Direct Trade coffee versus Fair Trade coffee

Direct Trade coffee and Fair Trade coffee are two different ways of selling coffee. In Direct Trade, farmers work directly with coffee roasters, while Fair Trade coffee is sold through a system of social and environmental certification. Direct Trade coffee focuses primarily on price and fostering a lasting partnership, while Fair Trade considers multiple aspects of sustainability.


In this article, we further explore these certifications for coffee beans and also share some insights into the lives of coffee farmers..


Challenges facing coffee farmers

The coffee industry is experiencing a moment of great boom, consumers' purchasing power for coffee is increasing, and yet small-scale coffee farmers are struggling to survive.


Coffee farmers, especially those on small plots, face a multitude of challenges today. Most coffee farmers cannot produce enough food for their families throughout the year and have no savings, credit, insurance or alternative sources of income to compensate when their coffee crop fails or the market price is low.


Typically, coffee farmers earn less than 8% of the final consumer price of their coffee. Additional costs related to farming (such as fertilizer) and brokering with suppliers further cut into the small profit farmers can make from selling their beans.


Direct trade vs Fairtrade koffie - Direct trade koffie zak op tafel, iemand halt koffie en kaart in hand


Positive changes in the coffee industry

This disastrous situation is no secret, and yet we are not acting on this knowledge - when we know without a doubt that a widespread, meaningful change for the world's coffee farmers is essential. For farmers, who continue to live in poverty despite the growth of the industry.


That is not to say that significant change is not happening. There is a clear drive in the industry to make a difference, and organizations like Fair Trade, UTZ and Rainforest Alliance are trying to empower farmers to improve their livelihoods and communities.


However, the situation is not at all that simple. Even with the work of these organizations, it is still a question whether the farmer actually gets value from the organizations' certification..


Direct trade vs Fairtrade koffie - Koffiezak met overlays erop die beschrijven hoe geld stroomt in de koffie-industrie


The impact of certifications on the coffee industry

Certification has clearly been a great first step in creating awareness and has played a crucial role in putting important issues on the agenda, however, it is not the holy grail. To qualify for certification, producers must meet certain requirements, sign up for the program and pay a fee to be licensed as a Fair Trade company. In return, they gain access to a large market of consumers willing to pay for this particular type of product. Sounds good, right? However, there is a big upfront investment required from the farmers to get certified - this is money that some farmers simply just do not have.


What is wrong with the certification models?

"Slave labor found at Starbucks-certified Brazil coffee plantation" (D. Penha, Mongabay 2018). "Do Sustainable Certifications For Coffee Really Help Coffee Growers?" (A. Chen, NPR 2018). "The Problem with Fair Trade Coffee" (C. Haight, Stanford Social Innovation Review 2018). These are just a few titles of articles that have fiercely attacked the certification model in recent years.


This system, which looks good on paper, instead has many drawbacks.


Misconception about where premium price goes

First, there is often a misconception surrounding Fair Trade coffee brands about where the premium price consumers pay goes. This does not mean that farmers are not guaranteed a "fair" price, but that it is usually disproportionate to the premium price paid by consumers. Indeed, a larger percentage of this premium price goes to retailers and other supply chain actors closer to the end consumers.


Direct trade koffie vs Fairtrade koffie - Fabrieksarbeider meet koffiebonen


Quantity above quality in Fair Trade coffee

Second, buyers of Fair Trade coffee are generally more interested in quantity than quality. Although Fair Trade guarantees farmers a minimum price for their coffee, they are not compensated for particularly good beans and are not motivated to continually improve them.


No guarantee for coffee farmers

Moreover, certifications cannot guarantee farmers that a market can be found for their products. Once the demand for Fair Trade products is exhausted, farmers are forced to sell their product to other retailers, therefore receiving a lower price, even though they have to bear much higher production costs.


These conditions result in a vicious cycle in which the farmer does receive a fair price for their work, however, there is no specific focus on increasing the resilience of producers and their personal empowerment.


Alternative to certification models: Direct Trade

As you have probably gathered, the belief that a label is synonymous with sustainability is often unfounded and leads to profound misunderstandings in the market and for consumers.


One of the most adequate solution for the shortcomings of Fair Trade coffee and other similar certifications are Direct Trade coffee beans.


What is Direct Trade coffee ?

Direct Trade is a term used for coffee companies who buy directly from the growers. All unnecessary middlemen are eliminated and people know who earns what in the coffee supply chain. This system is based on relationships with producers that go beyond the transactional and include a sense of equality manifested in reciprocal and transparent processes that promote best practices in coffee production and processing to ensure the rights and well-being of producers, the community and the environment (S. Panhuysen and J. Pierrot, Coffee Barometer 2018).


At Wakuli, for example, we use a "grassroots" approach with cooperative-specific KPIs (key performance indicators) for the social and environmental impact of our operations. This means that consumers who buy from us can decide not only about coffee quality, but also about the farmer they buy from. In the case of one of our small farmer cooperatives in Tanzania, for example, this means that in addition to standard KPIs such as fair distribution among farmers and a higher kg price for beans, each year we measure the number of CPUs (washing sites for processing coffee) in which the cooperative invests. CPUs are an indication of less pollution, higher and consistent coffee quality and more value per labor hour. In the case of our Tanzanian partner, the farmers decide whether the extra money goes to the cooperative or to the farmers themselves. Dit betekent dat de coöperatie alleen investeert in waardeverhogende toevoegingen (niet het geval bij Fair Trade). This means that the cooperative only invests in value-adding additions (not the case with Fair Trade).


