how to promote social and economic upgrading in the coffee value chain - duke viu workshop 2009

Coffee GVC Memo

Almeida, Christian, De Marchi, Mannino

1

Duke-VIU Workshop, 2009

Memo: Coffee GVC

From: Mansueto Almeida, Michelle Christian, Valentina De Marchi and

Ilda Mannino

INDEX

HOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE VALUE CHAIN

........................................................................................................................................ 2

1. Introduction ............................................................................................................. 2

2. Coffee Industry: an overview ................................................................................... 2

3. The Global Value Chain (GVC) of Coffee ................................................................... 5

3.1. Economic Upgrading .......................................................................................... 8

3.2. Social Upgrading ................................................................................................ 9

3.3. Environmental Upgrading ................................................................................ 10

3.4. Labels .............................................................................................................. 12

4. Methodology ......................................................................................................... 12

5. Bibliography ........................................................................................................... 14

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HOW TO PROMOTE SOCIAL AND ECONOMIC UPGRADING IN THE COFFEE

VALUE CHAIN

1. INTRODUCTION Fitter and Kaplinsky aptly posit in their discussion regarding avenues for developing countries to

advance their economies in positive forms that “the key challenge thus confronting policy design and

implementation is not whether to participate in global processes, but how to do so in ways that provide

for sustainable income growth” (2002: 70). Economic and income growth notwithstanding, social and

environmental growth, are also hoped for consequences to participation in the global economy. As

Fitter and Kaplinsky note, however, the way in which countries are incorporated into global processes

mitigates their overall growth potential. Moreover, economic growth may not lead to social and

environmental advancement.

Following this notion, we briefly examine the global value chain of coffee to unpack the layered

dynamics that represent the industry and how those dynamics complicate or make accessible

developing countries’ capability to economically, socially, and environmentally upgrade. The coffee

industry provides an example of how an agricultural commodity can be seen as a means for developing

countries to participate in global value chains with varied results depending on their position in the

value chain and the global, national, and local institutional environments which global and local coffee

value chains are embedded. With our analysis we hope to create the groundwork for a research project

that explores the complicated nexus between forms of upgrading and national contexts.

Therefore, below we put forward a brief research memo where we highlight the background and global

context of the coffee industry, a rough sketch of its global value chain, and issues relating to

upgrading. We end with a research design project analyzing the industry from the country cases of

Brazil, Ethiopia, Costa Rica, and Vietnam. These four cases allow us to address the themes

we highlight in the memo from varying national foundations.

2. COFFEE INDUSTRY: AN OVERVIEW Coffee is a genuine world product. It is an important product cultivated in many African countries

(such as Ethiopia and Uganda), Latin American countries (Brazil, Colombia and Costa Rica) and

Southeast Asian countries (Vietnam and Indonesia). In addition, it is also an important export

“commodity” for many countries, including developed ones such as Germany. Coffee is such an

important product for developing countries’ exports that in many years it is second in value only to oil

as a source of foreign exchange to these countries. Its cultivation, processing, trading, transportation

and marketing provide employment for millions of people worldwide.

Coffee is bought and sold by roasters, investors and price speculators as a tradable commodity and has

its price set in the New York Mercantile Exchange (NYMEX) and in the London International

Financial Futures and Options Exchange (LIFFE); but this was not always the case. Up to the 1990s,

the main producers of coffee participated in the International Coffee Organization (ICO), which was

established in 1962/63, and used to put in place a quota system through the International Coffee

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Agreement (ICA). This system set the amount of coffee that producers were allowed to produce and

export. Although the organization is still active today, since 1989 the ICO has not been able to impose

price controls and quotas for producers and the market today is deregulated, following a dynamic

driven by the procurement policy of the roasters in what Gereffi (1994) calls a buyer-driven commodity

chain1.

The world demand and supply of coffee has followed a cyclical pattern driven by prices on the world

market. It seems that the industry of coffee suffers from what Talbot (2004) calls a “structural

oversupply” trend that will not be corrected by supply and demand. Whenever the price of green coffee

(i.e., traded coffee form before roasting) goes up, the production increases in the next period bringing

prices back again to its previous levels. The average monthly coffee price in international trade was

well above 100 US cent/lb during the 70s/80s under the ICA regime, but then declined during the late

90s reaching less than 50 US cents/lb in 2001 (see Figure 1).

