Sintercafe 2018: what should the coffee sector be paying attention to today?

2018-11-01T13:48:26+00:00 November 1st, 2018|Categories: Insights|Tags: , , , |0 Comments

This and other questions were posed recently to Sintercafe’s Board President Arnoldo Leiva and Daniele Giovannucci, President of the Committee on Sustainability Assessment (COSA) and keynote speaker, as they look ahead to the upcoming thirty-second edition of the annual  Sintercafe event. Sintercafe’s International Coffee Week is an annual event known worldwide which involves both sides of the coffee value chain.

 

Q: What key issues are you seeing for the coffee industry?

Arnoldo: A key issue we see is the need for the industry to define pricing structures that better reflect and reward the cost of producing coffee and its quality. Coffee growers need to improve their income to remain in this business.

As well, the need to improve the sustainability efforts involving the whole industry in a meaningful way. Real and measurable impact is key.

Daniele: To your point about sustainability efforts, we too agree that impact is a critical part of the story. We are also seeing that the types of investments in sustainability are altering. They’re more specific now and more controlled. In the near future, they will be more results-oriented and will even seek different forms of ROI, and not just at a financial level but in risk and reputational calculations also. They will increasingly be conducted through partnerships rather than solo efforts.

Today’s tendency to seek compliance and traceability will only increase, but with a significant shift: businesses will see more clearly that, while valuable, compliance and traceability are not a credible substitute for sustainability.

Technology is radically altering our visibility into supply chains and into the conditions at origin. The implications are considerable, especially for larger companies that lag behind, leaving them to depend on intermediaries to provide information and transparency.

Finally, consumer expectations in the information age will demand a more sophisticated set of product attributes. Brands will need to ensure customers that a set of basic standards is embedded in their products and that can include a range of features from food safety to ethics. We have already seen how even dominant brands like Apple have faced a tarnished reputation, and incurred great cost when they failed to meet their customer expectations around ethical product components.

 

Q: The price farmers receive for coffee has remained stagnant for decades. Why is this, despite growing demand?

Arnoldo: This is a very complex matter but some of the reasons are:

  1. Oversupply in some origins
  2. Aggressive price competition at roaster level
  3. Pricing structure based on NY “C” (or LIFFE) and participation of speculators on this market
  4. Lack of information at producer level as well as at the consumer level

Daniele:  Yes and low farm-gate prices are not likely to alter significantly (barring a big shortfall in a major origin) so long as two things are missing. First, is a sense of consumer pressure that is now minimal in many cases as civil society’s role of informing has declined. Second, is the industry’s elaboration and recognition of the many intangible values at origin (terroir, culture, tradition, flavors, etc) in such a way that origins can retain a reasonable share of the new higher value that these could generate. We can learn a lot from industries that have de-commoditized the raw materials to drive new and greater levels of variety and value.

 

Q: COSA is a known as a global leader in collecting sustainability data from farmers around the world. What is the data telling you?

Daniele: We’re seeing an increase in awareness of sustainability issues, and that is reaching much broader segments of the production and processing industry. For example, we see greater awareness and application of good environmental stewardship. We no longer turn a blind eye to forced labor and the practices that encourage it. However, this awareness is far from universal or commonplace.

A second point is that we are beginning to see more intelligent use of data.  There are interesting applications and not necessarily just in new technologies like blockchain. Some of the smartest efforts are using data to understand the needs and the risks in their supply chains and how to effectively address those.  Among the results are much more efficient targeting of an array of interventions such as training, credit, capturing and transmitting intangible values, and driving the adoption of improved varietals.

 

Q: What new or interesting things should those coming to Sintercafe expect from this year’s conference?

Arnoldo: Overall this will be a very dynamic event with participants from 20 countries discussing the latest trends, developing new business, and catching up with old coffee friends.

We’ll see very interesting presentations about the future of sustainability, supply and demand. We will learn about the state of the industry in Honduras as a producing country and the UK as a consuming market.

There is also a round table about the trends of wet processing methods and the real value for producers and consumers. Coffee Producers Forum will present their actions to deal with the most recent price crisis. There is also an economic overview and discussions on blockchain, leaf rust, and the specialty coffee market in Australia and the US.

On the last day we’ll visit the Costa Rican Coffee Institute Research center to learn about the latest techniques in agronomy, varietals and processing. The program also includes several workshops and social activities.

Daniele: For me Sintercafe has always been a welcoming place where productive exchanges and valuable conversations can occur. For three decades, its intimate scale and high-level attendees allow the time and opportunity to interact in a friendly way with almost anyone. It is one of the assets of the unique country that is Costa Rica.