A leading expert in fair trade organisations says Cafédirect’s recent takeover of Grumpy Mule could be a trailblazer for the sector – as it is the first time a social enterprise focused on social impact for smallholder coffee farmers has acquired a larger private sector company.

Cafédirect has been one of the leading lights of ethical coffee trading in the UK since it was founded in 1991, becoming the first coffee brand in the country to carry the Fairtrade mark. In 2018, the Cafédirect management team made the strategic decision to focus on provenance, increasing efforts to build sales of their top-selling lines Machu Picchu and Kilimanjaro coffee in the grocery supermarket sector.

“For Cafédirect, this proved to be a fortuitous decision, as hot beverage sales in the grocery sector grew rapidly during the COVID-19 pandemic of 2020-2022,” says Professor Bob Doherty, a fair trade expert from the University of York’s School for Business and Society. “People started working from home and hospitality closed. Machu Picchu sales grew from £3m in 2017 to £12m by the end of 2022. In addition, Cafédirect sales overall grew from £8m to £18m, driven by increased sales in supportive supermarket chains such as Sainsbury’s, Co-op and Waitrose. The Co-op also decided to stock Machu Picchu coffee in all of their stores, helping raise sales from £300k to £2.2m between 2018-2023.”

At the same time, hot beverage companies which specialised in food service/out of home such as Grumpy Mule in Meltham, Yorkshire (owned by Irish hot beverage company Bewley’s) declined rapidly as venues shut down almost entirely in the pandemic.

In late 2022, Cafédirect entered into discussions with Bewley’s with a view to acquiring the Grumpy Mule business in the UK. This made strategic sense as Grumpy Mule were strong in food service, and had a manufacturing packing facility with a much greater capacity than Cafédirect. The Cafédirect London Fields facility has the capacity to roast approx. 400 tonnes per annum. In comparison, the Grumpy Mule facility in Meltham can roast 4,000 tonnes per annum. In addition, Cafédirect already had a strategic relationship with Bewley’s who have manufactured the Cafédirect retail coffee in Dublin for the past 16-years.

On the 7th of June 2023, Cafédirect acquired Grumpy Mule. Cafédirect and Bewley’s also came to a 10-year supply agreement on Cafédirect retail coffee. Cafédirect agreed to maintain the roasting operation in Meltham in Yorkshire. The acquisition was supported by Cafédirect investors Oikocredit and Triodos bank.

“All in all, this has been quite the turnaround for a company that in 2015 lost business in Tesco and Asda with key lines being destocked, and in 2016 carried out a rights issue with Triodos bank to raise funds,” says Doherty. “Cafédirect now has two commercial directors for grocery and food service, and the business has an annual turnover of over £30m, all providing increased returns to producers via the gold standard.”