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Issue Date: Vol. 48, No. 5, May 2008, Posted On: 5/28/2008


OCS Industry Can Gain By Meeting Demand For Cause-Related Coffee


Emily Jed
Emily@vendingtimes.net

CHERRY HILL, NJ — Positioning an OCS operation as a “good corporate citizen” can be valuable in securing new business today, and publicizing causes congenial to environmentally and socially aware patrons, like sustainable organic agriculture and purchasing practices that reward responsible production, can build sales and bolster customer loyalty.

During the recent National Automatic Merchandising Association Coffee Service Education Summit, a perspective on the growing importance of products and policies perceived by patrons and prospects as “friendly” to the environment was provided by Marie-Claude Dessureault, director of cup quality and brewing technology for Canadian roasting giant and international coffee service operator Van Houtte (Montreal). She was joined by Eileen Cooke, a specialist in workforce learning for AMR Research.

“Sustainability is a trend that will not go away,” emphasized Dessureault. “Make it relevant to you, your people and your customers. Your clients want to be better corporate citizens and support environmental practices. Your patrons want to feel good about the coffee they drink, and to feel like they’re contributing to a better world.”

Cooke added that simply packaging a product customers already buy in a way that communicates particular attributes to those who care about them can help OCS operators differentiate themselves from their competitors, and position them as partners in good business practices to the locations they serve.

Dessureault added that 86% of Americans are likely to switch the product they purchase if they feel a suitable alternative is associated with a cause in which they believe. And 78% say they want to do business with companies that relate to their cause-oriented efforts, yet only four in 10 will actually switch from their current supplier.

MORALE BUILDER

Employees are increasingly interested in products they perceive as supporting good business practices, because many of the companies for which they work are changing their cultures by appointing vice-presidents dedicated to sustainability and social responsibility, Cooke noted. “Because coffee is such a widely traded commodity, it has a tremendous impact on people and the environment in what are often the poorest countries on earth,” said Cooke. “Sustainable coffee has huge ‘legs’ with customers; it’s easy, clean, simple and direct to drink coffee, and to know they are helping poor people.”

The rise of fair trade practices has channeled more than $75 million in additional income to small-scale family coffee farmers, which has been reinjected into their communities to the benefit of the entire industry, said Dessureault. She explained that “fair trade” is not a quality certification, but rather denotes a means of compensating coffee-growing communities at a level that allows them to sustain their livelihood by continuing to grow high-quality coffee. It relates to growing and harvesting practices that do not deplete or permanently damage the environment in which the coffee is grown. “Farmers abandoned their crops at one point; now fair trade gives them the incentive to come back and grow better coffees,” she noted. “Good agricultural practices will assure the coffee industry’s long-term survival.”

Also driving the fair trade movement is the trend over the past two decades that favors marketing specialty-grade coffees as consumers’ taste buds have evolved. With  higher-quality product in greater demand, producers need more money to grow larger quantities of it.

Further analyzing fair trade principles, Dessureault explained that purchasing conducted according to those principles guarantees farmers a minimum or “floor” price for coffees, protecting them against destructive swings in international commodity prices, and offers an additional premium for certified organic products. Set to increase to $1.25 this June, the price of fair trade coffee remains stable and assures growers of predictable revenue on which they can rely.

Importers purchase fair trade coffee directly from the producer group rather than through the open market. The grower organizations are “transparent” in their structures and practices, so all parties can make sure that funds go directly to coffee farming communities. The organizations democratically decide how to invest their fair trade revenues.

Fair trade certification also provides the assurance that labor conditions are monitored, including prohibition of child labor and a commitment by the certifying entity to community development.

Farmers and workers directly invest fair trade premiums in social and business development projects, including scholarship programs, quality improvement training and qualifying for organic certification, so they can produce coffee that will command a higher premium and further benefit the community.

TransFair USA, a nonprofit organization, is one of 20 members of Fairtrade Labelling Organizations International (FLO), and the only third-party certifier of fair trade products in the United States. The organization audits transactions between U.S. companies offering Fair Trade Certified products and the international suppliers from whom they source the coffees, in order to guarantee that the farmers and farm workers  were paid a fair, above-market price. In addition, annual inspections conducted by FLO ensure that strict socioeconomic development criteria are being met by reinvestment of the increased fair trade revenues.

