A recent study commissioned by Global Coffee Platform (GCP), IDH, and Solidaridad has shed light on the uneven distribution of value within the coffee supply chain. Conducted by independent firm BASIC and based on current public data from the German coffee market, the study titled ‘The Grounds for Sharing: A Study of Value Distribution in the Coffee Industry’ highlights significant discrepancies between prices received by coffee farmers and those paid by consumers.
BASIC developed a comprehensive model to analyze the flow of value along the coffee value chains. This involved examining costs, taxes, and net profit margins from coffee-producing countries such as Brazil, Colombia, Ethiopia, and Vietnam to retail markets in Germany.
The findings underscore that a substantial portion of the value generated within the supply chain tends to accumulate downstream, primarily benefiting importers and retailers rather than coffee farmers themselves. Particularly concerning is the revelation that labor costs, which constitute a significant portion of expenses for smallholder farmers, often remain inadequately compensated.
Annette Pensel, Director of Global Coffee Platform, expressed concern over the current distribution model, stating, “The existing structure undermines the economic viability of coffee farming for many families and poses sustainability challenges for the industry as a whole.” She called for collective action within the coffee sector to rethink and reformulate its approach to value distribution.
In response to these findings, the organizations behind the report urge coffee companies to explore alternative models of value distribution and adopt common trading principles aimed at enhancing farmer incomes. The report advocates for industry-wide commitments to sourcing practices that facilitate fairer distribution of value along the supply chain.
Tessa Meulensteen, Director of Agri-Commodities at IDH, emphasized the need for immediate interventions, stating, “Sector-wide commitments to equitable sourcing practices and collaborative efforts in supply chain partnerships are essential to ensuring sustainable coffee production.” She stressed the importance of implementing mechanisms that enable companies to meet due diligence requirements and uphold long-term sustainability goals.
Looking ahead, GCP, IDH, and Solidaridad plan to engage industry leaders in discussions aimed at establishing principles for equitable value distribution that accommodate the diverse needs of coffee farmers and origins worldwide.