Coffee Knowledge Base

15 February 2024

Understanding the nuances of direct vs. indirect trade

Understanding the nuances of direct vs. indirect trade

In this blog, we'll look into the differences between direct and indirect trade in the coffee industry, exploring the best practices for ethical sourcing. 

Table of Contents

Indirect trade

Indirect trade means purchasing the coffee beans through a trader. The dealer or trader has agents in different countries who ensure that the required type of coffee beans is delivered.

Purchasing beans through a trader simply means buying good-quality coffee beans for a fixed price, nothing more and nothing less. It is not the trader’s job to provide the buyer with the full story behind the coffee. After all, the trader has only limited information about the production cycle.

Shipping the coffee beans also involves a number of factors that can affect the quality of the product. Full traceability of the coffee bean is difficult with indirect trade. If you want to achieve a higher reputation as a roaster, it is a priority to know everything about the coffee beans’ origin. And that brings us to the concept of direct trade.

Direct trade

A coffee roaster who opts for direct trade is very committed to the importance of the origin of the coffee beans he or she uses and ensures transparency and fairness in coffee transactions. The roaster is comparable to the chef of a Michelin-starred restaurant, who also knows the precise origin of the products he or she uses. Without full traceability and an eye for detail it is virtually impossible to produce a balanced and high-quality specialty coffee.

The coffee beans that are most likely to be of top quality are found on plantations where the farmer’s primary concern is caring for his or her product. Direct trade is based on a direct relationship between the grower and roaster, and it is based on mutual trust and respect. Of course, a roaster who moves into direct trade can't achieve such a relationship overnight. It takes time, money and a lot of passion for the product. And the farmers on the plantations need to have a different philosophy from the mainstream. There are only a few growers in each coffee-producing country who choose to produce ‘niche coffee’ or even dare to try.

The balance between direct and indirect trade

But what about a third option, offering the best of both worlds for optimal outcomes in the coffee industry? The realm of coffee is not stagnant in this regard. While options were once more black-and-white, there are now flexible solutions, and the landscape of traders has become more diversified. The range of traders has dramatically broadened and now includes niche operators too.

In a nutshell, there are the big traders on one hand and the smaller, newer, niche operators on the other. The big traders mainly work with volume and have the strength of a very extensive range, but mainly of conventional coffees. The smaller, newer, niche operators specialize in specific origins, small consignments and particular processing methods. And they are usually very focused on ethics, long-term relationships, transparency and high-end speciality coffee. They offer a solution for small and medium-sized speciality coffee roasters, for whom direct purchases are not currently feasible or are too labour-intensive. This compromise offers them the benefits of direct trade without the hassle that comes with it.

Direct fair trade

Direct fair trade is an important and growing trading model that has also become a marketing tool, but unfortunately it is often abused. That is why this model deserves some clarification.

What is ‘fair trade’ exactly? And why did we at OR Coffee Roasters start out with direct fair trade? You can find the answer to these questions in our blog: 'Fairness in every sip: the journey of direct fair trade coffee'.