B716 Module: Cafedirect Case Study on Functional and Ethical Issues

This case study analyzes Cafedirect, a fair trade pioneer, examining its functional and ethical challenges. The analysis focuses on the company's struggle to maintain growth since 2005, particularly concerning its supply chain, ethical sourcing, and competition. It explores issues such as limited organic coffee supply from key suppliers, the impact of pricing demands from Accor Hotels, and internal ethical concerns related to human rights and environmental compliance. The study also highlights the need for Cafedirect to improve its risk mitigation strategies, enhance its production capabilities, and address its ethical shortcomings to capitalize on opportunities, such as the Accor Hotels bid, and sustain its market position within the fair trade movement. The case study references various sources to support its findings and recommendations, emphasizing the need for strategic adjustments to ensure long-term viability and ethical business practices.

Running Head: CAFÉDIRECT FUNCTIONAL AND ETHICAL ISSUES
CAFÉDIRECT FUNCTIONAL AND ETHICAL ISSUES
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1CAFÉDIRECT FUNCTIONAL AND ETHICAL ISSUES
Cafedirect
Founded in 1991, Cafedirect is an alternative trading organization, which is engaged
in trading activities. From the day it is found, Cafedirect is continuously serving its people,
and they made a significant impact on the mainstream fair trade in the UK. Fairtrade
organizations are generally engaged in other supporting activities along with their primary
operation (Estevez, Bhat, and Bray 2018). Cafedirect has signed a contract with Accor
Hotels, which will help them to increase their revenue over the years (Hutchens 2016).
However, certain issues affected their growth. These include awareness among customers and
other sustainable awareness issues. Cafedirect contributes to the sustainable environment by
providing a better environment for their workers and customers (Zhang and Liu 2020). In
recent times, Cafedirect is facing various functional and ethical issues, which are noteworthy
to mention. Since 2005, their growth has been slowed down, and it is a crucial problem for
them to survive in the market.
Cafedirect is trying to enter a new market by investing in its own high street coffee
shop. The recent demand for gold organic roast and ground coffee is the major issue that
Cafedirect is facing in recent times. Accor hotels have decided to increase their range of
Fairtrade products; therefore, they increased their offer for Fairtrade coffee in their hotels
(Geldres-Weiss et al. 2016). Cafedirect primarily purchases raw materials for their coffee
from small growers that are a risk for them in their growth. Pricing is also a concern for
Cafedirect as the Accor hotel is demanding coffee from them at a low price. Cafedirect has
chosen two suppliers to meet their additional requirement of coffee; Cooperative del sol and
Cooperative del Rio. Cafedirect has also involved them in various issues other than the fair
trade plan, including a debate regarding climate change with its partner GTZ (Davies. and
Doherty 2019). They also dealt with certain negative publicity regarding the fair trade. The

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market issues are also increasing, which includes management issues, broader ethical issues.
The product quality is not on par, which reduced their sales growth. Supply of coffee is a
major issue for them as the suppliers of Cafédirect are limited as Cooperative del Rio limited
their coffee supply to their suppliers. The produced coffee from their suppliers is 40%
organic; therefore, it is a vital issue for Cafedirect. Del Rio produces approximately 230
tonnes of coffee per year, of which only 92 tonne is organic. On the other hand, del Sol
produces approximately 35% of organic coffee. The yearly production of del Sol is 146
tonne, of which 51.1 tonne is organic. On the total, there is approximately 150 tonne of 100%
organic coffee from these two suppliers. The transport structure of Cafedirect is not proper to
supply coffee to Accor hotel. Competition is a big challenge for Cafedirect as they are facing
competition within the fair trade movement. Cafedirect does not have a licence for their
products; therefore, this is a big issue for them. Survival is also a serious issue for Cafedirect
as they are not viable within the mainstream market. The ethical issues of Cafedirect include
consumption issues, overseas development, and human rights issues (Grant and Palakshappa
2018). It is very hard for them to maintain their business ethics. The ethical issues influenced
their growth of sales. Currently, Cafedirect is not able to improve their products. They are not
able to solve human rights issues, as well as majority of their customers are not satisfied with
their products. Cafedirect also failed to maximize the values of their workers, which affected
their production. Cafedirect is facing several issues related to compliance and governance.
Café direct does not comply with many of the regulations related to the environment. They do
not communicate well with the farmers; therefore, the problems of them remain uncovered.
In addition, Cafedirect does not have fair trade certificates. Production of coffee affects the
environment heavily; therefore, Cafedirect should reduce emission by taking certain
sustainability programs (Nie, Wang and Meng 2019). Accor hotel is demanding a gradual

