Smallholders produce around 80% of the world’s coffee, and for brands whose business is dependent on their continued ability to sell a consistent high-quality product, having a reliable supplier is essential. We have published a report that demonstrates smallholder producer organisations (SPOs) can flourish on the international coffee market and offer buyers the conditions to create unique, sustainable and long-lasting supply chains.
- The common attributes for SPOs to succeed are no different from any other business: strong leadership, clear objectives, focus on quality, customer service and a vision for the future.
- Buyers should consider establishing multi-season contracts with suppliers to enable them to better plan and invest in their businesses and farms. This can also support SPOs to access finance.
- Developing a long-term memorandum of understanding based on values and vision will lay the foundations of successful relationships between buyers and producers.
- Buyers that engage in regular, direct communication with SPOs will establish good working relationships and gain a better understanding of complex challenges on the ground.
- Transparency is vital in the supply chain: buyers should share as much information about their business as they expect from SPOs.
- SPOs should consider crop and business diversification to spread risk, especially in light of a changing climate.
The report surveyed 31 SPOs across East Africa and Latin America. The organisations were a variety of sizes with membership ranging from 400 to over 200,000. All the respondents were certified Fairtrade and 85% had at least one other certification.
In addition, five unique supply chains were examined in detail to demonstrate good practice, or valuable lessons when things go wrong. One case study from Uganda provides insight into how weak governance can cause a SPO to collapse and offers lessons to prevent this happening in the future. Another case study looks coffee supplied from Muungano in the Democratic Republic of Congo to Atlas in the United States. It demonstrates how support from international buyers can help SPOs operate in difficult social and political environments.
Life for SPOs
There is no ‘one size fits all’ model for SPOs – they are hugely varied in size, capacity and capability. They are often formed to deal with very local issues and therefore have different histories and working practices. The survey revealed that no matter the size or location of the organisation, there are some common benefits for producers working together in an organised union. For example, 74% of those surveyed felt there are more opportunities to access international markets as an organised group of producers, rather than individual smallholders.
However, SPOs still face huge challenges – they are at the mercy of a changing climate, a volatile market and challenging social and political conditions. Collectively, these challenges make it difficult for SPOs to invest in development of their business.
The survey found that access to finance and pre-finance is the biggest challenge for 75% of respondents. If there were greater access to funding, SPOs could invest in vital infrastructure and create conditions that ensure farmers remain loyal – thus strengthening the supply chain.
The wider coffee industry working with SPOs
The sector cannot function without smallholder farmers and SPOs. Buyers need reliable suppliers that produce high-quality coffee. They also want the unique stories from coffee farms that allow them to differentiate their products in a competitive marketplace. SPOs can help buyers increase their brand value and identity. In an interview for a case study on a supply chain from Peru to the UK, Tom Blackwell from Finlays said, “When you buy from a cooperative you get the personal touch; you are in contact with them directly and you know where the coffee is coming from.” He went on to say that a deeper understanding of the story behind the product is something consumers are willing to pay for.
The report demonstrates there are budding SPOs that are blossoming as international businesses. It shows there are supply chains in place that the sector can learn from. Smallholder farmers are essential to the future sustainability of the coffee sector so it’s crucial that representatives across the whole value chain help to create the conditions for SPOs to thrive. The report concludes with practical recommendations for both ends of the supply chain to adopt and build relationships that are beneficial to everyone.
Twin’s Managing Director, Richard Anstead, said “At Twin we believe that connecting coffee producers with buyers will benefit everyone. It’s fantastic to be able to share producers’ perspectives and highlight to buyers how they can build solid working relationships. I hope that the recommendations in this report will provide value and lay the foundations of many responsible supply chains.”
The report is available to download here.