I have a few thoughts to share about the idea of buying groups as regards these auctions, and about the ability of the auctions to deliver prices to coffees in line with quality but modified by scarcity and other factors.
But first a big up to Steven Vick and to Pete for their excellent input on this topic. I couldn't agree more--educating one's customers about coffee quality and why it costs more to produce exceptional coffees and deliver them in pristine condition to the cup is the key to driving our industry towards real sustainability. It is a fact that there are many additional costs associated with producing truly great coffees as opposed to average or mediocre ones. It is not enough that a coffee is simply clean"excellence means finesse, detail, nuance and this is very hard to achieve at every level from farm to mill to roaster to cup preparation.
Rewarding great coffees with great premiums also means that the farm can keep moving forward (assuming there is true traceability and the $$ actually reaches the farmer) with quality and growth there is a huge difference between simple maintenance / subsistence and actual economic development. The idea is that the farmers who are working hard and producing excellent quality can continue to invest in their business, plant more trees, acquire more land, and grow. After ten years of high-quality production a farmer should have measurably improved living conditions, should be able to send the kids to university, be producing more and better coffee in my opinion most roasters underpay for their coffees, as do consumers. If this continues it means supply of top, top quality will decline in time and there will be greater separation between qualities"meaning the farmers who are getting paid will continue to improve and be producing coffees that can score in the 90's, while those who are not will do the minimum necessary to pass the muster and will steer towards an 80 score. The amount of very good coffee in the 84-88 range will drop off. Of course this is just my personal prediction.
All this means it is up to the roaster to drive prices upward in his/her local market, and invest in teaching customers to understand, recognize, and appreciate real quality. We cannot be scared of pushback from existing customers or hog-tied into submission by price-driven competition from other, lesser quality roasters. We must stand firm in our commitment to charging more, not less, and passing this additional revenue back to the farm so that it can tip from subsistence to prosperity. I get calls and emails all the time from customers who tell me that they 'know the world-wide price of coffee has declinedâ€? (perhaps they read a Wall Street journal article tracking coffee futures prices) and ask why is it that I have just raised their price? The explanation is simple"we don't buy commodities, we buy specific, unique, and exceptional caliber coffees based on their intrinsic qualities and our relationship with the individual producers. We invest in growth, and encourage further investment in quality on the part of the grower by adding significant premiums that reflect additional quality in the cup. I really don't care where the C is well, not entirely true"I do care, but even if it goes down to $0.30 I will not reduce the price I pay to the farm. I've made that commitment to the growers we work with and made it crystal clear"prices I pay them can only go up, never down.
Anyway, I've gotten off topic a bit. I really just wanted to address a few things that were written in this threadâ€¦
1. Regarding the viability of selling one bag of coffee, or the prospect of someday splitting apart bags---shit, I would buy and sell 15 lbs. of a killer coffee if that was all I could get my hands on. Lack of quantity should not be an issue"we as roasters are pursuing greatness in the cup, and anytime we encounter it we want to get it into our hands and our mouths. Doesn't matter if it is one bag, five bags, twenty bags, or twenty lbs. Would it be better if there was more? Sure. We all wish our favorite concert would last all night, with an endless series of encores. It would be great if an orgasm could last for 3 hours. And at 2 hours, that inspirational movie was just a bit too short, right? That's the way things go. Real Greatness is usually found in small quantities and provides temporary elation.
2. Regarding the idea that buying groups suppress prices well, that's just silly. Peter said it right"most of us could not afford a $30,000 outlay for 5 bags. But we can come up with $6k for one. If auctions were always single buyers the prices would actually be much lower. One piece of anecdotal evidence"the recent Brasilian coffee that raked in $49.75 would almost certainly have fetched far less had the Small Axe group not been involved in the chase. There were, as far as I know, three groups involved up to $30.00. At that point one dropped out, and then there were two. We stayed in it up until the bitter end, and finally conceded as our group began to atrophy. But from about $30.00 until the final close I believe there were just two groups bidding"us and the Australian/Canadian team. Had Small Axe not been involved that coffee would probably have settled as much as $19.00 lower than it actually did. That's a lot of money.
3. Regarding the idea that auction buyers chase the top lots for marketing value and fame rather than quality, or that group buying on particular coffee limits participation on other lots"again, it's off-base. I've served on 18 juries in the last 5 years, and in all but 2 I felt that the top two coffees deserved their place. They were really the best, and the jury made the right decisions. The best coffee should get the best price, and should come as no surprise that the #1 coffee usually garners a higher price than the rest. Is there added marketing value to having the #1 winner? Sure, of course there is. But I know most of the people who have purchased #1 over the years, and the huge majority did so because it was their favorite coffee. Sometimes, though, the coffees do shift position a bit during the 6 or 7 weeks between competition and auction. Have a look at the 2005 Nica results. There were indeed coffees better than the number one, and it was reflected in the prices. Number 5 got top price, and number twelve came very close to number one. How about 2004 El Sal? Number 3 was right behind one, and number 7 was hanging in there as well. Intelli participated in groups and also as solo buyers. Stumptown does it, Terroir does it, Sweet Marias does it This happens all the time. These are just a few examples, but if you take time to weed through all the auctions that have taken place over the last 5 years (CoE and others"Crop of Gold, Panama, etc..) you will find that buyers exert their taste preferences by bidding for their favorite coffees, not just the ones with the highest jury score.
4. Someone mentioned that we will not make money on the Esmeralda. I beg to differ. I do not plan to lose money on this coffee, unless of course I and my fellow colleagues decide we just cannot give it up and we end up drinking a lot of it ourselves. That might happen, and if so it is because we have decided to indulge ourselves and celebrate the coffee every morning on the front porch. However, it is quite possible to make money.
The figures presented in this thread are way off base for example, as Trish pointed out, it would be sacrilege to roast so dark that you lose 20% weight"the nuance and delicacy would get completely muffled. We will likely lose about 13% weight. If we sell 40% of the coffee at roughly $35.00/ half lb, drink 10% ourselves, and sell the remaining 40% via clover brews at between $6 - $7 / 12 ounce cup we will be above break-even.
That said, if we do lose money because we decide to treat our best customers to a free half-lb as a way of saying thank you for your continued support, I could live with that. And I still might drink most of it myselfâ€¦
And Steve, I'm sure any one of us would sell you a few lbs of green to cuddle up with on a rainy English afternoon. There is a real comradery among those roasters who have devoted themselves uncompromisingly to coffee quality and the betterment of our industry...We are happy to share.