Figure 1 – World Price of Coffee (1980-2009) – US Cents per lb. Source: The International coffee

organization

Falling prices are explained by the increased production under a free market environment. Since 1990,

the world production and consumption of coffee has increased steadily and in the last years, (2001-

2008), world coffee exports went up from 108 million to 134.2 million of 60-KG bags – a 24% increase

in seven years. Today, more than 50 developing countries, 25 of them in Africa, depend on coffee as an

export, with 17 countries earning 25 per cent of their foreign exchange from coffee.

The main coffee exporters, according to the 2008 data from ICO, are Brazil (34.28% of the world

market); Vietnam (14.53%); Colombia (9.17%) and Germany (9%). Germany is a major exporter by

1 Talbot (1997) states that the collapse of the ICA regime, and increased consolidation in the coffee industry, has

affected the distribution of total income generated along the coffee chain. In the 1970s, an average of 20 per cent

of total income (the total amount of money spent by consumers to purchase coffee products for final

consumption) was retained by producers, while between 1989/90 and 1994/95 the producers’ share decreased to

13%. In the same period, the share of the total income retained in consuming countries went up from 53% to

78%.

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re-exporting part of its imports. In 2007, Germany imported 19.5 million 60-kg bags and exported 10.7

million bags; while Brazil exported 36 million bags in 2007 and 45.9 million in 2008. In Africa, the

two most important produces are Ethiopia (3% of the world export market) and Uganda (2.5%-3%).

How can developed countries such as Germany, Belgium and even the USA appear side by side with

developing countries as major exporters of a commodity such as coffee? The reason for this apparent

paradox lies in the global value chain (GVC) – see Humphrey and Schmitz (2002) and Gereffi (1994).

Usually, developing countries focused on producing and harvesting, the least profitable nodes in the

value chain, while developed countries focus on roasting, branding and selling the packaged coffee to

specialty stores in domestic markets and abroad. About 8% of the price of coffee in a U.S. supermarket

goes to farm labor, and another 5% goes to the grower while 67% goes to the company that does the

roasting, grinding, packaging and shipment, and 11% goes to the retail store. Thus, most of the value is

captured in the roasting segment.

The roasted coffee business is controlled by multinationals such as Kraft (owner of the famous

Maxwell House brand), Nestlé, Proctor & Gamble (owner of Folgers and other brands) and Sara Lee.

These four companies are responsible for over 40% of worldwide sales. In addition, contrary to the

third world countries that grow coffee beans, these companies are not affected by the falling prices. In

fact, these multinational companies earn more not less when the price of the coffee beans goes down

because much of the price charged to consumers is beyond the actual costs of growing the coffee. This

is typical in a market where MNCs are oligopolistic on the seller side and oligopsonistic on the buyer

side. In addition, MNCs use their financial power whenever necessary to hedge against price

fluctuations in the future markets.

How come developing countries do not start their own roasters to move up in the value chain? In fact,

in July 2009, the Good African Coffee factory at Bugoloobi in Uganda started to operate the first coffee

roasting and packaging factory in the whole of Africa to export coffee to supermarkets in the UK2. This

was part of a US$ 1 million investment in a public-private partnership with the government. This,

however, is not an easy path to pursue since this company will need to break into a highly competitive

market controlled by a few MNCs and branded name roasters and sellers as illy from Italy and

Starbucks from USA.

The challenge for countries that grow coffee beans to develop and export their own brands is similar to

the challenge apparel and footwear producers in developing countries find to export their own brands.

Usually, firms in these labor-intensive sectors from developing countries are successful in participating

in the global markets as suppliers for leading global firms, but they have a hard time when they try to

market their own brands.

Another problem is that there are time constraints involved in trading roasted coffee versus green beans

coffee. The former is a perishable product that last only for five days while the latter can be stored from

two to ten years. Therefore, producers need to control sophisticated packaging techniques in addition of

the roasting process to move up the chain and become a roaster. For some low-income countries such

as Ethiopia, this means learning a manufacturing process far more complicated than planting and

harvesting coffee beans.

2 See http://www.newvision.co.ug/D/8/12/688235

http://www.newvision.co.ug/D/8/12/688235

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There is no easy solution on how to increase coffee growers’ share in the GVC. Some authors believe

that because coffee is very easy to produce and the production will always follow price increases, the

only way of improving prices for low-income growers in developing countries is controlling

production and world exports again through a new International Coffee Agreement for the XXI century

(see Talbot 2004). However, before jumping again to control the world production of coffee it is

important to see different alternatives that might help small producers in developing countries to

benefit more in participating in the coffee business; i.e. how producers in developing countries are able

or not to upgrade and improve labor and environmental standards. This is the key question we want to

answer in this research.

