Capitalism’s Favorite Drug

Filling those cans of Hills Brothers coffee involved a few different forms of brutality. Because growing coffee requires a tremendous amount of labor—for planting, pruning, picking, and processing—a planter’s success depends on finding enough people in the countryside willing to work. The essential question facing any would-be capitalist, as Sedgewick reminds us, has always and ever been “What makes people work?”

Chattel slavery had provided a good answer for Brazil’s coffee farmers, but by the time Hill arrived in El Salvador, in 1889, slave labor was no longer an option. A smart and unsentimental businessman, Hill understood that he needed wage labor, lots of it, and as a son of the Manchester slums, he knew that the best answer to the question of what will make a person work was in fact simple: hunger.

There was only one problem. Rural Salvadorans, most of whom were Indians called “mozos,” weren’t hungry. Many of them farmed small plots of communally owned land on the volcano, some of the most fertile in the country. This would have to change if El Salvador was to have an export crop. So at the behest of the coffee planters and in the name of “development,” the government launched a program of land privatization, forcing the Indians to either move to more marginal lands or find work on the new coffee plantations.

Actually the choice wasn’t initially quite so stark. Even the lands newly planted with coffee still offered plenty of free food for the picking. “Veins of nourishment”—in the form of cashews, guavas, papayas, jocotes, figs, dragon fruits, avocados, mangoes, plantains, tomatoes, and beans—“ran through the coffee monoculture, and wherever there was food, however scant, there was freedom, however fleeting, from work,” Sedgewick writes. The planters’ solution to this “problem”—the problem of nature’s bounty—was to eliminate from the landscape any plant that was not coffee, creating an ever more totalitarian monoculture in which nothing else was permitted to grow. When a chance avocado tree did manage to survive in some overlooked corner, the campesino caught tasting its fruit would be accused of theft and beaten if he was lucky, or shot if he was not. Thus was the concept of private property impressed upon the Indians.

In Sedgewick’s words, “What was needed to harness the will of the Salvadoran people to the production of coffee, beyond land privatization, was the plantation’s production of hunger itself.” James Hill did the math and found that workers showed up most promptly and worked most diligently if he paid them partly in cash—15 cents a day for women and double that for men—and partly in food: breakfast and lunch, which consisted of two tortillas topped with as many beans as could be balanced on them. (The local diet became as monotonous as the landscape.) Hill thus transformed thousands of subsistence farmers and foragers into wage laborers, extracting quantities of surplus value that would be the envy of any Manchester factory owner.

The whole notion of surplus value of course is Karl Marx’s and, as Sedgewick points out, emerged from Marx and Friedrich Engels’s analysis of industrial capitalism in James Hill’s birthplace. Communism was another Manchester export that found its way to Santa Ana, this one arriving during the Great Depression, when coffee prices collapsed and unemployed coffee workers could no longer eat from the land. It turns out that leftists were also able “to transform hunger into power.” The climax of Sedgewick’s narrative comes in the early 1930s, when thousands of mozos, organized by homegrown Communists who had spent time abroad, rose up against the coffee barons, seizing plantations and occupying town halls.

Revolution was afoot, at least until 1932, when the Salvadoran government, again at the behest of the coffee planters, launched a vicious counterinsurgency. Rounding up anyone who looked like an Indian, soldiers herded them into town squares and then opened fire with machine guns. The government’s campaign against the coffee workers came to be known as La Matanza—“The Massacre”—and its memory burns bright in the Salvadoran countryside. When El Salvador erupted for a second time half a century later, the coffee barons were under siege again; James Hill’s grandson, Jaime Hill, was kidnapped by rebels and held for a multimillion-dollar ransom, which the family had no trouble paying.

I’m making Sedgewick’s story sound more schematic than it really is. Though his analysis of coffee’s political economy does owe a debt to Marx, his literary gifts and prodigious research make for a deeply satisfying reading experience studded with narrative surprise. Sedgewick has a knack for the sparkling digression and arresting jump cut, hopping back and forth between El Salvador and the wider world, where coffee was being consumed in ever-increasing quantities. He is especially good on the marketing of coffee to Americans, going back to independence, when the country broke from England’s tea habit and drinking coffee became a patriotic act. He shows how coffee has long been promoted in America less as a tasty beverage or pleasurable experience than as a means to an end: “a form of instant energy—a work drug.”

American scientists studied coffee intensively in the early years of the 20th century, seeking to understand how a beverage that contained virtually no calories could nevertheless supply energy to the human animal, seemingly in violation of the laws of thermodynamics. Coffee had the extraordinary ability to generate surplus value not only in its production but in its consumption as well, as an episode in the history of the coffee break makes clear.

Sedgewick tells the story of a small Denver necktie maker called Los Wigwam Weavers. When the company lost its best young male loom operators to the war effort in the early 1940s, the owner, Phil Greinetz, hired older men to replace them, but they lacked the dexterity needed to weave the intricate patterns in Wigwam’s ties. Next he hired middle-aged women, and while they could produce ties to his standards, they lacked the stamina to work a full shift. When Greinetz called a company-wide meeting to discuss the problem, his employees had a suggestion: Give us a 15-minute break twice a day, with coffee.

The effects of caffeine mesh with the needs of capitalism in myriad ways. Before the arrival of coffee and tea in the West in the 1600s, alcohol—which was more sanitary than water—was the drug that dominated, and fogged, human minds. This might have been acceptable, even welcome, when work meant physical labor performed out of doors (beer breaks were common), but alcohol’s effects became a problem when work involved machines or numbers, as more and more of it did.

Enter coffee, a drink that not only was safer than beer and wine (among other things, the water it was made with had to be boiled) but turned out to improve performance and stamina. In 1660, only a few years after coffee became available in England, one observer noted:

’Tis found already, that this coffee drink hath caused a greater sobriety among the Nations. Whereas formerly Apprentices and clerks with others used to take their morning’s draught of Ale, Beer, or Wine, which, by the dizziness they Cause in the Brain, made many unfit for business, they use now to play the Good-fellows in this wakeful and civil drink.

“This wakeful and civil drink” also freed us from the circadian rhythms of our body, helping to stem the natural tides of exhaustion so that we might work longer and later hours; along with the advent of artificial light, caffeine abetted capitalism’s conquest of night. It’s probably no coincidence that the minute hand on clocks arrived at roughly the same historical moment as coffee and tea did, when work was moving indoors and being reorganized on the principle of the clock.

The intricate synergies of coffee and capitalism form the subtext of the historian Augustine Sedgewick’s thoroughly engrossing first book, Coffeeland: One Man’s Dark Empire and the Making of Our Favorite Drug. At the center of Sedgewick’s narrative is James Hill, an Englishman born in the slums of industrial Manchester in 1871 who, at 18, sailed for Central America to make his fortune. There, he built a coffee dynasty by refashioning the Salvadoran countryside in the image of a Manchester factory. Hill became the head of one of the “Fourteen Families” who controlled the economy and politics of El Salvador for much of the 20th century; at the time of his death, in 1951, his 18 plantations employed some 5,000 people and produced more than 2,000 tons of export-ready coffee beans from more than 2,500 acres of rich soil on the slopes of the Santa Ana volcano. For many years, much of what Hill (or rather his workers) produced ended up in the familiar red tins of Hills Brothers coffee.

“What does it mean to be connected to faraway people and places through everyday things?” Sedgewick asks in his early pages. Coffeeland offers a fascinating meditation on that question, by rendering once-obscure lines of connection starkly visible.

Greinetz instituted the coffee breaks and immediately noticed a change in his workers. The women began doing as much work in six and a half hours as the older men had done in eight. Greinetz made the coffee breaks compulsory, but he decided he didn’t need to pay his workers for the half hour they were on break. This led to a suit from the Department of Labor and, eventually, to a 1956 decision by a federal appeals court that enshrined the coffee break in American life. The court ruled that because the coffee breaks “promote more efficiency and result in a greater output,” they benefited the company as much as the workers and should therefore be counted as work time. As for the phrase coffee break, it entered the vernacular through a 1952 advertising campaign by the Pan-American Coffee Bureau, a trade group organized by Central American growers. Their slogan: “Give yourself a coffee-break … and get what coffee gives to you.”

Near the end of Coffeeland, Sedgewick attempts to quantify exactly how much value a pound of coffee gives an employer (or, put another way, extracts from an employee), using Los Wigwam and Hill’s plantation as examples. He estimates that it takes 1.5 hours of Salvadoran labor to produce a pound of coffee. That’s enough to make 40 cups of coffee, or supply two coffee breaks for Wigwam’s 20 employees, which Greinetz calculated yielded the equivalent of 30 additional hours of labor. In other words, the six cents that Hill’s plantation paid for an hour and a half of labor in 1954 was transformed into $22.50 worth of value for Phil Greinetz, an alchemy that reflects both the remarkable properties of caffeine and the brute facts of exploitation.

But the symbiotic relationship that coffee and capitalism have enjoyed for the past several centuries may now be coming to a sad close. Coffea arabica is a picky plant, willing to grow only in the narrowest range of conditions: Sunlight, water, drainage, and even altitude all have to be just so. The world has only so many places suitable for coffee production. Climate scientists estimate that at least half of the acreage now producing coffee—and an even greater proportion in Latin America—will be unable to support the plant by 2050, making coffee one of the crops most immediately endangered by climate change. Capitalism may be killing the golden goose.

Yet capitalism is nothing if not resourceful. Employers who now offer coffee breaks might, someday soon, instead hand out tablets of synthetic caffeine, one in the morning, another in the afternoon. This would offer the employer several advantages. Pills are cheaper than coffee, and less messy. And because they take mere seconds to ingest, the coffee break itself would no longer be necessary, giving the company every reason to claw back the 30 precious minutes the courts bequeathed to the American worker 64 years ago. The fate of the coffee workers in El Salvador will likely be far worse, but perhaps the “veins of nourishment”—nature’s edible bounty—will flow again after the monocultures of coffee collapse.

