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DI
F F ER E N T
I A T E D
C O F F E E
G U A T E M A L A
D A N I E L E G I O V A N N U C C I
W O R L D C O F F E E C O N F 2 0 1 0
3 Themes3 Themes
1. Understanding Drivers for Differentiation
2. Status of Differentiated coffees and key
trends
3. Understanding the actual Effects of
Differentiation on sustainability
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1. Quality & Specialty & Estate
2. Geographical Indications
3. Organic
4. Fair trade
5. Utz Certified
6. Rainforest Alliance
7. SMBC - Bird Friendly
8. 4Cs
9. Starbucks C.A.F.E. Practices
10. Nespresso AAA
11. Ready to drink products
Differentiation in Many Forms in Many Forms
= Standards
What are they?What are they?
Differentiated coffees are a unique
contribution to the coffee industry.
1. They keep people engaged, they keep them interested with new products, new flavors, new stories.
2. They also keep them interested by encompassing the ever rising consumer interest in ecological and social
values (sustainability)
3. They are the main drivers of growth in most mature import markets
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Geographical Indications
Potential of Geographical Indications
Protected
GI
Known
Origins
Giovannucci Giovannucci et al.et al. 20092009
Protected
GI
Known
Origins
Giovannucci Giovannucci et al.et al. 20092009
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Annual Growth 2006Annual Growth 2006--0909
2
17
19
22
33
45
70
74
0 10 20 30 40 50 60 70 80 90
% growth
Rainforest
Nespresso
Utz
Starbucks
Fairtrade
Organic
Gourmet
Conventional
Source:
Daniele Giovannucci
Where are Leaders moving?
Firms and their commitments to
sustainable sourcing…
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100
493
0
100
200
300
400
500
600
700
800
900
1000000 bags
2000 2003 2005 2007 2009
Fair Trade
Organic
Starbucks
Rainforest
Utz
16% of US Market is certified
1720 2280
Source: Daniele
Giovannucci
Global Coffee Exports Global Coffee Exports (green coffee)(green coffee)
Certified 8%
Conventional 92%
Source: Daniele Giovannucci (2010)
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Opportunities
Still…more than one-quarter of U.S. consumers state
that they don't buy greendon't buy green products because they
are not availablenot available where they shopNMI's 2009 Survey of 20,000
Managing Benefits
• Reputation and Credibility
• tangible value that translates to market growth, risk mgmt, and quality.
• McKinsey survey of CSR & Harvard Jensen-Erhard Corp Analysis
• Very few companies have developed hard data to clearly measure their supply chains or even the long-term value of their CSR investments.
• Without this information, executives and investors often see ‘CSR initiatives’ as separate from a company’s core business and shareholder value.
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Risk of Claims
• Climate ripe for enforcement of environmental advertising claims
• FTC revising its environmental marketing guidelines for ‘greenwashing’ (Federal Trade Commission)
• International Better Business Bureau already seeing more cases
• Costs of administration and mgmt. for Private Standards
ITC File source: 09-19-2008 www.law.com
Barrier to Entry
Standards as determinants of access
Competitive FactorStandards
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Standards for food and agricultural
products increasing
and increasingly complex
Best Public Role
public sector must provide more knowledge
…not just information
– Countries that do it appear to succeed “rising tide lifts all
boats” and even smaller entrepreneurs can take smarter
decisions.
– While biggest firms are not interested because they
have their own as an advantage.
– It is not that hard but firms and producers have to push
for it (WB 2004)
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Price Premiums
Quality still a primary factor
Premiums are a poor indicator
Net income is better indicator
Daniele GiovannucciDaniele Giovannucci
2009
certified vs. sold – why the difference?
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Can certifications hurt?
Three tools
• Committee On Sustainability Assessment (COSA)To understand what does and what does not work as well as establish the costs
and benefits
• Sustainable Commodity Assistance Network (SCAN)Supports application of Sustainability initiatives with tech support at ground level
• Financing Alliance For Sustainable Trade (FAST)Provides financing for producer groups that pursue Sustainability
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CommitteeOn SustainabilityAssessment
a global consortium of institutions
promoting the measure
and understanding of sustainability
CIRCLE
OF
SUSTAINABILITY
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Scientific CommitteeLawrence Busch
Alain DeJanvry
Steven Jaffee
Sietze Valeema
COSA Advisory Panel
USAID
FAO
ICO
NORAD
UNCTAD
European
Commiss.
Donors
4C
Organic
(IFOAM)
ISEAL
Utz Certified
Fairtrade
(FLO)
Rainforest
Alliance
Initiatives
ECOMEmbrapaEuropean
Coffee Fed
Mexico Dept. of Coffee
SAIINCAESCAAGuatemala
Anacafe
Sara LeeCIRADSocial
AccountabilityIndia Coffee
Board
StarbucksCATIE OXFAMPeru Junta
Nacional
NestleCornell U.CQIEast Africa
Coffee Assn
Kraft FoodsColumbia U.SolidaridadColombian C.
Growers
Federation
PrivateResearchNGOs -
Assns
Producers
members serve as voluntary advisors, their participation does not imply endorsement of the findings or of the institutions
• Credible metrics • broad participation beyond 1 label
• professional, controls, counterfactual
• Globally comparable data indicators• (ec + ev + so) = complete balance sheet
• Single global standard – why reinvent wheels
• UN database
• Multi-criteria analysis• business, academia, NGOs, certifiers, farmers
Measuring Sustainability
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Farm Level Performance: COSA Multi-Criteria
Analysis
0
2
4
6
8
10
Occupational Health and
SafetyWorking Hours and
Wages
Basic Human Rights
Community Relations
and Well Being
Farmer Perception
Farm Income
Risk Exposure
Market Access
Farm Management
Producer Organization
Resource Use
Pollution
Soil Quality
Recycling
Biodiversity
Carbon Sequestration
COSA Sustainabilityperformance of a farm, a region, or a standard
COSA now:
Colombia
Costa Rica
Cote d’Ivoire
Guatemala
Honduras
Kenya
Nicaragua
Peru
Tanzania
In process:
Brazil
Ethiopia
Ghana
Papua New Guinea
Vietnam
Cotton
CocoaCoffee
Tea
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Dgiovannucc
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