Much like the craft beer acquisition wave in the US last decade, where the largest beer companies in the world snapped up many of the leading independent breweries, the same has been happening in coffee on both the roasting and import side. Numerous independent businesses have been bought by some of the world’s biggest coffee companies. This is salient as in our industry there is already an acute concentration of power.
Karl Wienhold, author of the book, “Cheap Coffee Book – Behind the curtain of the global coffee trade”, mentions that around 60% of all coffee is traded by the five biggest transnational trading companies. Acquisition of medium sized businesses is a mechanism for these companies to increase their market share and add more speciality coffee to their portfolio, much like how “Big Beer” decided to purchase craft breweries to gain market share in the craft space of their industry.
The fact that this (muted) figure of 60% is increasing makes it ever more important to understand your supply chain and its power dynamics. If a company is the miller, the exporter, the importer, and the roaster, there are many cost benefits from this vertically integrated supply chain. That said, it also means effectively one company is dominating the entire supply chain and therefore the power dynamics are heavily stacked in their favour. This doesn’t necessarily mean that these companies are exploiting the most vulnerable actors (small holder coffee farmers) within the supply chain. In some cases, they can provide significant benefits to these farmers (favourable finance, access to market etc). However, given the existence of this power dynamic, it does mean that it’s important to really know your supply chain and engage with how people are behaving within it.
At DRWakefield, as an independent green coffee importer, we are proud of the way we source and trade coffee. The foundation of this is built on long term relationships with fellow independent businesses who share the same set of values and approach to coffee. We visit our partners regularly and we leverage their local expertise. We firmly believe that the best outcome can be achieved by people closest to the action and we therefore always try to work in a locally-led fashion. This is why we do not want to set up offices at origin as we value the knowledge of people there, and we want to support them and trade with them. When we seek out new partners at origin we always look for businesses led and owned by local people. Nothing is ever guaranteed in life, but we believe working this way increases the likelihood of the benefits of trade (jobs, business tax) staying in local hands. In turn, benefitting the communities that are linked to the product we all love.
It does mean we have less control over the product than some companies. However we are happy with this active choice as we believe having less control of the product leads to better outcomes for small holder coffee farmers and the benefits trickle down through the wider community.
We like the way we work and are very proud of the relationships we have. If you want to learn more about our approach to sourcing, I encourage you to speak to your account manager or join us on a trip to see firsthand how we engage with our partners at origin.