Michael Pollan

This article appears in the April 2020 print edition with the headline “The World’s Favorite Drug.”

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Should We Pay More For Coffee?

In the current age of going green and sustainability permeating every facet of our daily routine, the coffee industry is one that has taken the mission to heart, incorporating the concept into every aspect of the supply chain, from seed to cup. But for all of its efforts, one fact that stubbornly remains is that by nature coffee is a fundamentally unsustainable product: environmentally, socially, and economically.

I often lament how little the average consumer knows about and respects the amount of work that went into that cup of coffee they so desperately need to get them through their morning. Coffee, being easily one of the most labour-intensive agricultural products in the world, is grown exclusively in developing countries, populated by a great many of the three billion people in the world living on less than $2 a day.

The economics of coffee for the producers is untenable as it is, for one simple reason — we don’t pay them enough for their product. Five dollar lattes and Fair Trade premiums notwithstanding, coffee is disturbingly inexpensive when you take a closer look at the numbers.

The cost of production of a pound of coffee is around $2.00/lb (this varies greatly country by country). Most farmers make a very small profit when they sell their coffee to the first of many middlemen that stand between them and you. When it finally gets to a café in Toronto, the cost of the beans is around $8.00/lb, which will make 30 good, strong cups of liquid coffee at about $0.27 per cup. The café has additional costs, like milk, labour, rent, etc., but a cup of black coffee still has one of the highest profit margins in the food industry.

Now, imagine for a minute that the entire coffee community could get together and agree to pay $1 more per pound, all of which was guaranteed to get into the farmers’ hands. With that cost being passed all the way through the chain to the end consumer, that now $9.00/lb coffee would raise the cost per cup by just $0.03.

Think of the good we could do when considering a few more numbers: Canadians drink just shy of three cups of coffee per day, so with the $0.03 extra per cup, that would amount to $30.66 ($0.03x3x365) out of your pocket per year. Canadians alone drink in the neighbourhood of 14 billion cups of coffee every year, so just considering our consumption here, that extra three cents could conceivably result in $420,000,000 flowing directly into the hands of those who need it most — the rural, the marginalized, those who have the least access to social programs or government assistance, and who are the most difficult to reach through development projects.

And it should be said that, while development work is crucial, the people that know the needs of third-world farmers the best are the farmers themselves, many of whom face a difficult question every year when they are paid for their crop: do I feed my family or my farm?

This idea may sound like international wealth redistribution, but really, it’s more akin to a long-overdue market correction – fixing the lopsidedness of an industry that has been built on an intensive agricultural product being treated as an easy-to-manipulate commodity. So while this dollar-more-per-pound-model is not perfect, or even feasible at the moment, it illustrates a point.

We are facing a new reality in not just the coffee industry, but the food system as we know it: the things that we consume are simply going to cost more than they have in the past. Not only because costs of production are constantly rising, but because that market correction isn’t just something that should happen… it’s something that needs to happen to fix what has become an unsustainable agricultural model.

Buying great quality coffee is one way to ensure we’re paying more for it — as with anything, growing something of great quality costs money. But quality shouldn’t be the only reason we pay more. Bad farmers don’t grow bad coffee. In fact, little if any coffee is grown by bad farmers. Some grow quantity, some grow quality, and many fall somewhere in between. While there is no doubting that a higher quality of product deserves a higher price, the average price must come up to ensure that every coffee farmer’s quality of life improves.

We need to create, or rather adapt to, a truly sustainable business model for coffee; one where the producer, consumer, and everyone in between are all financially, environmentally, and socially stable. I know I can comfortably speak for the coffee industry by saying that we’re actively working on it, every single day.

What can the average coffee drinker do to support this? There is no one answer, yet. So buy your daily cup(s) of coffee from roasters and shops that are going above and beyond for the benefit of the farmers that are producing their coffee — they’re quite easy to find with just a little bit of research. And the next time you see an infomercial that asks you if you are willing to save a child’s life for “just the cost of a cup of coffee a day,” think about just how much more good you could do by spending an extra $0.03 on your actual cup of coffee every day.

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Coffee, Capitalism, and Choice

Too many people have a naïve belief in the freedom of the market. Big companies like Starbucks do not compete fairly with their smaller rivals but seek to eradicate them.

There’s nothing like starting the New Year with a new controversy. My recent essay, “Finding Freedom in Your Pocket,” prompted a scathing response from one reader who derided my concerns about the rising power of the United Nations as “a little ridiculous” and who dismissed my belief in small business and localism on the grounds that such beliefs had been “completely destroy[ed]” by an episode of South Park (no, I’m not making this up!).

I’ll get to the alleged wisdom of South Park shortly. First, however, I would like to address the idea that my concerns about the power of the United Nations are “ridiculous.” Here is how my interlocutor addresses the issue:

Joseph Pearce likely makes a good point regarding undemocratic centralization when it comes to the E.U. However, his worry over the U.N leading to global tyranny is a little ridiculous in that COP21 was agreed to by a voluntary consensus of member states and the agreement itself is strictly voluntary with other nations and non-governmental actors only having the power of moral suasion to keep nations to live up to what they’ve voluntarily agreed to.

I would argue, in response, that there is a frightening parallel between the evolution of the European Union over the past fifty years and that of the United Nations, or, at any rate, that the tyrannical rise of the former serves as a timely warning of the potential danger inherent in the rise of the latter. Let us not forget that the EU is, in theory at least, like the UN, “a voluntary consensus of member states,” even if it is, in practice, a corrupt and coercive political institution working progressively to undermine the national sovereignty and therefore freedom of its members. I recall only too well, though I was only a child at the time, that critics of the Common Market, as the EU was then called, were dismissed as being “ridiculous” for claiming that it constituted an embryonic United States of Europe. The Common Market was, we were assured, only a free trade zone and nothing more. We had nothing to worry about. Then, without any consultation with the electorate of Europe, the Common Market metamorphosed into the European Economic Community, making it a “community” and not merely a free market, and then it became simply the European Community, signifying that it was no longer only the “economic” institution that we had been told that it was; eventually it became the European Union, forcing its will and forging its union with a new single currency.

I accept, of course, that there are significant differences between the European Union and the United Nations but the fact is that the tendency of large political bodies is to seek to centralize and consolidate their power. I see no reason to believe that the UN is an exception to this rule. As the UN seeks to impose the “agreements” reached at its summits we will see that the dividing line between “moral suasion” and “political coercion” becomes very fine indeed, and, as history has shown, it is a very short leap between political coercion and political enforcement.

Now to the claim that the infallible authority of South Park “completely destroys” my arguments for localism and for small businesses. According to my interlocutor there is an episode of South Park in which a small local coffee shop is shown to serve some of the worst coffee in the world, much worse than the major chain with which it is competing, presumably meant to be Starbucks. This episode, says my interlocutor, “correctly pointed out that all the restaurant chains started out as local businesses that grew because people liked them because they served products that people enjoyed and that were consistently good.” This seems reasonable enough and might indeed be true, up to a point. It is, however, not the whole story.

I have witnessed at airports long lines of people lining up at McDonald’s for breakfast, while a kiosk selling breakfast items twenty yards away had no line whatsoever. Is this because McDonald’s offers better or healthier food? Of course not. It is because people are creatures of habit, and often bad habit, and have bought into the McDonald’s brand, expressing their loyalty to it by their willingness to line up patiently for ten minutes to be served. They have been brainwashed by the megabucks that McDonald’s spends on advertising, which is really a nice word for propaganda, and have been branded by the brand, much as cattle are branded by their owners. It is not the quest for good food that unites those in the line for McDonald’s but the herd instinct.

Is being the member of a herd, branded by our brand loyalty, a mark of freedom? Or do we express our freedom better by ignoring the propaganda and heading for the anonymous kiosk to take a look at its menu?

Another problem with my interlocutor’s position is his naïve belief in the freedom of the market. Big companies do not compete fairly with their smaller rivals but seek to eradicate them. Apart from the aforementioned power of propaganda, big companies use their so-called “economies of scale,” a euphemism for brute force, to exclude genuine free choice from the market. Thus, in the UK, until the law was changed to prevent them from doing so, the big brewing companies sought to exclude craft ales from the market because the big brewers owned most of the pubs and refused to sell the products that their customers wanted. Closer to home, a coffee shop in New York’s East Village was forced to close after Starbucks offered to pay higher rent for the space. In both cases, consumers were prevented from enjoying the products that they desired because big business had bullied their competitors out of the marketplace.

The biggest problem with my interlocutor’s position is his naïve assumption that small coffee shops produce bad coffee. As a self-confessed coffee snob, I can only say that the best way of refuting South Park’s silliness is simply to step into one of these locally-owned coffee shops and sample what they have to offer. In similar fashion, as a self-confessed ale-snob, I have absolutely no doubt that the many craft ales being produced by small brewing companies are so much better than Budweiser and other brands of mass-produced swill. The proof of the pudding is in the eating, and, in this case, the proof of the argument is in the drinking.

My interlocutor concludes his comments by stating that the “South Park episode was actually a rather brilliant explanation of the positive ideals and ideas of capitalism.” This, of course, begs a host of other questions, not least of which is what we mean by capitalism. If capitalism is the ruthless manipulation of the market by the biggest companies, a sort of Nietzschean survival of the fattest, so that there are relatively few capitalists owning relatively few mega-sized companies, I suppose I might concede my interlocutor’s point. If, however, capitalism is the encouragement of the entrepreneurial spirit in as many people as possible, so that the economy is ideally comprised of millions of small business owners, all working to produce quality products for their own local area, I’d say that the South Park perspective, and that of my interlocutor, is profoundly anti-capitalist. In any event, and whether we decide to call it “capitalist” or not, I will continue to spend my money on the excellent coffee and excellent ales to be found in local cafés and hostelries, and will not be joining the line outside McDonald’s or Starbucks as long as I have a choice in the matter.

