August 2021 - Exploring a different impact of the pandemic, Secret Label sweet nectar. Roasters rant takes on the unethical.

Date Posted:5 August 2021 

 

“Any tool can be used for good or bad. It's really the ethics of the artist using it." - John Knoll

 

 

August 2021

Welcome to our subscriber newsletter.

With many parts of Australia enduring short or longer lock downs over the last month, we have certainly seen elevated levels of ordering, but it's nowhere near the wild spikes and crazy rollercoaster's from last year.

Freight networks on the surface appear to be avoiding the chronic, protracted jams so often experienced last year, but there will always be areas where transit times are taking longer, especially during lock downs.

Delivery agents are telling us they are continuing to process higher volumes of parcels, so perhaps things are more efficient or scalable now, but the only truism in parcel logistics is that an imminent disaster is hiding just around the corner.

There has been one particular aspect which has become glaringly obvious – general delivery standards continue to decline as agents are either rushed or lazy and not even trying to physically deliver parcels, instead forcing receivers to collect.

It's a really frustrating issue happening across both AusPost and Sendle, but it seems AusPost has dropped their standards more dramatically in recent times as they continue to push more of the parcel delivery last mile work out to sub-contractors in ongoing efforts to bust their highly militant, Unionised workforce.

With contractor delivery agents paid on different metrics that seemingly never link with service quality or the customer experience, it's only natural when humans are not incentivized to perform for the right metrics they lapse into bad habits and cheat.

So contract delivery agents are more frequently failing to try and deliver parcels to the receivers door because it's a lot easier to drive a van along the street, sit for a short while to play with a phone, then go back to either an LPO or a collection point and drop off a load of parcels.

In effect, they are gaming a system when parcel delivery companies don’t care about customer satisfaction - that's right, they can get away with bad performance by hiding behind the sender. With just a few providers there's no real competition and a huge base of captive customers called merchants that can't go elsewhere.

Unfortunately, calling or emailing us to complain about why your parcel wasn’t delivered as requested to your door step won’t help I’m afraid – all of the parcel delivery companies stopped listening to merchants long ago, truth is they never listened in the first place……. and they remain a law unto themselves. The only way to beat bad freight service is to boycott their shipping brand by selecting an alternative. Please don't believe any retailer has power or influence over freight providers, it's just not possible.

Full steam ahead.

It's interesting that Australia's economy keeps on powering along and growing despite all the lockdowns and it seems at odds with the narrative peddled by media organisations claiming businesses everywhere are on their knees (which I’m sure there are valid cases and situations, especially in hospitality, education, event management, travel and entertainment, so this is not an attempt to trivialize those that are doing it tough).

With all the negative news being published since the pandemic, we thought it would be nice to see some positive signs that not everything is failing in the economy.

If you live in Melbourne or for that matter any of the other capital cities in Australia, there are constant reminders that things appear quite busy – roads are congested (except in CBD's) and there is also the never-ending stream of too many large trucks jockeying for a temporary parking space on roads around the industrial estates - all day, every day, waiting to get into a business loading area.

We can see that every business in our industrial estate along with the commercial districts nearby are running flat out and have done since the pandemic started, even during Melbourne strict Stage 4 lock-downs and ring of steel in 2020, these businesses were stilling running.

According to the company owners I speak with in our area, many are struggling to keep up with demand and the large companies across the road from us are so busy they need to work every weekend.

Our entire industrial area has the appearance of boom time, there's no street parking when 2 years ago you could play cricket on the roads. Even Melbourne’s declining suburban strip shopping areas have experienced a thriving spurt of growth after years of increasing vacancies, the tide has definitely turned outside of the CBD.

A once reliable indicator of the economy were commercial property transactions, not so much the office space segment which is still largely contracted, but the industrial and semi-industrial areas where most of the goods we all purchase are processed.

In our region there are almost no warehouses for sale or rent despite the number of warehouses in the estate more than doubling in the last 5 years. It seems that neighboring industrial estates are experiencing similar capacity challenges making the entire industrial segment across Melbourne far tighter than the residential market.

After wasting 2 years trying to buy another warehouse nearby it’s a similar story to some segments of the residential market – limited by no stock. Maybe the owners of warehouses are hanging on for rapid capital gains to match the overall property market, but there's also a good reason most commercial renters are reluctant or terrified to think about moving with no choices available. The industrial market has frozen.

Secret Label.

