The Coffee Supply Chain - Fair Trade vs. Non-Fair Trade

Coffee is one of the most popular Fair Trade goods. Coffee is grown in a number of places around the world. In some countries, the coffee industry is a huge part of the economy. When coffee is grown, it must make its way from the farm to your coffee cup. Along the way, the coffee passes through the hands of many people. Collectively, the path through which a product such as coffee makes its way from the farmer to you, the final consumer, is known as the supply chain.

We can look at Ethiopia as a good example of a country with a coffee supply chain, which is also sometimes known as the "marketing chain". Ethiopia is a country in the western part of Africa, near Somalia.

The Coffee Supply Chain

Both the non-Fair Trade and the Fair Trade coffee supply chains start with the farmer who plants and then tends to coffee trees.
(Photo by Lisa M. Rogers/USAID)

The trees sprout the coffee “fruit” which is known as the “red cherry”. In Ethiopia, the red cherry is harvested from the trees by people who are employees of the farmers or who are independent contractors who are paid a couple of cents for every pound of coffee that they harvest, usually depending on how much money the farmer is able to pay and what prevailing wages are. At this point, the Fair Trade supply chain splits off from the rest of the coffee.


The Non-Fair Trade Coffee Supply Chain	The Fair Trade Coffee Supply Chain

After the cherry is harvested, it is sold to wholesalers or collectors or to the cooperative. The coffee is then washed and dried. It is transported from the inland rural farms to Addis Ababa.	The Coffee is sold by the farmer to the Fair Trade Cooperative of whch he is a member. The cooperative washes, dries, and packages the coffee for shipment to ATOs (Alternative Trading Organizations) in the developed world. The coffee is transported from inland rural farms to Addis Ababa for shipping overseas.


The coffee is then sold at auction. By law in Ethiopia, all coffee must either be sold at auction or through deals with cooperatives. Sometimes the coffee is bought by exporters. The usual selling price for coffee hovers around 70-90 cents per pound for premium coffee, and 30-40 cents per pound for regular coffee.	The coffee is sold to the ATO by the cooperative for a minimum of $1.26 per pound. The ATO roasts and packages the coffee to prepare for sale to the final consumer. Sale to the final consumer can happen either through ATOs or through retail channels.


The coffee is then sold by the exporter to a roasting company. The roasting company roasts the coffee, blends it with other kinds of coffee and prepares it for the final consumer. If the company sells bagged coffee, the coffee is bagged for sale. If the company operates coffee shops, the coffee is roasted and prepared for drinking.


The coffee then makes its way to your cup at a markup of 1200-1500% (or more) from the prices that are paid to farmers. The markup is usually set at the largest markup that the market will allow.