Innovation

While most coffee is sold in bulk on the commodities market, leaving coffee growers with little if any profit from their labors, “direct trade” enables Intelligentsia to buy the world’s best coffees from individual growers, leading to a better cup of coffee, and creating a more sustainable market for coffee producers. Multiple coffee retailers claim to follow direct trade practices, but Intelligentsia was one of the first, and still is one of the purest direct traders in the world.

Intelligentsia’s Direct Trade Charter includes five core principles that guide their purchasing practices. In summary, they only partner with farmers who are “obsessed” with growing quality coffee and they invest in the collaborative science behind growing the highest quality coffees. Intelligentsia also rewards farmers for their commitment to quality by guaranteeing a minimum price and paying fixed prices for multiple grades of coffee qualities, rather than only buying small “micro-lots.” These practices foster long-term relationships between growers and Intelligentsia, which creates mutual benefit.

Image found on Intelligentsia.com

Inspiration

Intelligentsia was founded in Chicago in 1995 with the mission of brewing the best cup of coffee. In the experimental pursuit of quality, founders Doug and Emily roasted and extracted their beans in every way imaginable, then turned to sourcing as the key variable in a quality cup. Their direct trade practices began as a “means to an end” to find the highest quality beans in the world, but now serves as a “means in and of itself” because of the mutual benefits to Intelligentsia’s competitive advantage and the growers’ livelihoods.

Overall impact

Intelligentsia strives not only to do the most good, but also to do the least harm. In addition to their direct trade practices, in 2019 the company also sourced 40.1% of their coffee from smallholder farmers and 19.7% of their coffee was certified organic. They have grown to six locations in Chicago, four locations in Los Angeles, two locations in New York, two locations in Boston, and one location in Austin, expanding their - and their coffee growers’ - market, all while maintaining their sustainable trade relationships.

Intelligentsia's use of direct trading practices is a radical and scalable innovation that can help reduce the impacts of the "coffee crisis" (the extremely low commodities prices for coffee) and combat poverty (SDG1) in coffee-growing regions because of the higher and more reliable pricing structures. Its impact is net-positive and empowers growers to take care of the land around them (SDG15) and produce coffee in a sustainable way (SDG12) to maintain the high quality of coffee that Intelligentsia wants to source.

Business benefit

In the crowded coffee market, Intelligentsia competes on quality, so direct trade is the only and best way to do business. Through the commodities market, all different qualities of coffee are combined into bags for bulk sale, reducing the overall quality of each bag. By forging partnerships directly with growers, Intelligentsia can avoid the mixed bags and keep lots of different qualities and origins separate. These relationships also provide Intelligentsia with the story behind the beans and an understanding of the different farming methods used to grow them. By building connections between different growing partners, Intelligentsia facilitates an ever-growing community of passionate coffee farmers committed to continuously improving the quality of their beans and maintaining Intelligentsia's continued access to the best coffee in the world.

Social and environmental benefit

Intelligentsia’s approach to direct trade generates incredible social benefits for their growing partners. By paying “fixed” (consistent) prices, Intelligentsia ensures farmers receive fair and reliable compensation for their labor, whereas the commodities market, which pays “differential” pricing, fluctuates dramatically over time, creating price risk for farmers.

Not only does Intelligentsia pay a fixed price all year round, they also commit to price floors and purchase multiple grades of quality from each farmer. This allows farmers to sell their whole crop to a single buyer (rather than searching for multiple buyers to purchase different grades of beans) at guaranteed minimum prices, reducing the risk that comes from the selling process.

This price assurance and consistency, as well as the long-term trade relationships and investments Intelligentsia makes in coffee research, enable farmers to invest in their farms to expand and continually improve their quality.

Interview

Michael Sheridan, Director of Sourcing and Shared Value