This month's Secret Label is all about jaffas....... those sweet solid orange flavored chocolate balls of deliciousness.

We've gone for a "coating" effect and you will taste the beautiful chocolate long after the cup has finished - tempting you for a second.

Notes of plum, berries, caramel, orange, strawberry, cocoa, black tea with amazing brown sugar sweetness.

Coffee prices surge.

We had mentioned it a few times throughout the year, but never did we contemplate how quickly coffee prices would rise.

In February, it was a near-drought in Brazil affecting the growing conditions of the world's largest producer in an already off-cycle season, then came the 8 week complete shutdown in Colombia, the world's #2 arabica grower and finally Brazil suffered the most severe frost since 1994 on July 20th, destroying more than 20+% of next season's crop.

The response to the series of major shock events has been swift and ruthless with the global coffee index almost doubling since the start of 2021, although it’s retreated slightly but still up around 60% since the start of this year.

There's now a mad scramble taking place inside of the coffee industry - prices have gone nuts and we are predicting a minimum $2 per kilo hike for the remainder of the year and into the 1st quarter of 2022.

When it’s unethical to keep on promising ethical.

Roaster's Rant is back and he's on a rampage with a war on vague, feel-good platitudes lacking any real substance or relevance.

It's the lazy marketer's abuse of the term "ethical" that's got his goat.

Throwaway lines attempting to position the same, boring products as holy saviors of enslaved and impoverished coffee farmers – creating the illusion they are doing good when in fact they are doing the same as everyone else.

For reasons that don't appear obvious, most of the coffee companies in Australia feel a compelling pressure to use the term “ethical” as if it’s a must-have essential inclusion in their marketing spiel, just like “specialty” was essential speak 6 years ago and “100% Arabica” 10 years ago.

One “internet coffee company” proudly pinned a medal on their own chest by declaring they sell “Australia’s most ethical coffee” without even explaining how or why they managed to achieve the Ethical Gold Medal.  Beats me how they managed to sneak inside of every other coffee company to measure themselves against the other 3,000 brands to claim this mythical holy grail.

This just proves how absurd it is to even utter the word ethical without backing it up.

Read Roaster's Rant below to learn why you shouldn't be fooled by companies peddling fake "ethically sourced" credentials.

 

 

August 2021 Secret Label

August's Secret Label is all about jaffas....... those sweet solid orange flavored chocolate balls of deliciousness.

Notes of plum, berries, caramel, orange, cocoa, black tea with amazing brown sugar sweetness.

There is something rather special about pairing orange with milk chocolate.

The creators of jaffas new this and it's a delicious contrast between the sweetness of both elements.

We added in a few other notes like plum, caramel and some berries to give it added vibrancy.

Loving the silky smooth sweetness that builds in the cup.

 

 

Lazy coffee marketing - abusing the term "ethical"

Irrespective of your beliefs, we all have various emotional triggers around ethical concepts.

Sometimes it is a behavioral instinct that drives us to change to a more socially conscious alternative, or it might be the ways in which you have been unethically treated as a customer.

It's not a new trend and according to marketing research firms consumers have been making these sorts of choices for almost 50 years, although to some degree activism is on the rise in recent times.

As a modest share market investor, I tend to focus my small investments into themes that resonate with my personal views on the economy and environment, whether it returns the highest profits (or in some cases losses) doesn't really matter as the strategy is driven by a conscious desire to do good for the longer term which sometimes means avoiding investing in companies that do the wrong thing - like retaining JobKeeper handouts when their profits increased or if they have been caught out acting immorally, e.g. Financial organizations charging fees for no service.

A few months ago I drafted a "Roaster's Rant" about how every man and his dog trying to flog coffee all fell into the same stupid hole by over-using the term "ethical" in their marketing.

But I decided not to publish this rant as it did make quite a few harsh points that I felt at the time nobody was really interested in hearing given the ongoing negativity generated by the battle to survive the pandemic.

However, a recent article by Ever Meister in the popular US online cultural blog Salon managed to fire up the Roaster's Rant again as everywhere we look there's far too much lazy, patronizing and pathetically dishonest claims being made by players of every size in desperate attempts to prove they are doing something different from the rest of us when they seek your undivided attention to buy their product because it's somehow "ethical".

It's so easy to claim "ethical" without proving how it's ethical, just like the person that claims they are honest because they say so, whilst the wise heads amongst us know that when a person is compelled to vigorously declare their honesty credentials, it's generally a warning sign they shouldn't be trusted in the first place.

