Bridging the gap: Blockchain for a ‘fairer’ coffee supply
IBM and Farmer Connect unveiled a new mobile application, ‘Thank My Farmer’, at the 2020 Consumer Electronics Show (CES) today. The consumer-facing app allows coffee drinkers to trace their coffee and understand its quality and origin – as well as supporting the farmers that grow the beans.
According to IBM and Farmer Connect, the development helps coffee companies meet growing consumer expectations around traceability and ethical consumerism.
Empowering consumers through ‘transformative’ tech
Trends shaping today’s coffee market include premiumisation, convenience, customisation, and single origin coffee. Market research suggests consumers in developed markets like North America and Western Europe are increasingly seeking coffee that is ethically and sustainability sourced.
The beverage has a strong appeal to young people, with Euromonitor research across 15 countries showing that 55.6% of 16- to 25-year-olds choose coffee as their favourite drink. And, for this group in particular, sustainability sells. A 2018 report from Ernst and Young revealed 34% of consumers aged 16-24 would pay an extra 20% or more for an ethically sourced product.
In coffee, key sustainability issues relate to the working conditions of farmers, biodiversity and climate change. A growing number of people are interested in the origin of the coffee they are consuming, and companies have responded by working to their impact and traceability policies.
But despite progress by international certifying bodies, there still a lack of knowledge around the need for coffee farmers to earn a sufficient living for bringing their product to market, Farmer Connect believes.
According to DJ Boden, chief operations officer at Farmer Connect, the Thank My Farmer blockchain initiative provides companies with an additional tool in their efforts to improve transparency in the coffee supply chain.
“Manufacturers are probably doing more than they advertise. There are a lot of good stories that are just part of doing business, stories that never get told. Farmer Connect is a way to share those stories, and for the consumer to encourage that kind of behaviour. And if it’s adding value to the supply chain, we think that will translate into more investments into the supply chain and more value to the farmer,” he told FoodNavigator.
The app will also allow consumers to see how sustainable the coffee they buy is – effectively giving them the ability to vote with their wallets - he continued. “The Thank My Farmer app details product certifications, as well as brand or civil society projects (which are categorised by the UN Sustainable Development Goals they address). We believe the environment is important. And we think that by contributing through the app or choosing brands that represent their values, consumers can make it clear they do as well.”
This model demonstrates how technologies like blockchain can empower consumers – and farmers. Boden believes this is one of the most ‘transformative’ impacts new technologies hitting the F&B market can deliver.
“Bringing decisions down to the individual is one of the most transformative things technology can do for humanity. In the last twenty years, we went from expecting governments to regulate the world to demanding brands hold themselves accountable. Now, sustainable choices in the home are part of our daily conversations, and a real part of how we make decisions in stores. The same is true for farmers. We want to put control of their business, their product, and their finances firmly in their hands.”
The big challenges in coffee: complexity and price volatility
The large, complex nature of the global supply chain makes tracing the origins of coffee beans particularly difficult. Once grown, beans travel through various layers of the supply chain, including coops, exporters, shippers, importers, roasters, distributors, and retailers… before finally reaching the consumer.
Each participant in this complex system tracks their small segment of the journey - and each uses its own system to log data. This means that information about the product is fragmented.
To address this, Thank My Farmer will use IBM Food Trust technology to pull information directly from the blockchain in a standardised way that can be used across the industry network – and communicated directly to shoppers.
Blockchain simplifies the exchange and tracking of information and payments by creating a permanent digitized chain of transactions that is unalterable. Each participant in the chain can access the data and additions to the blockchain are shared in the network based on each participant’s level of permission. This means farmers, traders, wholesalers and retailers are able to interact more effectively using near real-time data, IBM Food Trust suggested.
The consumer-facing app presents information in an interactive map, allowing each product to tell its unique story. It also presents sustainability projects in coffee communities and provides an opportunity for consumers to support them.
“Blockchain is more than aspirational business tech, it is used today to transform how people can build trust in the goods they consume. For business, it can drive greater transparency and efficiency,” IBM Food Trust GM Raj Rao explained.
Blockchain can also be leveraged to help combat ‘price volatility and dependence’, Boden told us. While coffee prices have increased from recent historic lows – and global production is forecast to be slightly down this year providing some insulation from further negative price swings – Boden said that low prices and high production costs still remain an issue for smallholder coffee farmers.
“Over the past two months, coffee prices have risen back to historical averages, but the farmer has little protection against a return to lower levels. High costs of production are a problem, too. Old trees, a lack of agricultural knowledge, or poor access to services and markets can also limit farmer income. If the grower can’t make a living, there is no coffee industry. Allowing the farmer to access information, differentiate their product, and be rewarded for the sustainable efforts they make is good for everyone,” he said.
Oliver Nieburg, market analyst for Lumina Sustainability (the insight platform owned by FoodNavigator's publisher, William Reed Business Media) and host of the Sustainable Food & Drink Podcast, concurs that empowering farmers through technology will be crucial to building a more sustainable coffee supply.
“Digitising the supply chain is a step forward. Technology has the prospect to address inefficiencies and to finance sustainability initiatives,” he agreed.
However, Nieburg told us that there are some caveats around access and infrastructure. “Success will depend on solid local infrastructure in coffee communities to ensure data accuracy, as well as smart phone penetration in remote rural areas.
“It will also require finance beyond the technology. For example, farmers will likely require training support to make practical use of historical yield data and the pest & disease alert systems and auditors may be needed to verify data accuracy.”
Scaling up for impact
The blockchain initiative was developed by IBM and Farmer Connect alongside representatives from across the global supply chain including Beyers Koffie, The Colombian Coffee Growers Federation (FNC), ITOCHU Corporation, Jacobs Douwe Egberts (JDE), The J.M. Smucker Company, Rabobank, RGC Coffee, Volcafe, Sucafina and Yara International.
The new mobile application will launch to the general market at the beginning of 2020. Users in the US and Canada will be able to scan QR codes on Folgers Coffee 1850 brand premium single-origin coffee. European consumers will be able to access the app through a new single-origin brand, Beyers 1769, roasted at Beyers Koffie.
As the app expands in 2020, additional large and small coffee companies will be invited to join.
“We’ll be looking at implementing the consumer application in North America, Europe and Asia in 2020. In parallel, the blockchain-enabled industry solution will be rolled out in most coffee (and other agricultural commodity) producing countries based on our partners’ needs,” Boden revealed.
For Nieburg, scale will be a litmus test for the effectiveness of the blockchain solution. “The technology is likely to begin in more developed coffee origins with established cooperatives but will hopefully be available to harder hit regions. Coffee farmers in Uganda, Ethiopia, Tanzania and Kenya are furthest from achieving incomes above the extreme poverty line ($1.90),” the sustainability expert noted.
“Any technology should available even to illiterate smallholder farmers – which other technologies are proving is possible with recognisable shapes and patterns in mobile apps.”