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Coffee and Capitalism: The Need for a Humanistic Model

Turns out the story of how coffee became the drink of capitalist societies has everything to do with the exploitation of workers. And yes, every time I write that I think — wait — have I become a communist? No. I have not. I am a humanist and I believe in the benefits of market economies. The problem is and always has been that our market economies are rarely capitalistic let alone humanistic.

Atlantic magazine had a really interesting article by Michael Pollan reviewing a book by Augustine Sedgewick about coffee and capitalism. The book is called Coffeeland.

What has coffee got to do with capitalism? And how did coffee become the drug that fuels capitalism? It’s because workers tend to lag in the afternoon. It’s siesta time and our circadian rhythms naturally want to take a break and relax.

To fix that, workers decided they needed a coffee break and business owners agreed. Coffee is a stimulant. It allows owners to get more work out of their employees. Give people a break and allow them to take a stimulant and magically, productivity in the afternoon increases.

The problem is, growing enough coffee to keep workers working.

In order to grow coffee, they need workers and in the places that grow coffee. The problem was that the people who lived there weren’t interested in working on a coffee plantation. They were self-sufficient in terms of food production. In order to get locals to work on the coffee plantations, their owners had to impoverish the local population and make it so that the only way they could get food was to work for the plantation. Otherwise, the locals would have no reason to work for the plantation owner.

To impoverish and starve the local population to make them dependent on the plantation owners for survival, the owners privatized land and instituted totalitarian monoculture. Why? Because as long as there was free food growing all around them, people had no incentive to work. Planned and intentional hunger was a prerequisite for the coffee economy to function at all.

The result was the establishment of a brutal oligarchy in El Salvador (where a lot of coffee was grown), diminished ecosystems, and exploited and starving people who were only starving because that is what the oligarchs needed to control their workforce that had gone from sustainable self-sufficient communities to exploited workers.

A humanistic perspective: I have been a human rights advocate and worker since I was in my teens and able to volunteer. What happened in El Salvador was brutal. And it was brutal because it wasn’t a fair market economy. That economy was built on exploitation to sell a product to other business owners so they, in turn, could exploit their own workers.

We need to get the idea of exploitation as necessary out of our heads. Capitalism is driven by demand. But it must be community demand. If an individual demands the right to exploit others to create personal wealth is NOT a job creator. They are a psychopath posing as a businessperson.

Exploiting people not only isn’t necessary to capitalism, it’s counterproductive. Exploitation is only necessary if you want to control people and not share the wealth. It’s bad for people, it’s bad for the economy, it’s bad for the environment.

A humanistic vision for the economy starts with the question: how can we help people flourish?

Imagine how different the world would be if humanistic economies were the norm. We would still have market economies. We would still have the innovations that market economies demand and therefore create. What we wouldn’t have is all this intentional and constructed suffering.

Because honestly, if your business can only function if people starve, then something is wrong with your business.

Jennifer Hancock is the founder of Humanist Learning Systems and the author of the new book: “Applied Humanism: how to create more effective and ethical businesses.” She can be found online at https://humanistlearning.com. She is a board member for the USA Chapter of the International Humanistic Management Association.

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Labor Alienation as a Barista

 “Smile, c’mon why do you look so mad?”

Well, you’d be mad too if a man was telling you to smile while you took his ridiculous coffee order.

“Oh I just wanted to bring you my number, it seems like we have a good connection.”

No, we don’t. I’m nice to you because if I’m not, my manager will be on my ass.

“You want to study linguistics? You must be good with your mouth”

I smile and laugh, then hide in the back until he leaves.

“What does a girl like you need with college? Just find a nice man and settle down!”

My stomach is churning but I just keep laughing, he’s one of our best customers.

Marxism puts into the words the alienation of labor from capital, but it doesn’t wholly do justice to another type of alienation the worker experiences. More than alienation from the products I create, I feel an alienation from myself.

From the time that I clock in, to the time that I leave, I cannot be myself. I am disconnected from my own identity, forced to be someone I do not know. By the end of the day, I am exhausted and dreading whatever comes next.

The integration of emotional labor into actual labor need not exist as it does. The status quo posits a scenario where we do not have economic rights, and instead we are expected to beg for a job, for the ability to be exploited in the name of profits and capitalism. The bosses can demand not only competent work, but a false persona of a perfectly happy employee all the time.

But why do bosses need the baristas and sales clerks and waitresses to be smiling and giddy at all times? The answer is, of course, quite complicated, more so than I can summarize here. But I want to focus on one thing in particular: the burden of tipping.

Tipping is a way to justify keeping wages low and profits high, at the expense of the customer and worker instead of the capitalist. It allows customers to think their food is cheaper than it is. And if they want to save money, rather than skimp on the five-dollar latte, they can just skimp on the tip instead

It does something else though, tipping conflates the labor of the person making your food with their quality of personality in their service. The result is the commodification of prettiness, of the ability to smile despite lewd comments, and of generally putting up with the bullshit that comes with food industry.

My wage should not be dependent on how much a stranger in my coffee shop likes me. Whether or not I can pay rent next month should not be dependent on how many times I can overlook the shivers of disgust I get from a married man twice my age hitting on me. When I will be able to afford an education should not be dependent on how much of my identity I am willing to suppress to get through the work day.

Capitalism alienates me from my labor, the service industry alienates me from myself, but we can change it.

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This was originally written and submitted to a zine for Anchorage DSA. 

The Global Grind: Capitalism through Coffee

The coffee industry provides a prism through which the nature and history of capitalism can be viewed, writes Ben Hillier​.

Coffee’s roots lie in the Islamic world, but it was European capitalism that created a global addiction. “[U]ntil the mid-seventeenth century, most people in England were either slightly – or very – drunk all of the time”, writes historian Matthew Green. “Drink London’s fetid river water at your own peril; most people wisely favoured watered-down ale or beer. The arrival of coffee … triggered a dawn of sobriety.”

It may have been true of much of Europe. That didn’t make the importation of the bean necessarily welcomed by the upper classes. Defending tradition, and wine, French doctors protested in 1674 that the coffee drinker “suffers delusions, and the body receives such a shock that it is as though it were bewitched”. A century later in Prussia, Frederick the Great condemned as “disgusting” the increase in local coffee consumption. “My people must drink beer. His Majesty was brought up on beer, and so were his ancestors, and his officers.”

It wasn’t sobriety itself that the elites were afraid of. The brew was said to promote rational thought. According to novelist and playwright Honore Balzac, “Coffee falls into your stomach, and straightaway there is a general commotion. Ideas begin to move like the battalions of a grand army of the battlefield … Things remembered arrive at full gallops, ensuing to the wind … the artillery of logic hurry up with their train and ammunition, the shafts of which start up like sharpshooters.”

A Seditious Bean

Coffee was not simply a drink. It became an institution. The first coffee houses were established in the mid-17th century. Particularly in London, they rapidly proliferated. Charles II attempted to ban them in 1675 because they were considered “seminaries of sedition”. He wasn’t necessarily wrong. Many houses established a reputation as centres for debate and learning and often fostered a democratic atmosphere at odds with aristocratic privilege – at least for those who could manage the 1 penny entrance fee that kept the labouring classes out. The anti-establishment spirit is captured in the rules and orders of one 17th century outlet:

First, gentry, tradesmen, all are welcome hither,

And may without affront sit down together:

Pre-eminence of place none here should mind,

But take the next fit seat that he can find:

Nor need any, if finer persons come,

Rise up to assigne to them his room.

Anthony Wild, author of Dark History, a gripping narrative of the origins and development of the commodity, writes that the secret ballot “re-emerged in the [republican] ‘Coffee Club of Rota’… [W]hen a member wished to sound out the meeting’s view of the subject under discussion, he could call for the ‘wooden oracle’ [i.e. the ballot box] to be consulted.”

Paris’ Cafe le Procope was frequented by Voltaire, Rousseau and Diderot. Later it was a meeting place variously for Robespierre, Danton and Marat. During the French Revolution, the Phrygian cap, symbol of liberty and headwear of the sans-culottes, was reportedly first displayed at the cafe.

It would be a stretch to locate in coffee the seeds of the new capitalist order that emerged in Europe. But the relations bound up with the production and consumption of coffee were the quintessence of capitalism; the commodity became deeply embedded in the culture and commerce of the time. “The stock exchange, insurance industry, and auctioneering”, writes Green, “all burst into life in 17th-century coffeehouses – in Jonathan’s, Lloyd’s, and Garraway’s – spawning the credit, security, and markets that facilitated the dramatic expansion of Britain’s network of global trade in Asia, Africa and America.”

The great transformation that followed wasn’t simply the triumph of liberty and reason over serfdom and superstition, let alone sobriety over intoxication. Nor did it represent the birth of genuine equality. Far from it. The democratic pretensions of the rising bourgeoisie were a facade of a regime of oppression and exploitation that would engulf the world – as would the drink they sipped as plans were hatched for commercial dominance.

New Worlds, Exotic Markets

Colonial expansion created an era of plantation cropping and rampant pillage of all corners of the globe. In the Congo the Belgians presided over a reign of terror to secure rubber exports. In the Philippines hemp became dominant. But coffee, sugar, tea and tobacco would be the king crops – sourced from Asia, Africa and the Americas and labored on by indentured Scots and Irish, West African slaves, newly dispossessed indigenous farmers and the poorest of the working class.

The Dutch East India Company established forced labour coffee cultivation in Java (Indonesia) in the 1690s. Over time, much of the archipelago was turned to plantation farming, to the detriment of subsistence agriculture. The economy and the entire social structure were transformed. The resulting famines and misery were replicated wherever the bean was cultivated.

In the 1700s, the center of world production shifted to the slave-rich Caribbean. The French colony of Saint Domingue (Haiti) was the world’s largest producer until one of the greatest revolts in history. In 1791, almost half a million slaves ripped the plants from the ground, burned the plantations and drove the French from the island. Brazil then became the dominant producer in the 1800s, importing 1.5 million slaves from West Africa to work the farms.

