People believe that coffee is more than just a drink, as, for 75% of people, coffee is one of their favourite beverages. In the hot beverage industry, coffee deserves a special mention owing to its large market size and business potential. The number signifies the importance of this industry to a variety of stakeholders.
Today, coffee drinkers consume more than half a trillion cups per year, and as many as two-thirds of consumers aged 19-24 surveyed say that they prefer to buy coffee that is sustainably grown and responsibly sourced. But despite progress by international certifying bodies, there still a lack of knowledge around the need for coffee farmers to earn sufficient living for bringing their product to market.
Its large, global supply chain makes tracing coffee difficult. Once grown, beans make several stops, including at coops, exporters, shippers, importers, roasters, distributors, and retailers before finally reaching the consumer. Each participant in this complex system tracks only their small segment of the journey, and each uses its own system to log data. This means that information about the product is fragmented.
We can say that coffee is the most preferred beverage in the world and with a worldwide market worth billions, coffee is rightly nicknamed as “liquid gold.” In fact, coffee is the second-largest export commodity in the world after oil and exported from 52 countries. As estimated, three billion cups of coffee are consumed every day around the world.
But, how can blockchain change the coffee industry? Let’s have a look on this!
Organizations and companies are exploring blockchain as a viable solution to add transparency and traceability to the entire process.
The coffee industry is large and growing at a healthy pace. The global coffee market is projected to reach $102.28 billion by 2023. According to the data by the International Coffee Organization April 2019 report, approximately 161.381 million bags (each bag is 60 kg) were produced in 2017-18.
While the coffee market is valued in billions, small farmers growing the product continue to earn meager incomes. It is estimated that about 25 million small producers and half a billion people are directly or indirectly dependent on coffee.
A World Bank report highlights:
“An estimated 500 million smallholder farming households globally, who comprise a large proportion of the world’s poor, [are] living on less than $2 a day.”
The blockchain technology is being explored as a solution to bring traceability and transparency to the coffee supply chain.
Blockchain technology brings all the parties in the coffee supply chain together by simplifying the exchange and tracking of information and payments and enabling greater trust. It creates a permanent digitized chain of transactions that cannot be altered. Each network participant has an exact copy of the data, and additions to the blockchain are shared throughout the network based on each participant’s level of permission. Farmers, wholesalers, traders, and retailers can interact more efficiently using comprehensive, near real-time access to this data, and consumers can have new insights about the origins of the products they consume.
Blockchain and Coffee Industry
In 2017, Bext360 announced two programs with an aim to trace the transportation of coffee at all points in the supply chain as well as payments made to coffee farmers. The first project engaged Great Lakes Coffee, the Uganda-based coffee exporter and Coda Coffee, a Denver-based coffee roaster. In its second program, Bext360, Moyee, and the FairChain Foundation joined forces to work on a traceable fingerprint to track products from the producer to consumer.
Last year, Brooklyn Roasting Company collaborated with IBM Blockchain (IBM) to revolutionize the integrity of the supply chain in the coffee industry using blockchain. IBM put the data behind Brooklyn Roasting Company’s Ethiopian Yirgacheffe coffee onto a blockchain to ensure traceable, trackable coffee trade.
“Blockchain can help farmers, roasters, and everyone in between to bring you a fresher, fairer cup.”
It maintains an immutable index of all transactions and sequences in the process such as purchase, export, import, and evaluation.
By entering the unique cup ID, consumers can view a coffee’s journey from the mountaintop to countertop.
To ensure customers that their coffee is organic and fairly traded, Cambio Coffee, a direct trade organic coffee company based in Shanghai, turned to blockchain “to connect the consumer to the origin story” which is the company’s primary motto. They implemented ScanTrust’s unique QR codes on their packs in May 2018 and used Hyperledger Sawtooth to build a blockchain-enabled traceability function for their existing application.
Moreover, the important parties involved in the process of bringing coffee to customers include coffee growing farmers, suppliers, associations, distributors, and retailers. The supply chain is complex and the addition of more intermediaries such as agents in case of coffee is imported or exported – makes the process even more complicated. Add to this, the growing awareness and conscious of the consumers towards the sustainability practices and the process become even more convoluted.
“Thank My Farmer”
The “Thank My Farmer” app is slated to roll out in January 2020, and lets users scan a QR code on packages of coffee to trace its journey and send a contribution to support sustainable farming projects in agricultural communities on five continents.
The app represents only the initial use of IBM’s distributed ledger technology (DLT) for an entire coffee ecosystem that includes farmers, traders, roasters, manufacturers, and distributors who want to revamp a paper-based supply chain system and create digital payment rails for participants.
Dave Behrends, the Founder and President of Farmer Connect, said:
“We’re working on building a self-sovereign identity for farmers to actually own and control the data produced by their farm. By doing that, we’ll be able to digitize a lot of the transaction process that happens today in an analog way.”
