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SCA publishes a summary of work of the Price Crisis Response (PCR) Initiative

PCR SCa

MILAN – The Specialty Coffee Association ( SCA ) has published a summary of work by the Price Crisis Response ( PCR ) Initiative, first commissioned in December 2018. Aimed at understanding and addressing the price crisis affecting coffee farmers and threatening the supply chain, the project intentionally focused on identifying interventions with the most potential for long-term, systemic change, rather than a short-term fix.

Two main outputs for the PCR initiative are a systems map and specific recommendations to guide the industry towards the initiative’s vision: A specialty coffee sector that distributes value equitably, fosters resilient coffee farming communities that are economically prosperous, and values diverse producers of differentiated coffees.

Here is a summary of the Pcr report

On the surface, coffee price crises are tied to volatile swings in supply and demand, with high prices reflecting a shortage in coffee supply and low prices, a glut. But even in times of high prices, many producers simply aren’t benefiting from the swing upwards. Higher coffee prices and premiums often aren’t enough to cover the cost of sustainable production and dignified livelihoods for coffee communities, and this is particularly true of quality premiums that use the C market for price discovery. Coffee’s extractive model of production—depleting the soil, relying on forms of unpaid and sometimes even forced labor— often bridges the gap between the achievable prices and the cost of doing business.

This is a chronic problem, and current efforts are insufficient. Right now, the capacity of industry actors to invest in sustainability projects often directly correlates to their ability to increase the profit margin on coffee purchases. Most of these investments seek to optimize producers’ behavior to drive higher yields to ensure greater financial return. Metaphorically speaking, if the problem we’re trying to solve is to make sure that producers receive more for their efforts—to get a larger slice of the “pie”—you could say that this kind of approach seeks to “increase the size of the pie” to make sure there is more to go around. These models not only risk further oversupply—perpetuating low prices—but haven’t ever managed to deliver fully on a vision of long-term dignified livelihoods. These kinds of efforts don’t address the root causes of the problem; they often reinforce them.

Why is this? Once the size of the pie has increased, where does that “extra” pie go? Tracing the flows of finance through the value chain, you’ll find it highly concentrated at the consumer end; this is at odds with the increasing level of risk borne by growers in the face of climate change and increased costs. Following the price crisis in 2002, our industry turned to solutions focused on increasing the end consumer price or introducing new market segments, but in hindsight, these have had a negligible impact on addressing the problem of stagnant producer income: only a tiny proportion of the increased value filters down to growers in the current model. The pie may have grown, but only some are seeing bigger slices of pie end up on their plate as a result.

This is compounded by an increasing number of mergers and acquisitions in the coffee world, concentrating both wealth and power. It’s a complex loop: Roasters and traders compete to drive competitive, arbitrary pricing and favorable contract terms, while producers are often in the position of being “price-takers.” When wealth continues to generate at the consumer end of the value chain, it self-reinforces: more wealth helps to accumulate more power in the negotiation process.

And then we are faced with a similarly complex loop of consumer communication: Few know that the pie isn’t being divided equally among those at the table. Many consumers—and industry members—feel that they’re already supporting dignified livelihoods by buying and supporting specialty coffee, but there hasn’t been much transparency to date on value distribution. What opportunities are there to improve this, acting ahead of the curve and living up to the values of the younger generation, our emergent consumer base?

Slicing Pie

The full PCR report spans over 80 pages and traces learnings from a landscape analysis, 160 industry representatives convened across four sector gatherings, 800 attendees across six Price Crisis webinars, and over 200 specialty coffee stakeholders who requested to be involved in the peer review process. Together, they honed a shared vision: A specialty coffee sector that distributes value equitably, fosters resilient coffee farming communities that are economically prosperous, and values diverse producers of differentiated coffees. And—after mapping the system and hypothesizing leverage points—they came to an important realization: Unequal value distribution is a root cause of the price crisis. We’ll need to address this if we truly want to make specialty coffee a thriving, equitable, and sustainable activity for the entire value chain.

Achieving an equitable value distribution isn’t about making the pie bigger; it’s about dividing the pie better. It’s about who captures the value within the chain, regardless of where they are. It’s relevant at both the level of value capture by different communities or organizations (for example, the percentage going to trading companies) as well as the distribution of that value within those firms and communities so that each individual achieves an equitable portion.

There are two ways to do this: take less; give more. But even this isn’t as simple an answer as it might seem. It’s important to acknowledge that the way we tend to “give more” celebrates the act of philanthropy without questioning how individuals or companies have so much to “give back” in the first place. (Hint: it’s that extractive model of production.)

A “take less” approach recognizes and rewards the risks, costs, and value generated by producers. It should build resilience in coffee producing communities while also placing more emphasis on the unique, valued attributes shaped by the actions of producers during planting, picking, and processing. This could be achieved by new, more regenerative or distributive business models with longer-term horizons, responsible to stakeholders beyond just shareholders. There may also be new economic models, with different forms of shared ownership and governance, that help to drive shared objectives across the value chain.

Towards a More Equitable Industry

In many ways, the past few years have seen specialty coffee enter a period of intense self-reflexivity as we’ve matured. What does it mean to be “specialty,” to work in our little corner of the coffee industry? As we broke this question down bit by bit in order to start to try to answer it, the task of defining became more daunting.

In the recommendations of this report, I see a framework that will help us to redefine specialty coffee in a way that will help to ensure its viability 20, 30—hopefully even 50—years into the future. Most are tied to the idea of working towards a more equitable specialty coffee industry, whether it’s through shifting the balance of ownership, finance, risk distribution, information access, or governance. Each recommendation encompasses years of work ahead, across multiple projects, organizations, and platforms—many of which we haven’t even yet begun to outline or even identify as potential drivers for change.

But—if we apply the framework used to outline the recommendations to our own personal, internal analysis—we can begin some of the large work of shifting our collective understanding of “specialty” on an individual level. It starts with leaning into this idea of self-reflexivity, of questioning who we are, what our role is, and if how we move in the world—passively or actively—reinforces or fights against the inequality inherent in the current system. It means asking: “What is ‘value’?”, “Who creates it?”, and “What is my role in creating value?” These are big, complex questions without simple answers, but in asking them openly—and regularly—of ourselves as we go about our daily work, we’ll have already begun the important work ahead as outlined in the report.

Jenn Rugolo is the Editor of 25. Read the full PCR report here.