2006 Best of Panama

coffee competitions, auctions, best of panama, etc

Postby Robert Goble on Wed May 31, 2006 3:11 pm

It is my understanding that no members of the Small Axe group are selling this coffee at prices to recover their investment. I've always understood that this coffee was offered sub-cost as a customer perk, comped out for free as a perk, or sold at a retail loss -- loss leader style.

I'd be curious to hear what the long-term thinking is on these premium coffee offerings, and what the strategy is to develop a viable consumer market for higher priced coffee. Anyone care to chime-in?
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Postby Jimmy Oneschuk on Wed May 31, 2006 4:58 pm

That was Before Clover. Now it can be brewed at a 20 gram dose for five dollars for a 100% markup (if I did my math correctly). Of course, this is just the auction price, not air freight, etc...

-jimmy "5 bags of coffee can be checked baggage, right?"
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Postby fleck on Wed May 31, 2006 5:39 pm

How long till we see one bag auctions and people splitting sacks. Is this a problem? Should it be encouraged as long as the farmers doing the hard work get rewarded?

steve, not sure if you noticed or not, but sweet maria's is part of the small axe buying group. sweet maria's is not a roaster (as their primary business), but sells green coffee by the pound for not much more than they pay for it in auction (just enough to cover handling, etc.). send tom an email, get on the list. this is your solution if you want the opportunity to obtain a small amount of this coffee but can't afford a whole bag. i think that having a buyer like sweet maria's in buying groups such as this is a huge advantage to the smaller guys who want to get their mitts on some super fine green coffees in smaller quantities.

--stephen
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Postby Alistair Durie on Wed May 31, 2006 5:48 pm

"Panama's Best Coffees Set New Records in Online Auction"

http://www.scaa.org/news.asp?article_id=76104439
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Postby Jim Saborio on Wed May 31, 2006 6:50 pm

Woah, to think I roasted this coffee in my kitchen back when it was $21.00 / lb.

Kinda like seeing the Beatles when they were playing weddings.

Matt, you'll let us know of any Clover possibilities in Chicagoland? That sounds like a worthy trip across the lake.

-JIm
-JIm

...aaannndd the Starbucks down the street just got a Clover
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Postby aaronblanco on Wed May 31, 2006 8:18 pm

jimmyo wrote:The exposure from auction lots goes without saying and this is less a question about fair trade, but instead equity in pricing vs quality.


i'm inrigued by that statement--in a good way. can you expound on that a little bit? what sort of equity in pricing versus quality scale can measure the value of a coffee? isn't its value worth whatever the market will bear? so long as people keep paying the premiums the quality, ostensibly, will keep improving...and keep improving farmers' lives. when it gets to be too much, buyers will stop buying--at those prices, at least.

relatedly, fwiw, i think we're only going to continue to see these meteoric prices because this is such a new phenomenon (i mean these seemingly exhorbitant prices for greens) and there are a lot of folks still on the sidelines who may eventually want a piece of the action, for whatever reasons. there's a lot of money out there and a lot of quality minded folks behind it who are ready, willing and able to buy only what they perceive to be the best.

which brings up another thing...well, maybe on another thread another time. sorry for the scattered post. i really am interested in hearing what you mean, jimmy.
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Postby Jimmy Oneschuk on Wed May 31, 2006 9:14 pm

Simple. Look at the coffees toward the bottom of the list: Lerida, Mama Cata, Volcancito, Maunier. These (and others) are usually mid to high 80s coffees - and higher. Mama Cata is usually above 90 - but it took 1.90?

Yes, the top 3 are being rewarded very well, and the next 3-4 (Don Pepe, Ruiz, etc) are approaching what they deserve - but there is a slew of other coffees that ought to be right up there.

The other thing is these coffees (and most CoE) are not commodity coffees - so the question of what the market can bear should not apply because a truly savvy roaster or retailer should have no problem marking premiums on these coffees - and make decent money.

For the record, I should have said pricing inequity, not equity.

Hopefully a roaster/cupper can fill us in on the dynamics of this auction and the pricing...
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Postby Chris Davidson on Wed May 31, 2006 10:09 pm

Not sure what I can offer to this discussion...

We had some ideas at Zoka about where the Top Three Coffees in this Subasta would go, price-wise and purchaser-wise. We ran through the whole routine, three rounds of cupping through all 31 samples. Out of Our Six Finalists, we got two of Our Favorites! Say what you will about exorbidant prices, but I Say "Big Ups" to "Small Axe" for raising The Bar. I can say that after 10 hours of watching The Boards, it was fun to see other bidders go after the same coffees that Jeff Babcock and I agreed were bid-worthy. As far as why the others didn't make it through; not sure. Maybe a poor sample? The top scorers were clear, though, and Felícitaciones to the Buyers who Got Their Coffees!

