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NRPPD Discussion Paper

54

THE FUTURE FOR SUSTAINABLE COFFEE PRODUCTION

IN INDIA: CERTIFIED AND ORGANIC COFFEE

P G Chengappa Devika C M

Arun Muniyappa Pradeepa Babu B N

2016

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These Discussion Papers are produced by the National Research Programme on Plantation

Development (NRPPD) Sponsored by the Ministry of Commerce, Government of India, at Centre for

Development Studies (CDS). The papers in this series aim to provide a platform for publishing

preliminary results of the policy oriented research and it is meant for encouraging discussion and

debate.

The views expressed in this publication are those of the authors’ and do not necessarily reflect the

views and policies of the NRPPD/CDS or the Ministry of Commerce. When reporting or citing this

paper, the authors’ names should be stated clearly.

Copyright © 2016, NRPPD, Centre for Development Studies, Trivandrum.

All rights reserved

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ABSTRACT

The paper examines the role of certification, as a measure to improve the

sustainability for Indian coffee in view of emerging demand for certified and

organic coffees in the global market. The global imbalance of supply and

demand have often eroded farm-gate prices to low levels. Indian coffee growers

have to make a choice of either staying as low-cost producers of a bulk coffee

or adopt innovative practices to differentiate their produce to access quality

conscious consumers. This aspect is further analysed with a quantitative

assessment of production costs and returns as well as a perceptions case study in

India's largest coffee growing district - Kodagu. The analysis from a sample of

conventional, certified and organic coffee growers. indicated that adoption of

certification programs in Kodagu is relatively limited with a few individual-

level niches in the area of certified coffees. Therefore, we have argued that the

potential for conservation-oriented certification for coffee in Kodagu as a hotspot

of biodiversity as well as synchronisation among multiplicity of international

standards to complement the regions' socio-economic and natural ecosystem.

Keywords: sustainable coffee, certified, organic, Kodagu

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1. Introduction

One of the innovations in the plantation sector in the context of sustainability is

certification. These programmes have been employed in many agricultural

products as a means to encourage and communicate compliance with standards

associated with various attributes, such as organic, fair-trade, GMO free, and

eco-friendly among others. These programmes seek to add value, through a price

premium, to producers and supply chain actors associated with the label. It is

postulated as a useful strategy for alleviating the position of small producers in

the market given the uncertainty faced by them. Various certification labels use

different strategies to enhance sustainable production and /or responsible trade.

The demand for standard compliant certified and labelled coffees has risen

substantially in major coffee importing countries in North America and Europe.

This demand comes from a growing and informed consumer concern for social,

environmental and health impacts of agriculture commodities produced and

distributed across the globe. Coffee retailers and manufacturers have also been

promoting sustainability as a cause-based marketing strategy and means of

achieving corporate social responsibility objectives.

Figure 1.Sustainable coffee production by country, 2012 (%).

Note: * India Source: Potts et al (2014)

The global sustainability standards compliant coffee production currently

accounts for 40% of the total production. The growth rate for certified coffees

1%2% 2% 2%

2% 2% *

3%

Peru- 6%

Vietnam- 16%

Columbia-18%

Brazil-43%

3%

Costa Rica

Ethiopea

Nicaragua

Indonesia

Mexico

Honduras

Others

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have varied between 20-25% per annum compared to just 2 % for conventional

coffee. Brazil leads in the production of sustainable coffee followed by

Columbia and Vietnam (Figure 1).

Participation in certification programmes helps coffee producers to upgrade

their role in the value chain. Such initiatives aim to increase the welfare of

smallholder producers through improving production, marketing processes and

access to credit markets. Within the basket of certification programmes, the

focus of organic certification is on environment friendly production processes

and handling standards, while, Fairtrade focuses on social standards and fair

marketing, and trading practices. Fairtrade certification is available to coffee

producers organized in a group or cooperative, while individual producers can

be certified as organic growers. India the sixth largest producer of coffee in the

