SOAS Research Online

Abstract

The aim of this paper is to understand how coffee roasters in the Italy source from a variety of suppliers. In identifying the roasters’ sourcing strategies, this work helps to understand how these ‘channel captains’ shape the whole supply chain. While the socio-economics of the coffee industry has received much attention, this article presents a novel analysis of B2B relationships in order to understand what determines roasters’ sourcing strategies. It explores how roasters in the country from which the now-global retail consumption model originated, shape the whole supply chain. The theoretical framework based on New Institutional Economics, and relational contracting complements the literature on sourcing approaches. The methodology is qualitative and uses a multiple case approach. By integrating different multidisciplinary perspectives, the nature of the purchasing strategies is analyzed. The paper shows that coffee transactions are surrounded by extreme uncertainty. The attributes of the supplied raw material seem to change according to the roaster’s business strategy. Different governance mode of transactions are devised in order to cope with the business uncertainty and to guarantee supplies of the coffee with the desired attributes.. Traders offer the guarantee function that growers and exporters cannot provide to roasters. Relational components in transactions are essential to reduce uncertainty and transaction costs. Thus inter-firm and interpersonal relationships are important coordination mechanisms in trader-roaster linkages and even more in the exporter-roaster interface. Roasters tend to devise stronger coordination mechanisms with suppliers when the reputation of the quality of its core product is considered critical in their business strategy. The research suggests that firms that decide to make the quality of the core product their differentiation strategy, should coherently align their sourcing strategy, and invest accordingly. This may include the integration of supplier development strategies. Insights about which buyers should be targeted by coffee exporters and growers are provided.