Coffee by now was becoming one of the world’s most widely traded commodities. But the greater the riches amassed in trading house safes and European government treasuries, the poorer and more degraded the colonised world became.

As in other markets, trading became more complex as capitalism expanded. Some of the early appearances of derivative contracts – used to such destructive effect in the recent North Atlantic financial crisis – were in the coffee market. With the rise of these “securities” in the 1800s, the wealthy didn’t have to possess the beans to make money from them. In 1880, with the world harvest totalling fewer than 7 million bags, 61 million bags were reportedly bought and sold on the Hamburg futures market.

Trade was still based on the promise of something tangible. The original “forward contracts” were simply designed to give price certainty. For example, a coffee roasting company agreed to pay a coffee grower $10 a bag in six months’ time. The market price at that later time would likely be different to that specified in the contract, but it at least provided “peace of mind”. The futures market, however, became a gamblers’ den.

The logic of speculation goes something like this. Trader X makes a contract to pay Grower Y $10 per bag at a future date. Assume that the current price is also $10. The trader gambles on a price movement of, say, 0.2 percent (to $10.02) in the intervening period. S/he then sells the contract for $10.01 to Trader Z. Trader Z now tries the same play with a different starting price. A 1 cent return sounds like the prize for a fruitless endeavour. But if the contract is for 1 million bags, then a $10,000 profit results from this minuscule price movement. If the price rises 2 percent, the profit could be $100,000 or more.

By the 21st century, upwards of 2 billion bags per year were being traded despite actual harvests of around 110 million bags. With these markets, obviously, there are substantial risks. If the price moves in the wrong direction, large losses can accrue, sparking a sell-off as traders attempt to rid themselves of contracts. That can result in a collapse. Growers without a price locked in can be hit hard.

Even those with a contract to sell might find their buyer, whoever that now is, unable to pay. That’s because speculators are often not in possession of the money required to fulfil a contract – the expectation is that they will sell it before the due date. So to trade the contract requires only a fraction of the money needed for the final settlement. If they get stuck with the contract after the price has dropped significantly, then the game is up. In that regard, the speculative movement resembles musical chairs as much as a casino.

Fair Trade Fraud

It is the perverse logic of capitalism that the promise of a bean can destroy the livelihoods of millions. No one knows that better than the 25 million peasants and workers involved in growing coffee across the world. Low prices and high volatility characterize the coffee market in which underdeveloped world producers sell their beans. Many can expect less than $3 per day.

The last, and biggest, crisis in the industry was just over a decade ago. A market glut pushed prices so low that in Central America alone around 600,000 jobs were lost. Millions more were affected. One attempt to improve the situation for producers is the multi-billion dollar “fair trade” industry. Fair trade involves Western NGOs and corporations guaranteeing farmers a minimum price on those occasions when the floor falls out of the market. It might sound good. There is, however, a major problem with this fashionable industry.

“The fact that Fair Trade has achieved a significant impact in some regions of the world is undeniable”, writes Ndongo Samba Sylla, a former employee of Fairtrade International and author of The fair trade scandal: marketing poverty to benefit the rich. “But isolated and limited successful experiences are insufficient to argue that this tool has been effective …

“Fair Trade is a logical continuation of free trade and not a remedy to its weaknesses. The reason for this is quite simple. Can the excesses of the market economy be overcome using the same principles and methods? Can the grip of the free market on human lives actually be loosened while still promoting further trade, albeit in innovative ways? The answer is most certainly no.”

Capitalist trade can never be fair because it is based on an established inequality of resources. On one hand this is about large multinational companies like Nestle dominating the system to get the cheapest price possible.

Fundamentally, however, the poor deal for coffee growers is the result of the anarchic way that production is carried out. The growers – whether small farmers, cooperatives or agribusiness – compete for market share. All capitalist industries produce goods only with the expectation, or the gamble, that they will be sold. There is always some degree of speculation involved. That makes for an unstable and crisis-prone system. When the going seems good, capacity is expanded, creating greater output, driving down prices and some out of business. That’s what happened in the last crisis.

Further, the “developing world producers” narrative that often dominates discussions of coffee is only one part of the story. Production isn’t always carried out by a small farmer. In places such as Guatemala, for example, a landed elite controls most of the plantations. Coffee pickers, migrant workers and farm workers are, like most employees, often left out of the picture – that’s also true of the fair trade industry, which focuses on building a business model, not on equality for the labouring classes.

In Peru there are 200,000 predominantly small farms. But the conditions are no better for the labourers working for a small producer. Eduardo Montauban, head of the Peruvian Coffee Chamber, told the Financial Times in 2006, “No one in the industry is paying minimum wage. It’s simply not feasible.” That may have been a slight exaggeration, but of five Fairtrade-certified farms that journalist Hal Weitzman visited in the country, casual labourers were being paid below the national minimum wage in four. That’s the logic of capitalist competition. There’s nothing fair about it.

High, But Not on Life

Just as the stereotype of the small farmer papers over class divisions in the “developing world”, so too the undifferentiated image of the Western consumer masks the class nature of the so-called developed societies.

As the 1 penny coffee house entry fee earlier indicated, liberty and democracy in practice excluded the labouring classes. Working class men did not get the vote until the 19th or 20th century, depending on the country. The Jacobin constitution of revolutionary France included universal suffrage, but in practice it wasn’t implemented. Universal suffrage was not won prior to the 20th century in any capitalist democracy.

As the European economy rapidly expanded in the 1800s, it required pliant and disciplined wage workers capable of performing repetitive tasks over extended periods of time. This profit-driven industrial production destroyed the workforce. The individual worker, wrote Karl Marx and Friedrich Engels, “becomes an appendage of the machine, and it is only the most simple, most monotonous, and most easily acquired knack, that is required of him”. It is hardly surprising that stimulants became staples throughout the workday.

In Britain, coffee was displaced by tea. But central was the combination of caffeine and sugar, which enabled work intensity to be maintained and quelled hunger pangs in otherwise empty stomachs. In the rising industrial powerhouse of the United States, where the 1773 Boston Tea Party rebellion (planned in the Green Dragon coffee house) had been an opening salvo in what became the American Revolution, coffee was promoted as an alternative to British Empire-sourced teas.

“Coffee is perfect for those who work on a production line”, writes Morton Satin, former director of the United Nations Food and Agriculture Organization’s Global Agriculture Program. By the 20th century, it “was often supplied freely or at subsidised rates – all with the goal of keeping employees working at high outputs through their long shifts – and on into overtime whenever necessary. How could anybody complain about free or cheap coffee?

“It was not long before coffee became the national beverage that accompanied nearly everyone throughout the day … This was the case whether you were a New York government employee, a West Coast fisherman, a worker in a Chicago packing house, or a cowboy driving cattle a thousand miles to the railhead.”

The corollary of competitive mass industrial production was the industrial slaughter of imperialism. Wild notes of the Second World War, “[T]he combination of intense wartime factory production and the fighting itself made caffeine a vital chemical ingredient of the war effort. If there is any truth in the idea that capitalism depends on caffeine because it lengthens the productive day to a theoretical twenty-four hours, then the war provided further proof … [T]he instant [coffee] manufacturers found that literally everything they could produce was requisitioned by the army.”

Caffeine consumption had dramatically increased in the 19th century. By 1933 coffee was one of the most advertised products in the country. But war truly made coffee a mass commodity, keeping the working classes wide-eyed as they were sent to the slaughter.

Today coffee is so integrated into working life, and so many people have come to depend on a caffeine hit to get going in the morning or continue in the afternoon, that in most workplaces it is expected to be provided. Where many bosses now refuse, it isn’t so much that the drink isn’t valued, but that they know their workers, if they have no other option, will pay out of their own pockets – if not for coffee, then for some other caffeinated or high sugar drink to provide the needed “kick”.

Coffee and Capitalism

Starbucks is today’s corporate descendent of the democratic elites and coffee houses of yesteryear. The company began with a single Seattle outlet in 1971, but now boasts almost 20,000 stores worldwide. It publicly promotes “ethical trading and responsible growing practices” and even partnered with the British left-liberal newspaper Guardian to run advertising heavily disguised as a feature series under the guise “A guide to ethical living”. The company obviously ticks all the right boxes to be considered “socially responsible” – it promotes “sustainable” growing and “fair” trade, and CEO Howard Schultz advocates same sex marriage rights.

But while Schultz is paid $9,637 per hour, the average worker in his 120,000-strong US workforce earns $8.79, according to research by finance website NerdWallet. That’s $350 for a 40-hour week. Aimee Groth, who was employed at a New York Starbucks in 2011, related for Business Insider the working conditions at the outlet: “The intensity of what goes on behind the counter is simply not visible from the customer’s point of view. During the peak morning hours, we’d work through around 110 people every half hour with seven employees on the floor …

“We got two 10-minute breaks and one unpaid 30-minute break for every 8 hours on the floor, where we’d have to decide between running next door to use the restroom (because ours always had a line of customers in front of it), quickly eating a bag lunch (there was never time to stand in line and buy something from the store), or making a cell phone call. If you’re lucky, you got to sit down on the one chair in the break room, or on the ladder, because there were never any open seats in the store … On more than one occasion I walked into the break room to see someone crying.”

Such is the modern grind of a wage worker that, with mass unemployment still afflicting the Western world, they are expected to consider themselves lucky to have such a job. The story of coffee, however, is not just about one or two examples of indecency. Nor is it simply about the failings of individual firms or the greed of individual traders or CEOs. The coffee industry provides a prism through which the nature of all industry under capitalism is on display. It is a bitter drink indeed.

Ben Hillier is the author of Losing Santhia: life and loss in Tamil Eelam and The art of rebellion: dispatches from Hong Kong.

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Purpose Over Profit: Introducing Sustainable Brands

Can your company change the world?

Today, the world’s biggest brands aren’t just defined by their marketing strategies and logos. Customers all over the world are making purchasing decisions based on a sense of shared value and purpose.