world with a production of 3,48,000 MT accounts for 4.07 per cent of total

world production. However, India lags far behind in sustainable coffee

certification compared to even small producers like Honduras. As of 2012,

India produced 5.2% under Fairtrade, 3.4% under Rainforest Alliance, 10%

under UTZ certification and 0.4% under Organic standards respectively (Potts

et al, 2014). The Amalgamated Coffee Bean Trading Company (ABCTC), a

leading exporter of Indian coffee, was the first to initiate sustainability

certification through UTZ Kapeh in India starting in 2003-04. In Kodagu,

multinational companies such as NED Commodities India Pvt Ltd., EcomGill,

and Nestle India Ltd. are actively engaged in coffee certification. NED

Commodities started certification with the support of Prakruthi (a Bangalore

based NGO), while UTZ engaged the assistance of the Dutch NGO Solidaridad,

and Ecom Gill is associated with the Nature Conservation Foundation, a NGO

in Mysore for RFA certification starting in 2006-07. Nestle India started 4C

certification in the year 2012. At present, all major companies are implementing

certification on their own without the assistance of NGOs.

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2. Objectives

Given the current avenues for addressing sustainability in the coffee sector, an

attempt has been made to shed light on the following research questions with

reference to coffee in India -

1) Is coffee certification in India an innovative intervention for attaining the

sustainability goal?

2) What is the rationale of Kodagu coffee growers in adopting certification?

This article is structured into six sections. The following section highlights the

critical aspects of certification based on a literature review. The fourth section

describes the various types of certification programmes in practice and their

current role in the world coffee scenario and the status of certification in India

followed by its dynamics among the various stakeholders in the sector. Section

fifth presents the study area and methodology adopted to study the rationale of

the sample coffee growers in Kodagu district, Karnataka who have opted for

certification programmes and their perceptions of its effectiveness. The

empirical evidence of cost and returns from coffee production under certified,

organic and conventional production shows the viability of this innovative

intervention in attaining sustainability goals in the coffee sector of India. The

last two sections contains the challenges that are faced by the sector in adopting

certification programmes and innovations that can further promote a sustainable

coffee future for India along with policy suggestions drawn from the study.

3. Certification in Coffee - A Critical Review of Literature Conscientious consumers are embracing product certification as a symbol of

quality and sustainable environmental and social production practices. Hertel,

Scruggs and Heidkamp (2009) observed that 75% of coffee buyers would be

willing to pay 50 cents extra for a pound of coffee which is approximately 15%

of the sales price, if it was Fairtrade certified, over half would be willing to pay

$1 more per pound. Certification gained prominence over time by critiquing the

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inequalities embedded within global trade networks. Given such rising

popularity of these initiatives, a critical review has yielded divergent

conclusions. Some studies indicated marginal positive impacts or considered it

merely as a different marketing strategy, while others highlighted its beneficial

role across socio-economic and ecological systems. Studies compared Fairtrade,

certified growers and uncertified growers in Mexico based on their

environmental and social outcomes and found that the former adopted more soil

conservation practices (Jaffee, 2008). On ecological indicators certified organic

growers performed better (Martinez -Torres, 2008) and growers of organic

certified coffee from a cooperative perceived a decline in environmentally

harmful practices (Bray et al, 2002). A similar evaluation of eco-certification in

Costa Rica revealed that it improved the growers’ environmental performance

by significantly reducing chemical input use and adoption of environment

friendly practices (Blackman and Naranjo, 2012). Research studies have also

indicated that organic and Fairtrade certification improved education, health,

infrastructure and, social conditions and economic benefits through price

premiums (Méndez et al, 2010; Arnould et al, 2009). In Uganda and Kenya,

Ruben and Verkaart (2011) found Fairtrade contributing to improved farmer

organisation and market access, while UTZ certified coffee increased their

incentives for quality up-gradation. Rijsbergen et al (2015) concluded that the

certification programmes improved coffee returns and specifically Fairtrade was

effective in coffee processing and specialisation, while UTZ contributed to

increased yield. Ruben and Fort's (2012) study in Peru identified significant

alterations in organisation, input use, wealth and assets and risk attitudes among

coffee farmers in Peru, with a modest direct effects on income and production.

Coffee certification programme in the coffee forests of Ethiopia had a large

impact on forest protection and associated with a decreasing probability of

deforestation (Takahashi and Todo, 2013).

