Today, the global coffee market is more convenient, dynamic and flexible than
ever before. In the wake of the global economic crisis, consumers are spending
less on coffee by drinking at home and roasters are responding by launching
convenient, easy-to-use premium products. New players and distribution channels
are emerging, traditional brands are competing with cheaper products and major
companies are taking tactical measures to increase their market share, creating
a need for supply chain changes to adapt to market conditions.
The Colombian Coffee Growers’ Federation shifted to a new supply chain model
in order to respond to customer needs. In helping more than 500,000 coffee
producers, of which 91% are small farmers, go global, our first response was to
engage the coffee growers in the supply chain concept. This included the main
elements of a pull system model with the aim of protecting our core value
proposition: freshness.
In adapting our supply chain models to changing market conditions we were
able to do so without affecting the value proposition of our product. Through
the following examples the federation has demonstrated how flexible supply chain
models can succeed in evolving market conditions.
In Japan, the federation has supplied high- quality green coffee beans to one
of the major soft drink companies for more than 15 years, demonstrating how
innovative ideas have longevity in the complex world of commodities. The model
is simple. The federation sells the company high-quality, branded green coffee
beans to supply the most successful canned coffee in the Japanese market. The
final product bears the brand of the beans, which is owned by the federation but
licensed to the soft drink company. The success of this business has seen
premium prices delivered to growers with social benefits to the coffee-producing
regions where these coffee beans are grown.
In one of the federation’s most challenging models, it has the responsibility
of delivering green beans from the farm directly to the European factories of
one of the world’s largest food companies. This requires synchronization along
the supply chain and involves not only selling green beans but also selling
services to the buyer as some of the beans supplied by the federation must come
from specific producer regions across Colombia. The model demands the best of
the federation’s services in terms of coffee searching, quality control and,
again, freshness. This project also involves responsible and sustainable
policies by means of social and technical assistance for the coffee growers
concerned.
The federation also supplies instant coffee jars to a major Australian
retailer with the retailer’s private brand. As in the previous example, this
model requires extra coordination to engage not only the coffee producers but
the federation’s freeze-dried coffee factory and the suppliers of the materials
needed to produce the glass jars. This business model features value creation as
the federation supplies the final good to consumers.
These examples demonstrate the need for flexible supply chain models that can
adapt to market conditions and face new challen-ges with different levels of
complexity without affecting the quality, value proposition or response to
customer needs. With large quantities of cheap, low-quality coffees entering the
mainstream coffee market, it is important that we maintain the value of
Colombian Coffee. Our aim is to maintain and increase the consumer desire for
good coffee, but also to maintain our customers by selling services and adding
value to the green beans.
Additionally, price fluctuations increase the risk in trading coffee with
increased costs along the supply chain. Good risk management policies that
protect growers’ income are instrumental for the sustainability of coffee
production and for the stability of coffee supply.
Other across-the-board challenges affecting the global supply chain include
the diversity of suppliers, new market trends, such as ethical trade and
corporate social responsibility, and the increasing share of private brands on
supermarket shelves. These new trends and trade practices create additional
pressure on the global supply chain, reinforcing the need for flexibility,
adaptability and readiness to survive in a changing market.