Direct Trade Revisited
Direct Trade Coffees Explained
With the explosion of specialty coffee brands around the world, Australia also experienced a high growth in new coffee companies entering the market from 2010 onwards.
Around 2015, by far the most visible marketing tool used by many coffee brands in Australia was the idea, concept or promise of exclusivity via direct trade coffees.
As the coffee market experienced saturation from high levels of competition, Australian coffee brands continued to increase their claims of "exclusivity" in attempts to enhance their reputation with buyers to create a point of differentiation.
But the reality and truth were remarkably different from the claims. It was all too easy to promote unvalidated or unregulated promises of "we have special coffee nobody else uses", or "we travelled the world to find the very best beans".
Direct Trade coffees because a marketing tool for brands to "lock in" loyalty. Fact is that importing raw coffee is neither simple, easy or risk free and it was only possible or practical for a small number of large, established coffee brands.
Yet it was the new and smaller brands that shouted their "direct trade" credentials the loudest and they got away with it. There was no way these small brands possessed the capital, space or risk appetite to embark upon direct trade coffees.
Imagine for a moment a small container holding 22 tons of raw coffee. That's a lot of $$ for a shipment that must be paid upfront and when it arrives the coffee needs to be stored.
But what happens when the arrival of the coffee does not match expectations ?
Well it happens far more often than most people would think. Transporting raw coffee is a high risk activity. Not only does the container need to be packed in a special way, you would also hope that container does not get stranded at ports which happens in around 30% of global sea freight shipments, particularly those sent from developing countries.
Raw coffee sweats inside of the container. This heat and moisture destroys the coffee quality rapidly. It is no uncommon for containers to arrive in Australia with raw coffee that is significantly degraded.
So the small or upcoming brand shouting their direct trade coffee exclusivity cannot possibly protect themselves from this risk. Heck, most don't even pay their bills on time.
You see now there is a picture emerging of coffee brands pretending to be different when in fact they are all sourcing from the same small number of raw coffee importers just like the rest of us.
Smoke and mirrors.
Direct Trade does not always mean saving money or paying more to farmers, so the exaggerated benefits of engaging in direct trade coffee sourcing may not be realized.
There can be a degree of "exclusivity" in coffee when a coffee brand purchases an entire lot being imported. In this case there is no question of the authenticity of the claims. But that only happens on a small scale, or low percentage of imported coffees.
At Carlini we tried Direct Trade with PNG, Colombia and Brazil coffees - buying direct from quality farms and supporting producers with price premiums above the market rates.
In reviewing the performance of these direct trade transactions we came to the conclusion that Direct Trade was not meeting our broader objectives as we faced higher risks and issues which are traditionally handled by local Australian import brokers. Ultimately, the benefits were not realized and the risks too high.
With more coffee farmers having access to the internet there is an increase in attempts to establish direct contact (and relationships) with Australia coffee roasters.
But the risks remain - even when honest, trustworthy and reliable coffee farmers or exporters prepare containers for the long journeys from origin to Australia. Sometimes, these trips take 2 months and with the ongoing constraints in sea freight, there are added risks of containers being trapped in transit at intermediate ports waiting for connections.
An example from 2021 and 2022, we are aware of at least 8 containers being caught in ports for up to 2 months longer, sitting in hot, humid conditions with the contents sweating and degrading.
Direct Trade is no better or worse than any other method used to source raw coffees, except the transfer of risks that are not easily factored into the perceived savings or benefits.