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On the other hand, Philpott et al (2007) found no difference in ecological

indicators among Chiapas, Mexico certified and uncertified growers. Utting-

Chamorro (2005) and Van der Vossen (2005) have reviewed literature on the

adverse effects of organic certification among small-scale coffee growers in

developing countries. While, in Ethiopia certification of coffee cooperatives had

a low impact on small-scale coffee producers livelihood in the context of

cooperatives capacities to mirror the certification benefits (Jena et al, 2012).

Also, those outside the cooperatives especially, small-scale producers in the

case of Fairtrade were observed to be worse off (Raynolds et al, 2004). In

Indonesia, farmers’ participation in certification programmes are mainly seen

as a response to buyers requirements rather than based on farmers' interests

(Wahyudi and Jati, 2012) and scant attention is paid to the role of farmers

preferences in formulation and adoption of certification standards (Ibnu et al,

2015). A recent empirical study on the livelihood impacts on small-scale coffee

producers in a tribal community of India using the propensity score matching

showed that Fairtrade certification marginally improved the livelihoods of

growers from higher and assured prices and premium (Jena and Grote, 2016).

However, the study observes that with collaborative efforts between the

cooperative and local government, the benefits of certification could be more

effective in the long-term. There is also a distinction between producer

certification and certified sales, as not all certified coffee is sold in certified

marketing channels as they failed to receive premium (Kolk, 2013; Vellema et

al, 2015). Existing literature shows that the share of sustainable coffee to total

global coffee production was 17% during 2009, while only 8% was sold as

sustainable coffee. Some of the reasons for the low share include differences in

quality, additional marketing and licensing costs, and timing of demand. In few

cases, if stocks are unsold and the validity of the certification gets expired they

are sold in the conventional market.

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The reviews from various studies conducted across the coffee growing regions

of the world provide diverse insights on the impact of different certification

programmes. Some have positive effects on growers livelihoods and the agro-

ecosystem, while others are critical about its capacity to alleviate existing socio-

economic pressures as well as the dilemmas in governance within the

commodity chain (Murray et al, 2006). As such, a general consensus on impacts

of certification is inconclusive at this juncture. This particular study in India's

largest coffee growing district contributes to the existing literature on innovative

measures towards bringing sustainability into the Indian plantation sector.

4.1. Certification programmes There are a handful of relatively well-established certification programmes and

innovative market based initiatives blossoming each year. Some of the common

ones among them have been elaborated hereunder;

4.1.1Fairtrade certification: Fairtrade currently has 1.5 million growers and

workers across 74 countries. Although Fairtrade certified coffee exports

accounted for 1.8 % of the global coffee exports in 2009, the sales has increased

from 12,000 tonnes in 2000 to 123,200 tonnes in 2011 (Fairtrade International,

2012). Administratively, Fairtrade International is responsible for setting and

maintaining standards for all commodities while FLO-CERT is an independent

certification company that inspects and certifies producers and traders. This

certification system specifies a minimum premium over the market prices. It is

considered to offer better prices and stable market links to producers at the one

end, while providing consumers with product options that uphold social and

environmental standards at the other end. The scheme caters to smallholders

who are organised into producer groups or co-operatives that are democratic

and politically independent bodies. It also demands compliance with

International Labour organisation and environmental standards.

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4.1.2 Organic Coffee: Organic production that aims at promoting and

enhancing agro-ecosystem health based on precise production, processing and

handling standards. In 2009, nearly 1.7 million bags of organically certified

coffee were traded, a substantial increase - 335% - since 2001. Growth did,

however, slow during this time, with only a moderate 4% increase from 2008

to2009.

4.1.3 Specialty Coffee: The term specialty was originally coined in the USA to

mean gourmet coffee products differentiated from other coffees because of its

exclusivity. The range includes higher quality coffees, both single origin and

blends, unconventional coffees such as flavoured coffees and coffees with an

unusual background or story of origin. Examples include Jamaican Blue

Mountain, Hawaii Kona, Top Kenya AA and Guatemalan Antiguas and Indian

specialties include Monsooned Malabar AA, Mysore Nuggets Extra Bold,

Robusta Kaapi Royale. Their share in the world market is less than 15 %. This

market is growing based on the steady relationship between the producer of

such high quality characteristic coffee and the firm/s that ensures a timely and

fair price while promoting its consumer base resulting in a formalized market

agreement. The roasters or firms that market the product further segment

specialty coffee into ‘Exemplary Coffees’, usually single origin or single

source, high quality coffees that may include blends, and average quality coffee

that is offered ‘differently’, such as lattes. However, there are various Specialty

Coffee Associations in the US, Japan and Europe that defines the term in

different ways and therefore accounting for exact trade figures across the world

market is simply unavailable.