Human beings are growing increasingly aware of the damage that our lifestyles are having on the modern world. That’s why so many of us are beginning to change our ways.

One of the first steps that most consumers take towards living a ‘greener’ lifestyle is to build connections with brands that are known for their social responsibility strategies, and #Sustainable practices.

The demand for sustainable brands is so high in the modern world that almost every household company you can think of has their own environmental campaign. What’s more, ethical spending doubled over the last ten years in the UK alone.

Today’s consumers don’t just want eco-friendly commitments from the companies they buy from — they expect them.

Welcome to the age of the sustainable brand.

What is a Sustainable Brand?

So, what defines #Sustainability in the world of branding?

For most companies, sustainable branding comes down to having the right vision. Companies with an eye on the environment aren’t just selling products for profits. Instead, these are the organisations that are actively trying to change the world for the better.

From #SustainableFashion brands that use recyclable materials on the runway to lifestyle companies reducing their reliance on fossil fuels, sustainable brands are everywhere.

According to the Sustainable Brands group, ventures with this particular brand identity are defined by the following characteristics:

• Proactive and transparent governance
• Regenerative operations
• Purpose over profit
• Net positive products and services
• System-wide brand influence.

How to Start a Sustainable Brand Strategy

Sustainable brands build their company around the quest for a brighter tomorrow.

As we begin to recognise just how much the world is suffering from over-exposure to chemicals, dangerous manufacturing practices, and non-recyclable waste, younger generations are increasingly drawn towards the companies that put the planet first.

In fact, 55% of consumers say they’d pay more for products from a business committed to positive social change. What’s more, reports show that sustainable brands can achieve 18% higher returns on their investments than those without an environmental strategy.

There’s definite value in ‘going green’. The question is, how do you create a sustainable brand that speaks to your target audience?

1. Stand for Something

As mentioned above, one of the key defining factors of a sustainable brand is it’s commitment to purpose over profit. This means that your business needs to have a mission that goes beyond merely making money. The best way to choose the right target for your company is to select something that you can genuinely get behind. The more committed you are to a specific set of values, the more your authenticity will show through in your branding.

It’s also worth looking at topics that are relevant to your company and audience. For instance, if you’re a drinks company like Coca-Cola, you could commit to wasting less water and using less plastic in your bottles.

2. Build your Identity Carefully

Once you’ve decided what you’re going to stand for, and how you’re going to define yourself as ‘sustainable’, it’s time to start building the image and tone of voice that will support your #BrandIdentity. For instance, if you tell the world that you’re committed to cutting down on waste and the use of human-made products, then you can’t package your products in layers of plastic. Just look at Lush for instance, who support their sustainable image with recyclable packaging and a simple, no-nonsense image.

Alongside an image that highlights your commitment, you’ll also need a compelling tone of voice. The messages you use will help to convince your customers that you deserve their trust. Be transparent and honest in everything you do, even if that means admitting to your mistakes. At the same time, remember to stay positive and let your personality shine through. People love connecting with brands that make them feel like they’re making a positive difference in the world.

3. Cultivate your Community

According to branding expert Wally Olins, great branding is all about convincing your customers that they belong to your tribe. Through a sustainable brand, you begin to build affinity with your target audience based on global ideas, like the quest to reduce carbon emissions. With your user personas in mind:

• Use thought leadership articles to spark conversations about relevant topics.
• Show your customers what you’re doing every day to make yourself more sustainable, with case studies, videos, podcasts, and blogs.
• Encourage action by inviting people to help you achieve your goals through events, fundraisers, and more.

Sustainable brands know how to bring people together.

As companies struggle to differentiate themselves in a cluttered marketplace, the business that survives will be the one that can form stronger relationships with its target audience.

Standing out among your competitors isn’t as tricky as it seems. All you need to do is establish the right connection with your customers and convince them that you share their values. Now that people are more committed to the protection of the earth, sustainability could be the key to your strategic positioning strategy.

Being a sustainable brand isn’t easy, but if you can get the process right, then you’ll benefit from a devoted tribe of consumers, ready to do anything to support your company. Now that’s a strategy that’s sure to stand the test of time.

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Creating A Sustainable Brand

It is clear that we no longer have the luxury of ignoring sustainable practices and climate change solutions. Trends show that consumers no longer have the patience for brands that are not focused on ethical business practices. Even governments around the world, albeit slowly, are recognizing the importance of responsible business practices that, at the very least, do not harm the environment. The UK has recently declared an emergency over the effects of climate change, and is putting pressure on businesses to create models that are entirely sustainable with a low to zero carbon footprint.

Unfortunately, most brands see environmental sustainability as not much beyond an opportunity to market to and retain the younger consumer audience. As a value-add feature, it comes as no surprise to anyone that these measures are mere tokens. Clothing giant H&M, under much public pressure, has started several sustainable initiatives. They offer to recycle any old garment for which customers get a discount coupon at the store, and they have a new eco-friendly line of clothing. But the real trouble often lies with the actual business models of certain brands where they use non-biodegradable materials to create clothes or other relevant products that are manufactured in countries with poor environmental laws.

Millennials and Gen Zs now have the tools and information to spread the word about a brand’s sustainability, and they have the knack to pick on whether a brand is intrinsically sustainable or if they are using it as just a buzz word. Building a brand that is sustainable on all levels is now a requirement if you want to create an appositive image with the public.

How to Build a Sustainable Brand

Building a sustainable brand requires a different approach than regular businesses. Planning is the only way to ensure a smooth transition. If you are starting from scratch, the planning process is vitally important to have effective measures in place.

What you offer

An important guiding light in your future business proceedings is understanding and acknowledging why your brand is aligned towards sustainable practices. Knowing how your brand fits into the space of sustainability and what your brand offers is imperative to creating a coherent ideology. Once you have figured out exactly why your brand is sustainable, you can use this knowledge as leverage when appealing to investors and customers.

Working with customers

Keep a keen ear to the ground and listen to what your customers are thinking about. Addressing their concerns is a smart way to induce brand loyalty and increase engagement. For example, a coffee shop might find that customers care about ethically sourced coffee beans. Striving for this goal should be shared with the customers. For this step, it is important to know whom you are selling to. Once you have identified your target audience, head over to the spaces they occupy to find what they are concerned with.

Identify key areas

Find a few areas that are key to your business and create strategies to make these fully sustainable. Going with the same example, the coffee shop owner can identify procurement and waste disposal as important areas that will benefit most from being sustainable. A step further would be to make all the shops under the brand designed to have a zero-carbon footprint.

Content strategy

Use your creative energies to come up with authentic marketing strategies that will communicate your mission statement and environmental sustainability projects in the best way with your audience. Your target audience will have their own way of consuming content, and you must reach out to them on those platforms.

Measure results

Have the right analytics in place to see how your strategy is working. Pay attention to the data and fine-tune your practices as the strategy moves along. Make room in your planning to allow for results and its influence. Even simple changes like using a different image can make a big impact on the results. 

Why Do You Need a Sustainable Brand Identity?

Listed below are a couple of reasons that help establish the need for a sustainable brand identity. 

Growing market

The younger generation is willing to pay a premium price for a sustainable option or alternative. According to Nielsen, the demand for ethical services and products has grown by a whopping 40 billion pounds in the past decade. Choosing to go sustainable opens up certain sections of the market that you might have previously overlooked.

The writing on the wall

Any brand that ignores meaningful sustainability is looking at a future that will be shunned by the extremely aware Millennials and GenZs. With hyper-capitalism fatigue setting in, the consumer is looking for brands and businesses that are worth their money. For these individuals, sustainable practices that do not harm the environment is a worthy cause. 

Growing economies

There is a common misconception that sustainability is the concern of established economies. Consumers in growing economies like China and India are demanding more sustainable products and are seen to pick the sustainable option when given a choice. If you are serious about expanding your business into emerging economies, then a switch to sustainability is a must.

Some Do’s and Don’ts

Here are some of the dos and don’ts of creating a sustainable brand strategy.

Dos:

Integrate sustainability with your brand: If you are serious about making your brand sustainable rather than have it as a value add-on, then environmentally sustainable work practices need to permeate your business and culture at every step. A purpose-driven mission statement gives your employees and customers something to rally around.

Educate: Do not fall into the trap of championing your efforts constantly. There is only so much marketing and self-promotion that your audience can take. Instead, pepper your content with educational information about sustainability. The cause has many layers and nuances and a clear voice reaching out to consumers will stand out.

Make your own targets: Instead of following another business’s path to sustainability, it is important that you focus on creating and meeting your development goals. You know your business and company best and hence are in the best position to map out a path that works efficiently for your brand. Be sure to check if you are meeting your sustainable goals regularly.

Pick the right partners: While you might be certain that your company has sustainable environmental practices in place that are followed, you can undermine all your hard work by picking partners who are not sustainable. Do your research and make sure that you partner with green suppliers.

Don’ts:

Greenwash: Do not oversell your green initiatives and do not create a false narrative around them. 

Undersell: Celebrate your sustainable practices and achievements with your customers. It is better to appear as a green advocate than as a brand that does not care about sustainability.

Alienate your customers: Involve your customers in your green initiatives. If you have a sustainable model to dispose of certain types of waste, then invite your customers to partake by bringing in some of theirs.

Go into debt: Take your sustainable journey slowly and with simple steps. The aim of sustainable development cannot eclipse your business.

Conclusion

Creating a sustainable practice is the need of the day. With the impacts of climate change becoming more drastic, a green brand is beneficial to both the environment and the brand. There are many companies that offer sustainable products and services. EcoMatcher offers brands the ability to integrate tree planting into their business practices. Going green can be easy and rewarding if the right steps are taken at the right time to reduce the impacts of environmental change.

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“Sustainability Looks Different Wherever You Are”: Coffee Production Practices in a Risky Landscape

The coffee sector indeed appears to be in its heyday, but what do consumption and production trends tell us of its long-term sustainability?

