Especially in specialty coffee, there is more and more talk about transparency and traceability along the coffee chain. But what do these terms actually mean? What advantages or disadvantages do they bring to a company's communication? And what is their explanatory value?
David Wistorf from the Kaffeemacher team explored these questions in his bachelor thesis. The paper is dense, introduces the subject matter with a thorough literature review, and culminates in David's own model for measuring transparency.
Here, David summarizes the most important points of his thesis. He is also making his bachelor thesis freely available.
At the Kaffeemacher, David's input is currently having a significant impact, and we plan to advance our approach to how we report on our coffees. And that is exactly what David's work is intended to do – it is meant to challenge and provide new ideas.
David Wistorf: Management Summary
The price for a pound of Arabica coffee was around 0.92 US dollars on October 17, 2019. This price had been falling consistently since 2016, which meant that many producers could no longer cover their production costs. Due to falling coffee prices, there are initiatives in the coffee industry to show the coffee value chain transparently.
By disclosing cost distribution, the goal is to ensure fair payment for all parties in the value chain. However, there has been no analysis of the concept of transparency in the coffee industry to date. Furthermore, it has not been investigated how transparency in coffee processing can potentially be measured.
The aim of the thesis is, on one hand, to highlight the most important aspects of establishing transparency in the coffee value chain. On the other hand, it aims to develop a model for analyzing transparency in the coffee value chain.
Questions regarding transparency
The thesis deals with the specialty coffee segment and answers the following questions:
- What aspects must be considered in order to establish transparency in the specialty coffee segment?
- What approaches to establishing transparency in value chains prevail in the comparable product of cocoa, and what can be transferred from this to the coffee industry?
- What could a verified model for analyzing transparency in the coffee value chain look like?
A systematic literature review was conducted to answer the theoretical aspects of the questions. In addition, guided interviews and a short questionnaire were used to survey roasters, the organization “the Pledge”, and consumers. In this thesis, the following individuals from the roasters and the organization “the Pledge” were interviewed:
- Mathias Bühler from Adrianos
- Andreas Felsen from Quijote Kaffee
- Christoph Sauser from Horizonte Coffee Roasters
- Fabian Schmid from Drip Roasters
- Jonas Lorenz from «the Pledge»
Findings by David Wistorf
What aspects must be considered in order to establish transparency in the specialty coffee segment?
In answering question 1, current literature showed that the concept of transparency has neither only advantages nor disadvantages, but that the results of transparency must be evaluated on a case-by-case basis. Important units of measurement for analyzing transparency in the coffee value chain to date are the FOB price and the ex-farmgate price. However, criticism of both prices was expressed in the literature and in the results of the survey.
The interest and focus of the respondents lie clearly on the work and processing steps in the country of origin. For the surveyed roasters, it is particularly important in a transparent value chain to obtain information about farm worker wages, the ex-farmgate price, processing, drying, the FOB price, and production costs.
For a transparent value chain, the surveyed consumers value knowledge about the payment of all parties in the country of origin, working conditions, environmental impact, water consumption during processing, roasting, and shipping and delivery the most.
What approaches to establishing transparency in value chains prevail in the comparable product of cocoa, and what can be transferred from this to the coffee industry?
To answer question two—which aspects of establishing transparency exist in cocoa production and how these can be transferred to the coffee value chain—literature has shown that the focus in cocoa processing lies on disclosing what each involved party needs to make a living (living income).
The focus here is particularly on the producers, as they often receive a very small share of the final price. In the coffee industry, the FOB price or the ex-farmgate price is often communicated in isolation. This is without the corresponding context of whether these prices are high or low. Therefore, the approach of determining a living income can be transferred from cocoa to coffee processing. If a living income is determined and communicated in coffee, the previously communicated prices can be put into context and thus interpreted more easily.
What could a verified model for analyzing transparency in the coffee value chain look like?
To create a verified model for analyzing transparency in the coffee value chain (question 3), the results from the guided interviews were processed further.
This resulted in a model consisting of three parts, each forming a separate result. The three parts are divided according to the point at which value is added in the chain. Accordingly, three parts were created: Country of origin, logistics, and country of consumption.
These are in turn divided into a total of six sections. These sections are further refined into a total of 29 steps. These steps were weighted based on the results of the guided interviews, so that if information is available for all steps in the corresponding value chain, the three results of the parts each equal 100%.
When applying the model, it must be checked which steps of the corresponding value chain are known. In the next step, all weightings per step and value chain must be added up.
This results in individual scores per part of the value chain. The higher the scores, the more information is available about the coffee's value chain, and accordingly, the more transparent the value chain is.
Model as a table
Through the findings of this thesis, especially the model, it can be analyzed in practice how transparent a specialty coffee value chain is. This offers the opportunity to compare different value chains and make decisions based on this.
However, the interpretation and especially the generalization of the results must be done with caution, as the number of surveyed roasters and consumers was small. Furthermore, due to the COVID-19 pandemic and the restricted access to producers and coffee traders, they could not be interviewed. Thus, the results of the thesis reflect only the perspective of the parties in the country of consumption. Consequently, the part of the value chain up to and including logistics is not represented.
In the future, the results of the thesis should be verified with a larger number of respondents, and the established model should be adjusted accordingly. In addition, it should be tested whether the model can also be applied to coffee value chains below 80 quality points. Cocoa processing has shown that the living income can be of great importance, as it puts transparently communicated prices into context. Against this background, future research should investigate how high the living income is for coffee producers in each region.
