Sustainability Certification and Economic Performance An Analysis of Coffee Marketing Channels in Indonesia

Abstract

It is generally assumed that sustainability certifications in the coffee sector may shorten the coffee chain, reduce transaction costs and market risks, improve market access, enhance knowledge of good agriculture practices, and in that way improve farmers’ livelihood. A fast-growing amount of academic literature examines the impact of sustainability certification on economic performance, but little is known about the influence of different types of marketing channels on efficiency and equity. In this paper we hypothesize that the type of channel is an important structural factor influencing the performance of the coffee production, independent from the fact whether it is certified or conventional coffee. This paper analyzes the performances of different types of coffee channels in terms of efficiency and equity. Efficiency is operationalized by looking at costs, profits and lead times, whereas equity is measured in terms of the division of marketing and profit margins over the actors in the channels. Our results indicate that certified channels are more efficient than non-certified channels although the most efficient channels are not necessarily the most equitable ones. Channels that perform relatively well are either certified or mixed: none of the conventional channels performed well. It is however questionable whether this positive performance results from the certification as the channel’s length and the domestic demand for high quality coffee seem to be more important explanations behind performance.

Keywords: coffee certification; marketing channels; performance; efficiency; equity