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Postby Robert Goble on Wed May 31, 2006 11:26 pm

jimmyo wrote:That was Before Clover. Now it can be brewed at a 20 gram dose for five dollars for a 100% markup (if I did my math correctly). Of course, this is just the auction price, not air freight, etc...


Jimmy -- before Clover doesn't mean squat. Even with Clover, no one is selling this coffee at anything but a loss.

Some dirty numbers:

$50.25 green, after 20% shrinkage and all associated roast and packaging costs == $67.18/lb roasted cost

Typical wholesale margin = 40 to 60 % (let's say 50%)
therefore wholesale price of roasted is $100.50/lb

Retail markup is %100 = $201/lb roasted

Even 20grams at wholesale (not counting shop use shrinkage which can be very high) you are looking at $4.50 a cup. Factor in the shrinkage and a retail markup and you are looking at around $10 to $12 per cup.

Anyone currently (or previously) retailing these coffees actually selling them for profit at regular margins? I am very curious as to what the long term strategy is, and how the industry expects to mature the market and culture a consumer who will pay $$$$ for coffee at these prices.
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Postby Steve on Thu Jun 01, 2006 1:22 am

In an effort for people to completely hate me, I'm going to throw this one in too. If the small axe didn't work together then all of those buyers would be on there own, buying these coffee's competing against each other. Is the small axe holding back these prices? (please don't hit me I'm weak and like a kitten), but its an interesting thought don't you think?

Now back to reality my feeling is these guys wouldn't go up to these amounts because budgets wouldn't allow (last year we bought an lot from Brazil, but only 4 bags of the El Salvador number one which was more expensive than the whole lot).

The whole price thing with Brazil and the big coffee and then Colombia following up and making more money across the board was very interesting for me. We are entering a intregueing time in coffee that hasn't happened before. Five auctions in the space of 5 weeks. Budgets are going to be strained and is there going to be a market saturation of fine coffee's. I predict that we will see the high of Panama followed by lows of number 1's for cup of excellence. But what I do think we will begin to see is a shift in wealth amongst many in the auction, better prices lower down than we have seen before (a la Colombia 1st harvest). A long talk with my bank manager telling him whats happening has resulted in me at least having some budget :)
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Postby fleck on Thu Jun 01, 2006 1:41 am

I am very curious as to what the long term strategy is, and how the industry expects to mature the market and culture a consumer who will pay $$$$ for coffee at these prices.

education, education, education.

i could get in my car right now and drive to a grocery store at this hour and purchase a $150 bottle of wine. easily. (well, i could look at the bottle of wine, but i'm about a half-hour too late to legally purchase it in the state of oregon.)

coffee should be appreciated by a broader consumer base just as wine, but we face a number of obstacles to achieve that goal. this is where education is a necessity in broadening consumer specialty coffee knowledge.

challenge #1: flavor discrimination.

summary: because of the simplicity of its preparation method, even an average wine drinker can sample different wines and notice individual subtleties. however, to demonstrate subtle differences in coffees from different regions to a novice consumer base, you MUST prepare the samples for them.

solution: public cuppings/tastings as frequently as you can. do you see coffee in grocery stores? do tastings there just as a wine rep would.

challenge #2: the consumers' understanding of sustainable coffee trade practices.

summary: in general, your average "conscientious" coffee consumer will inevitably choose to purchase a fair-trade certified coffee. not that there is anything wrong with that. but does your customer realize that the coe coffees and relationship coffees on your menu are, in most cases, benefiting the farmers in a more direct way?

solution: when a customer requests a certified fair- trade coffee, train your barista staff to explain the differences between fair-trade coffees, other sustainable buying practices, and exquisite auction coffees such as those from coe, crop of gold, best of panama, etc.

challenge #3: freshness.

summary: as we all know, a bottle of wine will sit around on the shelf for a much longer period of time then a bag of roasted coffee, no matter how special the coffee may be.

solution: don't let your customer buy three pounds of your most expensive coffee just because it is a sale. encourage them to buy less, more frequently, and explain the perishable element of fresh roasted coffee.

challenge #4: preparation.

