Case 3.2 Cafédirect™: The building of a unique
coffee brand
This case was prepared by Keith Thompson of Silsoe College, Cranfield University
and Professor Simon Knox of the Marketing Group, Cranfield School of
Management, as a basis for class discussion rather than to illustrate effective or
ineffective handling of an administrative situation.
© Copyright Cranfield School of Management, October 1996. All rights reserved.
Some of the 4000 Peruvian coffee producers that Luzmila Loayza visits can
only be reached by donkey, even though most agents in this part of the
world seldom bother to go further than the coffee processing plant. But
then Ms Loayza is unusual; she buys coffee from small producers for an
organization which processes, packages and sells it under the brand name
‘Cafédirect’ in order to give a fair return to small growers. According to
Oxfam, these growers normally receive only about 10p for a standard 8oz
pack of ground coffee selling in a supermarket for around £1.30. Over 80
per cent of the world’s coffee is still grown on small plots farmed by fami-
lies who depend for their livelihood on one of the world’s most unstable
commodity markets. Although news of ‘frost in Brazil’ may bring a frisson
of excitement to informed supermarket shoppers, since it offers them a
chance to ‘win’ by stocking up with coffee before price increases reach the
supermarket shelves, for the growers the unpredictable rise and fall in
market prices can be catastrophic.
For almost 50 years coffee production was controlled by quotas imposed
through the operation of the International Coffee Agreement, a mechanism
which effectively stabilized prices (see Figure 3.2.1). When in 1989 the
agreement collapsed, the price of green beans fell so low due to uncon-
trolled coffee production that marginal producers were unable to even
cover their costs (Figure 3.2.2, years 1990–1993). There was no point in
them harvesting an unsaleable crop, so farms were neglected and families
could not afford sufficient food, school books or medical treatment. With
no resources to tide them over, survival frequently meant giving up the
farm and moving to the city to scratch a living among the urban poor,
putting intolerable strains on the economic and welfare infrastructures of
the countries concerned. Others drifted in desperation to the illegal coca
fields in order to support their families.
A unique organization is born
Charities, such as Oxfam, had long been buying coffee from small produc-
ers, having it processed and selling it through their own outlets up and
down the country. Since distribution through charity shops could only
196 Relationship Marketing