Is Asking Consumers to Spend More on Coffee Just Trickle-Down Economics?

Most coffee farmers aren’t paid fairly—but as a new report shows, charging consumers more for coffee doesn’t address that baseline inequity. Here’s why.

Photo by Artists Eyes on Unsplash

This week, a new study, “The Grounds for Sharing: A Study of Value Distribution in the Coffee Industry,” was published by the Solidaridad Network, the Sustainable Trade Initiative, and the Global Coffee Platform. The report, which looks at how value is distributed in the coffee supply chain—and how much of it actually reaches coffee growers—had a number of compelling findings (you can find my summary for Fresh Cup here).

The one that interested me most was the conclusion that there is enough value in today’s international coffee industry to pay all actors—but most of the value stays on the consumer end.

It’s not that this finding was particularly surprising to me. I’ve written before about the paradox of coffee pricing and consumer costs, and the unequal distribution of value to farmers. Past podcast guests, including Junior’s Roasted Coffee owners Mike and Caryn Nelson and third-generation coffee farmer Karla Boza have also talked in depth about how many farmers are producing coffee at a loss, because broadly, as an industry, we assign value to coffee without considering how much it costs to produce. 

Instead, what’s compelling about this finding is that it challenges an assumption in coffee we’ve been propagating for a long time: that if we simply charge consumers more, that value will make its way down to producers, and correct farmers’ depressed wages. 

In other words: Trickle-down economics doesn’t work in coffee either.

The Value Never Flows Down

“Trickle-down economics” is both a polarizing term and a specific set of policies, but I think it’s a fair framework here. The theory—popularized during the Reagan presidency—claims that economic policies favoring the wealthy will still benefit those with less money and power, because those resources will naturally “trickle down.” 

However, this simply does not happen. In 2020, a landmark paper by academics at the London School of Economics and King’s College London examined 18 developed countries that had implemented some form of trickle-down policies over a 50-year timespan. The unambiguous conclusion: “The rich got richer and there was no meaningful effect on unemployment or economic growth.”

If the consolidation of wealth has taught us anything, it’s that wealth and power not only tend to stay at the top, but that people with those resources will almost always find ways to hoard even more. Just ask former Starbucks CEO Howard Schultz, who is worth $4 billion—and who still recently expressed regret for not trademarking the word ‘latte.’

“The other thing I didn’t do is we introduced caffè latte to America, but we didn’t trademark it,” he said on J. P. Morgan’s Acquired podcast. “We trademarked ‘Frappuccino’ later on but we didn’t trademark ‘caffè latte.’ I wasn’t thinking. I missed it.”

It’s wild to me that Schultz would say this, and that he’d draw attention to the Frappuccino, a drink he trademarked but in no way invented. (George Howell invented the drink; Starbucks acquired his mini-chain of Boston-based coffee shops, The Coffee Connection, in 1994, and part of that deal was also inheriting rights to the name “Frappuccino.”) 

It’s even more wild that one of the world’s richest people is still bemoaning a missed chance to have made more money. He’s already got the trademark to one of the most successful coffee drinks ever made, and it still isn’t enough.

We know that trickle-down economics doesn’t work for society, or for coffee. So why are we still applying this logic to one of the coffee industry’s most long-standing inequities—and hoping for a different result?

A Simple Answer

One of the metrics that this week’s report broke down is the value of whole-bean coffee versus capsule coffee. Although capsules don’t have the same share of the market as whole-bean or ground coffee, they have the potential to generate significantly more money for retailers. For example, the study found that retailers make about €0.08 in profit per kilogram of ground coffee, €0.39 for whole bean, and €7.52 for the same amount of coffee in capsules.

In a way, this is a highly positive finding: It proves that more value can be generated in coffee, and that we can find ways to sell coffee at higher price points (even if capsules are gross). But more importantly, the study found that these same retailers do not transfer that added value down the supply stream. That value doesn’t “trickle down,” if you will.

Why do we continue to focus on one end of the supply chain in an attempt to fix the other? Probably for reasons you can guess: These solutions focus on those who have traditionally held power and wealth in the industry, including the countries that colonized coffee regions. Because specialty coffee positions itself as superior to commodity coffee, I don’t think the industry has really contended with the idea that some of its philosophies and driving ideals are actually rooted in deeply conservative fiscal approaches.

I'm not the first to note that these “solutions” to farmers’ depressed wages closely mimic trickle-down economics. I’ve heard dozens of colleagues use this term before, and Martin Mayorga of Mayorga Coffee has also discussed this concept. “The supply chain in the coffee industry is essentially a funnel,” he told Coffee Intelligence in 2023. “As the cash trickles down, the majority is captured by those closer to the market itself. We need to make the model more efficient and reward each player according to the value they’re each adding.”

So what should you as a consumer do? Should you stop buying coffee from your favorite roaster? Probably not, but you can consider how they talk about paying farmers and wealth distribution. You can also consider ways power should shift to give the people most affected by low wages in coffee more agency to propose and enact solutions. I think about Carlos de la Torre, a roaster in Mexico who encouraged people to buy more coffee roasted in coffee-consuming countries, or Vera Espíndola Rafael, who argued that increasing in-country consumption of coffee in producing countries will help the value of coffee stay closer to farmers. 

I don’t think retailers and roasters in traditionally consuming countries are off the hook, however. Policy initiatives seem to be part of the solution here, but it also seems like, as Mayorga says, thinking critically about efficiency on the retail and roasting end is also key.

I don’t have a ton of solutions, and I’m not saying there's something bad about paying a fair amount for a bag of coffee—we're not saying coffee should be cheap or bargain-basement. But instead, we're saying that those price upticks often only stick with roasters and retailers and don't get distributed further down the chain. 

Paying more isn't innately bad, but it's only one tiny step towards fixing a systemic problem, and consumers aren't responsible for that fix alone. Instead, actors across the supply chain need to work in concert to make that change, and they need to have the appetite to do so. As consumers, our advocacy is as important as our dollar in helping that change happen.