This lack of explanation in clearly describing how and why a product is more ethical than other comparable products available (which includes everyone else) allows sellers to get away with brazen, unsubstantiated claims.

So let's take a peek behind the stage curtain and peer into the Trump-like falsies that continue to plague the coffee market, not only here in Australia but all across the globe.

Context please

It's interesting to note that coffee is seen as a "luxury" yet the raw or green coffee (unroasted) is traded as a commodity - perhaps that's an important insight into why there's so much distortion.

Coffee farmers are some of the poorest humans on earth with many living below the poverty line, especially in smaller regions like Africa and some Central American countries.

Returns from coffee farming have been so low over many years that many farmers have abandoned coffee and with increasing challenges from the unpredictable weather patterns caused by global warming, it's no surprise that the majority of small holder coffee farms (which makes up around 85% of the global coffee supply) are owned and run by farmers that are 50+ years of age.

When you consider the average coffee farmer is over 50 with many younger generations seeking higher paid jobs elsewhere it's not unlike Australia's decimated dairy industry - irreparably damaged by the greedy monopolistic supermarkets through predatory, unsustainable pricing of cheap milk at the expense of dairy farmers economic living standards.

There has also been some fundamental shifts over the last 5 to 6 years in the more technically advanced and mature coffee origins like Costa Rica and Panama with coffee plantations being sacrificed by conversion into more lucrative real estate developments, the concept of "ethics" as applied in these situations is rather disconnected from the illusion of coffee being caught inside a poverty trap or worse, borderline slavery.

As we are just over halfway through 2021, the global coffee price index has literally doubled in the last 6 months and the market power has well and truly shifted significantly into the hands of sellers for what is likely to be the first time in 7 years with coffee farmers and exporters being reluctant sellers and disinterested in trade contracts as they continue to hold out for higher pricing.

Some may call this payback or retribution that is long overdue after such an extended period of low and questionably unsustainable pricing and the recent rising market may appear as a basic correction and re-balancing of the distributions in profits throughout the supply chain rather than specific profit taking in any segment.

Why is it so easy to abuse "ethical"

20 years ago, coffee marketing was all about images of beautiful people and gorgeous surrounds (and in some countries this style of advertising still exists today), however the modern coffee marketer's most potent weapon it seems is a lazy term called "ethically sourced".

Why is it so lazy ? Well for a start it's too easy to throw "ethical sourced" out there, a feel good hook that can rarely be qualified or challenged. In other words, you can say whatever you want and get away with it as there's no "ethical police" to catch them out.

Heck, most don't even bother to explain what they really mean when they claim "ethically sourced" and instead just borrow a few logos from Google thinking that will adequately fool the punters. It's the 5 minute marketing hack to success in the coffee industry.

Imagine a new idea for reality TV............cameras chasing those coffee spruikers down the street into warehouses where the same coffees we all buy are traded using the existing supply chains that have been in place for more than 100 years.

Perhaps when they claim "ethically sourced" it means they occasionally pay their bills on time (sorry, that's a Hospo in-joke), or at all.

It's just one of many carefully constructed smoke screens to protect over-priced retail products from being revealed as nothing other than plain and basic commodity goods enrobed in alluring, spanky-pants packaging.

Truth is that almost nothing in the coffee industry is "ethically sourced" in the purist sense as there are many vital players requiring a "clip" in multi-faceted supply chains and the myth of coffee supply being akin to slavery is an outdated and invalid assumption.

Coffee induced poverty traps are not how the modern supply chain functions, yet deceptive marketers are preying upon consumer conscious by harking back to a long lost past.

I've been involved in coffee for a long time and despite all my contacts and knowledge I don't know of any sellers of raw coffee that are regarded as "unethical" - they all have to follow the same process in trading coffee, uphold high standards in quality and risk management and let’s remember for a moment they actually have to deal with farmers that have immense pride in their crops.

The suggestion of "desperation and exploitation" within coffee supply chains is a carefully orchestrated emotional trigger.

There's really little opportunity for exploitation as there's no extreme disparity existing between the buyer and the seller. Some would argue that's precisely what's happened over the previous 15 years but modern coffee farmers are much better informed these days in understanding the highly volatile nature of global coffee pricing, differentials and how to value their prized crops.

It’s a complex array of relationships and influences driven by accessible market movements rather than forced exploitation.

