We’re All Trying To Find the Coffee Company Who Did This

If you’ve spent any time on the internet, you’re probably familiar with a sketch from comedian Tim Robinson’s show, “I Think You Should Leave”.

The premise is simple: A man in a hot dog costume crashes a hot-dog-shaped car into a menswear shop, and then tries to pretend it wasn’t him. “We’re all trying to find the guy who did this”, he says at one point while, again, wearing a hot dog costume.

That line quickly became a meme, used in response to, as Know Your Meme put it, “complaints about problems from the people responsible for those problems”. Which brings me to coffee. 

Coffee is, on the one hand, a multi-billion-dollar global industry ruled by a few multinational corporations. Just ten companies roasted 35% of all the world’s coffee in 2019, generating $55 billion in the process. Together with their executives and shareholders, these brands rake in more profit every year.

On the other hand, the farmers who grow that valuable commodity—not to mention the farm labourers, baristas, and the industry’s other essential workers—often struggle to make ends meet. Nearly half of the world’s 12.5 million smallholder farmers continue to live in poverty, with at least 5.5 million surviving on less than $3.20 per day.

This disparity is not a new problem, and it certainly isn’t unique to coffee. But the coffee industry is particularly adept at dodging responsibility for the inequity it has created, and which it continues to enforce. Adding to the hypocrisy, those same corporations regularly bemoan the plight of farmers.

In their sustainability reports and their CEOs’ softball interviews, they express sadness over this state of affairs. Ultimately, however, they affect powerlessness, shrugging off low farmer pay as an inevitability rather than the direct result of corporate policy.

At most, these brands might throw out a few targeted projects, like low-interest loans or education initiatives. Or perhaps commitments to sustainable sourcing initiatives, based on private criteria that they decline to publicise. When pushed, they might join a multi-stakeholder initiative with other brands, or offer vague platitudes like, “We pay above-market prices for high-quality coffee”.

Could there be a connection between the struggles of smallholder coffee farmers and ever-increasing corporate profits? Don’t ask us, the corporations say. We’re all trying to find the guy who did this.

Volatile Coffee Markets

Like many industries in a capitalist economy, coffee’s commodity price is—to simplify wildly—based on supply and demand. Too much coffee causes a surplus, which pushes the commodity price (known as the C price) down. Too little coffee means buyers have to compete for what is available, which increases the cost.

Historically, the commodity coffee market spikes and sinks every few years, in response to harvest yields and other factors. This volatility is good for traders and corporations, who can make money when the market falls and raise their own prices to offset increased costs when it rises.

However, those fluctuations can be devastating for small farmers, whose margins are often razor-thin. When the C price falls, it often drops below the cost of production, meaning that farmers lose money on their harvests. As authors Sjoerd Panhuysen and Joost Pierrot explained in the 2020 edition of the Coffee Barometer, such “low and volatile prices in international coffee markets squeeze grower margins that are already narrow”.

Even this past winter’s record-high market price wasn’t necessarily beneficial: Other costs, including for inputs like fertiliser, have risen alongside the C price. The impacts of climate change also mean many farmers are producing less coffee, and thus making less money.

In a 2018 article for Food Navigator, Katy Askew compared the “fat margins” of the biggest coffee companies with the struggles of small farmers. That year, farmers faced a low price crisis that saw coffee trading under $1 per pound—below the cost of production in many countries.

A spokesperson for Nestlé admitted to Askew that “the present period of historically low arabica prices are causing hardship for many coffee farmers”. The situation, the spokesperson said, was “not sustainable for the coffee sector in the medium term”, but when asked if the company would offer a minimum price guarantee, the spokesperson demurred.

Instead, the world’s largest food and beverage brand said that its prices were “competitive” based on the “open marketplace”—which, again, was hovering around $1 per pound—but assured that it paid more for “high quality and responsibly sourced coffee”, whatever that means.

Against Low Green Coffee Prices

Nestlé’s hand-wringing during the 2018 price crisis is just one example of its inability—or unwillingness—to connect the dots. In a 2004 report, “The Faces of Coffee”, the multinational stated that it “is against low green coffee prices and is concerned for the farmers and their families who depend on coffee for a living”. The C price in 2004 was even lower than in 2018, trading well below $1 per pound for almost the entire year.

The report asked rhetorically: “Why are so many coffee farmers in such a situation which is not of their making?” Good question—if only there were a way to identify those responsible, perhaps some large corporations that have been profiting handsomely from the coffee trade for decades. (Nestlé reported net profit of $5.78 billion in 2004. Two decades later, that had risen to more than $13 billion.)

Nestlé’s proposed solution to the problem of farmer poverty was not to better compensate its suppliers, but to increase coffee consumption, which has the added benefit of also increasing its sales. Additionally, it encouraged farmers to diversify their sources of income away from just coffee.

The company did at least agree that “more of the value of coffee processing needs to remain in the coffee-growing countries”. The way to do this, Nestlé posited, was for corporations to “help local economies and create jobs” by building processing plants in those countries. But those factories are still company-owned, and as my recent piece on unionised Colombian Nestlé workers makes plain, locals aren’t necessarily benefiting from its presence.

The report went on to state that, while it admires the concept in theory, Nestlé doesn’t agree with a Fairtrade-style guaranteed minimum coffee price: “If on a broad basis coffee farmers were paid fair trade prices exceeding the market price, the result would be to encourage farmers to increase coffee production, thus further depressing prices”.

