My Thoughts on Direct Trade Coffee

Author: Kenny

Translation: Raven

A few days ago, I accepted an interview by research student, Angela Lim from Nottingham University of Malaysia. It was my sixth coffee-related academic interview since 2019, and the quality of her questions took me by surprise. They served much more than scratching the surface in terms of coffee knowledge and had made me realise that perhaps it’s time for me to update my knowledge to handle similar interviews in the future.

One particular question caught my interest, it was about my thoughts on the misuse and overuse of the term Direct Trade Coffee (DTC). But before I dive into the question, I find it necessary to clarify the difference between “misuse” and “overuse”.

A coffee roaster or retailer could misuse DTC as a label on their coffee when they buy their green beans from a supplier that goes through many middlemen instead of directly from the farmer. 

The action of “overuse,” on the other hand, is difficult to define in this context. When the coffee is bought directly from farmers, one can market it as so. Even if one chooses to associate DTC with better quality and flavours, we still can’t deem the action as “overuse”. How much one is willing to pay for a good cause associated with their favourite coffee is a matter of value and subjectivity. We believe that no one can draw the line on add-on value consumption, such as service, ambience, stories, organic certification, fair trade, and direct trade, etc.

Let’s say DTC, by specialty coffee standards, is a form of quality assurance to the end-user. While ensuring fair and reasonable pay for its farmers, it promotes continuous improvements as a sustainable cycle. If this is the ultimate goal of DTC, then it deserves more marketing than it already has, and it can hardly be overused. 

It’s just like saying something is too good or too nice. I don’t think it’s possible to set a limit to these descriptive value concepts. But we do want to bear in mind the possibility of misuse; which is a different concept here.

So can DTC ensure better income for farmers? I think so, in the context of a free market. If traders can pay better and secure larger volumes than individual buyers like you and I, then farmers can sell to the higher bidder. This fits the basic economic model of trading, given farmers are exposed to different bidders, to begin with. 

However, I can’t say that DTC guarantees the coffee quality or its continuous improvement. If an independent roaster is buying directly from a smallholder who is limited by its soil quality, climates, primitive facilities, and relies on third-party processing plants nearby, it will less likely get consistent quality compared to larger farms that can facilitate their processing. 

Not to mention that some independent buyers may lack the experience in the proper evaluation of coffee quality, nor do they have the answers or solutions to guide their direct-trade farmers to refine their coffee production. 

The integrity of trade can also be an issue in certain areas, given the diversity of cultural and socio-economic background of different coffee-producing regions. If the buyer lacks experience, it’s hard for them to be sure that they are getting the coffee as promised by the farmer. We’ve heard cases of independent smallholders from large producing regions buying inferior beans from their neighbours and sell as their own.

Thus a truly productive buyer-farmer relationship consists of a coffee producer with the necessary facilities and corresponding factors that meet the demands of an experienced buyer who can evaluate the DTC quality which they expect to be no less than what they are paying fairly for. Otherwise, DTC is just an ideal way to pay farmers better and not necessarily a quality assurance. Just like organic coffee, you are paying for the concepts of health and environmental benefits, it doesn’t guarantee quality or taste. What we do know is that DTC does a better job than Fair Trade in terms of securing farmers’ income.

I do have examples of an ideal direct trade relationship. When we visited the coffee farms in India last year with Coffee Consulate, we’ve witnessed a coffee development project that they were running at the estates of their coffee-producing partners. Their team of German scientists, including a microbiologist and a chemist, were there to conduct processing experiments on different coffee fermentation effects with well over two hundred types of yeasts. Direct trade relationships like these are rare but great for long-term quality development that benefits not just the farmer and the roaster, but also the end consumer with better-tasting coffee.

Similar buyer-farmer relationships can be found around the world and are increasing over the years. So I think we have now come to terms that “overuse” is irrelevant to productive direct-trade relationships but it deserves more attention, as the concept of DTC is not yet well recognised in the mainstream market

This leads me to another frequently asked question: can a roaster market itself as selling DTC if it buys from a supplier who trades directly with farmers? 

I would personally encourage and promote DTC in less-restricted standards since there are so many wholesome benefits from the product itself. There should be enough space for those closer to the consumer’s market to get involved and promote the cause without an actual trading relationship with the farmers.

I find it acceptable if a roaster buys green beans from a real DTC supplier, roasts and markets it as DTC. You can say, “I’m not doing direct trade, but I sell direct trade coffee.” It doesn’t go against direct trade principles and wouldn’t cancel out its benefits. On the contrary, it helps to lower the hurdle for DTC to enter the mainstream market. So why not?

On second thought, the middlemen exist for many reasons in the challenging times of coffee trading, dealing with various logistics and storage issues for instance. The crucial collective efforts needed to tackle the accelerating coffee demand worldwide, somewhat reveal their value.

There’s no reason for us to believe that direct trade is the ultimate form, nor should it hold the highest value of coffee trading. And there is no need for anyone to declare war on non-direct trade coffee. Those who have been in the coffee business for long enough would recognise the contributions of middlemen, no less than that of direct trade. Without them, the existing international eco-system of coffee commerce would not be the in place, and without that, specialty coffee would have no pyramid foundation to stand on top of. 

In reality, I know many specialty coffee roasters who, like us, buy green beans from both direct and non-direct sources. This approach is more flexible and offers more options when roasters need to juggle between different market demands. We are not, by all means, trying to justify non-direct trade, but we also don’t want to be too narrow-minded and lose ourselves amongst the hypes and flares of marketing concepts.

The products we claim to be DTC are also limited to just a few local ones, namely Sarawak Liberica, Sarawak Lawas Arabica, Sabah Arabica from Sabarica, and some Kalimantan coffees that we are trying to purchase. These are all coffees from Borneo, and by the strictest definition, direct trade coffees.

So what about the pretenders who misuse the DTC title on their products, and the exploitive middlemen who take advantage of farmers and the ignorant market? Well, from a business point of view, I firmly believe in honesty, thus we should speak our minds and tell the truth if it ever comes to that.

At the end of the day, a free market sets its course, and those who fail to survive the competition will be filtered out. But some consumers would buy into labels without giving it much thought anyway. When there’s a demand, there will be supply. That’s market reality, it’s sad but true. Many who misuse labels for a cause, don’t know that they are putting their brand’s credibility on the line, and it leads to an unsustainable business model. So fear not, fellow specialty coffee brands, pretenders exist but are not here to stay, at least not for long.