Coffee, Meet Blockchain: How Tech Can Bring Transparency To Its Supply Chain

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The most preferred beverage in the world, and with a worldwide market worth billions, coffee is rightly nicknamed "liquid gold." Coffee is the second largest export commodity in the world after oil and exported from 52 countries. An estimated three billion cups of coffee are consumed every day around the world.

While sipping that perfect cup of coffee is easy, the process of bringing coffee to a restaurant or home from far-flung plantations is complex. The array of activities and the involvement of a number of entities such as farmers, intermediaries, processors, government agencies, exporters, dealers, roasters and retailers make the supply chain long, complex and opaque.

One of the biggest fall-outs of this the multi-layered supply chain is the petty income that coffee growers get for their yields.

Is blockchain a solution? Here’s an overview of how organizations and companies are exploring blockchain as a viable solution to add transparency and traceability to the entire process.

The coffee industry is large and growing at a healthy pace. The global coffee market is projected to reach $102.28 billion by 2023. According to the data by International Coffee Organization April 2019 report, approximately 161.381 million bags (each bag is 60 kg) were  produced in 2017-18.

While the coffee market is valued in billions, small farmers growing the product continue to earn meager incomes. It is estimated that about 25 million small producers and half a billion people are directly or indirectly dependent on coffee.

Just how meager is their income?

A World Bank report highlights that “an estimated 500 million smallholder farming households globally, who comprise a large proportion of the world’s poor, [are] living on less than $2 a day.”

Enter Blockchain

The blockchain technology is being explored as a solution to bring traceability and transparency to the coffee supply chain.

In 2017, Bext360, announced two programs with an aim to trace the transportation of coffee at all points in the supply chain as well as payments made to coffee farmers. The first project engaged Great Lakes Coffee, a Uganda-based coffee exporter and Coda Coffee, a Denver-based coffee roaster. In its second program, Bext360, Moyee, and the FairChain Foundation joined forces to work on a traceable fingerprint to track products from the producer to consumer. 

Last year, Brooklyn Roasting Company collaborated with IBM Blockchain (IBM) to revolutionize the integrity of the supply chain in the coffee industry using blockchain. IBM put the data behind Brooklyn Roasting Company’s Ethiopian Yirgacheffe coffee onto a blockchain to ensure traceable, trackable coffee trade.

IBM believes that “blockchain can help farmers, roasters, and everyone in between to bring you a fresher, fairer cup.” It maintains an immutable index of all transactions and sequences in the process such as purchase, export, import and evaluation.

By entering the unique cup ID, "consumers can view a coffee’s journey from the mountaintop to countertop."

Your cup of coffee

To ensure customers that their coffee is organic and fairly traded, Cambio Coffee, a direct trade organic coffee company based in Shanghai, turned to blockchain “to connect the consumer to the origin story” which is the company’s primary motto. They implemented ScanTrust’s unique QR codes on their packs in May 2018, and used Hyperledger Sawtooth to build a blockchain-enabled traceability function for their existing application.

This year, the Coffee Board of India launched a blockchain-based marketplace to integrate the farmers directly with markets in a transparent manner. India is the only country in the world where coffee is grown entirely under shade, handpicked and sun dried. While the coffee grown in India is highly valued, the share of farmers in the final returns is very meager.

This project aims to double the income for farmers by reducing the number of layers between coffee growers and buyers.

Starbucks (SBUX) is embracing blockchain, powered by Microsoft Azure (MSFT). The company has always been conscious about sourcing its coffee from ethical sources. Last year alone, Starbucks worked with more than 380,000 coffee farms. In 2015, Starbucks verified 99% of its coffee as ethically procured.

Powered by Microsoft Azure Blockchain Service, Starbucks is enhancing the transparency of its supply chain by recording each step on shared, immutable ledger that would provide all parties a complete view of their products’ movement.

Final Word

Changing demographics and a rising middle class continue to drive the demand for coffee, but millions of farmers continue to struggle for a stable livelihood. With 70-80% of the coffee being produced by small farmers, there is a need to bring in a system that’s transparent and provides growers a wider access for their produce. A cup of coffee that is ethically sourced with farmers rightly compensated, will sure taste best of all.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Prableen Bajpai

Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.

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