Notes on Direct Trade: Colombia El Jordan Impact Report

Here at Stumptown, we buy the vast majority (89% in 2019) of our green coffee according to a supply chain model we call Direct Trade. We started developing this model in 2003, when we took our first steps into sourcing the best coffee in the world, and we’re still at it almost two decades later.

Aside from the superlative cup quality that we have maintained through our Direct Trade relationships, we continue to purchase coffee according to these tenets with the intention of creating economic stability for the producers we work with. We understand, however, that our intentions may not translate to reality, and want to be sure Direct Trade is actually working for our producer partners.  So, in late 2018 we teamed up with a key sourcing partner, Caravela, to commission an impartial third-party impact study on Direct Trade, using the El Jordan producer group in Tolima, Colombia as our subject.

You may recognize El Jordan from our single origin menu, where it is a perennial favorite. Coffee from the El Jordan group also plays a key role in our blends for most of the year. We chose El Jordan for this study because it’s a good example of Direct Trade in action, with a small and well-defined group of independent producers that hasn’t changed much over the years, providing a stable sample.

The study’s key takeaway is: Direct Trade isn’t perfect. But if you want to incentivize quality and improve producer livelihoods, Direct Trade works. Price premiums are important - but impact doesn’t come from paying a good price once. Impact comes from long-term commitment, consistency, and volume growth over time.

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In recent years, more companies have adopted “Direct Trade” to describe their own coffee sourcing practices, which may or may not resemble ours. Here’s what Direct Trade means to us:

- We buy directly from producers, not on a trading floor. We know the producers and their farms.

- We don’t buy commodity-grade coffees, so we don’t set our prices against the commodity market price -- we set our price according to the quality of the coffee, and pay strong quality premiums.

- Anyone can buy good coffee once, but we’re in it for the long haul. We buy year after year from the same producers, and sign mutually agreeable purchasing contracts. 27% of the coffees we bought in 2018 were from relationships of 10+ consecutive years. 51% were 5+ consecutive years. 89% were from relationships of at least 3 consecutive years, our minimum tenure to label a coffee “Direct Trade.” The remaining 11% is largely in the pipeline to become Direct Trade; we buy less than 2% of our coffees “spot” (from inventory importers have on hand).

Caravela, a fellow B Corporation, is our import/export partner for a large percentage of our Colombian coffees, along with smaller amounts of coffee from Nicaragua and Peru.

They are a green coffee exporter/importer that for the past 20 years has been working directly with smallholder farmers in Latin America and connecting them with coffee roasters worldwide. Their relationship with El Jordan producers dates to 2003, a few years before introducing the group to Stumptown.  They work with the El Jordan group to provide producers with market access, technical and educational assistance, and real-time cupping feedback, all with the end goal of stabilizing and improving producer livelihoods. The basis of these initiatives is a model that insists on paying premium prices for better coffee and facilitating long-term relationships with quality-minded coffee roasters like Stumptown.

As with any honest conversation, the report also identified areas for improvement. Along with Caravela, we used this feedback to address shortcomings and help keep these relationships sustainable for years to come.

The two most frequently cited areas for improvement were:

- Difficulties managing climate change’s effects on specialty coffee.

 *As a result, Caravela and Stumptown are co-investing in enhanced climate-related assistance for producers in 2019-2020. The first phase involves installing climate monitors that capture microclimactic data to help individual farms adapt to their specific, changing conditions.*

- Lack of transparency surrounding timing of premium payouts

 *Caravela took immediate action on this subject, and increased the number of premium payouts from two per harvest to three. This change helped farmers maintain cash flow. On a follow-up visit to El Jordan in late 2019, producers indicated that they were satisfied with the revised payout system.*

Read the full report below; if you're short on time, the executive summary (pp 3-4) is a good place to start.

Some notes on methodology:

The research was conducted by Catholic Relief Services (CRS) Colombia, an international Non-Governmental Organization (NGO).

CRS conducted one-on-one personal interviews with all of the El Jordan producers. They also interviewed a control group from the local community; the control group sells coffee into the traditional (commercial) market. CRS adapted a methodology called “Most Significant Change” that gauges the most significant change(s) in interviewees’ lives, in this case as a result of the commercial relationship with Stumptown and Caravela. Through a series of open-ended questions, they gained information on producers’ experiences, from the producers’ point of view.

This is an important first step in understanding how Direct Trade works, and we understand that it’s a first step: one supplier group in one country doesn’t necessarily represent the diverse realities in other regions. In fact, we have already commissioned two other studies, in two different communities, using a different methodology that will yield different information; those results are forthcoming.  Nevertheless, we found the results encouraging and wanted to share them here.