What Does ‘Direct Trade’ Actually Mean? A Specialty Coffee Reality Check 

By Isabella Vitaliano and Chris Kornman 

Article Summary

Direct Trade originally popularized by specialty roasters in the late 1990s to improve transparency and relationships with producers, the term suggests direct communication and pricing agreements between roasters and farmers. In practice, however, coffee still relies on exporters and importers for logistics, financing, and shipping.

While Direct Trade can foster trust, better prices, and transparency, it also has limitations. Many smallholder farmers lack the infrastructure or market access to participate, and roasters rarely purchase enough volume to significantly support a producer’s income compared to large importer contracts. Because the term lacks certification or enforcement, it is sometimes used as a marketing label without fully reflecting meaningful sourcing practices.

Ultimately, Direct Trade should represent clear communication, fair pricing, and long-term partnerships—but roasters must define and communicate their sourcing principles transparently rather than relying on the loosely regulated term itself.

What Does ‘Direct Trade’ Actually Mean? A Specialty Coffee Reality Check 

Direct Trade is often a term used in the coffee industry but with little to no regulations for roasters using this name – what could it mean exactly? The term implies that a roaster has directly communicated and negotiated with producers to determine the price of the coffee being purchased. It also implies that there is no middleman involved – no importer. 

How Did Direct Trade Start? 

For most of coffee’s recent history, roasters purchased “spot” (i.e., domestically available) coffee from the warehouses of importers. In the late 1990s, a few upstart coffee roasters were simultaneously looking for ways to differentiate their offerings and gain access to more exciting coffees. Among those roasters were Counter Culture Coffee (Durham, NC), Intelligentsia Coffee (Chicago, IL), and Stumptown Coffee (Portland, OR).  

In addition to the appeal of new and exciting flavor profiles, there was no small marketing advantage to using the phrase “cut out the middleman” to convey increased traceability and transparency. The supply chain at the time was foggy, with the trading class (i.e., importers and exporters) possessing most of the sourcing information and frequently withholding some of it. 

For the vanguard roaster engaged in Direct Trade, the primary concern was always cup quality. However, the newly constructed system also allowed for greater degrees of sustainability—economically, environmentally, and socially—depending on the priorities of the roaster-producer relationship. Generally speaking these were net benefits to those engaged in early Direct Trade. 

With the prevalence of the already-existing Fair Trade certificate in wide circulation, the term “Direct Trade” became a catchy stand-in, signaling “better than Fair Trade” deals and sustainable sourcing practices… but without the requisite authority of a third-party auditor and certifier. 

The Benefits of Direct Trade 

Direct Trade can create high trust relationships between producers and roasters, and can often lead to better prices for producers, and increased sustainability. 

Direct Trade can benefit roasters looking to purchase riskier coffees in smaller quantities than importers prefer to carry, effectively expanding the possibility of new flavors and qualities a roaster can offer on their menus. 

Direct Trade also offers the possibility for roasters to increase their transparency with their customers, communicating effectively about costs and fair payment. The phrase Direct Trade is pithy shorthand, reminding customers of existing certifications while signaling something more detailed, and ideally more equitable.  

Uncomfortable Truths 

While roasters and producers can certainly negotiate contracts and agree to trade, there are a few uncomfortable obstacles to Direct Trade transactions. 

Most notably, in order to move coffee out or into a country an exporter and importer license is required no matter what to legally trade coffee. A roaster can negotiate with a producer about pricing but, the roaster then has to speak with an importer about moving the coffee utilizing their logistics, financing and insurance. 

Implicated in this direct communication, is that a roaster is paying higher prices compared to an importer because producer and roaster have a relationship with one another. While this is often true, this isn’t always the case.  

There are so many points of contact at play in the coffee supply chain, and varied relationships can create complexities for Direct Trade relationships. 

Smallholder farmers differ in levels of integration into local supply chains, frequently selling their harvest the same day it is picked to a local processor. Conversely, a well-established coffee estate will retain ownership of their beans throughout processing, both adding value and allowing them the ability to partner with a roaster/buyer… something a smallholder is unlikely able to do. 

Farmers can speak to coops, independent wet mills, independent dry mills, exporter owned dry mills, cooperative dry mills before their coffee is sold to an importer. Each point of contact is also, unfortunately, an opportunity for a producer to be taken advantage of. Theoretically limiting these points of contact and paying a farmer directly allows them to earn more money. As a whole, the industry relies on trust and communication along the supply chain to create long-lasting business partnerships. 

Additionally, financing coffee is an important part of the trade equation. While many roasters are able to pay for some coffee up front, and wait for it to be delivered weeks or months later, others are not. The role of an importer often includes owning the risk of the physical product and paying for the coffee prior to its delivery.  