Together we can create even more impact. How? By switching to specialty coffee from Wakuli, without compromising on taste or price! Try our tasting pack and discover your new favorite coffee.


What is the difference between Fair Trade versus Direct Trade coffee?

Direct Trade and Fair Trade coffee are two different ways that coffee farmers sell their products. In direct trade, farmers work directly with coffee roasters, without the use of middlemen. As a result, farmers often receive a higher price for their coffee.


Fair Trade coffee, on the other hand, is sold through a system of social and environmental certification. As a result, farmers also receive a fair price for their coffee, but working conditions and environmental aspects are also considered. In short, direct trade focuses primarily on price, while Fair Trade considers multiple aspects of sustainability.


In summary, the main differences between Fair Trade and Direct Trade coffee are:

  • Price: With Fair Trade, a minimum price is agreed upon for the coffee farmers, while with Direct Trade the price is negotiated between the coffee farmer and the buyer. See how Wakuli approaches price in our article
  • Certification: Fair Trade coffee is certified by an independent organization, while with Direct Trade the quality of the coffee is determined by the buyer himself. Wakuli also has a set of quality standards we adhere to with the goal of helping our partners increase the quality of their crops over time. 
  • Profit captured by the farmer: While a Fair Trade certificate ensures a minimum price per kg of coffee beans, the extra profit often ends up in the pocket of the middlemen. Through a direct relationship, Direct Trade coffe companies more commonly thrive to leave as much money with the farmers as they can.


Direct trade koffie vs Fairtrade koffie - Koffieboer zit op koffiezakken


Why is Direct Trade the way to go?

The previous examples given of Wakuli's activities highlights some of the key strengths of direct trade.


Cooperative-specific KPIs

First, Direct Trade gets companies to include cooperative-specific KPIs on social impact in their business plans. This allows direct trade companies to make purchasing decisions not only based on coffee quality, but also on what impact they want to have on farmers and their environment.


Transparency and equal distribution

Second, Direct Trade coffee trade aims to ensure a more equal distribution of the value of coffee and to provide full transparency about pricing to consumers. A very powerful tool for transparent communication is the price distribution, which we also use in Wakuli. With this tool, consumers can see the percentage of the retail price (divided into farmer, logistics, roaster, retail margin and company service) and make a conscious consumption choice.


Traceable supply chain

Third, Direct Trade creates a traceable supply chain that allows customers to know exactly where their coffee comes from and which hands it passed through.


How cool is it that? You can know exactly who contributed to your steaming hot cup of coffee or refreshing cold brew. Face, name and even direct contact? In fact, Direct Trade introduces you to your farmer!


Long-term partnerships

Fourth, Direct Trade fosters long-term relationships with farmers that enable co-investment, price-fixing and the sharing of experiences and ideas. This new dynamic allows farmers to step forward and express their own views. Want to know more? Check out our 13 partners and learn more about their stories. 


No financial commitment

Finally, Fair Trade certification costs money. Direct Trade does not cost money, and it can also guarantee higher prices than in a Fair Trade supply chain pays to the farmers.


What makes Direct Trade coffee unique?

Direct Trade is where premium quality and true value for farmers takes place. The close relationship between producers and roasters influences almost every aspect of the business. 


Because coffee is purchased in smaller quantities, producers can work on specific flavor profiles and roasters can pick the best beans. To set a price, farmers and roasters come to an agreement on which of the crop to buy based on a complex tasting protocol determined by Specialty Coffee Association of America (SCAA) scoring. Farmers are then compensated based on the actual value of the coffee, which ultimately makes them more inclined to invest in growing quality beans and future-proof their lot. This also assures them that the farmers are still making a great cup of coffee in the future.


Direct trade koffie vs Fairtrade koffie - Koffieboeren met Wakuli koffiezakken in hand


How does Wakuli do Direct Trade?

Wakuli is the one of the few coffee brands that knows where its beans come from. We know all our partners personally and pay them more than the coffee giants. That's why we want to make our coffee (bean and pods) subscriptions available to as many people as possible.


We want to know everything, which is why we buy directly from coffee farmers we know personally. In addition, we only involve those who add value to the journey from bean to your cup of coffee. A nice promise. But we can also prove it. We always pay the coffee farmers more than what they previously earned. And that's just the beginning. Will you join us on our journey to completely change the coffee industry once and for all?


So why choose Wakuli coffee?

  • More than just a "fair" price, we see the coffee farmer as our partner.
  • Fresh beans, roasted lighter for the best taste.
  • Specialty coffee from direct trade delivered through the mailbox.
  • Available in whole and ground beans, or in pods.


Together we can create even more impact. How? By switching to specialty coffee from Wakuli, without compromising on taste or price! Try our tasting pack and discover your new favorite coffee.
Direct trade koffie - Jongen leest Wakuli kaart terwijl hij ontbijt