The annual World of Coffee event, held in early June in Berlin, Germany, is known as the largest professional conference devoted to the coffee sector in Europe, where the sheer breadth and depth of the sector can be seen in full force.

A wide range of attendees converged on Messe Hall: everyone from baristas competing for who can make the best “latte art,” to farmer organizations presenting their products and approaches to coffee cultivation, to brewing machine manufacturers exhibiting their wares.[i]

The coffee sector indeed appears to be in its heyday: coffee consumption is on the rise and is no longer concentrated in just the traditional markets of North America and Europe.[ii] The International Coffee Organization (ICO) found that global coffee consumption hit a record of over 160 million bags of coffee in 2017/18, with much of that coffee traded across national borders.[iii]

Yet the buzz around the growing demand for coffee belies some of the sector’s many challenges, which were raised by research organizations, non-profit organizations and sustainability advocates during the lecture series held within the Berlin event, as well as at the International Coffee Congress on Sustainability held the day before by the German Coffee Association in cooperation with the World of Coffee and organized by the Specialty Coffee Association.[iv]

Consumption and Demand Trends

Currently, coffee production is heavily concentrated among a select set of countries: only five countries account for nearly three quarters of overall production in 2015.[v] With consumption on the rise, the world will need at least 21 million more bags of coffee produced per year by 2031—a number that could double, or even triple, depending on growth trends.[vi]

Coffee production needs to diversify among more countries and producers to meet this demand, while ensuring that growth does not lead to severe environmental strain. This has proven difficult: despite the growth in coffee consumption, which is due largely to having greater retail options available, the production side of the sector struggles constantly with uncertainty due to years of volatile prices, along with the effects of changing weather patterns on coffee yields.[vii] Many coffee farmers, for their part, have a challenging time making ends meet, and in some cases find it too expensive to stay in the coffee sector at all. Some of these farmers, both in the world’s least-developed countries and in many emerging economies, still live in poverty.

Moving the sector toward a wider uptake of sustainable production practices in this landscape is thus a challenging but necessary task, despite the costs of investing in these practices. Speakers at two of the Berlin lectures found that there are some promising signs across different coffee-producing countries that speak to the interest in and benefits of moving in this direction.

Looking more closely at coffee production, recent figures suggest that the level of certified coffee has been on the rise in recent years.[viii] Coffee that complies with one or more voluntary sustainability standards (VSSs) can be identified by a seal or other type of labelling to denote that the product in question has undergone a process that is mindful of environmental and social impacts, as well as a rigorous VSS certification process. In the coffee sector, the main VSSs include primarily 4C, UTZ/Rainforest Alliance,[ix] Fairtrade and Organic.[x]

“Coffee is a particularly strong example of the potential for certified product,” said International Institute for Sustainable Development (IISD) Associate Laura Turley in Berlin while presenting the inaugural Global Market Report: Coffee. The report is published by IISD’s State of Sustainability Initiatives as part of a series devoted to providing a market performance overview for key VSS-compliant agricultural commodities.[xi]^,[xii] “The trends that we’ve noticed in this report is that the growth of VSS-compliant coffee outpaces conventional coffee growth. In this period, from 2008­–2016, conventional production is down by 8 per cent, while VSS-compliant production is up by 24 per cent,” she continued, referring to the compound annual growth rates measured over that time.

While coffee consumption is on the rise, getting consumers to pay for certified coffee rather than conventional coffee is another challenge, with the demand for certified coffee often not matching up with the growing supply. In 2016, where the latest data is available, 34.5 per cent of the coffee market overall was compliant with at least one VSS.[xiii] This share may actually be even higher: up to 21.4 per cent of the coffee market may be compliant with one of these standards, but data limitations make it difficult to know for sure.[xiv]

The production of conventional coffee does not account for environmental and social costs, and therefore neither does its price. Conventional coffee therefore appears to be cheaper to produce than certified coffee, and thus have a lower price when being sold. Given that overall price environment for coffee, most farmers will often produce coffee at prices that are actually below their production costs.

Until end consumers are willing to pay the higher price for certified coffee, farmers who choose to meet VSS requirements can find it difficult to recoup the investments they have made in meeting those standards. There are also well-documented cases of certified coffee ultimately being sold as conventional coffee, which some research suggests could be a product of end consumers not being fully aware of the label and what it means, and therefore not willing to pay the higher price.xv]

“There seems to be an oversupply of VSS-compliant coffee, which is good for end-users, but for producers this is a real challenge: we’re making this effort, we’re taking these steps, but where is the demand? Who is buying this compliant coffee?” Turley said, describing some of the challenges facing sustainable coffee production.

Growing Interest in Sustainable Practices

According to sustainability advocates, the growing demand for coffee overall will need to be matched with a boost in consumption of VSS-compliant coffee, particularly given that the supply of this certified coffee is already on the rise. If these efforts are successful, they can have important implications for the social and environmental contexts in which farmers live and work, especially in countries that are facing a suite of developmental challenges, such as biodiversity loss, income inequality and environmental degradation.

“If this trend in VSS-compliant coffee continues to grow, then maybe we should look at the potential for low human development countries (LHDCs) and not just the top growing countries,” said Steffany Bermúdez, a data collection and analysis specialist at IISD who co-authored the Global Markets Report: Coffee.[xvi]

The Global Market Report: Coffee found that LHDCs represent 11 per cent of total coffee production, but the growth in VSS-compliant coffee production in those countries has been significant. The report showed a compound annual growth rate in VSS-compliant coffee of 19 per cent in LHDCs from 2008 to 2016, much higher than the growth seen in those same countries for conventionally produced coffee.[xvii]

“We know that there are existing challenges in developing this potential [in LHDCs],” Bermúdez added. Among these challenges are the high cost of certification, the multiple certifications available, meeting the “sometimes complex criteria for VSS” and the need for “supportive services” to implement these requirements at the farm level. Boosting demand for certified coffee across the value chain is also crucial, she said, as is dealing with the existing environmental challenges that many farmers deal with.

The multiple VSS certifications mean that farmers are often juggling several costly processes at once; at the same time, the number of certifications available does speak to the private sector’s interest in VSS-compliant coffee.

“There are a lot of other companies that are playing around with having some certified coffee, companies investing in their own systems and their own sourcing and standards systems, with the idea that it’s cheaper and more efficient than adhering to the existing standards systems,” said Sjoerd Panhuysen from Hivos, a Dutch-headquartered development organization devoted to social change. Panhuysen works with Hivos’s productive landscapes program and is the lead author of the Coffee Barometer 2018.[xviii]

“What we see in the sector is a lot of double, triple and even quadruple certification,” said Panhuysen in Berlin. “There are a lot of underlying, different standards, which are aligned with Fairtrade and Rainforest, and then you get double- and triple-certified farms.” Moreover, there is clear evidence of a gap between how much standard-compliant coffee is available at the producer level, relative to the volumes procured in practice by the buyer as standard compliant. That gap is growing, though the statistics are not sufficiently clear due to problems in recording data when multiple certifications are involved. One example, he noted, is that the figures for Organic coffee are believed to overlap by some 50 to 70 per cent with coffee that is certified under the Fairtrade standard.

Research by IISD’s State of Sustainability Initiatives has also highlighted the importance of making sure that new initiatives, including industry ones, have the necessary third-party overview and the appropriate governance structures in place, with stakeholders’ involvement from the standards’ design through to their implementation and audits.[xix]^,[xx]

Norbert Schmitz, of 4C, noted during a separate presentation that despite these challenges, there have been signs of how producing certified coffee can boost crop yields, farmer incomes and the implementation of conservation measures. This does not ignore the fact that certification has yet to live up to its full potential, as shown by farmer incomes not matching up with the efforts they make in producing sustainably, and the costs of implementing these requirements not being compensated by the market. Poorer smallholders often cannot undergo these certification processes, and certification audits are costly and difficult.

Farmers bearing the cost and risk of trying to produce sustainably must be able to sell their products at sufficiently high prices to recoup the costs of their investments and earn a sufficient profit; in addition, these prices must be consistent enough that they can make long-term business decisions. Cooperation and collaboration across the value chain will thus be crucial in addressing those challenges, so that this clear interest in VSS-compliant production, despite the associated difficulties, is not lost.

Adapting to Different Circumstances and Sharing Risks

Looking ahead, the challenges that are involved in transitioning to more sustainable coffee production practices cannot be addressed solely in the aggregate, and sustainability, while now a common term, actually can hold varying definitions depending on the starting point of the countries and coffee producers involved.

“Sustainability looks different wherever you are,” said Miguel Zamora, Director of Market Transformation at Rainforest Alliance, in Berlin.[xxi] More specifically, the challenges that farmers face in different countries, and therefore the solutions that need to be developed, will often vary, such as when it comes to improving land ownership and labour rights regimes in their respective countries. This holds especially true for LHDCs.

“What we have found in some of the challenges to help producers to become certified is that smallholders in Ethiopia and Uganda are small in terms of the land they own,” Zamora added. “That makes it more expensive to get them to trainings, to get the investment they need to be compliant [with these sustainability standards]. […] We want to make sure producers have the chance to choose the sustainability path that brings the most value to them.”  

Growing coffee is an activity that is indeed fraught with risk: the coffee sector is famous for its price volatility, for example, with prices fluctuating regularly and, at times, wildly. According to José Dauster Sette, Executive Director of the International Coffee Organization, the ICO composite indicator price shows an “almost continuous drop” since the start of 2016, and that price in January sat at 32 per cent below the 10-year average.

The implications of this price volatility are damaging both for producers and for the coffee value chain overall, Dauster Sette said in Berlin. Not only does price volatility create an economic disincentive for coffee producers, but it has also been linked to increased migration from coffee-producing countries, especially in Central America; greater social unrest; the “pauperization” of rural areas; and environmental harm, due partly to producers being increasingly concentrated in certain countries.

Climate change is also making its mark on the sector, with multiple examples already demonstrating how changing weather patterns or freak weather events can hurt coffee yields or create marked differences in coffee quality.[xxii] This risk also tends to affect farmers first, rather than being spread out across the coffee value chain.

