Cafedirect, which actually existed before Fairtrade was an established concept and organization, was influential in setting the criteria, which are today’s accepted international standards. In addition to paying Fairtrade price minima, Cafedirect has its own ‘Gold Standard’ - a guarantee to always pay above the world market prices and to support the growers through major tailor-made ‘Producer Support & Development’ programmes. This ensures the farmers benefit from a decent income to cover their production costs, at the very least, and the opportunity for them to develop their business and support their families and communities.
Cafedirect’s offices are in an attractive little mews area at the end of Old Street on the very edge of the City of London. Here, I met Chief Executive Penny Newman - a veteran of The Body Shop.
Once we had the obligatory coffee sorted out, a cafetiere of the lovely premium Cafedirect Organic Macchu Pichu, I asked Penny about ‘the point’ of Cafedirect. She told me that its aim is to be a "mainstream brand which proves you can trade successfully in a competitive market helping producers in developing countries get the correct price for their goods to provide a sustainable livelihood while providing customers with fantastic hot drinks."
The great news, Penny believes, is that both ends of the supply chain benefit from this way of doing business. The growers get a fair price for their hard work and the consumers get a better beverage because the growers give Cafedirect the pick of the crop. She hopes that Cafedirect’s success can set an example to other companies – it is not only a profitable way to do business but also one which offers significant and specific social advantages.
Penny is unapologetic about the need to be profitable. "Without profit, we are not sustainable ourselves - we end up being niche and charitable." Unlike conventional business models where supplier and buyer are pitted against each other competing for each others profits, Cafedirect producers are keen to support the company in making profit as it demonstrates to other brands that they can make money without exploiting growers too.
It was hard getting started because Cafedirect was new to the industry and wanted to do things differently. Penny relates the story of having to persuade a roaster to clean out an entire roaster so the Fairtrade beans would not get mixed with others. That seems reasonable except that Cafedirect only had 10 tonnes of coffee to roast and a roasting order is normally hundreds of tonnes without the need to specially clean out the roaster. The roaster supported them and now the volumes are much more commercial and the roasters are now taking a serious interest in Fairtrade.
There is still a perception in the industry and among consumers that Cafedirect is niche but, as the 6th largest coffee brand in the UK, that view is seriously out of date. That position has been achieved in only 12 years displacing many older and more established brands and they are on course to become the 5th largest.
Following the success of Cafedirect, Teadirect was launched and is now the fastest growing tea brand in the UK. All of this has been achieved with a small marketing spend and no TV advertising. They even hear anecdotally that Nestle is beginning to see them as a competitor.
The figures are impressive and should challenge the preconceptions of those who believe that profit is only available to those who are aggressive, hard and exploitative. The latest figures show a 20% sales growth enabling over £2 million to be paid in premiums to growers and a further £300,000 to be invested in ‘Producer Support and Development’ programmes - and still make a profit. This success and the confidence that it brings in its approach makes the whole team even more motivated and determined to be pioneering and innovating. Penny says: "Everyone cares in the company - they are super-motivated because they know that selling more coffee means more money and more support for more growers."
At this stage in Cafedirect’s development, Penny believes that focus on the company’s objectives, ensuring that everything is aligned around our mission, is their priority. While they are growing at such a rate, the risks are more around dilution of energy and loss of direction than being caught out by competitive pressures. She is dismissive of imposed measures such as CSR (Corporate Social Responsibility). "CSR is only about reputation and how it affects the bottom line. Cafedirect is about ethics and values - these are part of our DNA."
Those values are embodied in the company’s ‘Gold Standard’ policy. "Everyone is involved and we want people to express and live them for themselves rather than impose them on people." Penny sees a significant part of her job as coaching the team to share and live their own interpretation of the values on a daily basis. From that range of personally held values comes a common purpose. The ‘Gold Standard’ is derived from that common purpose and creates a set of policies which act as a framework which people can express themselves within.
Unsurprisingly Penny sees these values and policies as significant advantages. "We are unique which gives us an edge, seeing the impact of our work really encourages and motivates you. And when you hear stories about the way businesses are eroding societies you realise that you could not work any other way." Penny has never been interested in being conventional anyway and has always wanted to do things the way she thought they should be done rather than simply following convention. She went to Body Shop thinking she was going to learn retail but actually learnt a whole new way of doing business. Very few companies give people the time and the space to find themselves but they did at Body Shop and they do at Cafedirect.
This unconventionality extends into the measures which Cafedirect uses to judge their success. They look at things like how much income goes back to the producers and what percentage that should be of turnover. The number of producers and their families they are helping. The tonnage of coffee they are selling and how they balance where it gets bought from to encourage the maximum independence among the growers.
Other measures are connected with the work on the ground. Last year 10% of profit went to special projects in the growing areas, such as helping farms convert to organic or helping with skills development. However not everything is measured, the approach is for the team to agree the sorts of outcomes they are looking for and they just know if it feels right. For example significant effort goes in to spreading learning from one area to another so that farmers can benefit from each others learning. This is not measured but the results certainly feel right.
Part of the success is the wider success of suppliers in selling more of their products ideally to other Fairtrade outfits. "We don't want to end up with a monopoly on any of our suppliers." However, with some farmers selling 50% to Cafedirect and 50% to the regular market and still making a loss, there must be a concern that one of the outcomes of Fairtrade is to subsidise even lower prices for the rest of the coffee market.
Cafedirect see themselves as an infinity symbol . A permanent double loop that links coffee drinkers to growers with Cafedirect in a connecting role sharing learning between growers, passing money from consumers to growers and creating awareness of growers amongst consumers.
Whilst they are enjoying great success challenges remain. Trying to raise investment money from people who have the same values is a real problem when you have absolutely no intention of allowing the business to sell out ideologically. But Penny is really motivated to show that it can work. Another challenge is managing growth at 20% plus without compromising values and the culture clashes which can provoke when dealing with other companies. For example the deal that was done with Costa Coffee, after two years of discussion to get the brand, is explicitly there as a partner not just as a supplier. And a major supermarket's offer to run a ‘buy one, get one free’ promotion is not understanding how it would devalue the brand to present it in this way.
Cafedirect is hard to sell to a conservative and profit lead industry. It is easier to the very PR conscious big supermarkets but the independent retailers remain sceptical. However, the move from worthy to lifestyle brand focusing on top quality hot drinks with no bitter ethical aftertaste has been accomplished with spectacular success and with such commitment it is easy to envision a real change in how hot beverages are made and sold.
This interview was written for Neil Crofts book - Authentic, how to make a living by being yourself - published October 2003 by John Wiley