enemy eels Coffee Gateway to the USA’ stAfrica eS y Oct 10-12, 2018 Hamburg, GERMANY Re Roc ae aCe oeQA. HAY LNCS PEM CEU ae Pre ILE at aCe eu Pe erat oC Nations financed repo! Poe eae oe eee) PU) Luis F, Samper “There are valuable opportunities for producer ovigins to create new value and generate the conditions to sustainably improve livelzboods”’: that is the conclusion of a new pra per caauthored by Daniele Giovannucci, divector of the Committee on Sustainabitity “Assessment (COSA) based in Italy and the US, Brasit’s Luciana Marques Viera at FGV (Fundacao Getulio Vargas - Escola de Administracao de Empresas) and Luis P. Samper, founder at 4.0 Brands The work was commissioned by the World Intellectual Property Organization (a UN body) and made public as part of ts flagship global report released biannually. In the paper, the authors review the volume and value of major coffe market segments, their challenges and emerging solutions fo grow value and distribute it more equitably, The report conclude that there is ample opportunity to use inelletual property much more effectively to create new value and create the conditions for producer origins 10 reap appropriate benefits and establish a level of emponerment nithin supply chains that they carrently do not have in most cases 4B STIR cafes and tea lssue 42018 August September) STAR: What can be done to ater he current sconara where farmers take much ofthe risk and reve only limited revars for growing special cect Samper: First isto understand that the evolution of coffee as a commodity in the last century has permitted widespread market penetzation and lower market costs but has also led to the steady de- cline of distinctive charactesisties and the diversity of coffees around the world. If that trend continues, i is likely that many Of the uniquely interesting coffees that still exist today will be gone in just a few decades due primarily 10 the dual pres sures of unsustainable prices and climate change that make coffee fuming less vi- able for many. We may thus lose a veey ‘valuable source of Furuse value In our paper we undesline that in (xpi. cal market-driven value chains, where coffees and suppliers are easily inter- changeable itis easy to Tose distinctions that can grow value. Industry now finds the need to ensure long term supply to ensure growth, which can open up pos- sibilities of mutual inter-dependence between suppliess and industey 10 even create valuable long-term collaborations. These collaborations have the chance to be successful if farmers and coffee of gins develop the intrinsic values of their production systems. This is best done via theic own intangibles in terms of regional, collective ot individual brand equity and origin content that authentically com: ‘municates the diversity, and embedded knowledge or quality inherent in sustain- able farming techniques. STAR: Je shir sugested roe eomitent with current market ends? Giovannucei: Yes. Thied wave cof. fees are having a tremendous influ ence in the industry, even beginning 10 affect conventional brands and_mass rmurket channels, Single origin coffees are now available at higher price points and the content behind these offerings needs t be competently handled for both marketing and reputation man- fagement purposes. As business opens to much greater consumer awareness, many industry players are progressively understanding that they can better participate in future growth with more sound, approaches to theie sometimes stodgy procurement strategies which may thus need to be te-assessed to also function as partnership steategies. This is especially true iF greater sustainability or responsible sourcing prictices are part of the objective STAR: Flow you can tell if hs i beady happening? ‘Samper: Brands that created theie seputation from the commodity approach and the act of blending ace now integrating single origin offerings. Nescafe and Nespresso are ‘examples of this teend. Starbucks launched its Reserve line that aso Focuses on single origin coffees. Cleadly, moves by big coffee conglomerates buying smaller thied wave brands is another example. Even mainstream actors such as Walmart and MeDonalds are much more engaged with origins and now actively focus oa sustainability. Our ‘organizations 40 Brands and COSA are very different and yet we both see — as we independently work with a broad array of leading ongnizations, that they are engaging ‘more in not just quakity but aso transparency and a more useful knowledge of theie supply chains. They are nor only addressing causes of forure risk but also anticipating, the evolution of business to satisfy emerging consumer expectations. STAR: Flow can sis suggeed sre achieve a significant impact? ‘Samper: Mackets for differentiated goods have a thiest for information and axe already having an impact. Most analysts predict they can grow considerably. From individual faemets at one end and barista at the other end, the coffee world is alceady achieving ‘new value that can be replicated through coffe origin strategies that march individual brand strategies and values. Developing origin narratives that are authentic and, atthe same time, fit into a brands purpose ancl story-telling is the next phase of coffee part- nerships that may well begin the decline of an obsolete coffee procurement paradigm. that captures but does not create much mutual value. Of course, narratives have to be substantiated ancl impact needs to be measured because it cannot be just stores either, Fortunately, itis not difficult to do and the technology to do that is now here. We are {quickly going beyond the outdated idea of compliance checklists, it is about living data that adds knowledge and value to all the stakeholders all the way to the consumer. Tts building ongn and brand equity with meaningful, evolving, and long term partner ships that can really accomplish significant mutual impact and even achieve consumer loyalty STAR: Whar can cf brands do? ‘Samper: Many coffee brands, particularly first wave brands, are finding that they are Tess relevant in this new contest. Some will become obsolete and others will evolve, ‘especially as they sce market share and margins being affected. It is likely that some of them will choose to squeeze their suppliers further, demanding longer terms of pay- ‘ment or going for lower qualities, withoue realizing that they are getting some short ‘erm gains but are also making a big bet against the better interests of the coffee indus. try and likely contributing to their own demise To be successful we believe that three basic pillars of differentiation will become more prominent in the 21st century distinctive quality teansparency, and knowledge. Qual- ity is of course a condition to differentiate and to compete, but it is not sufficient. ‘Transparency will be a requirement of any credible supply chain. It will help validate jmportant narratives that are truthful in sharing the realities that producers face. Lastly, knowledge needs to be part of any growing sector and this one invests litle in coffee research and sustainability research. Some of that knowledge will be based on much- needed experimentation on qualities and characteristics at firm or regional level as well, as the aced to improve conditions and drive more effective investments, The most successful brands currently engage in this theee-pronged approach, ove Daniele Giovannucci STIR: What's nest? Giovanuccl: We may be emesgng from the “Indiana Jones model” wherein i trepid coffee buyers find high quaity jewels in eemote or exotic counties. The next stages thatthe hero isnot only the tryer but also the farmer and the gin Stores ate important for thi, especial as they serve to convey aunty, and even the conflicts and challenges of pro- dicing high-quality coffee in dificult ecvionments. But they will bo serve to al the catego if the ate not supported by realtic nowledge from the same of sins. As its becoming more common to have much greater visibly into the far and farmer levels, we alto-must be avace Of the narmatves that emerge to ensure that they are not us the product ofa f- werish marketing team. Ulimatly, with- out sustinable conditions, none ofthese stores survive and the lifelong value of an ofgin is to important to be left to the vagaries of a comporate macketing team. Natketing i crcl, of course, but not a i is increasingly being practiced with unpeincpled exaggeration and even Blatant lie that cease appeal to emo- tions. The movement among visionary finure-oriented organizations ws divene as McDonalds, the Swi Government, and the Global Coffe Patfbam ilsteate that credible and veriable data may well be the undying component of fore growth that embodies principle of cea sustinablty where contdbutors can reap the benefits and pretenders are in- creasingly exposed. [STIR and ten 49