives review, 2014 2 Hivos, Coffee Barometer, 2014 3 International Coffee Organization, Data on the Global Coffee Trade, http://www.ico.org/new_historical.asp 4 International Coffee Organization, Data on the Global Coffee Trade, http://www.ico.org/new_historical.asp 5 International Coffee Organization, Data on the Global Coffee Trade, http://www.ico.org/new_historical.asp 6 The Climate Institute, A Brewing Storm: The climate change risks to coffee, 2016 7 The Climate Institute, A Brewing Storm: The climate change risks to coffee, 2016 8 Potts, J. et al., The state of sustainability initiatives review, 2014 4 creation of a truly sustainable coffee sector – for producers as well as consumers – and that would guarantee its resilience in the face of climate change. 5 List of Abbreviations ICA International Coffee Agreement CIF Cost, Insurance & Freight (Incoterm related to imports) CLAC Latin American and Caribbean Network of Fair Trade Small Producers and Workers WFP Food and Agriculture Organization of the United Nations FLO Fairtrade Labelling Organizations International, known as Fairtrade International since 2015 IMF International Monetary Fund FOB Free on Board (Incoterm related to exports) FTI Fairtrade International Hypermarket
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