“What we see, when we talk about risk sharing, is that there is no risk sharing: the risk is pushed toward the farm at this moment,” said Panhuysen. While some research is trying to quantify the environmental and social risks that farmers face, those risks have yet to translate into an appropriately representative “price definition.”

“A farmer actually takes a certain amount of risk going into a trajectory to become certified, which comes back every year. It comes at a cost to the farmer,” who expects these efforts to translate into a better income, Panhuysen continued. The success of these VSSs requires that all stakeholders in the coffee sector are committed to the necessary capacity-building supports and measures, as well as trade relations, to ensure that farmers and the communities in which they live ultimately see improved livelihoods as well as working, social and environmental conditions.

Private and Public Sector Actions, Options: Looking ahead

Current trends confirm that there is a need to increase coffee supply to meet demand, especially in the near term, which will require expanding production beyond the traditional countries and actors to newer participants. Whether this will require the uptake of VSSs or other approaches, and what role certification will have in this context, remains to be seen. These are important questions to consider going forward. To ensure that this supply involves sustainably produced coffee, however, it is essential to find ways to make these production methods more profitable for farmers and draw in investments. It will also involve ensuring that the coffee produced is of high quality, and that farmers have access to both alternative income sources and to high-value market segments.

To ensure that farmers have the incentive to adopt more sustainable production methods, despite their costs, also requires making sure that consumers, including end consumers, show a higher demand for sustainable, certified coffee, rather than their conventionally produced equivalent. Sustainability advocates argue that this change in consumer preferences is vital to ensuring that there is a high incentive to produce sustainably, even with the level of investments required.

Mechanisms for sharing risks will also be vital, sustainability experts say, and require actors from across the value chain to take action. Governments must adopt practices and policies that provide an enabling environment for coffee production, especially sustainable production, to thrive. Among the options that are being debated by policy-makers is establishing a minimum price, which Ghana and Côte d’Ivoire have recently announced they will do with cocoa.[xxiii] Those governments have also pledged to communicate that price information to producers, among a host of other steps to address price volatility for that sector. Governments also have a role in developing legal and regulatory frameworks that support the uptake of sustainable coffee production practices, including when it comes to improving labour and environmental laws and practices, making it easier for female farmers to obtain credit and other productive inputs, and facilitating access to markets.[xxiv]

Another option could involve finding ways to ensure that farmers can cultivate larger plots of land, potentially making it easier to reap the returns of their investments and any support they receive. Tackling costs and mapping out the impact that certification has in practice will also be key, and some promising steps have emerged in this respect, such as the use of new technologies by 4C and Rainforest Alliance to capture information about deforestation and other key metrics about supply chain traceability and sustainability. These are just a few examples; context and collaboration are key to making sure the right tools are chosen for the right situation.

Some of the steps that the private sector can take include providing better support to smallholder farmers, improving chemicals management in production and pushing for biodiversity conservation, according to Nanda Bergstein, Director of Corporate Responsibility at Tchibo, a coffee retailer headquartered in Germany that sells products such as coffee machines. Tchibo is one of the top roasters and retailers globally, as ranked by Euromonitor.[xxv] Speaking in Berlin, Bergstein also raised the point that any private sector initiative would need to cater to farmer needs, rather than what the private sector assumes their needs to be.  

The private sector has a role to play in ensuring that end consumers, as in those people that buy and consume coffee as part of their daily lives, show the necessary interest in buying more sustainable products, even if it means paying a higher price. The private sector also needs to consider ways to share some of this risk so that it does not fall solely or primarily on farmers.

Ultimately, the various challenges that the coffee sector faces —price volatility, climate variations, consumer preferences—make the road to adopting more sustainable production methods difficult. However, there is a clear interest in many developing countries, and the benefits could far outweigh the costs in the medium and long terms. The growing demand from non-traditional markets provides a clear window of opportunity for expanding coffee production into newer markets, including in poorer countries that already have some share of global coffee production. This transition, however, will involve the uptake of sustainable production practices in those newer markets, which will need to be adapted to those producer countries’ particular needs. It will also require new approaches to collaboration among value chain actors that focus on supporting farmers as they adopt these practices, thus averting environmental and social harm and ensuring that they receive the necessary returns on their investments.

Looking ahead, this collaboration across value chain actors will be vital in safeguarding against risk and in ensuring that the efforts of producing sustainably can ultimately reap the desired rewards. Communication channels will need to be open and experiences and ideas must be shared regularly among industry players. This should go beyond just the major players in the industry, such as the top roasters and retailers, to include everyone from smallholder coffee producers to government officials to baristas to end consumers. Transparency along all steps of the value chain could play an important role in changing consumer preferences, so that the end consumer is ultimately aware of the benefits of certified coffee and willing to pay that higher price point, whether at the store or at their local coffee shop.

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[i] World of Coffee. (2019). Home. Retrieved from https://www.worldofcoffee.org/

[ii] Voora, V., Bermúdez, S., & Larrea, C. (2019). Global market report: Coffee. Retrieved from https://www.iisd.org/sites/default/files/publications/ssi-global-market-report-coffee.pdf

[iii] International Coffee Organization (ICO). (2018, October). Record exports in coffee year 2017/2018. Coffee Market Report. Retrieved from http://www.ico.org/documents/cy2018-19/cmr-1018-e.pdf

[iv] International Coffee Congress on Sustainability (2019, June 5). Home Retrieved from https://congress-on-sustainability.com/index.php

[v] Voora et al., 2019.

[vi] ICO, 2018.

[vii] Panhuysen, S., & Pierrot, J. (2019). Coffee barometer. Retrieved from https://www.hivos.org/assets/2018/06/Coffee-Barometer-2018.pdf

[viii] Voora et al., 2019.

[ix] UTZ and Rainforest Alliance were merged in 2017 under one certification.

[x] Voora et al., 2019.

[xi] Voora et al., 2019.

[xii] State of Sustainability Initiatives. (n.d.) About SSI. Retrieved from https://www.iisd.org/ssi/

[xiii] Voora et al., 2019.

[xiv] Voora et al., 2019.

[xv] State of Sustainability Initiatives. (2014). Chapter 8. Coffee market. SSI Review. Retrieved from https://www.iisd.org/pdf/2014/ssi_2014_chapter_8.pdf

[xvi] The term “LHDC” is a category from the UN’s Human Development Index, which ranks countries based on a combination of factors, such as life expectancy, education and national income per capita.

[xvii] Voora et al., 2019.

[xviii] Panhuysen & Pierrot, 2019.

[xix] State of Sustainability Initiatives. (n.d.). Credibility: Conformity assessment. Retrieved from https://www.iisd.org/ssi/credibility-2/

[xx] International Institute for Sustainable Development. (2019). Voluntary sustainability standards. Retrieved from https://www.iisd.org/topic/voluntary-sustainability-standards

[xxi] Rainforest Alliance. (n.d.). Home. Retrieved from https://www.rainforest-alliance.org/

[xxii] Panhuysen & Pierrot, 2019.

[xxiii] Government of Ghana. (2019). Ghana, Cote d’Ivoire sign agreement on cocoa. Retrieved from http://www.ghana.gov.gh/index.php/news/4512-ghana-cote-d-ivoire-sign-agreement-on-cocoa

[xxiv] Sexsmith, K. (2019). Leveraging voluntary sustainability standards for gender equality and women’s empowerment in agriculture: A guide for development organizations based on the sustainable development goals. Retrieved from https://www.iisd.org/library/leveraging-voluntary-sustainability-standards-gender-equality-and-womens-empowerment

[xxv] Euromonitor. (2017). Tchibo GmbH in hot drinks. Retrieved from https://www.euromonitor.com/tchibo-gmbh-in-hot-drinks/report

By Sofia Baliño, Steffany Bermúdez on July 17, 2019

Source:

Sustainability Programs, Livelihoods and Value Chains in Southern Sumatra, Indonesia.

This study explores the impacts of voluntary sustainability standards (VSS) on the livelihoods of coffee producers. The study takes a producer-centric view of VSS interventions in the southern Sumatran coffee value chain, including its interaction with producer livelihoods, and the perception of VSS among enrolled producers.

Attempts to address non-economic costs of production, particularly those related to local social and environmental concerns, by communities, government and industry, have relied on VSS to normalise good agricultural and social practices. But the dominance of lead firms over the coffee value chain means they are closely involved in the way VSS are rolled out across producer communities, without necessarily committing to appropriate levels of community consultation and involvement. This is important because of the purportedly large impact on producer livelihoods to arise from VSS enrolment.

The study comes at a time when global coffee production faces an existential threat from climate change, particularly in southern Sumatra, and the proportion of final coffee sales that are returned to producers remains small. This is indicative of the precarious livelihoods of coffee producers around the world.

The southern Sumatran highlands, which I define as the areas of the Bukit Barisan mountain range within South Sumatra and Lampung provinces (refer to Figure 1), are the major contributor to Indonesia’s total coffee production. Indonesia has firmly cemented itself in the world’s top four coffee producing countries, with the majority of Indonesia’s coffee produced by smallholders: family-run farms of one to two hectares. Mono-cropped plantations are very rare on smallholdings, with most producers choosing to include coffee in a mixed-cropping scenario. Despite these similarities, the quality of coffee produced varies wildly, presenting challenges for downstream buyers.

While the southern Sumatran highlands have supplied the world with cash crops for centuries (Andaya 1993), the governance of today’s coffee supply chain comes from major coffee exporters and roasters, usually based in the global north. The “value chain” describes the full range of activities required to bring a product or service from conception, through the different phases of production, delivery to final consumers, and final disposal after use.” Roasters are known as “lead firms”, and generally possess superior technical knowledge enabling them to dictate the conditions of production along the value chain. This typically requires the commodification of coffee, leading to stringent buying conditions, which in turn, influences growing requirements. Their influence is compounded by the absence of authentic group representation of Indonesian smallholders, beyond very small farmer groups of around 20 members, which have rarely developed beyond their original intent as distributary vehicles of government supports.

