The Challenge
Over the past four decades, the long-term price of green coffee has decreased in real terms – resulting in a massive decrease in producers’ purchasing power – while retail prices have almost doubled. The low prices, combined with the increased cost of production and cost of living, have put pressure on the livelihoods of many smallholder producers, and disincentivizing a much-needed generational change among producers. Growing public pressure has led to retailers and brands to rethinking their pricing and sourcing strategies.
The NewForesight Approach
Innovative thinking is at the core of how NewForesight has sourced archetypes based on market segments, establishing four distinct archetypes in the global coffee sector. This helped to build a common understanding of how international supply chains structure – and the integration of sustainability – differ depending on the market segment. Even deeper, this understanding reveals how this, in turn, influences smallholder producers and ultimately the living income gap.
Utilizing archetypical thinking, NewForesight worked with the Task Force participants to collect data from sustainability schemes to measure the farm economics and living income gap of Colombian coffee producers for each sourcing archetype. The final result was a public report with findings on the severity of the living income gap and tailored recommendations per archetype on possible pricing and sourcing practices to close the gap, as well as sector-wide policy solutions.
The Result
The results of the study were broadly recognized by the coffee sector, and presented at several major coffee conferences. The study ultimately enabled IDH to engage with private sector actors to develop living income projects in Colombia. The sourcing archetype thinking has since been adopted in sectorial studies by the International Labour Organization and Rainforest Alliance in tea, banana, and cocoa.
