Blockchain traceability solutions can be the answer to the coffee supply chain's equality. How will companies benefit from the technology?
According to the International Coffee Organization (ICO) latest report, the global coffee industry liberalization over the past three decades has resulted in a significant increase in supply chain trade. In particular, the coffee supply chain is increasingly associated with specialization and high efficiency. The solid and close relationship between the members involved is also a highlight of the industry.
Coffee is the largest segment in the Hot Beverages market and is expected to hit global sales of US $585 billion by 2025, primarily due to the continued boom in special coffees in foodservice. Coffees types in the Consumer Market Outlook include whole roast, ground coffee, pieces and pods, and Instant Coffee.
However, the imbalance in the value chain of the coffee industry and sustainability are posing challenges for the industry. The big question facing the leaders of the coffee supply chain is how to balance income and profits for all members of the chain, especially farmers who grow coffee. They are finding the answer with blockchain traceability solutions.
Will blockchain have the power to change the whole coffee value chain? Let's find out.
1. The imbalance in the coffee value chain
The cafe supply chain is extremely complex, but according to supplychainbrain.com, it includes the following parts:
- Producers/farmers,
- Shell grinder service providers
- Commodity brokers/traders,
- Carriers/shippers,
- Exporters,
- Importers,
- Roasters, and
- Packers/distributors/retailers
Producers/farmers are the chain's starting point, playing an essential role in quality coffee beans production. However, they are not being treated fairly and undervalued compared to the following parts of the chain.
Indeed, IDC figures show that higher-income regions such as Europe and North America account for more than 96% of roasted coffee exports and 53% of instant coffee exports in 2018. Processing activities mainly occur in higher-income areas that are heavily dependent on imports of green coffee beans from lower-income production areas.
Meanwhile, farmers are still growing on a small scale with fragmented production. Traders and cooperatives seem to be their vital output, so their coffee beans are easily price-pressed.
In particular, farmers will suffer substantial financial issues during the crop failure under severe weather, while other members of the coffee supply chain can manage in many different ways.
Experimenting with blockchain traceability solutions, the chain players hope to digitize coffee supply chain data to get a quicker grasp and accurately track what's going on on the chain.
2. Digital interactive experiences on blockchain traceability solutions - Transparency for the coffee supply chain's members
It is expected that blockchain traceability solutions will help cut unnecessary intermediaries and paperwork, and part of these costs will be paid to farmers, helping to rebalance the value chain.
In terms of operation, companies can digitize all data from the green coffee beans to the coffee products sold to consumers, ensuring each member's accountability in the chain.
Blockchain traceability solutions will benefit:
- Consumers to use quality products;
- Retailers to affirm standard, quality, reputable distribution channels;
- Producers and processors to secure distribution channels, tracking product movement history and marketability.
Consumers tend to trust coffee brands that have their stories, separated styles, and high-quality products from a marketing perspective. Proving the origin of those coffee beans will help businesses strengthen their brands, win consumers' trust even when they are in the high-end segment.
Ensuring the farmers' benefits will help them make a tremendous effort in taking care of the quality of the coffee beans, ensuring a sustainable supply of the entire chain.
Conclusion: Acknowledge the facts for the optimal solution
There can indeed be an upfront investment cost in developing and maintaining the blockchain traceability system. It is not difficult to see that large businesses and brands will be the pioneers in applying blockchain traceability solutions.
Solving the problem of imbalances in the value chain of coffee and other agricultural products requires more than the expectation in a particular technology. Although blockchain does not directly provide chain transparency, it is the tool to ensure transparency is fundamental. Businesses need to use this technology wisely to achieve its actual value.
akaChain, a permissioned enterprise blockchain platform, is developing BaaS solutions, providing a package to optimize the cost and time to deploy blockchain solutions for customers. Accordingly, customers will receive not only the necessary technical support but also suitable business models.
Businesses need to change their mindset and move towards new business models and ways of creating value. Please tell us what you are wondering about this technology, or leave contact information, and we will get back to you as soon as possible.
About akaChain
akaChain is backed by FPT Software, a globally leading technology, and IT services provider. It is an end-to-end, permissioned, multi-chain network based on the Hyperledger Fabric. Since its establishment in September 2018, akaChain’s product has assisted many enterprises, from SMEs to Fortune 500 firms, to transform with distributed ledger technology. The company provides a broad range of permissioned blockchain-based products and services in multiple sectors, including retail, supply chain, banking and finance, insurance, shopping mall management, etc. to transform with its distributed ledger technology. For more information, please visit https://blog.akachain.io/.
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