In Indonesia, the insubstantial contribution made by industrial scale coffee plantations and the absence of united producer representation may be attributable to the rugged, remote and tropical landscape that is typical of coffee production, combined with the specific political history of the area, which is referenced throughout the thesis. This geography also causes the value chain to be highly segmented between producers, small traders and transporters, and large traders and exporters. This segmentation allows major coffee roasters to hold superior technical and financial power, towards the end of the supply chain, which leads the governance of the coffee value chain to be strongly “buyer-driven”.

However, this dominance of the value chain has not shielded lead firms from two major challenges outlined at the outset; climate change and demonstrating social and environmental responsibility. Without changes to the way coffee is produced, Indonesian coffee supply is forecast to fail to meet increased demand from consumers, particularly in the context of a rapidly expanding domestic market. Sumatra acts as a major global source of Robusta coffee along with Vietnam and Brazil. While more resistant to warm weather, pests and diseases than Arabica coffee, Robusta is still susceptible to a warming climate. The second challenge is to provide adequate supports to demonstrate social and environmental responsibility by improving coffee producers’ livelihoods and preventing environmental degradation within their supply chain. The control of lead firms over the coffee value chain means they are increasingly held responsible for the social, economic and environmental conditions of production even when they are not proximately responsible.

These problems require solutions on a landscape-scale, and specific partnerships and cooperation between smallholders, their communities, governments and corporations. With a third, competing incentive to secure their supply in a hyper-competitive global market, major roasters and international traders have experimented with coffee value-chain interventions as a way of meeting all three challenges. VSS have been described as “instruments to translate the vision of sustainable development into concrete and practicable steps”. They may be developed by industry, civil society, the government or a combination of these to find solutions to specific problems, although the extent to which VSS is contributing to improved producer livelihoods continues to be debated in the literature.

This problem of accountability is a recurring theme of this study, which seeks to contribute to the literature by examining how VSS is used as part of corporate policy, and to examine their consequent impacts on producer livelihoods. The study details the interaction between these interventions, which have been rolled out across southern Sumatra with support from several large exporters, and the communities of southern Sumatra’s coffee producers. The study forms part of a broader push from civil society to compel good quality impact evaluation of sustainability standards at the producer level (Rangan et al. 2017).

Sustainability Standards in the Coffee Sector

Sustainability standards were first used in the 1960s, after Rachel Carson’s 1962 book Silent Spring acted as a catalyst for community awareness of the use of chemicals in food production. A number of small, independent organic certifications were established, firstly in the United States and then across Europe, before being unified by the International Federation of Organic Agriculture Movements (IFOAM). In the same period, growing awareness in developed countries of unfair agricultural trade rules between the global north and south led to the establishment of an “alternative trade organisation” in Europe. This included Max Havelaar, the precursor of Fair Trade. Community awareness of a number of differing labour- and environment-related challenges around the globe continued to grow, which saw the establishment of a variety of voluntary standards, including Fairtrade and Rainforest Alliance in the 1980s, and Utz Kapeh in 2002.

Undoubtedly due to the unique biodiversity of coffee producing regions and the generally low living standards of communities in these areas, standards were soon expanded from foods, to forests and to coffee. Coffee was first certified by IFOAM in 1995, by Fairtrade in 1997, by Rainforest Alliance in 1995 and by Utz in 2002. The emergence of these third party VSS was likely assisted by the end of export quotas imposed by the International Coffee Organisation’s member countries in 1989. This effectively ceded governance of the global coffee market to a non-stateregulated regime that persists today. Rainforest Alliance and Utz have recently merged, and while the market is crowded with VSS, the major third party schemes of IFOAM, Fairtrade and Rainforest Alliance have shown a remarkable persistence. In 2003, the German Coffee Association developed cooperation between representatives of industry, producers, trade unions and others to develop the Common Code for the Coffee Community (4C); a non-branded, internal VSS that encourages a “baseline” of social and environmental sustainability.

Today, sustainability standards are estimated to cover 55% of global coffee production – up from 40% in 2013 and while only 20% of global production is sold as certified, this still accounts for an annual value of $350 million. The inability of sales to match the supply of certified produce indicates a willingness among lead firms to continue their (financial) support of VSS despite limited market demand. This is part of a push to normalise VSS within supply chains for corporate purposes, potentially shifting the underlying intent of VSS away from its earlier concerns for labour and the environment.

In the eyes of its advocates (including lead firms), the application of sustainability standards to coffee production represents a major point of confluence between the increasing environmental stress on supply chains, consumer ethical concerns about coffee production and the economics of capturing and sustaining supply for lead firms in the coffee value chain. Organisations like the International Trade Centre have breathlessly promoted coffee as being “on its way to becoming the first sustainable agricultural product” (Global Coffee Report 2017). VSS are cited as being able to fill gaps in governance, because they can influence “all stages of the policy process: agenda setting and negotiation; implementation, and monitoring and enforcement”. For firms in the coffee value chain, VSS are used as a tool to reduce liabilities associated with perceived inefficient production, and to secure their supply through relationship building with producers.

The primary mechanism through which improvements are theorised to occur is through “upgrading”, whereby producers who participate in a value chain may acquire skills, knowledge or technology that can improve production. This may include upgrading farm management practices or processing capabilities, which are seen as crucial (among other requirements) to remove the worst quality practices and coffee from the supply chain. Such a broad goal requires explicit coordination throughout the value chain, which is proving difficult given its dynamism in the form of constant shuffling and takeovers of lead firms. This has frequently necessitated the re-introduction of concepts of improved social and environmental practices through process-related upgrading to new lead firms, making progress slow.

Despite this, the breadth of VSS roll-out (55% of global coffee production) offers potential for change at a landscape scale. A representative of Rainforest Alliance told me that 4C was becoming the norm in global coffee production and, together with Rainforest Alliance, offered a genuine opportunity to implementing change on a landscape scale. Some lead firms have claimed a desire to source 100% sustainable coffee, largely in response to pressure from NGOs. However, many continue to buy only a small proportion of final sales as certified. Even so, “the implementation, monitoring and impact of the industry’s inclusive 4C baseline verification system has hardly been investigated”, while the commitment of lead firms to sustainability of supply is yet to result in validated outcomes. It is ultimately this validated evidence of improved (sustainable) producer practices, improved livelihoods through increases in human and social capacities, improved natural resource management, and improved access to markets that will determine the success of VSS.

One barrier to the success of VSS is the often poor relationship between lead firms and producers, which is crucial for the success of upgrading. Upgrading through VSS relies on the longterm provision of training in good agricultural practices or their equivalent, but it is not always clear whether lead firms are willing to commit to this investment. Southern Sumatra is a case in point. JDE, the largest lead firm in the coffee supply chain, has withdrawn support for purchase of verified coffee and associated training, despite extensive prior investment by Mondelez, which JDE acquired in 2015. At the same time, other companies, like Nestle, have had a presence in southern Sumatra for over 25 years.

This has been enabled through a mechanism referred to as “strategic coupling”, whereby Lampung based exporters (in this case) have come to a commercial agreement with lead firms. The commercial benefits of strategic coupling accrue to both parties. The local exporting firms typically supply coffee exclusively to a given lead firm, and in return the firm has greater capacity to influence on-the-ground activities. In particular, training activities associated with upgrading stem from lead firm influence and demands on commodity specifications, not from lead firms (the latter view the training programs as a significant expense). Nevertheless, the prospect of more certain sales in a tightly competitive market is enough to encourage local exporters into these agreements.

Detractors attack the use of VSS by lead firms as “greenwashing” –the use of standards to manage reputation, quality and supply chain risk, rather than actively improving the livelihoods of enrolled producers or achieving environmentally positive outcomes. This is true for both private/internal VSS (such as Starbucks CAFÉ practices) and third party VSS (such as Rainforest Alliance and 4C), although this thesis focuses primarily on the latter. In the 13 years since Daviron & Ponte (2005) detailed the extent of control by lead firms over the supply chain, there is little to indicate these challenges have been met.

Recognizing the need for greater engagement with their producers, many lead firms are using VSS as a prompt to extend their direct influence further up the supply chain by establishing warehouses and training services in producer communities, where previously this role was outsourced to local firms and small traders. These firms are providing directives regarding quality management requirements directly to their suppliers at the farm-gate, through measures such as training and semi-formal contracts.

In the Sumatran context, VSS have had a long presence in the Arabica regions of Northern Sumatra, but there have been much lower levels of penetration in the Robusta regions of southern Sumatra. This is primarily because Indonesian Robusta is valued approximately four times less than Indonesia’s specialty Arabicas by global markets, making any VSS-associated cost premiums risky in a competitive market. Indonesian Robusta producers compete with counterparts in Vietnam, which is not only the world’s largest exporter of Robusta, but also has the world’s highest Robusta productivity at ~3.5 t/ha (although Haggar & Schepp (2012) note that this comes with extensive environmental degradation). There is certainly limited market access to be currently gained through verifying Robusta.

Despite this, demand for Robusta (particularly in Indonesia and emerging markets like China and the Middle East) is forecast to increase, prompting firms to search for ways to meet the shortfall. The perception of inefficient production of Robusta among Sumatran exporters has been a primary target. Given its aims of improving baseline levels of production (described in further detail below), 4C appeared well suited to improve production among southern Sumatran producers. As a result, lead firms and their local export partners in southern Sumatra made a concerted effort to introduce and normalize practices associate with 4C over the last five years.

Joshua G.P. Bray (2018). Sustainability Programs, Livelihoods and Value Chains in Southern Sumatra, Indonesia.

Jeff Neilson & Russell Toth (2016) Evaluation of the Early Impacts of Sustainability Standards on Smallholder Coffee Farmers in Lampung and South Sumatra, Indonesia; Demonstrating and Improving Poverty Impacts