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Luis F, Samper
“There are valuable opportunities for producer ovigins to create new value and generate
the conditions to sustainably improve livelzboods”’: that is the conclusion of a new pra
per caauthored by Daniele Giovannucci, divector of the Committee on Sustainabitity
“Assessment (COSA) based in Italy and the US, Brasit’s Luciana Marques Viera
at FGV (Fundacao Getulio Vargas - Escola de Administracao de Empresas) and
Luis P. Samper, founder at 4.0 Brands
The work was commissioned by the World Intellectual Property Organization (a
UN body) and made public as part of ts flagship global report released biannually.
In the paper, the authors review the volume and value of major coffe market
segments, their challenges and emerging solutions fo grow value and distribute it more
equitably, The report conclude that there is ample opportunity to use inelletual property
much more effectively to create new value and create the conditions for producer origins
10 reap appropriate benefits and establish a level of emponerment nithin supply chains
that they carrently do not have in most cases
4B STIR cafes and tea lssue 42018 August September)
STAR: What can be done to ater he current
sconara where farmers take much ofthe risk
and reve only limited revars for growing
special cect
Samper: First isto understand that the
evolution of coffee as a commodity in
the last century has permitted widespread
market penetzation and lower market
costs but has also led to the steady de-
cline of distinctive charactesisties and the
diversity of coffees around the world. If
that trend continues, i is likely that many
Of the uniquely interesting coffees that
still exist today will be gone in just a few
decades due primarily 10 the dual pres
sures of unsustainable prices and climate
change that make coffee fuming less vi-
able for many. We may thus lose a veey
‘valuable source of Furuse value
In our paper we undesline that in (xpi.
cal market-driven value chains, where
coffees and suppliers are easily inter-
changeable itis easy to Tose distinctions
that can grow value. Industry now finds
the need to ensure long term supply to
ensure growth, which can open up pos-
sibilities of mutual inter-dependence
between suppliess and industey 10 even
create valuable long-term collaborations.
These collaborations have the chance to
be successful if farmers and coffee of
gins develop the intrinsic values of their
production systems. This is best done via
theic own intangibles in terms of regional,
collective ot individual brand equity and
origin content that authentically com:
‘municates the diversity, and embedded
knowledge or quality inherent in sustain-
able farming techniques.
STAR: Je shir sugested roe eomitent with
current market ends?
Giovannucei: Yes. Thied wave cof.
fees are having a tremendous influ
ence in the industry, even beginning 10
affect conventional brands and_mass
rmurket channels, Single origin coffees
are now available at higher price points
and the content behind these offerings
needs t be competently handled for
both marketing and reputation man-
fagement purposes. As business opens
to much greater consumer awareness,
many industry players are progressively understanding that they can better participate in future growth with more sound,
approaches to theie sometimes stodgy procurement strategies which may thus need
to be te-assessed to also function as partnership steategies. This is especially true iF
greater sustainability or responsible sourcing prictices are part of the objective
STAR: Flow you can tell if hs i beady happening?
‘Samper: Brands that created theie seputation from the commodity approach and the
act of blending ace now integrating single origin offerings. Nescafe and Nespresso are
‘examples of this teend. Starbucks launched its Reserve line that aso Focuses on single
origin coffees. Cleadly, moves by big coffee conglomerates buying smaller thied wave
brands is another example. Even mainstream actors such as Walmart and MeDonalds
are much more engaged with origins and now actively focus oa sustainability. Our
‘organizations 40 Brands and COSA are very different and yet we both see — as we
independently work with a broad array of leading ongnizations, that they are engaging
‘more in not just quakity but aso transparency and a more useful knowledge of theie
supply chains. They are nor only addressing causes of forure risk but also anticipating,
the evolution of business to satisfy emerging consumer expectations.
STAR: Flow can sis suggeed sre achieve a significant impact?
‘Samper: Mackets for differentiated goods have a thiest for information and axe already
having an impact. Most analysts predict they can grow considerably. From individual
faemets at one end and barista at the other end, the coffee world is alceady achieving
‘new value that can be replicated through coffe origin strategies that march individual
brand strategies and values. Developing origin narratives that are authentic and, atthe
same time, fit into a brands purpose ancl story-telling is the next phase of coffee part-
nerships that may well begin the decline of an obsolete coffee procurement paradigm.
that captures but does not create much mutual value. Of course, narratives have to be
substantiated ancl impact needs to be measured because it cannot be just stores either,
Fortunately, itis not difficult to do and the technology to do that is now here. We are
{quickly going beyond the outdated idea of compliance checklists, it is about living data
that adds knowledge and value to all the stakeholders all the way to the consumer. Tts
building ongn and brand equity with meaningful, evolving, and long term partner
ships that can really accomplish significant mutual impact and even achieve consumer
loyalty
STAR: Whar can cf brands do?
‘Samper: Many coffee brands, particularly first wave brands, are finding that they are
Tess relevant in this new contest. Some will become obsolete and others will evolve,
‘especially as they sce market share and margins being affected. It is likely that some of
them will choose to squeeze their suppliers further, demanding longer terms of pay-
‘ment or going for lower qualities, withoue realizing that they are getting some short
‘erm gains but are also making a big bet against the better interests of the coffee indus.
try and likely contributing to their own demise
To be successful we believe that three basic pillars of differentiation will become more
prominent in the 21st century distinctive quality teansparency, and knowledge. Qual-
ity is of course a condition to differentiate and to compete, but it is not sufficient.
‘Transparency will be a requirement of any credible supply chain. It will help validate
jmportant narratives that are truthful in sharing the realities that producers face. Lastly,
knowledge needs to be part of any growing sector and this one invests litle in coffee
research and sustainability research. Some of that knowledge will be based on much-
needed experimentation on qualities and characteristics at firm or regional level as well,
as the aced to improve conditions and drive more effective investments, The most
successful brands currently engage in this theee-pronged approach,
ove
Daniele Giovannucci
STIR: What's nest?
Giovanuccl: We may be emesgng from
the “Indiana Jones model” wherein i
trepid coffee buyers find high quaity
jewels in eemote or exotic counties. The
next stages thatthe hero isnot only the
tryer but also the farmer and the gin
Stores ate important for thi, especial
as they serve to convey aunty, and
even the conflicts and challenges of pro-
dicing high-quality coffee in dificult
ecvionments. But they will bo serve to
al the catego if the ate not supported
by realtic nowledge from the same of
sins. As its becoming more common to
have much greater visibly into the far
and farmer levels, we alto-must be avace
Of the narmatves that emerge to ensure
that they are not us the product ofa f-
werish marketing team. Ulimatly, with-
out sustinable conditions, none ofthese
stores survive and the lifelong value of
an ofgin is to important to be left to
the vagaries of a comporate macketing
team. Natketing i crcl, of course, but
not a i is increasingly being practiced
with unpeincpled exaggeration and even
Blatant lie that cease appeal to emo-
tions. The movement among visionary
finure-oriented organizations ws divene
as McDonalds, the Swi Government,
and the Global Coffe Patfbam ilsteate
that credible and veriable data may well
be the undying component of fore
growth that embodies principle of cea
sustinablty where contdbutors can
reap the benefits and pretenders are in-
creasingly exposed.
[STIR and ten 49