summary: (this kind of brings us back to challenge #1) let's face it. you buy a high quality bottle of wine as a gift, for a fancy dinner party you are hosting or attending, or just for some other special occasion and it is easy to prepare: you buy it at the store, take it to your venue, open it, pour it. the only thing you really have to worry about is not @#$%ing up the cork in the process. coffee, as we know, is a whole different story. i would imagine that 75% of the time (or much more frequently than that) coffee is not correctly brewed at home by your average home bean buyer.

solution: again ... education. show your customer how to use their french press, moka pot, vacuum pot, etc. give them grind samples. explain and demonstrate the difference of a fresh- vs. pre-ground coffee. most customers are intimidated to purchase an expensive coffee because they are afraid they are gonna #$@% it up when they try to brew it at home.

if a customer knows what a coffee will taste like, how it may pair with what they are preparing, is confident in the coffee's sustainability, and knows exactly how to brew it, then just imagine how many customers you have out there that will buy that $50, $100, $200 pound of coffee and serve it as a special treat for their guests along with desert at a dinner party.

i'm not trying to make this huge comparison to the wine industry, nor am i suggesting the specialty coffee industry should model the wine industry in any way. also, i'm sure i left a NUMBER of key factors off in comparison.

however, the few things i did mention are what i rarely see happening in this industry by most coffee roasters. unfortunately, more time and money gets spent on the fancy rare silk packaging sealed up with wax and then topped off with a fancy branded logo to go along with that fancy expensive coffee you are selling. i'm all about seed to CUP, not seed to pretty package. teach your customers the social importance of these coffees, show them how they can taste, and finally, show them how to do it right on their own.

when the stumptown bought the esmeralda in the 2004 auction, it retailed for $48 per pound. it sold out in three days.

--stephen
Last edited by fleck on Thu Jun 01, 2006 2:35 pm, edited 5 times in total.
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Postby Klaus on Thu Jun 01, 2006 1:53 am

Fleck wrote:I get in my car right now and drive to a grocery store at this hour and purchase a $150 bottle of wine. easily. coffee should be appreciated in the same manner and the only way to do that is to bring the consumer closer to it.

And that's exactly what we mean by raising the bar. All of the sudden the coffees that before has been "expensive" in the eye of the consumer is suddenly not all that expensive. It's about changing the way people think about these coffees - sure they won't drink it everyday as their morning cup, but whenever they feel like treating themselves (to a tasting experience) they can make a cup of one of the best coffees in the world. And getting the 'best in the world' in coffee is still nowhere near the costs of getting the best in the world of wines.

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Postby Alistair Durie on Thu Jun 01, 2006 2:09 am

Dasein wrote:Retail markup is %100 = $201/lb roasted


by your numbers, $100 for 8oz of coffee, this would be just the right amount of coffee for two people (8oz cups) to last for 7 days.

for the experience of sharing one of the worlds most magical and rare delights in seven sittings at $7 per person...

its a deal!
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Postby trish on Thu Jun 01, 2006 3:57 am

nick wrote:The Sma-roo Ack-suh strikes again!!!

I had a funny feeling that Double-R was involved somehow... when Ric was talking about the Esmerelda in Charlotte, it was like hearing a pre-teen talking all googley about Rick Springfield or something. :D



Make no mistake, the new hotness at Groundwork is Aleco. He was at the judging and all that too. I'm all googley for him. ; )
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Postby Jimmy Oneschuk on Thu Jun 01, 2006 6:40 am

Dasein wrote:Jimmy -- before Clover doesn't mean squat. Even with Clover, no one is selling this coffee at anything but a loss.

Some dirty numbers[...][/b]

Even 20grams at wholesale (not counting shop use shrinkage which can be very high) you are looking at $4.50 a cup. Factor in the shrinkage and a retail markup and you are looking at around $10 to $12 per cup.

Anyone currently (or previously) retailing these coffees actually selling them for profit at regular margins? I am very curious as to what the long term strategy is, and how the industry expects to mature the market and culture a consumer who will pay $$$$ for coffee at these prices.


Don't put words in my mouth - the figures I mentioned were roaster-importer numbers, not wholesale numbers.

Even so, 10 to 12 per cup is nothing for esmerelda. I would have paid that gladly at Hines during the SCAA/WBC (even though sanders roasted it a tad dark :twisted: ).