4.1.4 Others initiatives: There are other voluntary sustainability standards that

share common overlapping goals apart from their focused initiatives that they

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represent. These include Utz, a market based mainstreaming of sustainability

standard that enables online monitoring apart from traceability and 4C

(Common Code for Coffee Community), that started as a public-private

partnership between the coffee industry and the German government.

Corporates have also introduced labels such as Starbucks' Coffee and Farmers

Equity Practices (CAFÉ) and AAA Nespresso by Nestlé.

5. Study Area and Methodology Coffee production in Kodagu district accounts for 36.73 % of the total

production in India (2013-14) and hence was purposively selected for the

present study. The district lies on the eastern and western slopes of the Western

Ghats in the State of Karnataka, where coffee is grown at an elevation of 2460 –

3609 ft above mean sea level. Recorded coffee statistics shows an increasing

trend in the coffee bearing area and production, while the yield depicted a

continuous fall in Arabica mainly attributed to increased infestation of white

stem borer. While the Robusta yields show a steady increase on the Kodagu

District. The growth rates for production and yield for coffee in Kodagu stood at

3.52 % and 0.5 % respectively in the recent decade (Coffee Board Statistics,

various issues).

A structured survey using snowball sampling technique was conducted during

the months of February and March 2013, covering 52 growers, of which 15

were certified growers. UTZ and Rainforest Alliance being the most common

certification programmes, followed by 4C and Nespresso. Four of the ten UTZ

certified growers undertook a second type of certification. Six were certified as

organic (National Programme for Organic Production and Phalada), and 31

were conventional growers. The socio-economic profile of the sample indicates

that a majority of coffee plantations are managed by those aged over 50 years.

Interestingly, a greater proportion of those over 60 years of age are engaged in

organic and certified production. They possessed relatively higher educational

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backgrounds, indicating their higher exposure to emerging technology, trends,

and markets. More than 80 % of the growers had over 10 years of experience in

coffee cultivation, with organic and certified growers having more experience

than conventional growers. The size of land holding of the sample growers

ranged from 4 to 143 acres in case of conventional, while the range was higher

for certified producers (10 to 220 acres). Indian coffee holdings show a high

density of shade trees. The average tree density among the sample growers’

holdings stood at 70 trees/acre. Interestingly, the highest number of trees was

found in conventional production (77 trees/ acre), though the density needs to

be compared with the type of trees and variety of coffee planted, as the extent of

shade canopy also counts. As expected, Arabica growers maintained higher

shade cover compared to Robusta growers. Many growers prefer silver oak, an

exotic species, as tree cover which has advantages in pepper production and

timber value, but limited bird species diversity. As expected, those growers with

a greater concern for the environment maintained a higher ratio of traditional

species over silver oaks.

6. Findings

6.1 Cost and Returns of coffee production in India

A comparison of costs and returns associated with certification was attempted

based on the primary data obtained from the growers is depicted in percentages

in Table 1. In working out the returns to coffee production in this study, we only

considered variable costs. On an average, labour accounted for about 60% of the

total cost of cultivation, with the other major item being fertilizers. We found

that Arabica growers had higher net returns than Robusta growers irrespective

of the practice followed. Returns were highest for organic production

(Rs.64,823/acre), followed by certified (Rs.62,226/acre) and conventional

growers (Rs.59,257/acre) in Arabica. Similarly, in the case of Robusta, organic

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growers had the highest net returns (Rs.56,515/acre) followed by certified

(Rs.50,125/acre) and conventional (Rs.47,779/acre) producers. It is important to

note that the higher net returns received by organic and certified producers are

due to higher premium prices and reduced costs of cultivation particularly in the

case of organic production.