As estimated, QR codes should begin showing up on coffee packages; scanning the code by using mobile devices, coffee buyers will be able to track the entire journey of the beans from the farm to the store shelf. They can also send money to support sustainability projects near the farmer who grew the beans. Users in the US and Canada will be able to scan QR codes on Folger’s 1850 brand premium single-origin coffee and other well-known brands.
IBM said in a statement:
“This app is a major step in the sustainability of the coffee industry. By bringing some of the biggest companies in the industry together, it allows consumers to play an active role in supporting coffee farmers and demand more transparency from their favorite brands. It also assures family farmers that their work is valued: more than 12.5 million households rely on growing coffee for their income, supporting a $100 billion industry across the globe.”
Founded only a year ago, Farmer Connect connects coffee and chocolate lovers to the producers that fuel their habit and trace products. They work with the non-profit Sovrin Foundation to create coffee industry players’ self-sovereign identities, a new form of digital identity that enables users to own the security keys that control how their business and banking account data is shared with industry players; the technology can create a digital wallet that stores the encryption keys used to access banking funds and verify user identities.
Farmer Connect designed the Thank My Farmer app that IBM built and supports on its blockchain-based platform; as it is the same technology used for the IBM’s Food Trust supply chain ledger. Since its launch in 2017, Food Trust, which is based on the Hyperledger protocol, has attracted a large group of leading food suppliers piloting it as part of a consortium. The group includes:
- Golden State Foods
- McCormick and Company
- McLane Company
- Tyson Foods
By storing supply chain data on a blockchain provides digital identities, certificates, and smart contracts to enable the delivery of, and payment for, commodities between unfamiliar parties. It can also automate the flow of data in real-time. Verified data reduces the risk of fraud and enables players to share it in real-time with third parties.
According to a study by Juniper Research, with adoption increasing in the supply chain industry, blockchain and IoT sensors are expected to create $31 billion in food fraud savings globally by 2024. Substantial savings are expected as early as 2021 and compliance costs will be reduced by 30% by 2024.
Companies using Blockchain in the Coffee Industry
- Beyers Koffie: Beyers Koffie is a leading, sustainable private label coffee company serving the major players in retail and coffee roasters in Europe, dating back since 1880. Beyers produces and distributes a wide assortment of coffee products (coffee, espresso, pads, capsules, machines, etc.) under private label as well as under the brands Beyers, Fort, and Kimbo. Beyers has grown exponentially over the past two decades. Its acquisition of Fort coffee (Belgium) and EP Leidsche (the Netherlands) in 2004 and the opening of Beyers GmbH (Germany) in 2016 allowed the company to strengthen its position on both the Belgian and Northern European retail and out-of-home market, especially as a private label manufacturer. At the beginning of 2012, Beyers installed a state-of-the-art coffee roaster, which allows for the development of new products and further reductions in energy consumption. The investments accord perfectly with the company’s commitment to quality and sustainability. Moreover, Beyers calculated its organizational carbon footprint and offers coffee products which are produced climate neutral over the entire value chain, from the plantation to the clients’ warehouse.
- Cambio Coffee: Cambio Coffee is an organic direct trade coffee company. They love great coffee and travel all over the world to source the best beans from small farmers and cooperatives that are empowering their local communities through social and environmental projects. All of their coffees are 100% organically certified, and often shade-grown. They ensure that the farms they source from do not destroy trees and ecosystems, and that their production methods are free of pesticides and chemicals.
- The Colombian Coffee Growers Federation (FNC): In 1927, the Colombian coffee growers organized themselves to create an institution that would represent them both nationally and internationally, defend their rights, and seek ways to improve their quality of life. The Colombian Coffee Growers Federation (FNC) is a non-profit and politically independent organization. As the foremost coffee association in Colombia, FNC is present in every rural region where coffee is grown. Its work revolves around 563,000 coffee growers and their families ensuring Colombian Coffee is grown in a sustainable manner, strengthening common interests within the coffee growing communities while positioning Colombian Coffee as the best coffee in the world. The FNC advocates for economic sustainability and believes that it represents the most important pillar of sustainability. The FNC sees Farmer Connect as a platform that has the potential to generate more transparency along the supply chain and help promote remunerative prices for coffee producers.
- IBM: IBM is the latest vendor to provide a blockchain platform for coffee bean growers looking to track their product on its journey to market – and let consumers trace their java back to the farm to discover where and how it was grown. IBM is recognized as the leading enterprise blockchain provider. The company’s research, technical and business experts have broken barriers in transaction processing speeds, developed the most advanced cryptography to secure transactions, and are contributing millions of lines of open source code to advance blockchain for businesses. IBM is the leader in open-source blockchain solutions built for the enterprise. Since 2016, IBM has worked with hundreds of clients across financial services, supply chain, government, retail, digital rights management, and healthcare to implement blockchain applications, and operates a number of networks running LIVE and in production.
- ITOCHU Corporation: The history of ITOCHU Corporation dates back to 1858 when the Company’s founder Chubei Itoh commenced linen trading operations. Since then, ITOCHU has evolved and grown over 160 years. With approximately 110 bases in 63 countries, ITOCHU, one of the leading sogo shosha, is engaging in domestic trading, import/export, and overseas trading of various products such as textile, machinery, metals, minerals, energy, chemicals, food, general products, realty, information, and communications technology, and finance, as well as business investment in Japan and overseas.