Instead, the company touted its “direct purchasing” arrangement, which “respects the market’s rules” and elides “middlemen” to make sure more of the purchase price stays with farmers. However, it admitted that this “direct purchasing” accounted for only 14% of Nestlé’s coffee transactions at the time. In 2010, the company promised to double its direct coffee purchases by 2015, although a 2024 report by the Swiss investigative outlet Public Eye noted that “it is highly debatable whether this target has been achieved”.

In its company report, Nestlé listed the many ways it helps farmers, from technical assistance to free seedlings. Public Eye, however, found that farmers and farmworkers in Mexico and Brazil who had taken part in the company’s sustainability programme, Nescafé Plan, “can barely make a living from growing coffee”.

Nestlé doesn’t publicise how much it pays for coffee, but the Public Eye investigators tracked the various prices paid for a 60kg bag of green coffee, sourced from Minas Gerais in Brazil, along the supply chain. 

That bag of coffee was ultimately processed into 25kg of Nescafé instant coffee. Nestlé sold that instant coffee for upwards of CHF 2,000 (a little under $2,500 at current exchange rates) in Switzerland, having paid a middleman $211 for it. The farmer earned about $150, and they in turn paid the farmworker roughly $12.

That pay is laughably meagre—especially when the often-treacherous realities of coffee farms are taken into account. Public Eye detailed “slave-like working conditions” on Brazilian farms connected to the Nescafé Plan, as well as mutilations from operating harvesting machines. Exposure to hazardous chemicals, meanwhile, remains an ongoing concern.

It’s All of Them

I’ve focused on Nestlé because it is the world’s largest coffee company, but its behaviour is certainly not unique.

Take Starbucks. In his 1999 book, “Pour Your Heart Into It”, then-CEO Howard Schultz wrote of an initiative his company established in Guatemala to provide cooperatives with low-cost loans. “Most of the growers we’re helping are struggling to feed themselves and their families from the produce of a few acres of land, and they suffer from high rates of illness and malnutrition”, Schultz wrote. But why were they struggling, and was one of the largest coffee companies in the world maybe partly responsible? No one knows!

There’s more. In 2018, Starbucks announced that it would provide $20 million to coffee farmers in Central America during the worst of the coffee price crisis. Then-senior vice president Michelle Burns stated in a press release that the crisis “cannot be ignored” and that “we have a role and responsibility in helping smallholder farmers sustain their livelihoods”.

Starbucks had revenue of $24.7 billion in 2018, and returned $8.9 billion to shareholders. As Zac Cadwalader wrote in Sprudge, “Starbucks set up this relief fund until the market ‘self-corrects and rises above the cost of production,’ effectively removing, or attempting to remove at the very least, any volition or agency one of the world’s biggest coffee companies has in the creation of that price”.

Then there’s Jacob Douwe Egberts (part of the JAB Holdings-owned JDE Peet’s), which noted in its 2019 corporate social responsibility report that “addressing poverty is at the centre of our responsible sourcing efforts. The majority of smallholder farmers earn low incomes, driven by a combination of low farm productivity and small farm size”.

The company purchased 8% of the world’s green coffee in 2019, the report says, and JDE Peet’s made $7.55 billion in revenue the same year. But much like the other corporations, it doesn’t connect the dots or commit to the changes needed to make things more equal. Instead, it aims to “increase the productivity, profitability, and sustainability of the smallholders we work with” by focusing on third-party certifications and its in-house sustainability programme—not by paying them more.

The Coffee Paradox

What’s notable is that these companies’ solutions are never systemic. They are always piecemeal initiatives that help farmers with training or productivity or, at the most, access to finance.

Still, there are some actors in the coffee industry who are advocating for—and moving towards—more widescale change. This often comes from producing countries themselves: The Colombian government, for example, launched a price stabilisation fund in 2019 to protect its farmers from too-low commodity prices. Ethiopia followed suit in 2020.

Some in the private sector also saw this as the way forward. Vivek Verma, managing director of the coffee trader that was then called Olam Coffee (part of the agribusiness giant Olam International), called for a global stabilisation fund in 2019.

“If coffee were a product of the developed world, there would have been some price stabilisation mechanism put in place or, at the very least, there would have been subsidies at low prices”, he pointed out. Verma called on public and private bodies, as well as commercial banks, to work together on a fund. (As far as I can tell, this never came to pass.) 

Such collaborations are known as multi-stakeholder initiatives and are often regarded as a solution to the industry’s ongoing inequality. Panhuysen and Pierrot in the Coffee Barometer noted that every major coffee company is part of at least one such initiative. Big corporations working together, putting aside their differences to forge a better future for everyone—who could argue with that?

Well. “There is hardly any evidence across the coffee industry that the current MSI commitments are actually translating into meaningful change at scale of some of the most important indicators like income, labour standards or adaptation to climate change”, Panhuysen and Pierrot wrote. 

In Tim Robinson’s sketch comedy show, his characters are often digging themselves into holes and then continuing to make things worse in an attempt to get out. His hot dog guy keeps professing his innocence, despite it being obvious to everyone at the scene that he is the culprit.

Similarly, coffee companies continue to wring their collective hands about inequality and farmer poverty in the face of the overwhelming evidence that they are, in fact, responsible. Retail coffee prices keep increasing while the price paid to farmers stays pretty much the same—what Benoit Daviron and Stefano Ponte called “the coffee paradox” in their 2005 book of the same name. 

But what can Nestlé, Starbucks, or JDE do? They are simply tiny little multi-billion-dollar companies with no control over the global coffee trade. Someone else is clearly responsible, otherwise the industry wouldn’t be in the dire state that it is. We’re all trying to find the guy who did this.