Discussions of cryptocurrencies such as Bitcoin, Litecoin and Ethereum have been in the news quite a lot over the last year, in response to rapidly changing values and a proliferation of uses in different industries. The coffee industry is beginning to witness the use of different cryptocurrencies and blockchain applications with more conversations are taking place about how blockchain may be a useful concept for altering the global coffee supply chain.
Howard Bryman from Daily Coffee News has written two excellent articles on ‘Cryptocurrency and Blockchain in Coffee’. Part 1 focuses on ‘Retail’ and explores how some companies in the coffee industry from coffee equipment manufacturers to coffee retailers have been adopting cryptocurrencies , and how the blockchain works. Part 2 focuses on ‘Origin’, examining how blockchain and cryptocurrencies ae being adopted in the coffee global supply chain. As an introduction to coffee and cryptocurrencies I would highly suggest starting with these articles which not only provide examples of cryptocurrencies in the coffee industry, but an explanation of the concepts of block chain and cryptocurrencies and how they work more generally.
In the last few months I have noticed a rise in discussion of these issues in the coffee industry in particular from the use of coffee focused cryptocurrencies such as coffee coin, to how the blockchain concept is being integrated into the practices of companies such as Starbucks. I first heard of Coffee Coin in a podcast from Orange Cactus Coffee when they explained how they bought some coffee from Thailand with the cryptocurrency.
Coffee Coin is essentially a trading platform which is specifically for the specialty coffee industry, designed to make coffee more traceable. According to the Coffee Coin White Paper using Coffee Coin contributes to eliminating ‘many of the current economic, administrative and logistical inefficiencies in the specialty coffee trade, thereby increasing value and profits throughout the supply chain’. It explains how ‘CoffeeCoin works as a “single currency” for rapid global transactions – which ‘removes issues and loss of value in the global specialty coffee supply chain due to the current use of multiple currencies and exchange fees.’
Coffee Coin can be used for different elements of the coffee supply chain – from contracts, quotes, shipment tracking, the administrative side of the industry, to a platform for farmers and roasters to crowdfund sales and purchases of specialty coffee lots, reducing the need for intermediaries in the supply chain. In principle ‘small-batch roasters will now have access to micro-lots of specialty-grade beans more directly from those willing to offer them. This opens up the door to thousands of boutique roasters who previously had limited access to smaller volumes of specialty grade beans. It also offers coffee farmers and cooperatives more opportunities to sell their best beans at a higher premium.’
Other companies have sought to establish how the blockchain has the potential to alter the supply chain in coffee. The Cofe project has produced a White Paper to explain their approach which ‘aims to solve the broken, inefficient coffee supply chain by being the first successful and scalable implementation of the blockchain as a solution’. Largely it suggests that these inefficiencies can be reduced by removing the middle men in the coffee supply chain to create a system based on fair trade. The report suggests there are ‘often around 15 intermediaries between the farmer and the consumer, each of whom takes their own profit and does so by pursing the cost of the entity before them down’ which leads to the farmer suffering the most. For those involved in the Cofe project, the ‘Solution involves implementing an online market place to connect farmers, roasteries and consumers so that direct and transparent transactions between these parties can take place. In this system, transactions will be recorded on the blochain via the Cofe Token (COFE).
‘The Cofe (COFE) token will provide a native and universal method of payment within the Cofe network, the online marketplace and any CofeHouses. The use of the COFE token will allow for trackable transactions to take place between all parties using themarketplace, and, to increase demand and usage, discounts will be given for purchases made with COFE at CofeHouses.’
The Cofe project aims to provide a better, more efficient alternative to the current system with the The Cofe marketplace will operate as a means for connecting consumers with farmers and roasteries:
‘This marketplace will allow truly fair-trade transactions between consumers and farmers and will make use of under utilised capacity in independent coffeehouses close to the consumer to replace many of the activities of the current supply chain. … All transactions made on this marketplace will be recorded on the blockchain to ensure trackability and traceability. Therefore, the solution that the Cofe project proposes is more flexible than the existing supply chain, allows coffee to be tracked to source, and produces a measurably better product.’
In a recent episode from the BBC’s the Food Chain, the use of blockchain in the coffee industry is used as an example of how the blockchain technology is being adopted to try and establish a fairer and more transparent food system. It highlights how the Dutch company Moyee Coffee has teamed up with Bext360, a US based tech start up, to try and create Blockchain traceable coffees, using the blockchain system. This technology allows traceability of the coffee from a specific micro lot all the way to the roasters and retailers.
‘Moyee coffee takes transparency to the next level. Since 2017 theFairChain farmers have been paid through Blockchain, unique in the coffee industry. Every piece of data of data in the coffee chain, from harvest to payment, is stored digitally in the blockchain. Transparent for everyone. This data is lock by a cryptographic key. In other words, the data can not be tampered with, resulting in a fair and complete registration on the chain. (Moyee Coffee, 2017)
This is designed to create a direct relationship between the farmer and the consumer.
It’s not just start-ups that are entering into the world of blockchain, the global coffee giant Starbucks too has taken notice of the potential application for its own operations. In March 2018 it announced that it was going to launch a pilot programme to establish traceability on some of its beans using ‘traceability technology’ (i.e. blockchain) as part of its efforts to ensure it has an ‘ethical’ coffee supply chain’. The director of traceability at Starbucks, Arthur Karuletwa argues that ‘traceability technology could have profound implications for connecting coffee drinkers to the farmers who grow it, and that there is the potential for this technology to create an “authentic, seamless, dynamic” one-to-one connection between farmers acros theg globe and someone drinking coffee at, say, a Starbucks in Seattle or Shanghai.
At the consumer end of the supply chain too, the use of cryptocurrencies has been appearing. Dedicated cryptocurrency cafés, have opened in a number of cities: Bitcoin Coffee in Prague or Ducatus Café in Singapore are twoexampls. Then there are increasing numbers of coffee shops that wil ccept bitcoin as payment, even in the UK. While the use of cryptocurrencies on te high street is by no mans manstream more examples are apearig, indicative of a rising awareness and use o cryptocurrencies in the modern economy.
Clearly blockchain and cryptocurrencies have the potential to be utilised in the coffee industry, but questions remain about how possible it is to scale up some of these initiatives and really have an impact on the global coffee supply chain, and about how feasible it is for cryptocurrencies to be used for day to day transactions? It will be interesting to see how these companies and initiative develop, and the extent to which cryptocurrencies and blockchain become a component of the global coffee industry.