November 2013 - are retail prices of coffee beans a good indicator of quality ?

Date Posted:1 November 2013 

Are retail prices of coffee beans a true indicator of the quality ?

It's a battle we fight everyday - perception.

Why are we so cheap ?

Why are your coffee beans almost half the price and twice as fresh as my local provider ?

People ask us these questions everyday, surely they must think we are sourcing cheap, low-grade raw coffees !

There is a natural tendency inside every human to summon upon traditional, if primal, laws of value - price being a typically indicator of implied or inherent quality.

Surely it applies to everything in life - cars, electronics, etc.

Is it really the case and does it apply to roasted coffee beans ?

We can categorically confirm that retail or selling price is NO indicator of quality when it comes to fresh roasted coffee beans.

The pricing we set is controlled by me - the owner of mycuppa - not the industry, not any regulators, not the government, not the distribution channels or retail sector (supermarkets), not the competition and definitely not the source and supply costs.

Whilst it's true that at different times something like a Sumatran is priced higher than a Brazil because of differentials in origins sourcing costs. Programs like FAIRTRADE and Organic also add pricing premiums and levies.

Background

I made the decision 8 years ago to run a low-margin, just-freshly-roasted coffee operation that would enable people all around Australia to enjoy that "premium coffee" experience in their home or office.

The only way this could work is if we setup a fast-track system to maintain freshness and quality, deal direct with our customers and very importantly we had to remove the retail and distribution layers that cause dilution and confusion of the value-proposition.

We could see that the coffee industry in Australia was unstructured, un-regulated and distribution was highly fragmented. Coffee is like wine, except that wine is ridiculously controlled and influenced by distribution channels (primarily the Supermarkets who own the majority of liquor outlets).

Fortunately, coffee distribution has some independence at the moment and is likely for the foreseeable future.

The number of new entrants to the coffee roasting industry in Australia is staggering. It has become a modern-day gold rush (although we do not know why as it's too competitive).

Almost every experienced barista wants to run his own coffee roasting business. The challenge with this view is that the market is completely saturated with up to 900 labels now available in Australia (inclusive or domestic and imported brands).

What does this mean for the coffee consumer ?

Very simply.........confusion. Too many brands, too many promises, too much hype.

We believe the tipping point has well and truly occurred.

As at late 2013, the industry has way too much capacity (supply) to service the demand.

Every roasting label is now promoting themselves as Specialty - even the long-term players who have been stuck in their old-school ways for 20+ years are scrambling to re-brand themselves as specialty roasters to try and cash in on the modern movement and shifting consumer trends.

So, let's get back on track - is price an indicator of quality when it comes to roasted coffee beans ?

I will start by breaking this up into a few sections - sourcing, roasting, service/value-add.

Sourcing Green Beans

This is where the game can be won or lost.

In my typical 90+hr week, almost 20hrs is dedicated to sourcing raw coffee.

8 years ago, I must confess I was utterly guilty of looking for "bargains" - money was tight, standards were average and I had a mis-guided belief that I could turn something average into gold through pure will-power and super-human skills - boy, was I so very wrong !

Many years of valuable lessons have been learnt - buying quality results in benefits and gains in the longer term. We have been on the quality bandwagon for more than 5 years now and there is literally no ceiling when it comes to sourcing quality.

We have also seen the competition step-up. These days there are contenders everywhere, so you need to be on the top of your game and when it comes to green beans - we only pick the best - budget is never a consideration.

The embedded legacies of traditional coffee companies holds them back. You see, they have strict budgets to operate within - because they have spent large amounts of capital to lock-in cafes with equipment, signs and other so-called "freebies" meaning they are left with having to purchase cheap coffee in order to turn a profit - all their margin is used to service their debtors (cafes not paying their Invoices) and suppliers of freebies.

I'm glad we are free of that market - it constrains your thinking and controls your behaviour.

In the last 12 months we have stopped putting farm or estate names on our coffees - unless we have the entire lot that was imported into Australia. The reason is because there are a lot of lazy coffee roasters out there that just copy what you are doing - they will not bother themselves with roasting, cupping, evaluation and all the scientific analysis required to correctly assess a new prospective coffee.

98% of the raw green coffee roasted in Australia comes from just two(2) coffee brokers - one in Sydney and one in Melbourne. We purchase 99% of our coffees from these brokers and almost all of the coffee roasters in Australia do exactly the same.

There is so much delusion, pretension, hype and "smoke and mirrors" in the coffee industry - I've seen coffee companies claiming some rare & exotic, exclusive type of coffee only to see the commodity, generally-available raw coffee on pallets with their name on it in the truck that delivers to us - as per above, there are just 2 companies supplying just about everyone.

Roasting

This area remains a key differentiator and is a high investment area for us. Recently, we have revised all our profiles using advanced optimisation tools.

How you do it and how your platforms are configured is still a critical factor in the final result - roasting makes a real difference, but the gap is closing.

We run two(2) very different roasting plants and both are tuned to such a precise state we know the coffees running through them will be the absolute best we can achieve at that time.

Service and Value-Add

The final cog in the solution.

As at November 2013, we continue to operate in a demand-pull model.

That is, we roast based on orders and not to stock.

Our scale is now major, so we can comfortably roast 16 to 20 different coffees each night, 6 nights a week to ensure we are always sending fresh roasted coffee beans to our customers daily.

Speed is the other compliment to service. It's critical that we process your orders fast and have your parcel out the same day. Currently, we run at a 99.5% fulfilment rate which we think is pretty special.

We can only achieve that with the fast-paced schedule that runs from 8am through to midnight, 6 days a week - something our competitors simply cannot and will not match that level of coverage.

Because of our freight volumes, we lodge directly into a distribution centre each day - meaning our parcels have reduced the first-hop leg that would normally delay parcels by up to 24 hours.

We don't understand how our competitors can charge $50 a kilo for coffee that is not as fresh, or roasted with the same precision as our computer-controlled plants.

Is it hype ? have they done a good job at their marketing by convincing you to pay a lot of money for something that is rare and exotic ?

How would you know what is being promised is actually what was delivered - it's impossible !

We provide honesty, transparency and the highest-quality coffee to our customers at a fair and reasonable price.