BOX 1 – Two Examples of the Importance of Coffee for African Countries

A) Uganda: Coffee accounts for 20%-30% of Uganda’s exports earnings and the country has an

explicit policy to attract foreign investors to increase coffee production and exports. Though large-scale

coffee producers are gradually emerging, the coffee sub-sector is almost entirely dependent on about

500,000 smallholder farmers, 90 percent of the farms with a size ranging from less than 0.5 to 2.5

hectares. The coffee industry employs over 3.5 million families through coffee related activities.

B) Ethiopia: The trade of coffee is Ethiopia's largest export, which generates 60% of its total export

earnings and 20% of the government revenue. Nearly all of Ethiopia's coffee bean production is still by

hand, from the planting of new trees to the final pickings, which are then sent to the big warehouse.

The coffee business employs about one out of every four people in the country (around 15 million

people) and peasants on small farms of less than a hectare produce 98% of the coffee. State farms

produce the remaining 2%. All the coffee processors and warehouse enterprises are modern, and state-

owned. In spite of producing one of the best green coffee beans in the world, Ethiopia is the poorest

country in Africa and one of the poorest in the world.

3. THE GLOBAL VALUE CHAIN (GVC) OF COFFEE The actual input-output stages of the coffee global value chain have changed relatively little over the

last one hundred years. In Figure 2, we highlight the five main stages of the chain. First are all the

inputs which go into the growing and harvesting stage. Second, immediately following harvesting, the

red cherries are processed in either a “dry method” or “wet method” to become parchment coffee seeds

where then the parchment coat is removed from the seeds yielding green coffee beans. At the green

coffee bean stage the beans are ready for export if they are heading for an international market. The

green coffee travels through a series of intermediaries who facilitate trade in producing and consuming

countries before reaching the roasting stage. At the roasting stage, green coffee goes through another

round of processing depending on the final coffee product, i.e, instant coffee, blends, specialty drinks.

From there the final coffee product is distributed to consumers at different retail ends.

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Figure 2 – GVC Input Output stages

What has changed over the last twenty years, however, according to Ponte (2002) is the deregulated

global trading context that traditionally stabilized coffee prices; new consumption patters spearheaded

by specialty blends, brands, and trends; and corporate strategies that have solidified new power

relationships along the chain. These changes situate how economic, social and environmental

upgrading was possible or negligible for our four country cases. As mentioned, a wider global trend is

the power shift to consuming countries after the collapse of the international coffee agreement in 1989

with consuming countries gaining up to eighty percent of total income (Ponte 2002).

Actors in the downstream activities of the chain - mediators, roasters, and retailers - embarked on a

series of corporate strategies to ensure supply and demand by shaping availability and product options.

Ponte (2002) argues that roasters are the current drivers of the chain, see Figure 3. Roasters are most

prominently the branded manufacturers, e.g., Nestle, Sara Lee, Kraft Foods, who are large transnational

corporations with several brands within their portfolio, e.g. Maxwell House in Kraft. The top five

roasters have over sixty percent of the market. The concentration of roasters has happened with the

concentration of international traders, as well. Roasters have placed larger demands on international

traders to ensure quality and supply of green coffee. International traders are beginning to rely more on

first and second line suppliers. In order to guarantee supply international traders are also becoming

more integrated in some upstream activities. As experts in logistics and awash with capital they play

important intermediary roles connecting producing and consuming countries.

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Roasters and retailers have further strengthened their position by cultivating new consumption demand.

Coffee has moved away from just being the morning “fix” people need to start their day. It has become

an "atmosphere," a "latte revolution." Specialty drinks and gourmet blends began to be mass marketed

in the last twenty years and neighborhood coffee shops began expanding in the United States and other

developed nations. Starbucks, as a branded manufacturer and retail outlet, has personified this growth.

Starbucks Chairman Howard Schultz has called going to Starbucks an "experience." This form of

branding has allowed a specialty coffee drink to market for $4 dollars because the "product they are

offering is not coffee, it is the ambiance, the image associated with costly coffee consumption" (Fitter

& Kaplinsky 2001). In addition to specialty differentiated drinks, some manufacturers and retailers

have also adjusted to the growing corporate social responsibility trend where consumers have begun to

demand coffee beans, blends, and products that fall under the umbrella of "fair trade." Fair trade coffee

can include guarantees to consumers that the coffee was grown, packaged and transported with

environmentally friendly practices or that farmers were guaranteed a higher price per bag.

