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Friday, December 21, 2007
It's all about volume
I have long been a bit confused by the marketing of some of the larger coffee companies out there who set absolute terms for quality but the product has almost never really lived up to the pitch. It's as if by shaping the term quality to fit their own model, they can be 'right' or 'correct' in their approach or a hard to prove claim, the most ethical in their dealings. This is something that quietly is muttered by many a purist in closed circles but often doesn't get discussed in public.
So let me add a few thoughts on volume and quality.
Volume begets buying power. Buying power allows for purchase of better product or quite simply, purchasing discounts. The problem therein, the best product is only available in limited supply and at a high cost so scale becomes relevant to access and purchasing power.
Building for volume then means you may have the buying power to get the best coffees but then you also may get too large in volume to offer them to all your accounts or too large in scale to focus on producing the product at near peak efficiency. It becomes a relevant question if the end quality even exists to justify the purchase of the high grade product at certain volumes. Once you begin a volume model, there must be a minimum and a maximum to sustaining peak quality but I feel like many roasting outfits pass the maximum threshold well before the machines are running at max capacity.
Think on this, the best lots are tiny, the best roasts are at less than full capacity, the best brews are often manual and labor intensive. The best product must then be quite manual, labor intensive, and time consuming at every step in production. It's everything a volume business is not. Though every sustainable model currently in coffee focuses on volume and still screams about quality during every step of the way, it seems that the roasting part of the coffee business and especially the cafe end are about as volume oriented as you can get.
A true specialty model would be built solely on the top end coffees and focusing on producing them at maximum quality. Does a roasting outfit like this exist and could it survive under the current market OR would it simply lack access to top green coffees for lack of buying power? Could they even get through all the convoluted 'fairly directly organicaly' traded speak out there to a market segment willing to pay top dollar for detailed execution of a good cup?
Many roasters who dabble in the most expensive green seem to be buying a lot of low grade coffees to fill out the majority of their offerings which they sell in volume to a multitude of cafe accounts. In many cases, the margin on a sub $2/lb coffee can be much larger than on one of these top placing CoE winners. The truth is that you can jack up the cheaper greens once roasted several times the actual production cost but the price multiplier on an expensive coffee leaves a slim margin. This is built on a fear that consumers won't pay the high prices. It almost seems that buying the top coffees are simply marketing schemes to attract high volume accounts with some 'credibility' so a company can then push the lower tier coffees at good margins.
At low margins, as established by the current market, how can a business focus on solely top end 'gold bag' product without selling a lot of 'black bag' offerings to shore up the financials? How do they keep the disconnect out of the public eye and balance a commitment to both ends of the business? How can you commit to quality and charge a profitable price AND still be able to buy top product in the current market at a smaller production volume?
I have long been a bit confused by the marketing of some of the larger coffee companies out there who set absolute terms for quality but the product has almost never really lived up to the pitch. It's as if by shaping the term quality to fit their own model, they can be 'right' or 'correct' in their approach or a hard to prove claim, the most ethical in their dealings. This is something that quietly is muttered by many a purist in closed circles but often doesn't get discussed in public.
So let me add a few thoughts on volume and quality.
Volume begets buying power. Buying power allows for purchase of better product or quite simply, purchasing discounts. The problem therein, the best product is only available in limited supply and at a high cost so scale becomes relevant to access and purchasing power.
Building for volume then means you may have the buying power to get the best coffees but then you also may get too large in volume to offer them to all your accounts or too large in scale to focus on producing the product at near peak efficiency. It becomes a relevant question if the end quality even exists to justify the purchase of the high grade product at certain volumes. Once you begin a volume model, there must be a minimum and a maximum to sustaining peak quality but I feel like many roasting outfits pass the maximum threshold well before the machines are running at max capacity.
Think on this, the best lots are tiny, the best roasts are at less than full capacity, the best brews are often manual and labor intensive. The best product must then be quite manual, labor intensive, and time consuming at every step in production. It's everything a volume business is not. Though every sustainable model currently in coffee focuses on volume and still screams about quality during every step of the way, it seems that the roasting part of the coffee business and especially the cafe end are about as volume oriented as you can get.
