Tech-Assisted Transparency

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By Dan Shryock

Linking coffee cooperatives and smallholder farmers to other parts of the supply chain would be a lot easier with real-time analysis and verification of their coffee crop quality and payment on the spot reasoned the founders of Colorado-based bext360.

The company’s blockchain technology also enables consumers at the other end of the chain to track their coffees’ origins as they make their individual purchasing decisions and see for themselves the positive impact their buying decisions make on the farm.

Blockchains are a network of cloud-based databases that track digital information and transactions. Using bext360, farmers and cooperatives access a field-operated application program interface (API) called a “bextMachine” to get real-time analysis, pricing and to receive payment for their products.

Once entered in the system, specific lots of beans are tracked through the supply chain – from the point of origin through export-import to roasting and delivery to retail locations.

The company, which raised $1.2 million is venture capital from the financial technologies investment group SKS Venture Partners, will sell bextMachines for $1,500 to $2,000 depending on functionality. The bext360 will analyze cherry, parchment, and green coffee beans, according to Allyson Quijano, bext360’s director of partnerships and business development.

“We will be applying a fee per transaction based upon the level of analysis,” Quijano said. “This will be similar to the copy machine model where the fees will cover the maintenance and provide all access to the data and analysis via our API so companies can integrate into their own tracking systems or point-of-sale systems.”

Here’s how bext360 works. Using a bean analysis scanner in the field, bext360 can provide accurate and transparent grading of beans at the farm. Buyers who like the product submit a bid. The coffee farmer or cooperative can choose to accept that offer. The buyer submits payment into the blockchain system and that value is deposited immediately to the farmer in the correct currency.

“The farmer will be more accurately compensated for the beans and this allows the fair-trade payment to be made seamlessly,” Quijano said. “There’s no paperwork and no delay in payment.”

Along the supply chain, wholesalers and retailers can embed or include this information in their websites, marketing, point-of-sale systems and supply chain management tools. The information is automatically updated using an “application program interface” (API) that is common in commercial Internet technology.

Company c.e.o. Daniel Jones sees this entry into the coffee industry as a first step for farmers in emerging countries.

“We would like to be a technology company that improves both the quality and traceability for commodities produced in the developing world – such as coffee, cocoa, fish, palm, nuts and minerals,” Jones said. “This becomes possible because of emerging technologies and the ability to collect, analyze and make timely payments during procurement and production. These technologies allow bext360 to provide a service, increase the quality of the products and improve the lives of the people that produce these crucial products.”

Working with financial technology from Stellar.org, bext360 aims to make direct, secure payments to farmers the moment their products are evaluated and purchased. Once the product enters the supply line, the blockchain transparently tracks the flow from origin to consumer.

“Companies want to meet their high standards,” said Jone “But in general, groups working on fair trade (certified coffee) spend a lot of overhead on tracing materials. They use rudimentary tracing mechanisms that are imprecise. People in the field may still be exploited. Our goal is to bring complete transparency to the coffee supply chain, and to other commodities as well, including cocoa.”

“We are always interested in anything that gets more value back to the farmers in the field,” Fairtrade America spokesman Kyle Freund after considering bext360’s plan. “It would be interesting to see how this develops.

“Working toward transparency is a good thing,” Freund said. “One of the key things for us at Fairtrade America is seeing farmers and cooperatives participate in the price-making process. We encourage cooperatives because it puts farmers on an equal footing in negotiations so they can get a fair price.

“Any technology that helps reach that goal is a good thing,” he said.

The bext360 initiative started with coffee, Jones said, because coffee is one of the most popular beverages in the world. Citing statistics from the United Kingdom’s Fairtrade Foundation, he said 80% of all coffee is produced by 25 million smallholders while about 125 million people worldwide depend on coffee for their livelihoods.

Stellar.org’s technology allows local cooperatives to create and complete transactions that are transparent to the currency’s owners, traders and governments.

“The machine has a wallet of its own,” Jones said. “If there’s a loan on that machine, it could make a loan repayment every week based on the amount and quality of product the machine collects.”

“I like to think (of blockchain technology) as a currency translator,” Quijano said. “Stellar.org’s blockchain provides the infrastructure for transparency and traceability across countries and communities.

“We’re applying the technology from start to finish. Every individual can touch something from the (coffee bean) supply chain,” Jones said.

Blockchain allows business to be conducted across currencies, Quijano said, and it makes it easier for bext360 to comply with banking regulations in foreign countries.

In the end, there’s a transparent thread between the grower and the coffee drinker.

“Consumers in general and millennials in particular have a stronger thirst for knowledge. They have a specific demand for coffee and they want to know they are getting a better-quality coffee,” she said. “They like to invest and connect with the markets and a single source origin.

“Transparency for us is the interaction within the community – the first mile of coffee production, so to speak, is most important. This provides farmers a fair understanding idea about the value of their product.”

The company’s long-term goal is to link consumers directly to the farmers that provide the products. “We are in the process of selecting specific coffee partners in Central America and Africa,” Quijano said. “We’re still in beta. We’ll announce those partners in the fall. In the meantime, we’re going to do some more testing before we ship. The goal is to ship fully traceable coffee by the end of 2017.”