Figure 3 – Coffee GVC actors

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3.1. Economic Upgrading

From a research perspective, the structure of the chain with power relationships concentrated in the

international trader, roaster, and retail end, elucidates several questions regarding upgrading. Possible

economic upgrading paths that developing countries’ firms may undertake are:

Product upgrading: specializing in specialty, high quality coffee and blending or specializing in

“sustainable” coffee

Process upgrading: new processing techniques (e.g., wet vs. dry processing)

Functional upgrading: from harvesting to branding and roasting

For economic upgrading, there seems to be two key themes: 1) how can producing countries become

manufacturers or brands? Or, 2) how can growers receive better prices and terms of trade from green

coffee? The former seems the better option since from the analysis of the global value chain it is clear

that the higher concentration of value is in the latter steps of the value chain. However, it is also the

most challenging, involving the need for new skills, funds and knowledge of the final market in order

for farmers to add this function. The following questions fall under both themes.

Under which circumstances are firms able to functionally upgrade? What set of skills are

needed?

What are the barriers of entry for producing countries to create their own brands?

What is the role of cultural capital in facilitating brand identity and creation?

What are the barriers of entry for producing countries to become modular suppliers for branded

manufacturers (i.e., make instant coffee for brands under their labels)?

Do growers have a better position in the value chain if they work in small hectares, cooperatives

or as large plantation estates?

Do branded manufacturers ever buy directly from growers, bypassing mediators? If so, when

and why?

Are there value added differences between the wet and dry forms of processing immediately

following harvest?

Does the growth of "fair trade" equate to better income for growers?

Talbot (2002) argues that forward integration, or economic upgrading, is most possible when states

pursue aggressive industrial policy; there is a strong "capitalist class," and a large domestic market or

local demand. The latter issue may point to a more viable outcome for original brand manufacturer

upgrading for producing countries since they know local preferences, have local industrial knowledge

and MNC competition is less severe. In the case of Brazil, as Talbot (2002) acknowledges, local

manufacturers were able to become stronger modular suppliers of MNC instant coffee brands than

breaking into developed countries’ markets, but Côte d'Ivoire found that pursuing a foreign direct

investment policy for coffee created limited backward linkages. Regardless of producing countries'

ability to become manufacturers they are limited due to the delicate storability and transportability

issues ground coffee products have and because MNC manufacturers are more aggressively setting-up

their own manufacturing subsidiaries in producing countries. Nevertheless, there are some "success"

stories such as the Cafe Brit brand in Costa Rica.

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It is also important to add consideration on the consumers’ side with regards to economic upgrading.

This has proven to be true especially for fair trade coffee, which will be discussed later (Raynolds

2002). Change in coffee consumption activity like how recent innovations are fostering new ways and

new places where to consume (e.g., Starbucks) is impacting economic upgrading. Furthermore, the

consumer is becoming more and more sophisticated, appreciating different blends and global coffee

roasting mixes. However, country differentiation both in tastes and culture seems important

differentiation factors. A deeper analysis of secondary sources is needed in order to better understand

the size of such trends.

3.2. Social Upgrading

To understand social concerns and upgrading possibilities it is useful to analyze the different steps of

the entire global value chain. The higher number of social challenges is in the very first steps, regarding

the growing and processing of coffee. The differences in the countries seem interesting to understand,

as well, in order to identify benchmarks and determinant variables. From a social upgrading standpoint

and a decent work agenda, however, it is still unclear how the structure of the chain impact workers

along the chain. For example,

Has the trend toward more vertical integration in the international traders’ node benefited or

hampered growers' ability to receive more income?

What are the benefits/drawbacks of grower cooperatives in negotiation with downstream

actors?

Do the seasonal workers who pick the red coffee cherries receive fair wages, have enabling

rights? Are there problematic gender, racial, ethnic divisions of labor?

What are the rights of the workers in different chain segments? Has the increased demand for

"fair trade" coffee corresponded to better wages and conditions for growers and pickers?

Currently, there is little knowledge to these questions so fieldwork is needed in order to understand

these dynamics, and in particular to identify both:

Output standards on quantity, in terms of employment creation in poor countries, and quality of

wages, hours, benefits, contracts, skills development and content of the job; and

Enabling rights: to investigate the freedom of association, discrimination among different

workers and the presence of forced labor, traditionally employed in these production processes.