But instead he gave me a pound for free...
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Postby trish on Thu Jun 01, 2006 6:45 am

I don't get the $67.18 roasted cost....please explain.
Shrinkage for all of these cats should not be more than 18%, or we'll have to call the cops on them.
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Postby Robert Goble on Thu Jun 01, 2006 6:48 am

Fleck wrote:
I am very curious as to what the long term strategy is, and how the industry expects to mature the market and culture a consumer who will pay $$$$ for coffee at these prices.

education, education, education.

i get in my car right now and drive to a grocery store at this hour and purchase a $150 bottle of wine. easily. coffee should be appreciated in the same manner and the only way to do that is to bring the consumer closer to it.

when the stumptown bought the esmeralda in the 2004 auction, it retailed for $48 per pound. it sold out in three days.

--stephen

stephen -- that's the first I've heard of it being retailed for something near cost. Any idea what % of Stump's total allotment was retailed?
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Postby Robert Goble on Thu Jun 01, 2006 6:50 am

trish wrote:I don't get the $67.18 roasted cost....please explain.
Shrinkage for all of these cats should not be more than 18%, or we'll have to call the cops on them.


I used 20% shrinkage and added $3.50 to $4 for all other costs (per lb).
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Postby Robert Goble on Thu Jun 01, 2006 7:12 am

jimmyo wrote:Don't put words in my mouth - the figures I mentioned were roaster-importer numbers, not wholesale numbers.

Even so, 10 to 12 per cup is nothing for esmerelda. I would have paid that gladly at Hines during the SCAA/WBC (even though sanders roasted it a tad dark :twisted: ).

But instead he gave me a pound for free...

I was specifically addressing your stated assertion that because there was a Clover that this would mean these coffees would and were being retailed at anything other than a loss. (which I still think is the general situation).
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Postby fleck on Thu Jun 01, 2006 7:21 am

for some reason only a part of my whole post got posted last night. weird computers. look up because a large chunk was missing.

oh and...
And getting the 'best in the world' in coffee is still nowhere near the costs of getting the best in the world of wines.


word klaus.

have a great thursday,
stephen

ps the esmeralda was $21 green in the '04 auction, to answer that retail cost query.
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Postby nick on Thu Jun 01, 2006 8:59 am

From globeandmail.com, "Panamanian specialty coffee smashes world price record"

Smashes?!? 0.50USD is a smash?

Mmm... okay. :?
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Postby K.C. O'Keefe on Thu Jun 01, 2006 10:50 am

Anyone see the bottom of the list on the panama site:
Auction Total: $161,566.79
Average price per pound: $4.72

A pretty good average I must say, so argument that only top coffees get top price?

OK, stretched by the top coffees, still lets do a count. Top 10 all over $4; Top 18 all over $3.20; Only 5 of 31 under $2.07.

Viva Subastas!
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Postby Peter G on Thu Jun 01, 2006 11:23 am

As far as equity vs. quality goes....

We must remember some basic economic principles:

1. as has been pointed out, in an auction situation (or any free market) price discovery relies on BOTH a willing buyer and a willing seller. If all parties were not happy with the price, it wouldn't have happened.

2. Quality is one factor in this coffee's stellar performance, but scarcity is probably a more important factor. There is only one Esmeralda Especial, and it has proven itself as a thouroughbred. It has dominated every cupping contest it has ever entered. All agree that it is absolutely unique in Central American coffee. And, there were only 5 bags in the auction. That means that there are only 5 bags of the 1st place-winning Esmeralda in the world this year. The seller has very shrewdly controlled supply, which has a number of effects, including limiting the total financial commitment these roasters have to make.

In all precious commodities, scarcity plays a big role. Is platinum prettier than gold or silver? Perhaps not, but it is scarcer and therefore more expensive. Is a Picasso a million times more beautiful than a painting from a more obscure cubist? Perhaps not a million, but the price might be a million times higher. Nobody ever said there was (or should be) a direct relationship between quality and price.

The question about buying groups (like the Small Axe) holding down prices... None of those companies might be able to afford a $30K coffee buy, but they apparently CAN afford a $6K bag. It is their cooperation that makes $50 per pound coffee possible.

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Postby Steve on Thu Jun 01, 2006 11:30 am

The question about buying groups (like the Small Axe) holding down prices... None of those companies might be able to afford a $30K coffee buy, but they apparently CAN afford a $6K bag. It is their cooperation that makes $50 per pound coffee possible.


Couldn't agree more peter, but is this to the detriment of the lots lower down the auction. If one company was buying one lot then the wealth may be shared all over the map. That 6k may have gone to five farmers. But you got me on the seller and buyer principal.

Steve
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Postby Aleco on Thu Jun 01, 2006 12:18 pm

Wake up and smell the Esmeralda, Steve. It's sweet, not bitter.
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