Blockchain's Role in Upholding Coffee Quality

The coffee sector grapples with several subtle issues. Coffee plantations, for one, experience a genetic diversity shortage. Additionally, fungal diseases can reduce an individual plant's output by 10% to 20% each year, inflicting lasting harm. Though the affected plant still produces, its progeny and its plantation neighbors yield fewer beans. Making matters worse, the practice of marketing lower-grade coffee as premium has almost become an industry standard. A study in 2018 found that as much as 20% of pure Arabica was overly mixed with Robusta. 

Beyond this, there are designations like "Halal," "Kosher," and "Fully Organic" coffee. Such titles imply rigorous technological processes, as well as specific methods for bean storage and treatment. Any falsehoods or misrepresentations in these areas can open doors to scams and the misuse of trademarks. 

The magnitude of the coffee industry is hard to overstate. Just in 2022, worldwide exports totaled 128 million bags of cocoa beans, spanning various quality levels, with over two-thirds labeled as Arabica. The deceptive practice of selling Robusta as Arabica isn't a recent issue. A notable patent in 2013 introduced a method for DNA-testing coffee to detect such frauds. Investigations in this field are ongoing: multispectral bean analysis is now a contemporary standard, and recently, scientists have begun employing coffee DNA's genetic markers to accurately identify its type. Since 2021, the global CSC testing and certification hub has provided DNA-based bean analysis, a service that has seen increasing demand. This indicates that the issue of coffee counterfeiting is seen as a real, not just speculative, concern.  

In Karl Wust's research paper, "Do you Need a Blockchain?", he eloquently argues for the adoption of blockchain over traditional systems like 1C, MySQL, or Oracle DB. Yet, this argument mostly applies to private databases where participants are acquainted and trust one another. The dynamics of coffee production are distinct: often, growers, transporters, distributors, and consumers don't initially know each other. These stakeholders must be able to confirm, even in transit, that a bag is filled with authentic coffee and not a counterfeit passed off as a high-quality variant. Blockchain provides a solution by offering traceability from the plantation to the final consumer, documenting every step in an unalterable ledger.

But how exactly does blockchain deter the replacement of genuine beans and what's its appeal in the coffee sector? Beyond the avid coffee aficionados, major investors are also drawn to this industry. Many express concern with the existing opaque systems that make tracing the journey and quality of coffee beans a challenge. The integration of IoT devices, RFID tags, and AI in coffee farming simplifies the production process but complicates verification. The essence remains: beans are still hand-picked, packed, and processed. 

In essence, the coffee industry is underpinned by a mosaic of farmer associations, similar to LLCs or Ltds, but concentrating on bean production. At first glance, it appears uncomplicated with a handful of dominant players provisioning the global market with coffee bean sacks. Yet, the intricate realities involve supply chains and farmer groups who demand secure earnings, stable employment, and avenues to market their products. Furthermore, coffee requires certification, with the associated data needing secure storage to ward off tampering. This landscape breeds numerous opportunities for intermediaries, frequently at the farmer's expense, especially when bean prices oscillate annually, but the sales compensation remains stagnant. 

While blockchain was once regarded as a trendy business enhancement, it's rapidly evolving into an essential tool for adhering to regulatory standards. Regulatory bodies such as the U.S. FDA, the European Food Fraud Network, and the updated Common Agricultural Policy (CAP) have introduced new expectations for coffee production. The directive is straightforward: every coffee product should be traceable, from its cultivation to its placement on store shelves. 

Starting January 2023, European food manufacturers will be required to disclose the intermediaries in their supply chains and describe the conditions under which their goods are transported. According to the FDA's revised policy, by January 20, 2026, producers are expected to relay information on key supply chain events within 24 hours. This intensifying demand for transparency underlines the growing significance of blockchain in ensuring product authenticity and transparency throughout the coffee industry.

On paper, the concept is straightforward: industries gain an efficient means to validate any component of their supply chain. But how does this pan out in real-world applications? Instead of having a handful of companies, perhaps five, each maintaining and potentially altering records of coffee transportation, all data is unified in a singular decentralized ledger. This ledger is designed to be tamper-proof, even by its developers. The essence of blockchain in this context is to guard against unauthorized data alterations and to chronicle any misdemeanors by participants. 

Consider the subsequent flowchart as an illustration of the data input process by each party involved:

In a nutshell:

Farmers provide the following details: farm name, address, GPS coordinates, and the specific type or variety of cocoa beans they cultivate. Additionally, they also furnish information about their farm, including the number of plants, their age, batch details, cultivation methods, fertilizers used, and harvest specifics. In turn, other stakeholders in the chain input data relevant to their particular tasks, all of which can be accessed later with a simple QR code scan. 

Regulatory authorities can access this data, all at once, without the need to place specific requests. The blockchain chronicles the real-time journey and processing of coffee, so one only has to wait until all participants update the blockchain.

The screenshot below illuminates a primary concern with using blockchain to authenticate supply chains: the potential to dupe the system. However, any such deceit remains indelibly inscribed on the blockchain, enabling the identification of culprits and marking them as dishonest for posterity.

Notably, Indonesia, which accounts for 60% of global coffee exports, is not lagging in embracing these advancements. Firms like Blue Korinjo Coffee, NOKA, and Alko Sumatra Kopi (ALKO) from Indonesia have woven blockchain into their workflows. This ensures that their clients can trace the trajectory of the coffee beans, right from the plantation to their cups. 

Other industry stalwarts are also stepping up. For example, UCC Coffee, one of the top coffee roasters, has integrated an IBM solution, underscoring its commitment to product traceability and transparency. Innovations like iFinca and IBM Food Trust offer their users insights into plantation activities, logistics, and the entirety of the documentation related to coffee production. 

So, what other advantages does blockchain bring to the coffee realm? It streamlines documentation costs. By holding all essential records within the blockchain, it sidesteps the fees that legal and accounting professionals usually charge for handling documents, cutting down on unnecessary overheads.