Of the 15 certified growers interviewed, seven incurred a one-time investment

cost to qualify for certification. These costs ranged from Rs. 4,000 to Rs. 40,000

per farm and related to expenditures on initial surveying, construction of

warehouses, purchases of equipment and labour safety materials, construction

of cement drying yards and fences, improvements to staff quarters, and capacity

building of farm workers, cemented/ tiled drying yards are a mandatory

condition to improve coffee quality.

The growers did not incur much additional investment to comply with organic

certification, as most of them already had installed facilities for pulping,

drying, and storage. The growers who underwent group certification incurred

a one-time cost of Rs.600/acre while the individual growers incurred Rs.

333 to 600 per acre per year depending on the agency chosen for certification.

However, all growers incurred recurring expenditure ranging from Rs.6,000 to Rs.

30,000 per /annum on items such as inspection arrangements of the team and their

logistics and labour safety equipments.

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Table 1: Costs and Returns of Coffee production in India

Source: Survey results from 2011-12 ;Chengappa et al (2014)

Although the fixed cost incurred for organic production is relatively high, the

returns on organic Robusta are higher than certified coffee production in Kodagu.

This is the case with Arabica production returns as well. Therefore, on an average

organic production costs are lower than either conventional or certified production.

Based on these calculations, the economic gains from certification and organic

programmes is a remunerative innovative intervention for medium and large

growers in the region. Further research needs to be done in the present context to

encourage proactive small growers to adopt these innovative measures.

6.2 Rationale of Coffee Growers in adopting sustainable programmes

The second objective is addressed in this qualitative survey that gauges the

coffee growers impulsions to undertake certification, via their views on its

awareness and attitude towards sustainability practices. A series of questions

based on a five-point Lik ert scale (strongly disagreed received a ranking of 1,

while strongly agreed received a ranking of 5) are used to elicit their perception.

The results presented in Figure2indicates that both quality and environmental

considerations attracted positive responses from the growers, with very few

Particulars Arabica Robusta

Conventional Certified Organic Conventional Certified Organic

Labour (Rs./acre) 23,657 23,657 20,657 21,294 20,054 18,005 Fertilizer (Rs./acre) 7,798 7,798 7,798 7,106 5,917 4,123 Chemical (Rs./acre) 1,972 1,972 1,972 602 1,315 - Primary processing (Rs./acre)

3,200 3,200 3,200 637 2,959 609

Irrigation (Rs./acre) 2,933 2,933 1,000 3,022 2,416 2,198 Certification Cost - 214 2,550 - 214 2,550 Total Cost (Rs./acre) 39,560 39,774 37,177 32,661 32,875 27,485

Gross Returns (Rs./acre) 98,817 1,02,000 1,02,000 80,440 83,000 84,000 Net Returns (Rs./acre) 59,257 62,226 64,823 47,779 50,125 56,515

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taking a neutral stand. As expected, environmental concerns were highly rated by

both certified and organic growers. The motivation of these subset of growers

for starting their respective type of certification program differed. Certified

growers were motivated by economic rationales (the promise of higher

prices receiving an average score of 4.6, (figure 3). All the 15 certified growers

interviewed indicated premium prices were the main factor driving them to

undertake certification, though price premiums are only a small percentage of

the final price. By contrast, organic growers were heavily influenced by

environmental considerations (indicated by an average score of 4.5) as a reason to

switch to organic (figure 4). Over 80% of them converted to organic practices

mainly because of their concern for the environment. The superior quality of

organic coffee was perceived by only 50% of organic coffee growers.

Figure 2: Perception of coffee growers on quality and good environmental practices

Source: Survey results. Note: GEP - Good Environmental Practices; values on bar indicate average score (on a 1 to 5 point scale)

4.4 4.0 4.6 4.5 5.0 4.9

0

10

20

30

40

50

60

70

80

90

100

Conventional Certified Organic Conventional Certified Organic

Pe

r ce

nt

Re

spo

nd

en

ts

Do Not Agree Moderately disagree Neutral Moderately agree Strongly agree

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Figure 3: Views of certified coffee growers on coffee certification motivations

Note: Values onbar indicates average score (on a 1 to 5 point scale). Source: Survey results

Figure 4: Views of organic coffee growers on coffee certification motivations

Source: Survey results; Note: Values on bar indicates average score (on 1 to 5 point scale)

Among the sample growers who volunteered to participate in the certification

schemes, the year 2009 recorded the highest number of new group certification

entries. However, in recent years, fewer growers have joined certification

program, as high coffee prices make it difficult for companies to offer

premiums for certified coffee. UTZ and RFA were the main certification

programs undertaken by the growers as witnessed during our survey. Four of

the ten growers that were certified by UTZ undertook a second type of

certification, namely Rain Forest Alliance (RFA). Most coffee certification

initiatives by these companies mainly covered large and medium-sized growers.

