The fourth wave coffee: what next for the coffee industry?

It has been a long time coming. We have all waited impatiently. The market is about to change.

The first wave was all about mass consumption of boring old instant coffee at home or in your local café. The second wave was all about café culture and the rise of Starbucks. The third wave saw the hipsters take control in their achingly cool specialty coffee shops-come-event spaces. Bulletproof coffee? Sure. That’s £9 please.

In an era of sustainability and social responsibility, producers are coming to the fore. Consumers are now quality-conscious and conscientious, and the fourth wave of coffee will be defined by this balance.

So what?

Major international coffee traders have always played an important role in the sourcing and distribution of green coffee. They make their money by dealing in bulk, which in turn allows them to make money on limited margins, and being privately-owned they can be opaque in how they do business.

But here’s the problem – the largest bulk buyers/roasters (see Nestlé, Starbucks) now seek to source their own green coffee in-house, and the retail market is arguably dominated by the small, independent coffee roaster. The major traders are seeing their markets shrink – disappear in some cases – and they must adapt to survive.

Adapt how?

Let’s be clear, commodities traders add significant value to the coffee ecosystem. Coffee needs storing, transporting and financing and the major traders – LDC, Sucafina, Volcafe, NKG, ECOM and the like – are all major players in this regard. But in speaking with contacts in the industry, a shift is clearly required to tackle a now fragmented and sensitive market.

When I speak to people in this market, they seem to always say three things:

  1. International coffee traders need to capture more business from independent and smaller-scale coffee roasters – especially if larger roasters are sourcing their own green coffee.
  2. To enable this, they have to have to invest in modern technology and logistics solutions.
  3. They also have to ensure that there are high standards for transparency, ethics and sustainable methods in the coffee supply chain.

How will they do this?

First of all, they’ll start listening to the needs of the independent roasters. These roasters will tell them that their consumers demand sustainability and quality side by side. So they will invest even more heavily in specialty coffees while evangelising their expensive and far-reaching sustainability programmes. The firms will deepen their relationships with farmers in origin countries and invest even more heavily in supporting farmers to build sustainable and profitable farms.

In response to roaster complaints about how unfit the buy in bulk/store/release model is for their needs, they will offer green coffee in smaller quantities and according to more transparent commercial models.

And there will be boxes. Volcafe’s Genuine Origin platform is notably ahead of the game when it comes to supplying smaller quantities of ethically-sourced and sustainably-farmed coffee, but it also delivers coffee in boxes as opposed to bags. They’re easier to stack in small shops, apparently.

And what will actually happen?

Commodities trading houses will start hiring new types of professional never before seen in this arena. We’re told that one major trader is on the lookout for ‘Customer Advocates’ to keep the company’s finger on the pulse of roaster and consumer trends. Another is rumoured to be building a major e-commerce platform to allow roasters to purchase and receive green coffee in more straightforward and contract-free manner. Meanwhile demand for sustainability-aligned professionals – notably agronomists and stakeholder engagement managers – is at a high as traders seek to expand their supply chain optimisation efforts. All of this will, of course, have to be documented by the new social media, brand and marketing professionals being hired by at least one of the more image-conscious traders.

Again, so what?

The global coffee market as a whole is changing rapidly, and this will lead international commodities traders into unfamiliar talent domains. A once insular industry may soon be forced to compete more aggressively in the global talent space if they are to survive.

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