What is Direct Trade?
Posted by Jeff Stern on August 17, 2015
Many artisan chocolatiers, and even some larger chocolate companies, claim they operate on a "direct trade" model. Direct Trade is a term coined in the last 5 to 10 years, first by the coffee industry, and now used widely in both the coffee and cacao business. To date, there is no certifying body or organization that defines or polices the use of the term or enforces standards.
Direct Trade has grown out of disillusionment with the Fair Trade model. The controversies over the Fair Trade model revolve around the pricing and premiums paid to farmers, the alleged lack of an incentive system for quality in Fair Trade, the limits on participation in the Fair Trade model, and the costs to producers involved in Fair Trade certification.
Direct trade and Fair Trade are both based on the idea that the conventional commodities market for cacao is not working. Not working in the sense that there is no traceability of product and no quality guarantees. That no labor or environmental standards exist for the products bought on standard commodity exchanges. And that prices paid for cacao on standard exchanges probably do not reflect the true costs of production for the producer.
Let's explore what chocolate businesses mean when they say they purchase their cacao beans using a Direct Trade Model.
Direct Trade standards are determined by the buyers of cacao themselves, rather than a third party as in the Fair Trade model. Direct Trade seeks to:
- In the aim of full transparency, reduce as many intermediaries as possible, and purchase directly from producers whenever and where ever possible.
- Reward quality by paying a premium directly to producers for their beans and pay a price above the cost of production.
- Build strong relationships between cacao producers and chocolate makers, at no cost to the producers.
- In some cases, address labor issues by ensuring workers receive fair and reasonable living wages, treated fairly, and get minimum health and safety standards met.
Direct Trade is now bandied about in the industry frequently. But because of the complexities of international trade and the cacao supply chain, taken at face value the term can be misleading.
In a future article, we will explore in more detail what Direct Trade means, and the nuances that make Direct Trade often more complicated, and less direct, than it ostensibly appears to be.
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