Leighton Up: Has Bean Punts On Direct Trade Model

There’s only one Stephen Leighton, the human dynamo responsible Tamper Tantrum, Tamper Tantrum Live (it’s like TED for coffee!), and Has Bean, a quality-focused wholesale coffee roasters based in Stafford, UK. Mr. Leighton recently published an editorial on Direct Trade and why Has Bean is moving away from the DT model. This editorial is edgy, biting, and intentionally courts controversy.  More from Mr. Leighton’s editorial, “Direct Trade Sucks”:

I liked [sic] it to being trapped in a loveless marriage, one was trying really hard, and the other didn’t feel the same way. Its [sic] a problem when your partner loves you for the wrong reasons, or doesn’t trust your motivations. I guess Thats [sic] my job to fix or change that.

Mr. Leighton tells his customers:

You’re going to have to trust me even though it doesn’t have the name direct trade / fair trade/ grown by nuns/ kissed by monkeys or any other certification. I don’t want to make the same noise or the same mistakes of others using direct trade. Relationships with many producers is too complicated to give it a title or a badge or a sticker. After all its not about words its about actions. feel free to judge me on them.

Do you think Mr. Leighton is right? Does Direct Trade indeed suck? Or should Leighton lay off? Direct Trade is a big concept and it means different things to different people – we’d love to hear more from you, so please feel free to  sound off in the comments below!

Comments

  1. nameKirke Campbell says

    Geoff –

    Wow, thanks! You really went above and beyond in answering our questions. Thanks so much – it’s an honor to be a part of this discussion!

  2. says

    Part Two:

    Steve brought up some important questions in his post that definitely merit discussion:

    SM: “Is [Direct Trade] meant to help farmers monetarily? Make them more socially or environmentally responsible? Improve quality?”

    My answer to all three is the same, an unequivocal Yes. I would go so far as to argue that the three things are mutually interdependent. Without quality as a differentiator and mechanism for adding value, the money part is screwy. Because coffee is such a huge global commodity, and because the way it is (mostly) consumed around the world doesn’t lend itself to significant price differentiation, quality is the one reliable way to give a coffee unique value that can attract a premium in the marketplace. Almost all the other premiums that farmers can obtain–those based on other criteria (Jamaica BM being a notable exception)—are small in comparison and have a somewhat well defined (read: limited) ceiling. In turn, the attainability/feasibility of most social and environmental objectives are in a very real way correlated with profitability and upward mobility for farmers. So yes, DT is meant to advance all three, and they sort of fit together neatly under the general concept of sustainability.

    I don’t think it is entirely accurate in the context of this discussion about DT to say that “most [farmers] are living hand to mouth” or to suggest that roasters who ask a farmer with whom they’ve been doing business for a long time to reject a higher offer from another roaster is akin to asking them to sacrifice their health care or their children’s education. That feels hyperbolic. Context is important here. We are not really talking about the entire global population of coffee producers when discussing DT. As you know the huge majority of the coffee consumed in the world is sold anonymously, usually pre-ground or in soluble form. It is generous to say that 10% of global consumption is specialty (talk about a word that has lost its meaning ☺. Of that perhaps a miniscule fraction (.00001% or less) comes from some semblance of a DT program. So really we are talking about a very small and very specific subset of coffee farmers. I would hazard a guess and say that the majority of producers currently selling coffee in some sort of a DT manner fit into a somewhat narrow category—they are either estate owners, farmers who belong to a relatively successful cooperative, farmers that have obtained valuable market linkages through competitions like the Cup of Excellence or various development projects, or those that have other linkages to consuming markets through family or friends living abroad. There are surely some in this category that are truly living ‘hand to mouth’, but I would wager there are more that are already far beyond that stage. I’m not saying they are driving around in Land Rovers (although plenty of estate owners in Central America are doing just that, with bulletproof windows to boot) but for the most part they doing considerably better than the average farmer and are well positioned to continue moving ahead. There are exceptions of course. There always are. But I do get your point, which is that roasters need to be sensitive to the realities that farmers face and understand that profitability depends on a lot of variables, many of which are beyond an individual farmer’s control (erratic weather, unforeseen plagues, rising labor and input costs among them). Simply paying a $1.00 or $2.00 or even $3.00 over the C is no guarantee that the farmer is going to make money that season.

