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The Supply Chain of Fair Trade Coffee: Challenges, Opportunities & the Future Inside a Troubled Industry

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The Supply Chain of Fair Trade Coffee: Challenges, Opportunities & the Future Inside a Troubled Industry University of Vermont ScholarWorks @ UVM Graduate College Dissertations and Theses Dissertations and Theses 2015 The upplS y Chain Of Fair Trade Coffee: Challenges, Opportunities & The uturF e Inside A Troubled Industry Katharine D. Lukas University of Vermont Follow this and additional works at: https://scholarworks.uvm.edu/graddis Part of the Agricultural Economics Commons, and the Sustainability Commons Recommended Citation Lukas, Katharine D., "The uS pply Chain Of Fair Trade Coffee: Challenges, Opportunities & The uturF e Inside A Troubled Industry" (2015). Graduate College Dissertations and Theses. 441. https://scholarworks.uvm.edu/graddis/441 This Thesis is brought to you for free and open access by the Dissertations and Theses at ScholarWorks @ UVM. It has been accepted for inclusion in Graduate College Dissertations and Theses by an authorized administrator of ScholarWorks @ UVM. For more information, please contact [email protected]. THE SUPPLY CHAIN OF FAIR TRADE COFFEE: CHALLENGES, OPPORTUNITIES & THE FUTURE INSIDE A TROUBLED INDUSTRY A Thesis Presented by Katharine Diane Lukas to The Faculty of the Graduate College of The University of Vermont In Partial Fulfillment of the Requirements for the Degree of Master of Science Specializing in Community Development and Applied Economics October, 2015 Defense Date: June 12, 2015 Thesis Examination Committee: David Conner, Ph.D, Advisor Shoshanah Inwood, Ph.D., Chairperson V. Ernesto Méndez, Ph.D. Cynthia J. Forehand, Ph.D., Dean of the Graduate College ABSTRACT What started as a grassroots effort to aid tradespeople in developing nations, Fair Trade and similar certification models have, over the last sixty years, successfully established themselves as a viable alternative to conventional international trade; the ongoing growth of their market share and volume emphasize the increasing market demand for these alternatives. For coffee, Fair Trade’s oldest and most established commodity, over two billion pounds was sold as certified in 2012 alone and the percentage of certified coffee continues to grow in share each year (Volcafe, 2012, Fair Trade USA 2012). As Fair Trade continues to grow, so does the variety of participants in the program and with this shift, Fair Trade is challenged to continuously evaluate how it can support both its producer base and the customers driving demand. This is, at its core, a challenge of maintaining its mission while appealing to new customers and channels. Fair Trade’s expanding customer base, particularly with larger and more conventional businesses, has driven increased pressure for Fair Trade to prove and improve its impact and value. The research presented in this thesis explores Fair Trade’s history, its current state and its future with a focus on impact and value creation. While Fair Trade is ultimately only a third party certification scheme with a mission singularly focused on improving producer livelihoods, its certification has inadvertently developed a global value chain network. This research focuses not on the mission, but on the supply chain of Fair Trade. This thesis reviews two existing bodies of literature; the first, the past and present of Fair Trade and its current challenges, the second sustainable supply chain management and supply chain governance. Following this review, we also explore the work of Keurig Green Mountain, the largest US procurer of Fair Trade coffee (Fair Trade USA, 2013). From here, we develop a conceptual model and framework by which to view the current supply chain actors within Fair Trade. Finally, through our research and a series of semi- structured interviews with key industry players, we explore the future of Fair Trade and the opportunities within the supply chain to optimize operations and explore the potential benefits. Based on the results of our qualitative research, our study seeks to highlight a gap in the existing literature of Fair Trade by exploring its opportunities from a business and supply chain management perspective. i ACKNOWLEDGMENTS I would like to take an opportunity to thank Dr. David Conner, Dr. Shoshanah Inwood, Dr. Ernesto Mendez and Dr. Richard Watts for being willing and able participants in the development of my Masters research. I could not have done it without your guidance, patience and support. I would also like to recognize and thank all of my colleagues and the many other leaders in the coffee industry that selflessly gave of their time, knowledge and experience to make this thesis a reality. It was a pleasure to speak with you. I would like to recognize and thank Scott K. Monteiro for his unending patience and support throughout the last four years. You are my rock. Lastly and most importantly, I would like to sincerely thank Ed Canty for sharing his Fair Trade wisdom, insights and innovations. Your passion for coffee and “doing well while doing good” is infectious. It was a true honor to work with you. ii TABLE OF CONTENTS ACKNOWLEDGMENTS .................................................................................................. ii LIST OF TABLES ............................................................................................................. iv CHAPTER 1: INTRODUCTION ....................................................................................... 1 1.1. Fair Trade: Why It Matters ............................................................................................................... 1 1.2. Supply Chain Management ............................................................................................................... 2 1.3. Research Questions .............................................................................................................................. 3 CHAPTER 2. COMPREHENSIVE LITERATURE REVIEW.......................................... 5 2.1. Literature Review: Fair Trade & Coffee ....................................................................................... 5 2.1.1. Background .......................................................................................................................................... 5 2.1.2. The History of Fair Trade............................................................................................................... 7 2.1.3. Fair Trade Today & Fair Trade Coffee .................................................................................... 10 2.1.4. The Fair Trade Divide and Current Challenges................................................................... 15 2.1.5. Critiques of Sustainable Models & Fair Trade ..................................................................... 21 2.2. Supply Chain Economics .................................................................................................................. 27 2.2.1. Background ........................................................................................................................................ 27 2.2.2. The Conflict of Business & Sustainability .............................................................................. 28 2.2.3. The Challenge of Governance & Power .................................................................................. 30 2.2.4. The Coffee Supply Chain ........................ 35 2.2.5 Supply Chain Management .................................................................................................................................................. 41 2.2.6. Summary ............................................................................................................................................. 45 2.3. Keurig Green Mountain .................................................................................................................... 47 2.3.1. Background .......................................................................................................................................... 7 2.3.4. Summary ............................................................................................................................................. 53 CHAPTER 3. CONCEPTUAL MODEL .......................................................................... 54 CHAPTER 4. METHODS ................................................................................................ 65 CHAPTER 5. ANALYSIS & FINDINGS ........................................................................ 70 5.1. Industry Themes ................................................................................................................................. 72 5.2. Fair Trade Themes ............................................................................................................................. 73 5.3. Themes from Keurig’s Fair Trade Programs ........................................................................... 77 5.4. Themes on the Future of Fair Trade ........................................................................................... 81 5.5. Conclusion.............................................................................................................................................. 85 CHAPTER 6. DISCUSSION ............................................................................................ 87 CHAPTER 7. CONCLUSION.......................................................................................... 96 COMPREHENSIVE BIBLIOGRAPHY & REFERENCES ............................................ 99 iii LIST OF TABLES Table Page Table 1: Conceptual Model of Coffee Buyer Categorization ……………………………55
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