3.5 4.6 3.4 3.7

0

10

20

30

40

50

60

70

80

90

100

Started - Environmental Reasons Started - get high price Certified coffee - higher qualityEncouraged neighbors to consider certification

Pe

r ce

nt

Gro

we

rs

Do Not Agree Moderately disagree Neutral Moderately agree Strongly agree

4.5 2.8 3.8 3.8

0

20

40

60

80

100

Started - Environmental ReasonsStarted - get high price Certified coffee - higher qualityEncouraged neighbors to consider certification

Per cent Growers

Do Not Agree Moderately disagree Neutral Moderately agree Strongly agree

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Group certification protocols are common, with the cost of certification borne by

the company itself. Safety equipment(helmets, gloves, masks, etc.) is also

required, though it is often difficult to convince workers to use these as

instructed. The social aspects of improved housing facilities for labourers

have attracted considerable attention and the certification bodies seriously

scrutinize the adherence of growers to mandated labour standards. Nestle India

has started a training centre near Kushalanagar to conduct training on their 4C

program to small and medium growers to adopt GAP and follow accepted

standards to secure certification. Normally certification covers the complete

landholding portfolio of a grower, including coffee and other intercrops.

Growers are not bound to sell coffee to the certifying agency. However, in

order to receive price premium, growers need to sell the certified coffee to the

particular company that has certified the farm. Sponsoring companies are not

always able to buy coffee at a premium prices, limiting the market for certified

coffee. This was evident in the present study; only 37 % of certified coffee was

sold under the label. A number of reasons explain this phenomenon. First, local

buyers at the farm gate often do not offer premiums for certified coffee. In

addition, asgrowers sell coffee in three to four consignments, it is difficult to

transport coffee to the certifying company that is often located at a distance

place from the grower, thus making it more convenient to sell coffee as

conventional. Among the four grades of coffee at the estate level, our sample data

indicated that Robusta parchment received the highest premium (Rs. 150/bag),

followed by Arabica parchment (Rs. 117/bag), which works out to an increase

of 2.51 and 1.50 % per bag (50 kg), respectively. These average price premiums

obtained match the premiums received by producers in other countries.

In contrast to certified production, only a few producers in Kodagu followed

organic coffee production that are driven by a combination of individual

passion and corporate encouragement, the latter by the organic company

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Phalada. In our sample, we identified six organic producers: four growers doing

it based on their own interest and the other two linked to Phalada. Those

practicing organic coffee were found to undertake innovative processing and

marketing practices, including the production of specialty coffees, single estate

branded coffee, direct exports, and retail sales. Phalada approached a number of

growers to undertake organic production, but the dropout rate was quite high as

more than 50 % switched back to conventional. Three of the six interviewed

organic producers certified their whole farm, while the rest certified a part of

their estate (ranging from 42-80 %).In the organic production of coffee, three

major problems were identified at the producer level. Firstly, organic

production requires significant quantity of organic inputs. The interviewed

growers found it very difficult to maintain sufficient stocks of cattle due to the

shortage of land for grazing, fodder and labour for its maintenance. Moreover,

purchasing organic inputs of sufficient quality and quantity is often difficult

and/or expensive. Secondly, organic growers indicated an initial yield reduction

ranging from 30 to 50%. This reduction was generally not compensated in

terms of the price premium received. Price premiums were generally around

Rs.200/bag, except among those growers who exported to overseas buyers.

Thirdly, the conversion period of three years for organic coffee considerably

reduced the income of interviewed growers.