A true specialty model would be built solely on the top end coffees and focusing on producing them at maximum quality. Does a roasting outfit like this exist and could it survive under the current market OR would it simply lack access to top green coffees for lack of buying power? Could they even get through all the convoluted 'fairly directly organicaly' traded speak out there to a market segment willing to pay top dollar for detailed execution of a good cup?
Many roasters who dabble in the most expensive green seem to be buying a lot of low grade coffees to fill out the majority of their offerings which they sell in volume to a multitude of cafe accounts. In many cases, the margin on a sub $2/lb coffee can be much larger than on one of these top placing CoE winners. The truth is that you can jack up the cheaper greens once roasted several times the actual production cost but the price multiplier on an expensive coffee leaves a slim margin. This is built on a fear that consumers won't pay the high prices. It almost seems that buying the top coffees are simply marketing schemes to attract high volume accounts with some 'credibility' so a company can then push the lower tier coffees at good margins.
At low margins, as established by the current market, how can a business focus on solely top end 'gold bag' product without selling a lot of 'black bag' offerings to shore up the financials? How do they keep the disconnect out of the public eye and balance a commitment to both ends of the business? How can you commit to quality and charge a profitable price AND still be able to buy top product in the current market at a smaller production volume?
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¶ Jaime van Schyndel 12:06 AM
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There wouldn't be a black bag/gold bag problem if people were more honest about there advertising. The problem arises because every man and his dog tries to pass off the house blend as something truly and utterly spectacular. If roasters could be more honest and say "this is a good, forgiving day-to-day cafe blend" and "this is a spectacular, special occasion coffee," things would be a lot simpler from the consumer's point of view. Two separate markets could develop. But the enormous pressure that roasters are under to talk themselves up seems to me to have made it difficult for them to provide good, simple and honest blend descriptors. Thus, your gold bags are always in the same market as your black bags and your stale crap.
The other problem is price. To be brutally honest, I don't think that consumers are really willing to pay the price for the gold bag experience in a cafe; certainly not here, at any rate. Or maybe it's just that cafe owners aren't willing to pay the price.
I think that if the consumer paid an extra 50c per cup for top shelf stuff, at ballpark 40 cups per kg, that's an extra $20/kg. That could be split 50/50 between the cafe owner and the roaster to reflect the extra price paid for the green and the extra attention paid in keeping it dialled in. Presumably that would be enough to keep everyone happy about the dollars. But we still have the black bag/gold bag "free rider" problem; once some cafes start pushing gold bag stuff at consumers, others will merely declare their black bag stuff or their crap to be gold bag. I'm sure that there would be heaps of people out there who would pick it in an instant. But I have absolutely no doubt that the majority would fall for it hook, line and sinker. The result, then, would be that the roaster and cafe's competition would actually reap the benefits of the hard work of the fanatics.
What we need to make the market function correctly is for the mass media to elevate someone to robert parker status for coffee and cafes. Or for there to be some quality watchdog body. It seems to me that neither will happen.
We also need someone to come up with a breakthrough way of educating the public. One of the most utterly amazing coffees that I had last year was just a generic Colombian Popayan Supremo. It just happened to be a freakishly amazing batch; exceptionally sweet and clean, albeit simple, no matter how it was brewed. Somehow, though, people weren't really very motivated to actually try it.
That is, of course, a very pessimistic view of things, but I don't think that it is that far from the truth. And remember that we're probably worse off in Australia than y'all are; we have sweet FA in terms of buying power, it takes ages for coffee to be shipped to us and our espresso market is only just starting to recover from a giant wave of commoditization.
Then there's a further issue, and that's the extent to which black bag vs gold bag really is a problem that needs to be dealt with for the majority of the cafe market. There's the simple reality that 100% of the market can actually use the top 1% of coffee that is available. It's no secret that the majority of people consume their espresso with milk. For such people, a generic chocolate bar type comfort food blend probably isn't actually a bad thing. It can be achieved with coffee that is reasonably available to commercial roasters, it is the flavour profile that many are familiar with and I don't think that there's anything wrong with it in the cup. Certainly some effort needs to go in raising the bar for the black bag. I don't think that quality of green is the limiting factor for most roasters and cafes. Frankly, spending more time on training, on maintaining and upgrading equipment and on delivery and storage times is probably going to result in a better experience for the end consumer than randomly delivering esmeralda instead of the standard blend. And then I'd imagine that a lot of roasters might well benefit from investing more time and money into experimenting with their roasts and their blends rather than sourcing exotic coffees.