Beyond this, coffee does not usually ship in partial container-loads. A full shipping container holds about 40,000 lbs of coffee, give or take. Roasters who are not able to carry large inventories, or prefinance these volumes, must rely on import-export partnerships that allow for consolidation (i.e., completing a full container volume with coffees, often from other sources, with other intended roaster/buyers). 

Additional Direct Trade Implications and Considerations 

Some companies have attempted to take over the logistics portion themselves and obtain an importer license. And while there are a few successful businesses that have done this, there are many that have to re-scale back when realizing what they tried to undertake.  

Due to the business models of coffee shops, and how green inventory works, volatility in the market and other factors all impact the types of coffee a roaster can buy. It is rare to see a roaster have their full SKU of direct trade coffees because of the time and effort put into it.   

Interestingly, the phrase Direct Trade has no standardized definition, and no enforcement agencies. While many good actors in Direct Trade contracts are in play, there are also undoubtedly bad actors in the supply chain, using the term without embracing the ideals that can make it a lofty undertaking. Co-opting the phrase while ignoring the principles of good-faith Direct Trade is a massive threat to the term’s integrity. 

As far back as 2017, a Swedish University released an eye-popping study on the co-opted nature of the phrase that ultimately concluded “Direct Trade is not working well in the US; it is more beneficial to those that co-opted it than to those that take it most seriously.” The study cited a flagrant example: Target’s “Acher Farms” coffee brand was labeled as Direct Trade without even providing transparency to the country of origin. 

Marketing coffees as Direct Trade gives them a certain distinction, signaling that producers are paid directly and fairly. However, for some, the temptation can be great to project a sort-of holier than thou energy with their labeling, their persona, their company, etc. Paying above market rates for ethically produced coffee is certainly not nothing, but it does allow for this undercurrent of a dynamic that roasters, and by implication consumers, are doing an act of charity work for producers. In plain fact, producers are businesses partners and should be treated as equals in the context of business relationships but also just as people. 

Economically, the belief that roasters are fully supporting the families they are purchasing from is unlikely to be supported by reality. Let’s say a roaster buys 30 bags of $6/lb coffee every year from a single producer. Yes, a producer may be able to rely on them year after year but is sustaining this making a true impact? 30 bags of 150lb bags $6/per lb. = 27,000 dollars. That amount of money is some solid business.  But say, an importer is purchasing two containers of a $4/per lb coffee. (With each container filling up at 40,000lb) 40,000 x 2 x $3/per lb = 240,000 dollars. While the 27,000 is an extra bump that a producer may appreciate, the lower quality coffee sold at high volumes is often responsible for underpinning finances for the year.  

Another argument for the benefit of Direct Trade is an easier chain of logistics because of the intimacy between producer and buyer. But, in a lot of ways, it can invalidate the longstanding relationships that importers have built with producers over many years. It also frequently requires the increased logistics complexities of consolidating shipments. 

We also have to talk about accessibility in terms of direct trade. A producer having contact with a roaster in a buying country implies a certain level of reputation, access to the market or financial backing. But many producers do not have the advantage of this. Direct trade may be better on paper in some ways to those producers that have accessibility, but it does discount so many other producers that don’t have the opportunity to introduce themselves to roasters in the U.S., or invest in different processing equipment to differentiate themselves. Equating direct trade with a better and more moral decision is an inaccurate depiction and can be a bit misleading.  

So, what does Direct Trade actually mean? It is intended to mean that there is some direct contact with a producer to taste offer samples and determine prices. Once that is confirmed, a roaster can take this information and bring it to an importer to determine if they can consolidate it with other shipments from the region. In the coffee industry this term is used semi-loosely and there is no way to confirm the extent of this relationship through any sort of certification process. 

What Should Roasters Do? 

For roasters looking to begin Direct Trade sourcing models, our best advice is to start small and clearly define your goals. Communicating your needs and desires clearly at every step of the process will help you begin successfully. 

Before jumping in, ask an importer what their capacity is to manage a consolidated shipment prior to committing to a purchase. Ask a producer if they have experience navigating Direct Trade, and to what extent they’re willing and able to help you through the process. Ask other roasters you respect what their experiences have been like, and what advice they might have about the process. 

For roasters already engaged in some form of Direct Trade or another, communication is also your greatest asset. Finding ways to effectively summarize your principles and how you accomplish them is ultimately a more effective method of participating in “better than Fair Trade” practices than simply using a catchy but increasingly vapid turn of phrase. 

Searching for excellent coffees, paying fairly for them, developing high-trust trade relationships, and supporting the work of coffee producers are all undeniably important, necessary work. Let’s not lose the forest for the trees because of poorly defined trade terms like “Direct Trade.”