Coffee growers in Kodagu have great concern for the environment and follow

conservation practices. Since entering certification, most growers considered

their certified coffee as of higher quality. However, opinions on participating in

certification were mixed. A majority of interviewed growers indicated that it

helped them to organize their production, processing, and handling practices,

as well as enhancing their record keeping. Nearly, 80%of certified growers

indicated that certification requirements are easy to follow (Figure 5(a)).

However, many growers felt that the guidelines were imposed on them

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without considering the local context and realities (Upendranath and

Subbaiah, 2012). It is interesting to note that only 22% of certified growers

indicated increased incomes due to certification while a vast majority

expressed that certification has only marginally enhanced their incomes when

compared to their conventional production earnings. This is directly

attributable to not being able to sell all products as certified. A majority

(60%) of interviewed growers see certification as an opportunity to expand to

new markets.

Figure5.Reasonsfor compliance with certification rules, costs, and new markets (a) Perception of organic coffee growers

Source: Survey results; Note: Values above bar indicates average score (on a 1 to 5 point scale)

(b) Perception of certified coffee growers

Source: Survey results; Note: Values above bar indicates average score (on a 1 to 5 point scale)

3.2 4.32.7

3.8 3.5

0

20

40

60

80

100

Requirements easy

to comply with

Certification rules -

transparent and

clear

Certification

inspections

expensive

Certification lead to

increased income

Certification opened

up new markets

Per cent Growers

Do Not Agree Moderately disagree Neutral Moderately agree Strongly agree

4.6 4.2 1.5 2.9 3.3 2.9

0

10

20

30

40

50

60

70

80

90

100

Requirements

easy to comply

with

Certification

rules -transparent

and clear

Certification

inspections

expensive

Certified coffee

increased income

Certification

opened up new

markets

Certification

continue - even

without

sponsorship

Pe

r ce

nt

Gro

we

rs

Do Not Agree Moderately disagree Neutral Moderately agree Strongly agree

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All the interviewed organic coffee growers indicated that guidelines for

certification were transparent, clear, and easily understood without any

ambiguity (figure 5(b)). Four of the six indicated that the certification

requirements are easy to comply. Three of the six organic producers are of the

opinion that certification costs are expensive and adds to their cost. All the

organic producers believed that the market for organic coffee is expanding and it

is an opportunity for them. In fact, these organic growers have attempted to

move up the value chain by adopting different types of processing (e.g. double

washing in Robusta), curing, packing, and branding, thereby realizing higher

prices. However, organic growers expressed that the premium realized was

not adequate given the investments and expenditure incurred. Given these

findings, the following section provides a way forward to address the role and

future of certification in coffee production.

7. Challenges Small producers and cooperatives in coffee growing regions have to protect

themselves against low cost producers in Brazil and Vietnam as well as the

increased role of transnational corporations at the macro level. Therefore,

access to high value coffee market segments offers potential gains, however

there are several challenges. Particularly, in the case of sustainable coffees, one

of the causes for slow growth of certified and specialty coffee in India relates to

a plethora of co-existing labeling standards and their multiple criteria imposed

on the Indian coffee growers adds to the cost of production, creating a

disadvantageous platform for the sector. Indian coffee being primarily grown in

the Western Ghats, one of the 10 hot spots of biodiversity in the world, is by

default a shade grown coffee under various agro forestry systems with high

species diversity. Our study clearly indicated that the same has not been

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exploited in the absence of organized efforts for certification and labeling for

this geographic advantage.

In addition, the impact of certification on growers’ welfare is complex, as

production intensity, variability in prices and production costs vary widely in

conventional and organic certified coffee. For example, incremental costs

incurred by coffee growers to comply with multiple eco-labelling criteria and

regulations do not often correspond with an increase in revenue realisation as

stated by a few growers in the region. Where, commonly coffee growers use

institutional finance to fund their annual operations, at times their loan

repayment priorities lead them to cut shade trees yielding immediate revenue

that cushion their negative cash flows. This has caused unsustainable

exploitation of biodiversity in these predominantly shade growing coffee farms

driving them away from certification. While certification and sustainability

norms require growers to maintain or increase shade cover, it often results in

lower yields, which is problematic in the context of income generation among

small growers. This practice hinders them from participating in sustainable

standard compliance initiatives. In addition, maintenance of consistent and

unwavering commitment to the sustainable certificate movement is difficult

when coffee growers often find small price advantage and as there are limited

buyers who offer them a premium price for their certified produce for

immediate cash flow. Growers also face lack of consistency in distribution of

premiums on certified and organic coffee by exporters that acts as a deterrent in

adopting certification.