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price reduction of Cafedirect prices as the purchase volume exceeds 100 tonnes; therefore,
Cafedirect should reduce their production cost by improving their technologies.
Cafedirect is trying to manage their trades in a way that they can reduce the risk to
their organizations and producers. They are also increasing their stocks to improve the supply
chain. To resolve this issue, they should also adopt the changing market condition. Cafedirect
is also improving its transportation structure as well as they are adopting a defensive strategy
to protect their brand and improve their revenue by producing 100% organic coffee to the
hotels (Doherty and Kittipanya-ngam 2019). Cafedirect should protect the rights of their
workers and employees in order to improve their ethical position. To improve production,
Cafedirect should look after the financial needs of their farmers (Elbeshbishi and Al A'ali
2020). In order to reduce the emission, it is recommended that Cafedirect should minimally
use plastic packaging. To improve the capabilities of producing more coffee, Cafedirect
should improve the working environment of its employees. Cafedirect should improve its risk
mitigation strategies, which will aid them in holding the appropriate stock level in the supply
chain; therefore, serving Accor hotel as per their requirement. They can also boost the
production of coffee by providing proper education to their farmers regarding coffee
production. However, it can be observed that Cafédirect got an offer to supply coffee to
Accor hotel. They should accept this proposal by which they can increase their market area
and reputation. Accor hotels need at least 200 tonnes of coffee a year, but it can be observed
that two suppliers of Cafedirect can only supply up to 150 tonnes of pure organic coffee a
year. To make up the needs, Cafedirect should improve their own organic coffee production.
By accepting the bid from Accor hotels, Cafedirect will be able to improve its business
operation by launching premier products to the major European markets and introduce
themselves to the Novotel chains of the UK and France later on. Therefore, it is

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recommended that Cafédirect should accept the bid from Accor hotel only after solving their
functional and ethical issues.

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References
Davies, I.A. and Doherty, B., 2019. Balancing a hybrid business model: The search for
equilibrium at Cafédirect. Journal of Business Ethics, 157(4), pp.1043-1066.
Doherty, B. and Kittipanya-ngam, P., 2019. Inclusive value chain development: the role of
social enterprise hybrids in smallholder value chains. In A Research Agenda for Social
Entrepreneurship. Edward Elgar Publishing.
Elbeshbishi, A.N. and Al A'ali, E.A., 2020. Fair Trade and Ethical Consumerism: A
Complementary Perspective. In Ethical Consumerism and Comparative Studies Across
Different Cultures: Emerging Research and Opportunities (pp. 101-125). IGI Global.
Estevez, C.L., Bhat, M.G. and Bray, D.B., 2018. Commodity chains, institutions, and
domestic policies of organic and fair trade coffee in Bolivia. Agroecology and Sustainable
Food Systems, 42(3), pp.299-327.
Geldres-Weiss, V.V., Soto, M.A., Ramos, H.R. and Uribe, C.T., 2016. Social Capital and
International Business Networks: The Case of a Fair Trade Organization. J Account
Mark, 5(168), p.2.
Grant, S. and Palakshappa, N., 2018. Social enterprise push or corporate social responsibility
pull? The mainstreaming of fair trade. International Journal of Nonprofit and Voluntary
Sector Marketing, 23(4), p.e1625.
Hutchens, A., 2016. Mainstreaming Fair Trade: Fair trade brands and the problem of
ownership. In Fair Trade, Corporate Accountability and Beyond (pp. 95-112). Routledge.
Nie, P.Y., Wang, C. and Meng, Y., 2019. An analysis of environmental corporate social
responsibility. Managerial and Decision Economics, 40(4), pp.384-393.

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Zhang, K. and Liu, Z., 2020. An Investigation on Fair Trade Business: Opportunities and
Challenges. In Supply Chain and Logistics Management: Concepts, Methodologies, Tools,
and Applications (pp. 1205-1227). IGI Global.