Certified Coffees, current market and a vision into the future.

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1 Certified Coffees, current market and a vision into the future. To talk about certification programs in coffee today, we must first look into the past history of the coffee trade and identify when and why did these alternative programs begin to show up. Certification programs have been known for quite some time in different industrial sectors; probably the best known program is the ISO certification program. In coffee, the first certification programs started back in the early 60 s with the organic food movement, organic coffee with different certifications slowly gained a couple of % s of market share in Europe and the USA.

2 While health was the focus of the first certification programs, lower coffee price periods during the 70 s and 80 brought awareness about the social distress happening in coffee producing regions and communities at origin. The European Fair Trade movement introduced the Max Havelar Fair Trade coffee to consumers in the mid 80 s, this program was only focused in bringing a better price to small and micro coffee producers in Central America. During these same years, 70 s, 80 s and 90 s, the Specialty Coffee segment started to gain an amazing market share in America due to its high quality standards and level of concern about the social and environmental conditions at the production level. Specialty coffees became an accepted informal assurance/certification for high standards in product quality, environment and social conditions.

3 As the Specialty coffee segment grew during the 80 s and 90 s, so did a series of environmental certification programs such as Bird Friendly Coffee, Shade Grown, and Rainforest. The organic coffee movement remained rather stagnant during these same years never surpassing the 2 or 3% of US and European markets. The FLO/ Fair Trade coffee certification program was introduced in to the US in the mid 90 s and the low prices after 1997 certainly helped it to build market share.

4 The late 90 s brought concerns and reactions regarding health and social matters on consumption goods, the low coffee prices of the end of the decade served to expand the consumer reaction into the mainstream coffee sector. Some programs gained momentum like organic and Fair Trade in America. New programs surfaced, such as the Utz Kapeh Good Coffee certification program focused on good social, environmental and e economic practices at the production level. This program was introduced into the Dutch and later European markets in The last four years have consolidated substantially the more efficient and better structured certification programs; these have expanded from the niche markets and are now part of important initiatives of the mainstream sector.

5 The most successful certification programs today and how they impact the supply chain.

6 Fair Trade This is probably the program with the strongest social benefit impact, in other words, the communities that supply this sector have solid benefits and can easily demonstrate that the price paid for their coffee has helped them weather the crisis and still invest in social communitarian and individual improvements. This program speaks strongly to consumers in the academic and intellectual layers and has a very strong expansion in the cultural and economic elite. In Europe it remains stagnant in the niche market while in USA, the label is facing a noticeable growth.

7 Benefits: A better dollar value to the coffee based on minimum prices for different coffees. Schools, training centers, coffee storage and preparation facilities have been built or purchased for the producing communities. Youngsters have been able to complete the normal schooling cycle and many are now entering the University level, etc. Weak points: Only for small family managed properties of up to 5 Hectares. Quality has been very volatile, generally from low to medium grade. Transfer of value to producer not always traceable nor transparent. Historically sent a message of charity supporting many times inefficient producers with poor quality.

8 Benefits: Rainforest Alliance Strongest appeal on the environmental area. Certainly acts on an area which suffers from chronic mismanagement and lack of education by the part of producers. Asides from being very well structured in the area of its focus, this program also offers very good marketing potential. Again, students and intellectuals as well as the cultural and economic elites are quite attracted by this approach. Weak points: Flexibility on the certification process, no basic codification regarding economic and social practices while very vague regarding the traceability and transparency issues.

9 Organic Benefits: This sector is very well structured regarding import legislation of the consuming markets of Europe, Far East and in America. The focus of this certification program is very clear and the products can be trusted to a great extent today. There are more and more quality levels being offered and a better value per LB is paid to the producer. Very transparent and totally traceable, this product is directed towards a still quite small group, the health concerned consumer. Weak points: Slow growth in market share unless quality is of high standards. Consumers in general still somewhat skeptic about the products quality and authenticity The smaller/lower yield not totally compensated in the commercial trade practice. Complicated both in handling and legislation wise.

10 Utz Kapeh Benefits: Founded in the late 90 s, this program is a code of conduct that starts at the farm level, it enables coffee brands to credibly and transparently demonstrate their commitment to sustainability at the producer level. It is inspired originally on Euro GAP standards and addresses very well the actual legislation and market demand requirements on traceability and transparency while at the same time promotes a better price for a better coffee. This program uses third party audit for yearly evaluations on the certification and the renewals. Addresses very well the current issues concerning Food Safety and Food Security Enables the consumer to trace back to the properties that produced the coffees in the blend has a Global Approach.

11 Weak points: Mostly viable to properties of medium and larger sizes. Difficult to implement into Cooperative structures unless the whole group or a selected group of member properties is organized to participate. Inefficient producers are incapable of participating.

12 Benefits: SCAA Specialty Coffee Standards Still an informal program regarding its codification terms but with strong quality standard, economic, environmental and social impact. Have specific tools and measurement methodologies already in place. Speaks strongly to a wider spectrum of consumers and is very well structured. Is based on the fact that high quality promotes consumption and economic growth. Has the highest revenue percentage on the selling end. Will soon launch a global traceability tool to track electronically or conventionally the properties that produce specialty coffees. Uses its contact to the final consumers to promote its mission. Has a fantastic marketing potential. Definably the best pricing structure where quality defines the price.

13 Weak points: Hasn t been formalized yet. Restricted to Specialty qualities.

14 Conclusion: Coffee remains the second most traded and valuable commodity in the world involving over 50 tropical countries in the production and over 25 million people throughout the world depending on it for their livelihood. The Internet, in a world of immediate information flow, the impact of environmental and social responsibility issues of any product is at the reach of billions of consumers.

15 Consumers are interested to know more about the products they buy, health, social and environmental issues as well as quality standards and price are a priority for a growing number of consumers. NGO s have been an important part of the changes towards sustainable practices in the food chain; their actions have promoted substantial changes to agricultural and economic practices throughout the producing world. The NGO s count with a very big consumer support and therefore remain in a very vigilant position regarding important issues in the coffee scenario. The media and the NGO s are usually very well connected and therefore have an incredible power to communicate and mobilize consumer opinion and actions.

16 The mainstream sector has already started to launch new products with different sustainable certification labels helping to strengthen the message towards further investments in this area. Legislation is another top reason for certified coffees to become a larger part of the supply. Many countries have already accommodated their import laws in a manner to address the traceability issue as a matter of national security. Food safety and food security (bioterrorism), Requirements are a living animal; many more legal changes are being made in countries like Japan, USA and the European Community.

17 The global volume of different certified coffees being traded today is probably over 8 million bags and growing, this is roughly 7.5% of world production. The values paid for certified coffees are certainly all above normal commodity commercial levels and the benefits can easily be measured on both sides of the chain.

18 The only barriers I see for certified coffees are the reluctance to change/investment/cost by the large food companies and the still incomplete codification of most programs. The consolidation of certification coffees as a mainstream product is just a matter of time, probably less than a decade. Christian Wolthers

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