From a consumer perspective, I love seeing a great black bag blend on offer as the main show, with a gold bagger on offer at a premium in another grinder. I know a few cafes that do that and, frankly, much of the time they do a better job with the black bag than the gold bag.
Anyhoo, that's all at a ridiculous level of generality that's not actually likely to be useful to anyone, but hopefully it makes for something nice to ponder.
Cheers,
Luca
The other problem is price. To be brutally honest, I don't think that consumers are really willing to pay the price for the gold bag experience in a cafe; certainly not here, at any rate. Or maybe it's just that cafe owners aren't willing to pay the price.
I think that if the consumer paid an extra 50c per cup for top shelf stuff, at ballpark 40 cups per kg, that's an extra $20/kg. That could be split 50/50 between the cafe owner and the roaster to reflect the extra price paid for the green and the extra attention paid in keeping it dialled in. Presumably that would be enough to keep everyone happy about the dollars. But we still have the black bag/gold bag "free rider" problem; once some cafes start pushing gold bag stuff at consumers, others will merely declare their black bag stuff or their crap to be gold bag. I'm sure that there would be heaps of people out there who would pick it in an instant. But I have absolutely no doubt that the majority would fall for it hook, line and sinker. The result, then, would be that the roaster and cafe's competition would actually reap the benefits of the hard work of the fanatics.
What we need to make the market function correctly is for the mass media to elevate someone to robert parker status for coffee and cafes. Or for there to be some quality watchdog body. It seems to me that neither will happen.
We also need someone to come up with a breakthrough way of educating the public. One of the most utterly amazing coffees that I had last year was just a generic Colombian Popayan Supremo. It just happened to be a freakishly amazing batch; exceptionally sweet and clean, albeit simple, no matter how it was brewed. Somehow, though, people weren't really very motivated to actually try it.
That is, of course, a very pessimistic view of things, but I don't think that it is that far from the truth. And remember that we're probably worse off in Australia than y'all are; we have sweet FA in terms of buying power, it takes ages for coffee to be shipped to us and our espresso market is only just starting to recover from a giant wave of commoditization.
Then there's a further issue, and that's the extent to which black bag vs gold bag really is a problem that needs to be dealt with for the majority of the cafe market. There's the simple reality that 100% of the market can actually use the top 1% of coffee that is available. It's no secret that the majority of people consume their espresso with milk. For such people, a generic chocolate bar type comfort food blend probably isn't actually a bad thing. It can be achieved with coffee that is reasonably available to commercial roasters, it is the flavour profile that many are familiar with and I don't think that there's anything wrong with it in the cup. Certainly some effort needs to go in raising the bar for the black bag. I don't think that quality of green is the limiting factor for most roasters and cafes. Frankly, spending more time on training, on maintaining and upgrading equipment and on delivery and storage times is probably going to result in a better experience for the end consumer than randomly delivering esmeralda instead of the standard blend. And then I'd imagine that a lot of roasters might well benefit from investing more time and money into experimenting with their roasts and their blends rather than sourcing exotic coffees.
From a consumer perspective, I love seeing a great black bag blend on offer as the main show, with a gold bagger on offer at a premium in another grinder. I know a few cafes that do that and, frankly, much of the time they do a better job with the black bag than the gold bag.
Anyhoo, that's all at a ridiculous level of generality that's not actually likely to be useful to anyone, but hopefully it makes for something nice to ponder.
Cheers,
Luca
I was thinking a lot more about green sourcing and buying than down to the cafe front.
More companies seem to be branding to seperate the lineups but I think it needs to go deeper than the label. Terroir has the Terroir lineup and the GHH select, Novo and '90 point coffees', then there's Paradise and RMiguel coffees. What Meza is doing seems intersting to me because it's like he is actively spinning off the top end stuff to a new company for a seperate brand and entirely different production line. It may actually be roasted in the same place but I would hope it's produced smaller scale with more focus to justify the price.
Execution aside, it seems like a good business move. Terroir seems to struggle having both productions under the same roof as do other companies who try to work out the logistics of small production batches on large roasters but maybe specialty really implies that you need to specialize. The black bag production and the gold bags should be seperate and have more intense focus on the expensive lineup without diminishing quality overall.