8. Policy Suggestions

The potential for certification in India needs to be seen both in terms of securing

incentives to conserve biodiversity as well as to exploit niche markets such as

“Shade Grown” or “Bird Friendly” or “Western Ghats origin” coffees which has

24

potential to fetch high market premium. Today, traditional coffee farms are seen

both in recent academic and conservation initiatives as havens for biodiversity.

Bird friendly, shade-coffee are advocated as new conservation oriented

marketing strategies.

The study advocates a policy of harmonization/synchronisation of different

certification programmes, so they can co-exist and be mutually beneficial to

both. This would reduce costs and minimise procedural requirements as well as

simplify these programmes for smooth participation by small growers in the

coffee growing region. Meta-standardization of sustainable practices as

advocated by Reinecke et al, 2011 also shows that there can be convergence at

the core principles of certification among standards, while allowing

differentiation at the attribute level enabling individuality in the standards

markets.

Also, mapping based on geographical positioning systems (GPS) are

increasingly used to facilitate the traceability of coffee through the supply chain,

which is necessary for the successful marketing of specialty, organic and

“sustainable” coffees. In addition, legally protected trademarks and

geographical indications (GI) help gain consumer loyalty as well as higher

prices by protecting products from duplication. In terms of marketing of coffee,

the age of internet sales, exclusive retail boutiques and flagship stores can

provide Indian coffee a wider platform of reach to its consumers. Group as well

as multiple certification are seen as positive trend as most growers from the case

study have two certifications which help them move towards a sustainable

certification system. The potential for certification in India needs to be seen

both in terms of securing incentives to conserve biodiversity as well as to

exploit niche markets such as “Shade Grown” or “Bird Friendly” or “Western

Ghats origin” coffees which has potential to fetch high market premium. Today,

25

traditional coffee farms are seen both in recent academic and conservation

initiatives as havens for biodiversity. Bird friendly, shade-coffee are advocated

as new conservation oriented marketing strategies.

India also has the potential to scale the market in terms of specialty coffee,

where a growing number of consumers are prepared to pay a higher price for

single origin high quality coffee. The efforts in this direction are found to be

very little. Few estates branded specialty's that have made inroads into the

international market are “Buttercup Bold”, “Balanoor Bean”, “Meerthi

Mountain” and “Horseshoe Heights”. With a global production share of only

2% of certified coffee, India has vast opportunity to expand its sustainable

coffee production taking into cognisance the context of biodiversity

conservation and ecological factors that it already preserved in its traditional bio

diverse coffee farms.

Another policy suggestion, is the need to improve extension services of the

Coffee Board to encourage small coffee growers to participate in the

certification programme. The Coffee Board, the nodal agency for coffee

research and development in India can play a key role in promoting such

governance initiatives to reorient the supply chain to meet the emerging demand

in international markets as well as support the sustainability goals initiated in

the SDG.

26

Acknowledgements

We are grateful to the coffee growers of Kodagu for their information and the

Anonymous reviewers for their comments and suggestions.

Funding

This paper is based on research project funded by the Norwegian Research

Council’s NORGLOBAL program, project number #217203 as a joint

collaboration between the Norwegian Institute of International Affairs (NUPI)

and the Institute for Social and Economic Change (ISEC), Bangalore.

Prof. P G Chengappa is a leading Agricultural Economist. He is currently

working as a National Professor of Indian Council of Agricultural Research at

the Institute for Social and Economic Change, Bangalore. He served as the Vice

Chancellor and Dean at the University of Agricultural Sciences, Bangalore.

Devika C M works as a Research Associate at the Institute for Social and

Economic Change and holds a PhD in Economics from University of Mysore

Arun Muniyappa is Assistant Professor of Agricultural Economics at the

College of Horticulture UHS-Bagalkot, Karnataka

Pradeepa Babu B N works as a Research Associate at the Institute for Social

and Economic Change and holds a PhD in Economics from University of

Mysore

27

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