    That said, and in reference to your comment about debts, I do know (and work with!) plenty of farmers who are carrying debt, a lot of which is related to the market collapse 13 years ago. Without exception, all of them that we’ve partnered with have advanced significantly since we started working together. Ironically, there have been a lot of years, especially early on in 2003/4, when we took criticism for what was seen by some at the time as “over-paying” (or, to use your expression, ‘leaving money on the table”) for coffees we bought from farmers in our DT network. Four, Five, Six times ‘market’. The reality as I see it is that we were not overpaying at all—we were paying the right price for the quality we were buying, or to put it differently we were paying the price that these farmers needed to get to be able to move forward and invest in further quality improvement. Many of these farmers have been working closely with us for over a decade now, and some have even told me they wouldn’t be in business today if it weren’t for our relationship and our support. So you could make the case that what we were really doing was investing in their success (and, by proxy, in our own). Most don’t sell us 100% of their coffee—they sell some to other roasters, in other markets, and have been able to leverage the quality improvements they’ve made over the years to their benefit. In effect, beyond supporting them directly with our purchases over many years we’ve helped them build a brand and find markets. So to expect some small degree of reciprocity, loyalty, or fidelity—whatever you want to call it—does not seem to me to be asking too much. Seems very fair and appropriate.

    In practice, we’ve experienced an amazing degree of loyalty and the majority of farmers we work with recognize the value of maintaining long-term relationships even when it means saying “no” on occasion to an offer from elsewhere. Every farmer must of course make those decisions based on their own situations, plans, and expectations. Some decide to go mercenary and look for the highest bidder, and I don’t blame them at all. No hard feelings, just some disappointment. But they are taking a risk, because there is no guarantee that the new suitor is going to be around and willing to pay the following season, or the next, or the one after that. This industry can be incredibly fickle. History has proven that over and over again. It is a gamble to bail on a relationship that has been consistently rewarding, and there is massive value to having partners you know you can rely on. Stability has a lot of appeal, and ought not be underrated. In fact most farmers I’ve met–large or small, impoverished or thriving—give nearly the same answer when I ask what they would like most to see for themselves and their coffees. Stability. Dependability. Reliable income. Forward progress. To have that and risk losing it is a gamble that many farmers choose not to take, even when presented with tempting offers. For those that do, I wish them the best of luck and I hope they find what they are looking for. I would never want to feel that I was somehow holding them back from achieving their goals by obligating them to sell me coffee. That’s antithetical to the very idea of DT. But I don’t really see that happening, and ultimately its not even something I can control as a buyer. People do what they want to do. All we can hope for is that they want to maintain a relationship with us because they believe it is in their best interest.

    To answer Kirke’s other question “are there importers that have been working within a “DT model” in that they consistently visit producers, have built relationships over many years, help improve quality of coffee, working conditions, and pay more than market value for their coffee?” Yes, I think so. To name a few– I think Café Imports, Atlas, and Coffee Shrub do admirable work and put their money (and their sweat) where their mouths are. There are others, too, I’m sure. And I am certain there will be more in the future, as coffee consumers (and in turn coffee roasters) become more knowledgeable and begin to demand more.

    And lastly, just to throw it out there, here is the most recent abbreviated definition I’ve been working on for Direct Trade as we view and practice it here at Intelli. Perhaps you can help me improve it.

