Michael Jones is on a mission to save coffee.
The self-described serial entrepreneur says that swift action is required to ensure ready access to the world’s favorite way of consuming caffeine. Earlier this year in Brazil, a drought created a coffee shortage that sent prices soaring, but Jones believes there’s another chronic problem that could limit the global coffee-bean supply: the pay for growing coffee sucks, and farmers are giving up. “This isn’t sustainable,” Jones says. “The people who like coffee are going to pay a whole lot more for it because there’s nobody to produce it. And the quality stuff starts to go away.”
The paradox, he says, is that even though demand for coffee, especially premium coffee, has risen over the last decade, and the price U.S. consumers are willing to pay along with it, farmers are still getting out of the business at an alarming rate. But Jones believes he has a solution. He wants to put more money in farmers’ pockets by purging the coffee supply chain of what he describes as needless networks of middlemen who stand between growers and consumers.
‘ALL THE PEOPLE WITH THE POWER TO CHANGE WHAT’S WRONG WERE BENEFITING FROM THE WAY IT WAS.’
To make that happen, Jones co-founded Thrive Farmers Coffee with a fellow Atlantan, Kenneth Lander, an attorney who had retired to Costa Rica to live out a dream of growing coffee in the tropics, only to discover what a lousy living it really was. The three-year-old company creates a direct pipeline from farms to U.S. roasters, cafés, and coffee drinkers that Jones claims can double farmers’ revenue—an approach to “disintermediation” at the heart of high-tech businesses from Uber to Warby Parker to Amazon. “What you’re doing is what has to be done if coffee is going to survive,” says Jones, who has his own personal tie to the coffee business: his father-in-law farms coffee in Jamaica.
Better Coffee Through Transparency
Thrive works by aggregating farmers’ crops into lots that it either sells green to wholesale roasters or roasts itself and sells to coffee retailers or directly to consumers through its website. Farmers receive half the take for beans roasted by Thrive, or seventy-five percent for beans sold green. Thrive handles the sales, marketing, distribution, and packaging while enforcing quality standards Jones says farmers are incentivized to maintain because of the higher returns they receive compared to selling their beans through standard channels. He also says farmers receive complete, regular reports tracking exactly where their beans go and how much is being paid.
Whether or not the world’s coffee supply is truly in such dire straits, Jones already has a track record of hacking supply chains to cut waste. Before coffee, Jones was the founder of Implantable Provider Group (IPG), which works to cut the costs of implantable medical devices by buying in bulk and selling to hospitals. The pricing schemes in the medical device business, he says, suffered from the same inefficiencies as coffee. “All the people with the power to change what’s wrong were benefiting from the way it was,” he says.
Though Thrive isn’t a technology company per se, it exhibits the same sensibility, and even uses some of the same jargon. It calls itself a “platform” in its tag line. And the company professes much the same belief in the power of vertical integration as, say, Amazon does when it promises a better return to writers who sidestep traditional publishers to have their books directly edited, packaged, and sold through the site.
One of the most insidious drags Jones sees on farmers’ financial security is the way coffee is traded as a commodity, like corn or oil. He believes direct farm-to-cup sales make the volatile coffee futures market obsolete by allowing reliable consumer demand set stable prices. “The way coffee is going to be valued is based on what people are willing to pay for it here,” he says.
The Gravity of the Global Market
Jack Scoville, a veteran commodities broker and analyst who specializes in agricultural and tropical goods, including coffee, says he thinks a direct sales approach could work, especially in the premium market Thrive hopes to serve. He sees less of an opportunity in serving the mass-market Folgers of the world, which he says can roast a million pounds a day. (Thrive this year expects to move more than three million pounds of coffee beans from about 5,000 farms.)
Even in the boutique market, Scoville says, maintaining quality will be a challenge. “That’s hard to do when you deal with the same producers all the time,” he says. “Their quality goes up and down any given year, which just has to do with weather and other things like that. There isn’t a whole heck of a lot you can do.”
THE IMPORTANT THING TO JONES IS GETTING THE PEOPLE WHO ACTUALLY GROW IT A BETTER CUT.
Scoville also doubts that Thrive will really be able to escape the gravity of the global commodities market, which he believes is still the most efficient way to balance supply and demand. Thrive, he says, can set whatever prices it wants. But in the end the global price of a pound of coffee will still be its reference point. And if, as Jones hopes, the supply chain is stripped of middle men taking their cuts, Scoville says the market will simply absorb that change in cost structure as another data point in setting the price.
However much or little control Thrive ends up having over how much coffee costs, the important thing to Jones is getting the people who actually grow it a better cut. It’s just and fair, he says. But coffee drinkers also have a purely selfish stake in how the economics of the global coffee trade play out, he says, since it’s everyone’s morning cup on the line. “Even if you don’t have a heart, there’s a case for it.”