I know you guys really have access problems over there but we have a whole different set of problems here in Cambridge. We have an educated base, we have the consumers willing to pay if they can find a consistnet product but the shops are slow to react. It's not the shop owners who are completely to blame though, there is a lot of friction and resistance at every end from repair service to roaster. It's just a mess stuck in the old ways right now.
More companies seem to be branding to seperate the lineups but I think it needs to go deeper than the label. Terroir has the Terroir lineup and the GHH select, Novo and '90 point coffees', then there's Paradise and RMiguel coffees. What Meza is doing seems intersting to me because it's like he is actively spinning off the top end stuff to a new company for a seperate brand and entirely different production line. It may actually be roasted in the same place but I would hope it's produced smaller scale with more focus to justify the price.
Execution aside, it seems like a good business move. Terroir seems to struggle having both productions under the same roof as do other companies who try to work out the logistics of small production batches on large roasters but maybe specialty really implies that you need to specialize. The black bag production and the gold bags should be seperate and have more intense focus on the expensive lineup without diminishing quality overall.
I know you guys really have access problems over there but we have a whole different set of problems here in Cambridge. We have an educated base, we have the consumers willing to pay if they can find a consistnet product but the shops are slow to react. It's not the shop owners who are completely to blame though, there is a lot of friction and resistance at every end from repair service to roaster. It's just a mess stuck in the old ways right now.
What you've hinted at is a dichotomy, not mutually exclusive, between sustainability and exceptional quality. I think this is valuable for a number of reasons, not least of which is transparency in self-marketing (how good is this particular coffee, really?), focusing on consumer demographics (maybe people can't afford a $50/# coffee but would love to support the people who produced their coffee at maybe $15/#), and probably some other ones, too, that are escaping me at the moment.
Good thoughts. Good thoughts.
-Phil
Pittsburgh, PA
Good thoughts. Good thoughts.
-Phil
Pittsburgh, PA
tried to edit/delete that last one because of my last sentence! sorry for the double post, this one is correct!
one thing you've neglected to address is there is no shortage of great, top tier green coffee out there. it just gets lost, blended into mediocrity at origin or destroyed in transit... so many places have the potential to go from ok to outstanding, but there are a lot of obstacles. rwanda is a great example of this, they didn't have an existing quality focused system in place so they were able to start from scratch and take really dramatic steps forward with the quality.
one thing you've neglected to address is there is no shortage of great, top tier green coffee out there. it just gets lost, blended into mediocrity at origin or destroyed in transit... so many places have the potential to go from ok to outstanding, but there are a lot of obstacles. rwanda is a great example of this, they didn't have an existing quality focused system in place so they were able to start from scratch and take really dramatic steps forward with the quality.
Great post, True Dat! And the comments too, all germaine and valid.
This will be a long comment but we are the poster child for this and I hope others who care (and if you read this blog chances are you do) can learn from us!!!
As a wholesale roaster fanatically & personally commited to quality AND sustainability we have struggled with this dichotamy for years. As a mom and pop company without suitcases full of cash (like some who shall remain nameless), we purchase 100% Organic lots in the $2-$6.00 range, no COE for us. We work very hard to identify the best lots within each crop and do a pretty good job with the help of our friends the importers. Sometimes we get lucky and score a high profile or super distinctive lot as a result of our diligence & good relationships, but generally we are buying the higher end of commodity organics. We have found that with intentional, Probat, small batch roasting and a high degree of experimentation and focus, blending, etc. we can pretty much make it all taste like Specialty coffee, and this has been a blessing and a curse.
Since our wholesale customer knows with us "it's all great" they generally won't bite when we present something at a higher price point, and since many want consistancy in offerings & price, most just choose our blends + Colombia, Brazil & Ethiopia. Our coffee is so much better and fresher than anything else around here, and more expensive (see below for the whyfore there) so they are extremely satisfied with our blends and "c" coffees, even when we are not! Hard to pitch them even the really off the chain coffees we are fortuate to get our hands on, though if we GIVE them a bag they will acknowledge the awesome cup, just won't BUY the awesome cup. Only about 1% say "give me the best stuff you have" in wholesale.