    Direct Trade:

    A personal and professional relationship between a coffee roaster and coffee farmer wherein there is a mutual commitment to pursuing two principle goals in a collaborative and progressive manner: Optimizing coffee quality through improvements in process control combined with ongoing experimentation and ensuring that coffee production is carried out in a sustainable manner with respect to both social and environmental metrics. DT relationships may vary in some aspects but share a set of fundamental standards that include transparency in financial transactions, long-term agreements, valuation of coffee based on actual intrinsic quality and real production costs, and year-round, bi-directional communication. Direct Trade is an approach to buying and selling green coffee designed to create incentive at the farm level to invest in quality improvement and preservation while mitigating risk for both the roaster and the farmer. It is based on the idea that roasters and farmers are the two most essential entities in the coffee supply chain and that by working together in close partnership they can solve most of the inefficiencies, imbalances, and uncertainties that have long burdened the coffee industry. The goal of every DT relationship is to create the conditions that allow the both the farmer and roaster to advance while maintaining a base level of security and stability for each. It is designed as an antidote to the historic volatility and unpredictable nature of the commodities market and is characterized by the recognition that investment in coffee quality is the best way forward.

    -geoff

  3. geoff watts says

    Great questions, Kirke. I want to try to answer in two parts, because there are several things to think about here and each deserves some close examination.

    Part one: The idea that pursuing a set of common, peer-reviewed and clearly articulated standards that industry folks and DT ‘practitioners’ could rally around and present to the public has been discussed informally for years now in various circles. The argument in favor usually goes something like this: with the use of the term proliferating throughout the industry at a fast rate and being applied to packaging, used to describe a wide range of different approaches to coffee sourcing, and in some cases even wielded as a kind of two-word ‘manifesto’ it is at risk of being diluted and losing any kind of meaning altogether. By creating some kind of certifiable system of metrics or standards to quantify, qualify, and specify DT we would preserve the meaning and reduce the potential for confusion or abuse.

    That argument makes sense, especially at first glance. But every time we’ve gone down that road and followed it towards practical application it starts to get a bit clumsy and onerous. In the first place it starts to look very much like yet another certification scheme, something that few people in any sector of the industry—from farmer to retailer–are interested in. With all due respect to the certification industry, when a consumer goes looking for coffee and is confronted by the more than a dozen different (and often competing) kinds of certification seals already in use they risk getting some new form of 21st-century ‘shopper’s vertigo’. There are already too many, and most farmers I know find the sheer number of them to be as overwhelming and confounding as the average consumer does. As an aside: I once had a chat with a university professor whose solution to this dilemma was to propose some kind of (in his words) “Über seal”—the seal to unite all seals. Again, an interesting idea that starts to collapse all over itself when the conversation moves from theory to application. (Meditate on how that might look for 20 minutes and you’ll see what I mean.)

    And in any case, I think we’ve all learned a lot in the last decade about the real-world functionality of universal certification systems for coffee. In almost every case their effectiveness and relevance show a tendency to weaken as they scale up and begin to be applied across an ever-growing number of different countries and contexts. That’s less of a criticism than an observation—they change because they have to, in order to maintain some level of feasibility (with regard to application and enforcement) across a huge number of extremely diverse farming and purchasing scenarios. The particular gravity of the commercial universe pulls them slowly towards broader standards and more efficient enforcement protocols and usually results in a measurable dilution of the ideology from which they were created in the first place. My experiences in the field over the last 12 years have repeatedly and consistently revealed significant inconsistencies between what most seals purport to accomplish or guarantee and what they actually manage to achieve, most often due to simple logistical limitations—geography, cultural considerations, available resources and the dynamic nature of the coffee producing world itself combine to create an inevitable gap between goals and outcomes. And of course in the worst of cases corruption itself creeps into the picture and wreaks its own insidious form of havoc. Sometimes they even end up yielding consequences that are in direct conflict with their own stated goals.

    I’m generalizing here, of course, and don’t want to give the impression that I think these seals are useless or that they don’t serve a positive purpose in our industry—on the contrary, I believe many of them have a legitimate place and are of benefit to the industry-at-large. I do believe, however, that the boutique, top-level quality coffee market is one particular industry niche where they have the lowest level of relevance, applicability, or usefulness.

