Why it matters where your coffee comes from – and how blockchain can show you
Legend has it coffee was first discovered by a curious goat herder in North Africa. Intrigued by the invigorating effect coffee beans had on his goats, he sampled some himself. The herdsman’s newfound energy was soon observed by a religious man who took a very keen interest in the stimulating qualities of the remarkable beans. The Imam found that the beans kept him awake for longer, meaning that he was able to significantly lengthen his prayer time.
And so the extraordinary influence of coffee on global society took hold, sweeping from 16th century Constantinople to the streets of Venice where coffee quickly became the beverage over which business and trade was discussed. Unlike alcohol which tended to sedate drinkers, coffee was a stimulant, making it ideal for social meetups between businessmen.
The drink became so popular in the world of western commerce that within a decade of the first coffee house opening in London, there were now more than 80. Many of these early coffee houses were set up in locations that attracted specific groups of businessmen who would then share industry information of commercial value. One famous example was established by Edward Lloyd in the 1690s to cater for specialists in marine insurance. Lloyds, as it became known, eventually began printing “Lloyd’s List” of shipping movements – a journal that still provides vital maritime intelligence to this day.
Beyond the world of business, coffee houses were also known to distribute journals on important issues of the day. Historians agree coffee not only changed the very way in which information was shared, but also inspired more informed and robust debate.
Today coffee has become a culture in and of itself. Already a US$100 billion industry, consumption is expected to grow five to seven percent through 2025. In the Middle East and Africa, the coffee market is estimated to have a 7.5 percent annual growth rate between 2019 and 2024. In simpler terms, the world needs to produce nearly a billion more kilograms of coffee every year to meet this increasing demand.
The opportunity for Africa in coffee
Home to several key coffee producing countries, Africa is well placed to benefit from the booming coffee trade. Burundi, which intends on doubling its output by 2023, is a case in point. The country has been growing coffee since the 1930s. As much as 80 percent of its foreign exchange comes from it and roughly 11 million people make their living from the industry.
With some 60,000 small-scale producers involved in the trade, growth in coffee production could have a far-reaching impact on Burundi’s economy. The outlook becomes more promising with emerging technology like blockchain, which makes it possible for consumers to know where their coffee comes from.
With more access to information, consumers are demanding greater transparency around the goods they purchase. They want to know the brands they support are involved in sustainable practices, positively impacting everything from the environment to society to individuals. For coffee drinkers, this means understanding where their coffee comes from and how it’s produced.
In response, the industry is pushing to ensure coffee farmers are not left behind in a rapidly evolving sector. The International Coffee Organisation (ICO) is actively seeking real-world solutions to low price levels and price volatility within the sector.
This is key to greater sustainability across the trade. A story by Bloomberg reveals farmers in Burundi have little control over the price of coffee they produce. A reported failure by local buyers to export some purchases and repatriate revenue from foreign sales has delayed payments, resulting in some farmers earning just US$22 a year.
How technology is driving fair trade
Given the vital role consumers have to play in encouraging fair trade, companies like Starbucks are championing bean-to-cup initiatives, and they’re looking to technology to lead the way.
Together with Microsoft, Starbucks is developing a digital, real-time traceability feature for its mobile app that shows customers information about where their packaged coffee comes from, where it was grown and what Starbucks is doing to support farmers in those locations. With this feature, customers can see the direct impact their coffee purchase has on real people, empowering them to make more informed purchasing decisions.
Bringing farmers into the digital economy
Perhaps more importantly, however, this platform is also empowering coffee farmers to know where their beans go after they sell them.
The app is powered by Microsoft’s Azure Blockchain Service, which enables businesses to develop applications on top of blockchain technology, ultimately providing tools for monitoring network activity. Specifically, the feature allows farmers to monitor and record both the movement of their coffee and its transformation from bean to final bag. Each state change is recorded to a shared digital ledger, giving farmers a more complete view of their products’ journey. Farmers can see exactly how much was paid for their product, and not just by their specific buyer, but also every other buyer that used the system. With this view, farmers can ensure they’re paid adequate prices that reflect the current market.
For Ivonne Herrera, a young coffee producer in Guatemala, this kind of technology helped her to see what a variety of roasters were willing to pay for her specialty coffee. In the end, she was able to earn 60 percent more than the rate at which the C-market would have valued it.
Beyond compensation, blockchain technology can also open new financial opportunities for famers, including direct access to financing, formal purchase contracts and new markets. With more data available on the size and productivity of coffee farms, service providers can formulate relevant risk profiles and offer services best suited to each one.
A vision in progress
Michelle Burns, SVP of global coffee & tea at Starbucks, believes this knowledge and data could go a long way in improving farmer livelihoods.
“We’re interviewing coffee farmers in countries including Rwanda, learning more about their stories, their knowledge and their needs in order to determine how digital traceability can best benefit them,” she says. “We’re forging new ground here, so we’re excited to report more in the coming months.”
Across the world, consumer demand for more sustainable brand offerings is growing – and the coffee industry needs to rise to the challenge. As consumption increases, more attention needs to turn to ethical farming, processing, packaging, transport, trade and distribution.
Consumers need to be informed and ask questions around the social, environmental and economic outcomes of each step of coffee production. While blockchain can’t solve this challenge in a vacuum, this and other technologies have the potential to make a real difference in the lives of those that earn a living from the growing coffee trade.