So, as we have grown and grown, we find ourselves today doing up to 400 Lbs a day/night in 18 lb batches (yeah, we work our tukas's off), since we roast to order we never get to roast the really good stuff as nobody orders it. Sometimes we have to just give the great ones away as a "premium" to our buyers, or use those to enhance lower quality lots and we really don't want to do that....which has led us to pass on amazing coffees we want to buy but know we can't sell! Very discouraging.
Meanwhile, our unqualified smaller competitors, and large volume national outfits, who can't even touch our cup quality, present lower end & past crop lots of some of the same origins we buy as GOURMET, SPECIALTY, yada yada. Then therre are the big guys who buy decent coffee but then ruin it in roasting. This is RAMPANT! The cup is sub par and since most people don't understand that * not all beans are the same*, they go ahead and give US the credit! They think we are some kind of geniuses (which we are but...) This bothers us much as we truly and sincerely want to help our growers market themselves as Quality Artisanal brands in thier own right (our labels have COMPLETE transparency often including lot numbers and crop year and unlike most we actually TELL THE TRUTH *gasp!*). We WANT to educate the public and share the joy of TRUE specialty with them, but it seems nobody wants that to happen but the little guys.
To make matters worse, some of our straight pirate competitors lie about the origin as a matter of policy, & label past crop & reconditioned, fell of the truck stuff, as top quality origins and usually label non organic coffee as Organic (with little enforcement by USDA or anyone else, they can do whatever they want, unfortunately, but I'll save for another day)and robusta as 100% arabica, estates as Fair Trade, whaever they want. WHat a mess!!!
Now, we have lobied every Q cupper and grader we know to get the Q to begin some sort of watchdog agency or something, but of course that's gone nowhere, we know of 3 so-called roasters who claim to present COE origins/lots and are literally putting low level *shite* in the bag and selling it for $9.95. One guy went so far as to claim he had a record setting Brazil (($130 (?)LB)) last year that was purchased en totale by Japan ! He was selling for $12.00/LB. We think many shlock roasters simply read the mags and K Davids etc. and just pick the hot ones and print up some labels, seriously. so appalling. NOBODY stops them.NOBODY who knows or cares buys their coffee, so NOBODY complains.
We did get a few growers to issue 'cease and desist' letters to some really bad ones and that worked, but they just switched to another fake big name origin. We reported some to USDA for organic violations, but little was done, they warned them, and they carry on to this day-- we stopped reporting after one of these priates made physical threats against my employee & he actually slanders us and cyber stalks us to this day(warning, USDA TELLS the violator WHO reported them). This is scary particularly where we live.
But our primary concern has been: with our bargain hunter customers, we really can't buy the amazing lots or do COE even though we now have the $ to. really irks us. not who we want to be, you see? WE would rather make less money and be GOOD than more money & be mediocre (call us crazy). Our wholesale model is forcing us to be less than we can be. The market says DUMB IT DOWN. argh.
So, after years of this, we have come up with an answer, for us at least: open a retail coffee house and beanery under a new brand name that exclusively offers only specialty lots. Let somebody else take over the wholesale company who still cares but isn't kept up at night by floaters and quakers. Keep our heads down, do the best job we can, prove our point in every cup, and hope and pray that somebody tastes the difference.
This will be a long comment but we are the poster child for this and I hope others who care (and if you read this blog chances are you do) can learn from us!!!
As a wholesale roaster fanatically & personally commited to quality AND sustainability we have struggled with this dichotamy for years. As a mom and pop company without suitcases full of cash (like some who shall remain nameless), we purchase 100% Organic lots in the $2-$6.00 range, no COE for us. We work very hard to identify the best lots within each crop and do a pretty good job with the help of our friends the importers. Sometimes we get lucky and score a high profile or super distinctive lot as a result of our diligence & good relationships, but generally we are buying the higher end of commodity organics. We have found that with intentional, Probat, small batch roasting and a high degree of experimentation and focus, blending, etc. we can pretty much make it all taste like Specialty coffee, and this has been a blessing and a curse.