    For all the reasons above (and plenty more that I’m sure you can arrive at yourself if you sit for a while and contemplate how it would work) there are a lot of problems with the idea of having a certifiable set of standards that all coffee companies looking to practice Direct Trade could adhere to. Enforcement is among them—imagine a huge group of DT roasters, many of them in direct competition with one another, trying to hold each other accountable to a set of standards, assuming they could all agree on the details of that set in the first place. Whatever emerged would likely be so non-specific and broadly worded as to be nearly pointless. It could even get silly, with some folks trying to “out-DT” each other in the same way that we’ve seen companies in the past look to “out-Fair” one another or “out-small” their faster growing and more established neighbor. You could certainly have some agreed upon set of goals or a “manifesto” of some kind (and I would submit that something of the sort). One alternative approach is for individual companies to create their own, personalized DT standards and even go as far as to contract outside verification for them if so desired.

    My personal opinion is that what Steve said at the end of his post: “That being said, it doesn’t need to carry the Direct Trade label or any label, just search out the best coffees and reward them. SO Stephen, I would agree with you, your customers should trust you by virtue of your reputation not because you slap a label on it” has a lot of merit. In the end, that’s how things have usually worked (and worked well) in other industries…individual companies earn consumer trust and set themselves apart in the marketplace based on their own particular ‘manifestos’ and stated goals as well as the public (and peer/industry) perceptions about how well their performance seems to live up to or adhere to those goals. I’m a big believer in the idea of the track record—of assessing performance over time—and of the notion that authenticity is not really that hard to detect if one is paying attention to details. There will always be some who try to utilize some sort of “Direct Trade” terminology strictly for marketing purposes and without any sort of commitment to the basic principles or goals which I do think have been fairly well articulated by a good number of companies that have been working under the DT banner for the last several years (more on those in Part Two of this post). But with time I think the differences between those who are DT in name alone and those who are putting in the work it takes to make it function and actively seeking to achieve something admirable and exceptional are not so hard to perceive as one might imagine. And to some degree the coffees really do speak for themselves, IMHO. Visceral, intrinsic quality of coffees is actually a pretty decent indicator. (insert comment here about defining quality…hehe ;)

    Interestingly, as a historical footnote, when we first started using the term DT almost 10 years ago we went through the process of trademarking it. We used to use a little ™ there, “Intelligentsia Direct Trade ™”. After a while we just let that expire, largely because the idea of a Linux-style, open-source protocol was really appealing and felt much more appropriate and in harmony with the idea of a global coffee community that was trying to push the concept of quality into the mainstream. Several other companies and individuals I respect, admire and support had taken a liking to the terminology as well and it came about during a time when there was a lot of frustration in the quality sector over what was perceived as a growing monopoly on the whole concept of ‘fairness’ or ‘sustainability’, or that those ideas were increasingly being branded and commodified. In some ways Direct Trade was seen as an answer to that quagmire and a way to differentiate the kind of work that a handful of progressive roasters were doing from the larger galaxy of eco-branding and social-consciousness driven labeling systems that were becoming increasingly popular, not just in coffee but in all kinds of consumer goods. Perhaps more than anything else, the phrase Direct Trade was created so that we would have a means of referring to the work we were doing at origin and to signify a quality-focused, collaborative approach to engaging with coffee farmers that was based on the idea that many farmers and roasters have similar goals and can them achieve more effectively by working in partnership than by working independently. To me it is as much a philosophy as it is a methodology (and I would submit that something of the sort already exists). Like most ideas of this nature, whatever true utility or meaning it possesses has far more to do with what it ends up accomplishing—whatever consequences result from its application in practice–than how it gets described on someone’s website, and for the most part those consequences are best measured progressively (and over time) over time rather than in snapshots or anecdotes.

    -geoff

  4. says

    First off, thanks for the two awesome, informative responses above!

    From the Sprudge post:
    “Direct Trade is a big concept and it means different things to different people…”

    I think Leighton’s blog post highlights this point well. I am a barista who has worked with and served coffee from several different quality focused roasters who work within a direct trade model.

    And some days I am still really unsure of what direct trade actually is.
    Mostly, because that model seems to be different for each roaster. Some folks even seem to be intentionally vague about what it means. Few seem to have standards written out and clearly available to wholesale clients and consumers.

    In a way it seems good to have direct trade be an open ended model, in that, as mentioned above, different people can take nuanced approaches; tailor the model to fit their needs. On the other hand, not having a clear definition is just confusing. And can be misleading.

