“Direct Trade” Sourcing: The Benefits and Challenges

In recent years, “direct trade” has become a popular buzzword in the coffee industry. It refers to the practice of coffee roasters buying directly from coffee farmers or cooperatives. In most cases, this means cutting out the middlemen entirely and creating a direct relationship between the roasters and producers. 

While direct trade sounds like an ideal way to create more transparency in the supply chain and pay farmers a higher margin for their hard work, this sourcing approach has benefits, but it also comes with its own set of challenges. 

Let’s dig into the reality of direct trade coffee sourcing: 

Benefits of Direct Trade Sourcing:

1. Personalized Quality Control:

   Direct trade allows for a more hands-on approach to quality control. Roasters can work directly with farmers to ensure that the coffee is grown, harvested, and processed to their preferred specifications. This can result in higher quality coffee with more consistent flavor profiles.
   

2. Control of Transparency:

   The method creates a more transparent supply chain. Roasters are able to trace the coffee back to the farm it was grown on since they are buying directly from producers and learn more about the farmer's growing practices. 
   
   This relationship can be used to market and communicate about the coffee with consumers who are increasingly interested in where their food comes from.
   

3. Reassurance of Fair Pricing:

   Direct trade can help ensure that farmers are paid a fair price for their coffee when done responsibly. By cutting out middlemen, more money can go directly to the farmers who grow the coffee and roasters know exactly how much is going to the producer.
   
   This can help incentivize and encourage farmers to produce high quality coffee and stay in the industry. 

Challenges of Direct Trade Sourcing:

1. Potentially Time Consuming:
   
   Direct trade can be difficult to scale as it requires a lot of time, intercultural communication, and resources to develop relationships with individual farmers or cooperatives. This is often difficult for roasters who are focused on growing their business. 
   

2. Involves Risk

   It also comes with its own set of risks. For example, if a farmer experiences a bad harvest or a natural disaster, the roaster may be left without a source of coffee. This can be mitigated through long-term relationships and pre-established agreements, but it still poses a risk for the roaster.
   

3. Financial and Logistical Responsibility:

   Direct trade can pose financial and logistical constraints depending on the terms of purchase. Roasters may be expected to pay in full for lots of coffee directly to producers or exporters ahead of arrival in the US via wire transfers and handle their own importing logistics. (Logistics can also be outsourced to an exporter/importer or other logistics provider, learn more on that here)
   

4. Difficult for Consumers to Verify

   It can be difficult to prove that a roaster's direct trade claims are accurate. Without third-party certifications, it can be hard for consumers to know whether a roaster is truly working directly with farmers and paying fair prices.

Direct trade can be an excellent way to source coffee with a mutually beneficial relationship between coffee roasters and farmers, but it does come with its own set of challenges that roasters and producers should be aware of before entering into agreements on. 

While it can result in high quality coffee, fairer prices for farmers, and a more transparent supply chain, it can also limit supply and pose risks for roasters and producers alike. It is important for roasters to weigh the pros and cons, understand what they are undertaking, and to be transparent with consumers about their direct trade practices.

If you're interested in learning more about direct trade sourcing or how you can partner with us to export/import coffee through relationships you already have at origin, contact us here.