While the official “Fair Trade Certified” logo on a coffee bag resonates strongly with consumers, many products are procured under similar principles but lack the certification. “If it’s a good coffee, with a fair price, and farmers are paid and treated well, it has value to communicate that to your customers,” recommended Cooke.

An official from Lacas Coffee Co. attending the seminar pointed out that fair trade is all about transparency. “If you pay $1.46 for non-fair trade coffee, it’s not going to go to the farmers,” he said. While growers in some nations are organized and defended by governments that maintain the rule of law, in others they are isolated, and at the mercy of unscrupulous middlemen.

THE PUBLIC EYE

Dessureault observed that Van Houtte, which is one of North America’s largest coffee service operators, knows that marketing sustainability and social responsibility are in demand. “For you, you distinguish your company to customers seeking these coffees,” she pointed out. “Not a week goes by that we don’t get requests; this helps us gain new accounts. A lot of businesses have purchasing policies for sustainable products and want suppliers with sustainable practices, including universities, hospitals and government.”

Dessureault added that environmental sustainability, another movement important to today’s consumers, is defined by the strict prohibition of harmful agrochemicals and genetically modified organisms in favor of farming methods that protect community health and preserve valuable ecosystems for future generations.

She explained that “certified organic” coffee, which describes how the coffee is grown, is distinct from fair trade coffee’s focus on assuring fair wages and specifying social standards that support coffee growers. Therefore, a coffee can qualify for either standard separately, or carry both certifications.

Organic certification is earned by coffees that are grown without pesticides, chemical fertilizers and GMOs, and are inspected annually by third-party certification organizations to ensure compliance. The principal organic-produce certifying body in the United States is the Organic Crop Improvement Association (OCIA International), details of which can be found at ocia.org.

According to the Van Houtte executive, the growth rate of organic coffee was 23.5% from 2004 to 2005, and certified organic products grew more than 50%, to 500,000 bags. The average premium paid for certified organic coffee was nearly 28¢ per pound.

Because certification is a meticulous process and demand is growing rapidly, there is danger of a bottleneck developing between compliant products and the companies that want them. “There’s a need to speed certification of organic coffee with an incentive for growers to make more money as demand is growing,” Dessureault emphasized, adding that coffee that carries both fair trade and organic distinction will be the star performer in the coming years.

Another environmentally friendly coffee-growing approach that’s attracting favorable attention is “shade” growing, in which a second, taller crop is grown among the coffee trees to provide shade. This can benefit both the coffee quality and the ecosystem in which it is grown.

“Traditionally, all coffee was shade-grown, but a in lot of regions, growers cut down those second-crop trees,” Cooke explained. Sun growing increases yield in the short run, but the result is lower quality beans, soil erosion and a loss of biodiversity. In particular, migrating birds that winter in tropical forests have been hard-hit. “Biodiversity attracts wildlife; sun growing drives bird species away, while shade provides food and shelter,” she noted.

The Smithsonian Migratory Bird Center offers the only 100% organic shade-grown seal – “Bird Friendly” – for coffees that meet its requirements for providing the shade covering that encourages the return of birds that have left their natural habitats while meeting organic growing standards.

Many countries have maintained traditional shade-grown growing practices, including Peru, El Salvador, Nicaragua, Guatemala and Sumatra. And, while such coffees may not carry an official “shade grown” seal, it is well worth the operator’s effort to learn whether coffees they offer are shade grown, and to promote them as such if they are, advised the speaker. In countries like Colombia, Brazil and Costa Rica, conversely, coffee is most likely not shade grown unless it is certified as such.

Numerous organizations provide their stamps of approval to coffees that support the farmers that grow them and the environment, and OCS operators should align themselves with one or more of these to educate their employees and customers about their efforts.

The Rainforest Alliance, for example, is an international nonprofit conservation organization that works to ensure that coffee farms meet a set of standards that protect forests, waterways, soils and wildlife as well as the rights and welfare of workers and local communities. On average, workers on Rainforest Alliance Certified farms earn twice the local minimum wage, and coffees grown on them are awarded the Rainforest Alliance Certified seal.