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3.3. Environmental Upgrading

In order to identify the main environmental issues linked to coffee it is useful to consider its life cycle,

see Figure 4.

Figure 4 – LCA assessment for the coffee Value Chain

As well represented by Salomone (2003), the coffee life cycle goes through different stages, among

which are cultivation, first processing, roasting, packaging and distribution, and consumption. In

particular, cultivation and the first processing stages (e.g. when the coffee beans are removed from the

fruit and dried before they can be roasted) are carried out in the exporter countries which are

developing countries. The remaining phases are carried out in the importer (and re-exporter) countries.

This means that also the environmental impacts linked to coffee as well as the possibilities of

upgrading vary a lot for exporter and importer countries.

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The life cycle analysis carried out by Salomone (2003) indicates that the cultivation and the

consumption stages produce the greatest impacts. In particular, when speaking about the cultivation the

first aspect to consider is represented by the differences between the shadow versus full sun cultivation.

The latter has a higher productivity, but passes trough deforestation and consequent depletion of soil

and loss of biodiversity. The differences in productivity should be evaluated when considering

environmental upgrading without forgetting the economic and social aspects.

Other important impacts are linked to the use of fertilizers and pesticides that can contribute to the

pollution of rivers and ground waters. Possible environmental upgrading could derive from the

substitution of chemical products with natural ones, but their different effectiveness have to be

considered in order to avoid economic downgrading. Moreover, the consumption of water for irrigation

represents another of the main environmental concerns linked to the coffee cultivation.

Water consumption can also be one of the main impacts during the first processing of the coffee if this

is carried out through the wet method. This method requires a great quantity of water for cleaning the

beans, but seems necessary to arrive to a better quality product. Moreover, in some areas it is not

possible to perform a dry processing due to the air humidity. These are aspects that need to be

considered when looking for the possibilities of environmental upgrading and avoiding the detriment of

economic gains. The environmental upgrading of the processing can probably produce more win-win

solutions if it passes through technological and procedural innovation of the techniques used.

Technological innovation of the machines used for the processing can also bring about to a reduction of

the energy consumption as well as of the air and water pollution.

Environmental upgrading can derive also from organizational innovation. For instance the benefits

from the cooperatives of small farmers have to be evaluated and also what are the methodologies to

promote it.

Concerning the consumption of coffee, issues such as water use, waste production (e.g. throw away

cups), energy consumption and air pollution have to be considered, as well, focusing on the

measurement of how much water and energy are used, what technologies are available to reduce the

use of water and energy in the coffee machine and what possibilities there are to promote the reduction

of waste. It has to be taken into account that upgrading opportunities and modalities can vary from

country to country due to the differences in the modalities of preparation and consumption (e.g., Italian

coffee vs. American coffee).

Some broader research questions regarding environmental upgrading are:

Do new environmental standards and labeling make it harder for growers to become part of the

value chain?

Have national industrial policies begun to push for “greener” forms of coffee cultivation and

processing?

Is it possible for firms to economically, socially, and environmentally upgrade at the same time?

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3.4. Labels

Social and/or environmental certifications for coffee are labels that ensure that is has been grown and

processed according to standards that ensure no violations of workers’ rights and/or the biodiversity

preservation and the lowering of the impact on the environment. There are many types of such labels

on coffee, such as Bird Friendly® Coffee, the 4c Code of conduct for the coffee community, Fair

Trade, UTZ Certified, Rainforest Alliance, and Shade/Bird Friendly initiatives. Some are specific to

coffee, others may apply to a wider range of products; some are private, others are managed by NGOs;

some are local while others have a global coverage; some guarantee the respect of social standards,

others of environmental (even though the majority consider the two issues together). Labeled products

are usually a bit overpriced and focus on a better quality, assured by the respect of the environmental

(and social) standards.

Questions arise if the certifications really reach their goals? Are these products able to compete on the

markets without social, environmental or economic downgrading in the long term? The issue is

challenging (Taylor 2005). Existing studies (Raynolds, Murray, and Heller 2007) underline furthermore

the need of public regulation to play along with private regulation in order to enhance social and

environmental sustainability, and not only uphold current standards.

Furthermore, are some regions or countries collectively upgrading in order to brand themselves and are

they entering in value chains thanks to their environmental and social friendly productions? Why are

other countries not moving in the same direction?

