Supply Chain – The Who: Who works to get coffee from farm to cup?

In our first Coffee Supply Chain – The Where post, we talked about where coffee moves as it travels from the farm to your cup. To better understand the terminology we use here, we recommend reading that post first.

In this post, we’ll fill in a bit more information by talking about the “who,” by which we mean the people responsible for creating and preserving the quality of coffee as it makes that journey. Again, each coffee supply chain is unique, so we’ll generalize here to give you a good overview:

1. Farmers and farmworkers

Farmers like Luis Huayhua of Nueva Llusta start the chain of coffee quality

Coffee quality starts at the farm level. The responsibility of ensuring the health of coffee trees, picking coffee at the correct ripeness level, and, in some cases, processing and drying the coffee, rests with farmers and farmworkers. If any one of these steps isn’t executed property, a potentially great coffee can depreciate with no way for people further “down” the supply chain to recoup its quality.

Coffee farms range from very small (1 hectare) to very large (100+ hectares). About 80 percent of coffee is produced by smallholders: farmers who have relatively small plots of land, depend upon coffee as their primary source of income, and generally rely on family and friends for labor. Most medium and large farms have a small permanent labor force and hire additional labor as needed seasonally. In general, coffee farming is a family business, with many of today’s farmers inheriting land and trees from their parents and beyond.

2. Cooperatives

The Incahuasi Valley Cooperative in Cusco, Peru, brings together nearly a dozen coffee-growing communities in an effort to promote specialty coffee production.

Many smallholders belong to a cooperative or a similar group that pools resources and provides market access. We use the term “cooperative” here to cover all entities that serve these purposes, regardless of ownership structure. Cooperatives serve as a collection point for coffee, as well as a service hub for members.

Some cooperatives collect coffee cherries and wet-mill on-site to remove the outer fruit layers resulting in coffee with a papery layer called parchment. Others collect coffee “in parchment.” In addition to hosting trainings and meetings, cooperatives often employ agricultural technicians who spend time visiting member farms to give advice. Cooperatives usually have staff dedicated to communicating and coordinating with other supply chain participants like exporters and roasters.

Facilitating payments to farmers is one of the most important services cooperatives provide. Generally, farmers get paid when they turn in their coffee, meaning that the cooperative is paying them before they themselves have received payment for that coffee. Once the coffee is sold, cooperatives sometimes distribute a second payment to farmers, depending upon the final sale price and contract terms. This financing service is crucial; if farmers weren’t paid until the coffee made it all the way to roasters and the money made it all the way back down to them, they would be waiting more than six months for payment.

This timing of payment is also important, because, after coffee is picked, the farm enters a kind of maintenance phase—pruning trees, adding nutrients to the soil, repairing equipment, etc. In many places where access to credit is limited, this crucial maintenance requires a farmer to have cash-on-hand.

Medium- and large-sized farms usually have their own facilities for wet milling and drying, and they sell to exporters directly with a similar financing situation.

3. Exporters

Exporters are responsible for physically getting the coffee to port and for preparing the paperwork to ensure the coffee is accepted by U.S. Customs.

From the cooperative or similar type of collection point, dried coffee in parchment is delivered to an exporter. The exporter almost always owns the dry mill, where parchment is removed from the coffee and coffee is separated according to size, density, and color. Any noticeable defects in the coffee are also removed during this stage. Dry mills also typically have cupping labs and trained cupping staff who taste coffee and assess its quality.

Once it’s dry milled, coffee is bagged and stored until it’s ready to go to port for shipping. Proper storage is especially important starting at the dry mill, because the bean without the parchment is particularly vulnerable and can develop mold, become stale, take on strong odors from its surroundings, etc.

Exporters are also responsible for physically getting the coffee to port and for preparing the paperwork to ensure the coffee is accepted by U.S. Customs.

Exporters also play a crucial role in financing. Much like cooperatives do for farmers turning in coffee, exporters pay cooperatives for coffee before the exporter gets paid for that coffee. In some cases, they are the ones loaning money to the co-ops to pay farmers—usually at a much lower rate (if any rate) than a bank would charge.

4. Importers

Our first shipment of green coffee to our West Coast roastery in 2015

Much like exporters are responsible for getting coffee out of its country of origin, importers are responsible for bringing it into the U.S. Usually, importers take ownership of the coffee at the port of export, booking space on container ships and facilitating the movement of coffee through U.S. Customs upon arrival.

Once cleared through customs, importers store the coffee in warehouses, usually located near the port of entry. Importers continue to own the coffee until we order it from their warehouse for shipment to our roasteries, which happens 1–2 times per week for us at Counter Culture. The fact that the importers own the coffee until we ask for it is important because it means we don’t have to have a lot of capital tied up in inventory. Instead, we’re able to pay for the coffee as we order it and can know that, until that time, it’s safely stored to maintain quality. Most of our coffee comes in and is warehoused in Charleston, SC, with a smaller portion coming in through Oakland, CA.

5. Roasters

We work to maintain the quality of the coffee we receive by testing for quality, meticulously roasting coffee to order daily, and teaching our accounts and customers how to brew coffee.

Hey, that’s us! Our job is to make sure that all of the work that’s gone into maintaining the quality of a coffee is realized and that the characteristics everyone has worked to create and preserve make it all the way to your cup. We do this by testing for quality, meticulously roasting coffee to order daily, and teaching our accounts and customers how to brew coffee. Learn more about our operations here.

Like many other supply chain participants, our role involves taking on risk. We do this by contractually committing to coffees pre-harvest. This means farmers and cooperatives know that they already have a buyer for their coffee, making the investment of time and money into their farms less risky.

We also spend a lot of time communicating and coordinating to help ensure that the coffee that we contract arrives on time and meets our quality requirements. We’re always trying to make the coffees that we buy better, and it’s rare that the responsibility for those improvements falls on a single person or entity. More likely, the improvements involve everyone working together.

6. From our partners to you

Our coffee is served by our partners, Muchacho.

Even the highest quality, freshest, well-roasted coffee can lose a lot of its potential to taste great if it’s not brewed properly. Our wholesale partners receive training from our staff on how to best prepare drinks for customers in their shops. If you buy whole bean coffee, we offer online guides and videos so you can brew a great cup yourself: Check out our brewing guides for instructions for your favorite brewing method.

Here are a few important concepts that we didn’t specifically address in the chain:

  • Contracts: Even though ownership and payment for coffee happens in real-time as coffee moves from party to party, 99 percent of our contracts are set-up in advance. In many cases, these contracts are what allow supply chain members to get the loans that allow them to pay for coffee upon receipt and not 6+ months later.
  • Timing: Coffee is a food product. While more stable than, say, tomatoes, it still loses quality over time. This is why timing is so important in the coffee supply chain, every step of the way.
  • Risk management: Coffee travels a long way and because of that—plus the fact that coffee is a vulnerable food product—a lot can go wrong in the supply chain. That’s why ownership of the coffee transfers as it moves down the supply chain: Each participant owns the coffee during the part of the process that they control.

For example, say a farmer owned their coffee until a roaster bought it, and it took on moisture and started growing mold while at the exporting dry mill. This coffee would fetch a significantly lower price and that farmer would lose an enormous amount of income for the year through no fault of their own. But because that farmer has already been paid and ownership has been transferred, the exporter would bear the cost for their own mistake. The exporter’s ownership also incentivizes them to take preventative measures to ensure this kind of scenario never happens in the first place.

In sum, high quality coffee is no accident—it relies on the careful attention of people at every level of the supply chain.