    When I attempt to succinctly explain what direct trade means to customers at my busy espresso bar,I feel like they walk away with a picture in their heads of a coffee farmer packing up jute bags of coffee and mailing them directly to a roaster.

    So questions:
    Would more clearly defined standards be a good thing for DT?

    Any suggestions on explaining DT to customers that is easy to understand but that also communicates that it is not a simple process?

    Direct trade is always used in terms of coffee roasters. Are there importers that have been working within a ‘DT model’ in that they consistently visit producers, have built relationships over many years, help improve quality of coffee, working conditions, and pay more than market value for their coffee?

    Thanks,
    -k.

  5. says

    Stephen, that is unfortunate you have had those experiences, there really is no excuse to be stood up a week before confirming a trip (at least without making alternate plans), and Geoff you highlight some good points like always, BUT…..

    Direct Trade is not perfect. It means different things to different people.
    Is it meant to help farmers monetarily? Make them more socially or environmentally responsible? Improve Quality?

    If you want to help and support producers, do you not want them to get the most for their efforts even if that might mean another roaster outbids you? Wouldn’t you consider yourself successful if you have elevated someone to that level? Wouldn’t this encourage other farmers to up their quality efforts to be able to reach the prices they see their farmer friends getting? After all, this is what has fueled the return of “exotic” cultivars or the different processing methods – we are seeing farmers taking on these risks and sometimes (not always) getting awesome results.

    Don’t get me wrong, I completely value and appreciate the need for a long term view, but not all producers have the luxury of a long term view: From Geoffs post.“The key here is to take the long view and not get swept up in the volatility that is a hallmark of the traditional coffee industry.”
    Most are living hand to mouth. Remember, that most producers “salaries” are what they make from selling that years crop.

    Furthermore most survived the “coffee crisis” years, 50-80 cent a lb prices, over 4-5 years, only to still be in debt today. Perhaps producers are close to getting out of that burden but it may be a lot to ask someone to leave money on the table if the opportunity is there and if they are indeed living hand to mouth, it could mean the difference between paying for school, healthcare, equipment, paying down debts etc.

    My point is that different farmers and producers have different realities they are dealing with and roasters have to have a more macro understanding of where they are coming from instead of just the last few years.

    To me, the greatest thing about Direct Trade model isn’t the farmer “story” it provides, it’s the impact it has on an entire coffee producing industry. Leading by example, other farmers see how extra effort of selective cherry picking, great focus in processing, and lot separation leads to a better price, and a better price will lead to a better standard of living for the farmers family and better coffee quality for all roasters to choose from.

    That being said, it doesn’t need to carry the Direct Trade label or any label, just search out the best coffees and reward them. SO Stephen, I would agree with you, your customers should trust you by virtue of your reputation not because you slap a label on it, but I also think the Direct Trade Model (not necessarily the label), like Cup of Excellence, has done a great thing to motivate farmers to better quality.

  6. says

    I like this blog post a lot, despite the unfortunate title. Stephen is always one to wear his heart on the sleeve of his football jersey, and I’m sure many readers (myself included) can empathize with the predicaments he describes. They kind of cut to the core of what makes Direct Trade so meaningful when it does work; knowing how fragile relationships can be and how many unforeseen obstacles can crop up to complicate what was intended to be a somewhat straight-forward pursuit is important to understanding why DT is not for everyone. Stephen’s frustrating experiences with operating a Direct Trade model in his business are not unique to him—I would wager that most coffee buyers who attempt to implement an extremely hands-on, relationship-based approach to working with coffee farmers have run into similar obstacles at some point. The thing is, to build a reliable and consistent DT program requires a great many things, among them:

    1. A lot of time (many years, I’d throw out 3 years as a basic starting point)
    2. A ton of effort (extensive travel, year-round communication)
    3. Substantial investment
    4. A great deal of patience
    5. A little bit of luck.

