Blockchain has been touted as the key to empowering coffee producers and improving supply chain sustainability in the face of crashing coffee prices – but what does it offer the roaster?
Ahead of the world’s first coffee blockchain auction, I spoke to Scott Tupper, Founder & CEO of Yave. He told me how blockchain functions and what it can – and can’t – do to improve a roaster’s marketing, trade efficiency, and transparency.
You might also like How Can Blockchain Empower Coffee Producers?
Bags of green coffee sit in a warehouse in Guatemala, awaiting transportation. Credit: Yave
Blockchain: Is It Just Producers Who Benefit?
There is no doubt that producers could, providing the service provider uses accessible technology, benefit from blockchain.
It is hard to negotiate a price for a product when you don’t know its market worth. Producers are traditionally reliant on the final pricing information given to them by buyers, which at best is unproven and at worst is non-existent. This means they are forced to value and negotiate their product based solely on the C market price and their production costs – not on how much is being paid per pound by specialty roasters for their crops.
Those producers who are promised a bonus “depending on the final sale price” can now verify exactly how much their coffee was sold for. Even those who weren’t can come to the negotiating table fully informed about their coffee’s worth.
But is it just the producers who benefit? Or do roasters also see the financial and business rewards?
Carlos Melen, Founder and CEO of DARKS Coffee, Japan, tells me, “I believe [blockchain] will offer both the producers and the roaster with a great platform for selling and buying good sustainable and traceable coffee, from good coffee farms around the world.”
So, let’s take a look at some of the potential benefits.
Washed and natural processed coffees dry under the sun on Carlos Pola’s farms in El Salvador. Credit: Carlos Pola
Differentiation, Marketing, & Pricing
In February 2019, market research firm Kai Analytics and Survey Research Inc. administered and analyzed the Global Specialty Coffee Roasters’ Transparency Survey. They analyzed text answers from 115 specialty coffee roasters around the world to questions such as:
- If your customers can be guaranteed that tips or a percentage of an end sale would go directly to the producer(s), for how much more do you think you will be able to sell your coffee?
- What’s the most important message in your coffee sourcing narrative?
They found that “86% of surveyed roasters believe they can sell their coffee for more if ‘tip the farmer’ was guaranteed.” 25% felt they could sell it for 5% more; 8% for 50% more.
They also found that “Direct trade (transparent sourcing)” and “Fair wages (to producers)” were two of the eight most frequently mentioned messages in roasters’ coffee-sourcing narratives.
Ultimately, it is not just the roaster who is interested in where a coffee comes from and how sustainably it was produced. Coffee consumers and café owners alike are becoming more aware of supply chain issues and more selective about where they spend their money.
Information about the coffee farmer and the price paid can not only reassure the customer but also create that emotional attachment that brings them back, time and again, even when a competitor is offering a similar coffee for a cheaper price.
For example, Scott also co-owns Onda Origin, a Seattle-based roasting company. He found that blockchain helped him communicate clearer narratives about the producers to their customers. It allowed the roastery to differentiate itself from its competitors. Scott attributes the “farmer narrative[s]” he was able to share to the company’s success in opening accounts with businesses such as MET market in Seattle and Whole Foods.
“It’s been a really big success… because we, as a company, speak to the farmer narrative all the time. And we find all kinds of people are speaking to that narrative, but they can’t actually show their consumers anything about it,” he says.
The information stored on blockchain gives him hard facts that he can use to tell a story to customers: one that focuses on a producer with a name and a family, a coffee farm they can almost picture, and demonstrably better prices.
A group of farm workers on Finca Ivonne, Guatemala. Credit: Yave
If you’re a roaster located in a non-producing country – such as one in North America, Europe, Northeast Asia, or Australasia – you have two options for buying green coffee. You can work with an importer. Or, you can operate via direct trade, buying directly from the producer. This typically means visiting them in person and filling out a lot of paperwork and bureaucracy in order to get the coffee exported and imported.
You might also like What Does “Direct Trade” Really Mean?
Scott tells me that blockchain digitizes documentations “that currently are not standardized.” According to Scott, as blockchain facilitates transaction recording, it helps streamline paperwork, reporting, insights, and data on coffee. He says that this feature of blockchain “enables us to trade more quickly, and in a more trustworthy and efficient way.”
Bags and boxes of green coffee stored in a warehouse in Laos. Credit: Yave
Transparency & Traceability
Once a transaction has been recorded in the blockchain, it is extremely difficult to alter or “lose” it. For roasters, this means that they can more easily trace their coffee, learn where it was produced, and how it has traveled to the roastery.
It also means that they can have more control over the quality of your coffee. Scott tells me that Yave, in collaboration with their ground team of Q graders, works to ensure that cup scores are included in the transaction records. If any quality issues arise, they then check the records to work out where and how things went wrong.
Yave CEO & Founder Scott (far right) sits with Guatemalan coffee producer Ivonne (center) as she records data about her coffee in a blockchain. Credit: Yave
Reliable Coffee Supplies
As a roaster, your profitability is based on the demand from customers for your product. Yet if that product keeps changing or if the quality is unreliable, it is hard to ensure repeat purchases.
Blockchain does not by itself guarantee a more reliable supply of coffee. However, it can enable stronger relationships with producer-partners. When a roaster can trace their coffee purchases back to the producer, they become able to purchase the same coffee from the same lot of the same farm year after year – rather than simply a coffee from that region.
What’s more, they are better able to communicate with the producer. Whether it’s to say “we would like to buy in greater quantities next year,” “we noticed a high moisture content in this year’s purchase and would like the coffee to be dried more next year,” or simply, “we loved this coffee,” this can create a useful feedback loop.
Sorting through ripe-red, freshly picked coffee cherries before depulping them on Carlos Pola’s dry mill, El Salvador. Credit: Carlos Pola
A blockchain-registered coffee is not necessarily a sustainable coffee. It is not necessarily a well-paid one, or good quality, or the start of a long-term and sustainable relationship. Yet blockchain gives roasters the tools to better monitor all of these aspects and, in turn, communicate this information to buyers.
As Scott says, neither “blockchain nor any technology in of itself replaces the human ability to build trust and business relationships. It is simply codifying that and opening doors to more people.”
Want to take part in the world’s first coffee blockchain auction? Sign up for a sample kit here