Not all coffee certifications have real purpose

With so many players involved in the supply chains for coffee, they all form an important role to manage the inherent difficulties and risks of trading goods unseen and unverified, from remote and often dangerous countries.

These significant risks are the same reasons why participation levels in direct importation is well and truly beyond the reach of almost all coffee companies in Australia except a really small handful of very large players.

When you see coffee brands touting their direct trade credentials, most of them are indeed stretching the truth by attempting to appear "closer" than they really are to the sourcing, just like standing next to someone famous and hoping for credibility. Mostly, it's about generating the unproven claims their coffee is unique and exclusive and they will certainly try and get away with charging you more for the privilege.

As we have stated before, the only trusted ethically sourced program applicable to coffee products is the FAIRTRADE system.

Even the FAIRTRADE system is just a basic floor price on coffee, plus maybe if the farming community is lucky they might receive some support aid like education, etc.

FAIRTRADE certainly does not guarantee a basic level of quality and this remains a specific weakness in the FAIRTRADE system as we pay higher premiums for what can be rather average or mediocre quality coffees.

So it raises one of the more deceptive and grotesque attractions for the grand illusion of "ethical" - that paying higher prices naturally infers a more ethical product.

Unfortunately, the price of a coffee has zero relationship to ethics, in fact it's by far the most manipulated variable sellers have in marketing toolkit by claiming the farmers are paid more and consumers are yet again fooled into paying higher premiums when there's no assurance or guarantee those premiums are being passed back along the supply chain. Nobody is holding them to account.

Everything else is just a hollow promise or worthless certification. The biggest con are supermarkets and large retailers hiding behind the toothless Rainforest/UTZ certification as it provides them with a "feel good" logo for literally zero effort and almost zero net cost.

Only the FAIRTRADE system measures and validates the flow of goods from the farmer through to exporters, importers, brokers, roasters and the end consumer sale.....it's painstakingly tracked right down to the kilo (with the emphasis on pain).

The Rainforest Alliance/UTZ shambles is still trying to work out how to put systems together for tracing purchases - in the last 12 years they still haven't got their act together. Rainforest Alliance also don't have auditors on the ground here in Australia that physically visit coffee companies to verify purchase records and sales invoices, so that means it's open to easy "bait and switch" routines by participants.

A reason many coffee companies in Australia don't play in the FAIRTRADE system is because they can't cheat or rort this system in the same ways it's possible with other certification programs.

Sure, there are plausible excuses like "it's too expensive, too difficult, requires admin effort or not entirely fair for the farmers, but the reality is many coffee companies are not prepared to "open their books" to independent scrutiny.

Raises the question - what do they have to hide ?

It seems that claims of "ethical sourcing" are just a made up story, especially some of the "direct trade" links coffee retailers may claim to use.

Less than 1% of Australia's 2,500 coffee brands self-import part of their raw coffees and those that do are the really big players that tend to only purchase cheaply by the container as every cent (or in most cases dollar) saved works out in tens of thousands of dollars more profit. They can afford to take risks and losses that are high stakes.

Even long-established coffee importers get caught out with containers of "inferior" or sub-standard coffee they can't sell. Transporting fresh raw coffee is not easy, it has to travel through multiple weather zones, hot, cool, humid, etc. and this affects the quality.

Almost 1 in 5 containers of raw coffee landing in Australia have noticeable differences between the pre-shipment and arrival samples. In other words, the trip from origin to Australia is never going to be kind to coffee quality.

So it's hard to believe there is anything ethical in direct trade sourcing when value-added participants are cut out of the supply chain and that my dear readers in a nutshell is the only legitimate reason self-importation of coffee exists - to save money by not to giving it away to pay intermediaries, 3rd parties and multiple players, it's all about bypassing or avoiding the various "clips" along the supply chains.

The other 99+% of us all use the same import traders, so when small coffee companies claim they are using "ethically sourced" practices you can see now it's just a marketing ploy that is meaningless and hollow.

Real, genuine, direct trade coffees are almost non-existent these days so I can't help but laugh every time I see a small coffee brand promoting their imaginary Direct Trade sourcing by making it out to be something special and real.

Almost none of them can buy containers of coffee at a time (22 or 44 tons), which is precisely how direct trade works. These small brands have neither the storage space, cash flow or the risk profile to support their wild claims of buying direct from farmers - it's just pure fantasy.

Hopefully, the world will soon tire of the "ethical" over-use and see it simply for what it is - a vague feel-good platitude lacking any real substance or relevance.