US Edition
A raft of EU rules on coffee production will push up prices across Europe and drive thousands of farmers out of business, the chairman of Lavazza has claimed.
Giuseppe Lavazza, the fourth-generation boss of the family-owned Italian company, warned that new deforestation regulations being introduced by the European Union will make coffee more expensive across the Continent than it is in the UK.
The rules, which take effect at the beginning of next year, are meant to prevent businesses from importing goods, including coffee beans, if they have been grown on recently deforested land.
However Mr Lavazza suggested they had been badly drafted without the input of the industry, imposing a bureaucratic burden that many farmers in poorer countries would be unable to cope with.
He claimed these suppliers would be unable to sell to EU companies as a result, meaning there would be a much smaller pool of farms to source from.
The consequence would be less choice in European countries, he said – as well as coffee that is more expensive than it is in Britain, which will not have to implement the rules because of Brexit.
Speaking to journalists at an event during the Wimbledon tennis tournament, Mr Lavazza said the upshot for his business would be “terrible”.
He added: “This is introducing a big limitation, a very strong distortion of the market.
“For all of the European roasters, this is very challenging. Think about farmers in Central America, I think very few of them are ready to be compliant with the regulation.”
The deforestation rules require traders in cattle, cocoa, coffee, oil palm, rubber, soya and wood to ensure they “do not contribute to deforestation or forest degradation worldwide”.
This means importers, including coffee bean roasters such as Lavazza, are required to carry out exhaustive checks on all their suppliers. They must also complete risk assessments and independent audits, according to advice published by City law firm White & Case.
Mr Lavazza claimed that even the initial step of digitally mapping the size of a farm using satellite coordinates would be impossible for many producers in the developing world.
He said: “Many farmers don’t know the boundaries of the farm, they have no chance of putting the geo satellite coordinates in the system.
“The farmer in Ethiopia doesn’t have any idea of, for example, the border of the farm. Many of them are just picking coffee, fantastic coffee, the best in the world, from wild forests.”
Companies found to be in contravention of the deforestation rules risk a fine equal to 4pc of their EU turnover for every breach. In Lavazza’s case, this would amount to €120m (£101m) per penalty.
At present, the business does most of its roasting on the Continent and ships this coffee worldwide, with a small additional facility in the US. However, Mr Lavazza hinted it might open additional roasting sites outside the EU as a way of avoiding the new regulations.
He said: “Maybe the UK, if the UK is not going to adopt similar regulation, or the US, or China.
“That means the European market is going to reduce now in magnitude and priority.”
Sources close to the European Commission downplayed the concerns, suggesting that the value of coffee gathered from wild forests was small and that free coordinate mapping technology was easy to obtain.
A Commission spokesman pointed out that research published in the journal Nature had found that deforestation was itself a threat to wild coffee species.
He added: “EU regulation is pro-business. Deforestation is a threat to business – including to the coffee business.
“The Commission’s proposal for EUDR was prepared following a public consultation which received some 1.2 million contributions. In this context, an overwhelming majority of stakeholders (business associations and NGOs) supported a mandatory due-diligence regime.”