- JDE: For more than 264 years, Jacobs Douwe Egberts (JDE) is a Dutch company that owns numerous beverage brands (coffee, tea, and hot chocolate). It has been inspired by the belief that it’s amazing what can happen over a cup of coffee. Today, their coffee and tea portfolio is available in over 140 countries around the world through iconic household names including Jacobs, Tassimo, Moccona, Senseo, L’OR, Douwe Egberts, TiÒra, Super, Kenco, Pilao & Gevalia.
- The J.M. Smucker Company: The J. M. Smucker Company, also known as Smucker and Smucker’s, is an American manufacturer of jam, peanut butter, jelly, fruit syrups, beverages, ice cream toppings, oils, and other products in North America. Inspired by more than 120 years of business success and five generations of family leadership, The J.M. Smucker Company makes food that people and pets love. The Company’s portfolio of 40+ brands, which are found in 90 percent of US homes and countless restaurants, includes iconic products consumers have always loved such as Folgers, Jif, and Milk-Bone plus new favorites like Café Bustelo, Smucker’s Uncrustables and Rachael Ray Nutrish. Over the past two decades, the Company has grown rapidly by thoughtfully acquiring leading and emerging brands, while ensuring the business has a positive impact on its 7,000+ employees, the communities it is a part of and the planet.
- RGC Coffee: RGC Coffee is a 50-year-old family-owned and operated importer of premium and specialty green coffee. Privately-owned and operated, providing in-depth expertise to roasters and retailers in the premium and specialty coffee markets. As a forward-thinking company, RGC promotes sustainable development to preserve and enhance the communities and ecosystems where coffee grows. RGC Coffee 3E (Elevate, Empower, Elevate) Sustainability Program covers 23 active projects in 5 Latin American origin countries to help promote the social well-being of farmers, their families, and communities. Today, RGC Coffee and its subsidiaries in the US and Colombia seeks to improve upon the ways in which green coffee is brought to market.
- Volcafe Ltd.: Volcafe is one of the world’s largest coffee merchants, trading coffee since 1851. Today, they provide beans for 80 billion cups each year and there is only one thing they prioritize above coffee itself – partnership. They pride themselves on their quality and range, sourcing from small farms selling a few kilos of coffee cherries in Papua New Guinea to large plantations in Brazil dealing in hundreds of tonnes of export-ready products. Their reputation has been built on great client relationships based on service, quality, reliability, and sustainability, and they continually aspire to be ‘the world’s best sustainable coffee partner’. They play their part in sustainable coffee through their in-house program, as Volcafe Way, through which over 250 Volcafe agronomists in ten origins help achieve their goal of farmer economic sustainability.
- Sucafina Group: Sucafina is a leading sustainable “Farm to Roaster” coffee company, with a family tradition in commodities that stretches back to 1905. Today, with more than 900 employees in 28 countries, the Group is a leading player in the world of green, roasted, and instant coffee merchanting. With its main trading arm based in Geneva, Sucafina sources coffee from most producing countries, often directly from farmers, to provide its partners with sustainable value across the global supply chain.
India uses Blockchain to improve Coffee Supply Chain
The Coffee Board of India has launched a pilot blockchain-based e-marketplace in order to integrate coffee farmers with markets, as the development was announced by the Indian Ministry of Commerce and Industry (MCI) on March 28, 2020.
The Coffee Board, an organization backed by the MCI to promote coffee production in India, has rolled out an e-marketplace for coffee producers in order to reduce the number of intermediaries between coffee growers and buyers.
The product aims to improve transparency and traceability of coffee produced in India “from bean to cup.” To implement the project, the Coffee Board collaborated with M/s Eka Plus, а digital commodity management platforms for agriculture.
Starbucks (SBUX) is embracing blockchain, powered by Microsoft Azure (MSFT). The company has always been conscious about sourcing its coffee from ethical sources. Last year alone, Starbucks worked with more than 380,000 coffee farms. In 2015, Starbucks verified 99% of its coffee as ethically procured.
Last year, Starbucks announced that it was working with Microsoft to develop a blockchain-based supply chain tracking system and mobile app that would allow customers to track the supply chain journey of the beans they buy and the coffee they drink.
The adoption of blockchain in the coffee industry has two-fold benefits – it provides customers’ the ability to trace the source of coffee beans to ensure its quality while helping supply chain partners to check the real-time status of the various operations associated with production and distribution of coffee. The blockchain also helps the farmers to receive fare-price of their products in addition to channelizing the flow of money and information in a more efficient and conducive manner.
With 70-80% of the coffee being produced by small farmers, there is a need to bring in a system that’s transparent and provides growers wider access for their produce. Thus, a cup of coffee that is ethically sourced with farmers rightly compensated, will sure taste best of all.
Cover Image: Pixabay