    What we are talking about here is, after all, a relationship. And everyone knows how challenging those are. It is not enough that one party has great intentions and is willing to make real commitments—it’s got to be a shared commitment, where both sides understand what is at stake and value the relationship enough to be loyal and support one another even when circumstances change and the grass across the way begins to shimmer with a seductive green glow. Most relationships become truly meaningful only after they’ve been repeatedly tested and somehow survive despite the pressures that threaten to overwhelm them. Fact is, they will be tested. Market spikes and market depressions are usually the first test—will a farmer accept less than ‘market value’ when the C surges to $3.50 or above? Will a roaster maintain their price levels in years when the C sinks to $1.00 and all of the competitors are acquiring significantly cheaper coffees? The key here is to take the long view and not get swept up in the volatility that is a hallmark of the traditional coffee industry. After all, that’s sort of why we are doing this in the first place—to get away from the cutthroat behavior and dysfunctional valuation systems that have long been the enemy of quality in our business.

    As with any relationship, trust is essential. But trust can only be earned, not purchased or granted. Real trust in DT comes after a long period of working together with someone and passing the ‘tests’, so to speak. And not every relationship will work, despite the best of intentions. Things have a tendency to fall apart, and when they do it can be extremely frustrating–especially when there was a lot of effort spent to build something in the first place. That’s just the way it goes, unfortunately. To expect otherwise is a fool’s errand. It takes a lot of perseverance to keep relationships together, and invariably there is going to be some problem solving required from both sides. If the commitment is there, almost every challenge to the relationship can be surmounted. If not…time to pick yourself up and work on building a new one, hopefully using the lessons you’ve learned from the failed relationship to help increase the probability of success for subsequent attempts.

    My own experience has been just that—a mixed bag, mostly positive but with a few projects over the years that didn’t work despite all my best effort. The coffee market (and perhaps people in general) is mercenary by nature, and to make DT work in that environment is not in any way easy. It is very hard. But it can work, and my best advice for someone striking out on that path is to focus a lot of effort on the human part. In some ways we’ve been successful by ‘rigging the game’—we intentionally seek out farmers who we feel we can believe in, who we believe share common values, and who have demonstrated some willingness to make commitments in their lives. Sometimes there are a lot of clues and other times we’ve got little to go on beyond instinct. When gambling on people, it makes sense to use whatever senses and methods you can to try to increase your odds. We try to be clear and direct in our discussions about how we intend to work together from the very start, so as to avoid creating false expectations. And perhaps most importantly, we make sure we do what we say we’re going to do so that we can build confidence and develop mutual respect.

    DT is not a shortcut to coffee industry success, whether measured by quality or profitability or some combination of the two. It is instead a long-term investment in building something that can last and eventually achieve success by any metric. And it does get easier with time, at least to some extent. Volume helps—some of the logistical obstacles begin to diminish when one is able to deal with full container shipments, for instance. There are efficiencies realized as things scale up, and obviously it is easier to justify putting resources into travel, training, and infrastructure when one is buying and selling more coffee. The dynamics change a lot—when I was buying 10 bags and nobody had every heard of my company it was tough to expect anyone but the smallest (or most visionary) farmers or farmer organizations to put all their chips on me and take the risk that things will work out for them. But over time we’ve grown and created a somewhat extensive track record that makes it easier to start new relationships and expand our DT network.

    In any case, I agree with much of what Stephen said. If you are in a loveless marriage, get the heck out. No one is benefitting in that case. If the relationship is one-sided it is not sustainable. But I would suggest that you shouldn’t give up on love just because you’ve been burned a few times. It happens to everyone. At the same time, no one should chastise Stephen or any other roaster for deciding that the effort and risk outweighs the benefit of pursuing a full-on DT program. There are other ways to achieve great results in the coffee business, and DT owns no patent on quality, sustainability, or any such thing. For my money, DT is and should remain the most powerful vehicle for roasters looking to achieve those goals, but it is not the only path. There are plenty of approaches that can lead to a better coffee world, and the industry at large will benefit when individual companies decide to innovate and chart their own course. I know Stephen well and I know we share the same values and motivations when it comes to coffee, so I look forward to seeing what comes next for him and hope that whatever it is it doesn’t suck ;)

    my three cents,

    geoff

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