Utz Certified Coffees, another well-recognized certification organization, sets standards for responsible coffee production and sourcing, with requirements for certification that address economic viability, social responsibility and environmental protections. It maintains a website at rainforest-alliance.org.

The Common Code for the Coffee Community Association strives to unite the global community; its mission is to continuously improve the social, environmental and economic conditions for the people making their living with coffee. It is known for short as “4C,” and is online at www.sustainable-coffee.net.

Coffee Kids, added Cooke, works with local organizations in Latin America to create education, healthcare, micro-credit and community-based programs for coffee farmers and their families. These efforts allow farmers to reduce their dependence on the volatile coffee market and to confront their most pressing community needs. The organization was founded in 1988 by a Rhode Island coffee roaster named Bill Fishbein. Operators who have been in the business for awhile will remember its presence at National Coffee Service Association conventions.

This group looks for small improvements that local people can leverage to yield long-term benefits, such as making micro-loans to aspiring entrepreneurs. “Coffee Kids may provide a $50 loan to someone in the community so they can bake and sell empanadas, or buy a pair of scissors for someone so they can earn a living by cutting hair, or teach someone to count so they can go to market and sell berries. These programs change the outlook of communities,” explained Van Houtte’s Dessureault. “It’s a fun organization with a bunch of projects and stories you can bring to your people and your customers.” Information can be found on the Internet at coffeekids.org.

PAINTING THE PICTURE

“People love stories that touch what’s important to them, and there’s a good chance your customers already know the stories of these communities and want to be connected to positive change,” Cooke pointed out.

She noted that in 2001, consumers had a 30% awareness of organic coffee, and 7% purchased it. In 2007, their awareness level rose to 57%, with 17% of consumers buying organic. Following a similar pattern, 11% of coffee consumers were aware in 2001 of fair trade coffee and 4% purchased it, with a dramatic shift by 2007, when 38% of consumers expressed awareness and 24% purchased fair trade coffee. Shade-grown coffee has risen in prominence from 7% awareness and 1% of purchases in 2001 to 10% familiarity and 4% of coffee consumers purchasing such products in 2007.

“Speak with your roaster. Providing these coffees is one more tool your sales reps can use to touch on what’s important to customers in other aspects of their lives,” advised Cooke. “Give your salespeople the message, the program, the story. If you give them a story they believe in, their power to articulate that story to the customer increases tenfold.”

She shared one success story from an organization called Care Canada, that country’s leading non-sectarian international relief and development organization. A young man in a coffee-growing community could not make ends meet because the middlemen (referred to as “coyotes”) purchased coffee from his farm at an unjustly low price and reaped the rewards of selling it at high market value. He left his native land for America and was deported back to Honduras. At that juncture, Care Canada stepped in to remove the “coyote,” a barrier to his livelihood.

“Now he’s the president of a coffee cooperative. His kids have been in school longer than anyone in his family has ever been,” noted the speaker. “It’s because the money is transparent; it comes back to the farmers for roads, electricity – infrastructure. Care enabled them to live in a coffee-growing region. You can be proud to relate these stories to your customers and staff.”

Contemporary consumer interest in quality plus environmental and social responsibility extends to other commodities grown in tropical lands. In addition to fair trade certified coffees, operators are also well advised to investigate fair trade and organic tea, cocoa and sugar. Renewable resources, such a bamboo stir sticks and recycled cup sleeves and napkins, are other items that address heightened consumer concern for the environment.

Cooke also asked operators to consider measures they can take within their own organizations to reduce their environmental footprint. “Do your trucks run when you’re idling? Do you recycle in the office? Can you reduce the packaging in your deliveries? Take these steps and tell your customers,” she suggested.

Dessureault concurred, emphasizing that customers look closely at what Van Houtte does every day, not just at the items it stocks in its warehouses. “I get calls from customers who say, ‘Your truck was running when it was parked; why didn’t the driver turn it off?’” she instanced. “It’s about a lot more than just product. Change the behavior within your organization with policies; tell your customers that you are taking steps to be a better corporate citizen, and ask them if they’re willing to partner.”

“Your customer will partner with you in growing a business that’s profitable for you and beneficial to the coffee industry and its people, because they get to contribute,” concluded Cooke.


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