Since our wholesale customer knows with us "it's all great" they generally won't bite when we present something at a higher price point, and since many want consistancy in offerings & price, most just choose our blends + Colombia, Brazil & Ethiopia. Our coffee is so much better and fresher than anything else around here, and more expensive (see below for the whyfore there) so they are extremely satisfied with our blends and "c" coffees, even when we are not! Hard to pitch them even the really off the chain coffees we are fortuate to get our hands on, though if we GIVE them a bag they will acknowledge the awesome cup, just won't BUY the awesome cup. Only about 1% say "give me the best stuff you have" in wholesale.
So, as we have grown and grown, we find ourselves today doing up to 400 Lbs a day/night in 18 lb batches (yeah, we work our tukas's off), since we roast to order we never get to roast the really good stuff as nobody orders it. Sometimes we have to just give the great ones away as a "premium" to our buyers, or use those to enhance lower quality lots and we really don't want to do that....which has led us to pass on amazing coffees we want to buy but know we can't sell! Very discouraging.
Meanwhile, our unqualified smaller competitors, and large volume national outfits, who can't even touch our cup quality, present lower end & past crop lots of some of the same origins we buy as GOURMET, SPECIALTY, yada yada. Then therre are the big guys who buy decent coffee but then ruin it in roasting. This is RAMPANT! The cup is sub par and since most people don't understand that * not all beans are the same*, they go ahead and give US the credit! They think we are some kind of geniuses (which we are but...) This bothers us much as we truly and sincerely want to help our growers market themselves as Quality Artisanal brands in thier own right (our labels have COMPLETE transparency often including lot numbers and crop year and unlike most we actually TELL THE TRUTH *gasp!*). We WANT to educate the public and share the joy of TRUE specialty with them, but it seems nobody wants that to happen but the little guys.
To make matters worse, some of our straight pirate competitors lie about the origin as a matter of policy, & label past crop & reconditioned, fell of the truck stuff, as top quality origins and usually label non organic coffee as Organic (with little enforcement by USDA or anyone else, they can do whatever they want, unfortunately, but I'll save for another day)and robusta as 100% arabica, estates as Fair Trade, whaever they want. WHat a mess!!!
Now, we have lobied every Q cupper and grader we know to get the Q to begin some sort of watchdog agency or something, but of course that's gone nowhere, we know of 3 so-called roasters who claim to present COE origins/lots and are literally putting low level *shite* in the bag and selling it for $9.95. One guy went so far as to claim he had a record setting Brazil (($130 (?)LB)) last year that was purchased en totale by Japan ! He was selling for $12.00/LB. We think many shlock roasters simply read the mags and K Davids etc. and just pick the hot ones and print up some labels, seriously. so appalling. NOBODY stops them.NOBODY who knows or cares buys their coffee, so NOBODY complains.
We did get a few growers to issue 'cease and desist' letters to some really bad ones and that worked, but they just switched to another fake big name origin. We reported some to USDA for organic violations, but little was done, they warned them, and they carry on to this day-- we stopped reporting after one of these priates made physical threats against my employee & he actually slanders us and cyber stalks us to this day(warning, USDA TELLS the violator WHO reported them). This is scary particularly where we live.
But our primary concern has been: with our bargain hunter customers, we really can't buy the amazing lots or do COE even though we now have the $ to. really irks us. not who we want to be, you see? WE would rather make less money and be GOOD than more money & be mediocre (call us crazy). Our wholesale model is forcing us to be less than we can be. The market says DUMB IT DOWN. argh.
So, after years of this, we have come up with an answer, for us at least: open a retail coffee house and beanery under a new brand name that exclusively offers only specialty lots. Let somebody else take over the wholesale company who still cares but isn't kept up at night by floaters and quakers. Keep our heads down, do the best job we can, prove our point in every cup, and hope and pray that somebody tastes the difference.
Ariel,
If you see someone passing their coffee off as COE when you know for a fact that it isn't, you should contact susie spindler (I think it's spindler@cupofexcellence.org or support@cupofexcellence.org). The COE name and seal are trademarked to prevent forgery. Thanks for your post. I can only hope our wholesale accounts will be more forgiving...
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If you see someone passing their coffee off as COE when you know for a fact that it isn't, you should contact susie spindler (I think it's spindler@cupofexcellence.org or support@cupofexcellence.org). The COE name and seal are trademarked to prevent forgery. Thanks for your post. I can only hope our wholesale accounts will be more forgiving...
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