Certifications are also costly: are all the actors able to obtain these certifications that can ensure them to

upgrade? Who capture the gains generated by the premium prices consumers are willing to pay for

these products? (Fitter and Kaplinksy 2001) Who are the excluded actors?

Fieldwork is needed to understand the impact on governance structure, upgrading possibilities and local

development linked with the participation to fair trade networks (Rice 2001). These movements

represent in fact a “type of economic and social restructuring from below” (Rice 2001), enabling local

development and a new relational structure within the chains.

For social and environmental upgrading we may see different possibilities depending on if the value

chain is global or local. For example, labor and environmental standards may be pushed from roasters

and retailers in global value chains, but not in local. Furthermore, environmentally upgrading may lead

to social downgrading if fewer growers are able to compete in this new niche market.

4. METHODOLOGY In this study we are interested in understanding under what circumstances producers in developing

countries can upgrade and reap higher benefits in the production and trade of coffee. Therefore, this

research is a small-N one and we will use a mix of methodologies traditionally employed to make

within-case analysis3: pattern matching, process tracing and causal narrative.

We will select comparable cases in four different developing countries (Brazil, Costa Rica, Ethiopia

and Vietnam). These four countries are important growers of coffee beans and in all of them coffee

3 See Mahoney (2000), Mahoney and Rueschemeyer (2003) and George and Bennett (2005).

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growers face barriers to upgrade, especially in Ethiopia and Vietnam. On this stage, we will select and

compare successful cases of upgrading (economic and social) and through these comparisons set the

hypotheses to investigate more deeply each case. This is the step where we will identify the major

independent variables that might explain producers’ upgrading strategies.

In the next stage, we will try to link the identified variables in the first stage with hypotheses linking

these variables with the observed outcomes. This step will help us to eliminate what it is called in the

literature “spurious correlation” when two variables appear to be correlated but they are in fact the

product of an antecedent variable. We can eliminate this problem looking carefully on the casual chain

between the independent variables and the upgrading process that we want to understand and explain.

For instance, we might find a strong presence of governmental officials in those places that coffee is

cultivated and some kind of upgrading occurred. But the presence of governmental officials might be

linked to tax collection or government auction and not necessarily to the processes that led to

upgrading. Therefore, in accessing the causal relationship between independent variables and the

upgrading process we would eliminate the presence of local government officials as an important

factor, although it might be presented in all the selected cases.

At last, we will go deep into each case to understand the causal mechanism behind successful cases of

upgrading, trying to disaggregate the actual sequence of events that led to different types of upgrading

(causal narrative) in each case. Although small-N analysis have some methodological problems such as

the problem of identifying the necessary and sufficient conditions (see Lieberson 1992) and the

problem of spurious correlation, this methodology allows the research to deal with the problem known

as equifinality, when different paths leads to the same outcome which in our case is economic and/or

social upgrading. Therefore, this method seems to be the most appropriate one to this kind of research

since we are more interested in understanding the different causal mechanisms that leads to economic

and social upgrading than in establishing a statistical relationship. Also, we are more interested in

assessing how and whether a variable explains the observed upgrading than in measuring how much it

mattered.

One last point is important here. We could easily design a research methodology based on large-N

cases and identify the most important variables to explain economic and social upgrading. But this

alternative methodology for this specific research leads to three problems. First, since we are

conducting these studies in developing countries, there is no reliable statistics available for the many

cases we want to investigate of small and medium coffee growers in the countryside. Second, a

statistical study we will not tell us how the independent variables translated into specifics outcomes.

We are not interested in the process of upgrading per se but rather on how the different processes that

leads to upgrading can be transformed in conditional generalizations to guide public policies that leads

to upgrading. And last, the small-N analysis and the use of process tracing makes possible to work with

deviant cases and do “contingent generalizations,” when the theory identifies the conditions under

which alternative outcomes occur (see George and Bennett 2005 ch. 12). In fact, contrary to the

statistical approach that does not look carefully at deviant cases, these cases in small-N analysis are

important and even leads to the formulation of new hypotheses linked to economic and social

upgrading. Therefore, small-N research and within-case analysis seems to be the most appropriate

methodology for this research.

In order to do this research, we will make use of the large literature on global value chains to develop

hypotheses, conduct interviews with business associations, small and medium coffee growers in the

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selected countries, international traders and government representatives in each one of the four

countries. In addition, we also intend to interview global buyers (branded manufactures) in some

developed countries and large retailers as well to see how their procurement policies and market

strategies affect coffee growers in developing countries.

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