“Moral courage is a higher and rarer virtue than physical courage". William Slim
mycuppa September 2022 Newsletter
This month, we look at our significant pivot towards fruity coffees almost a year ago and how that's been playing out.
But first, let's get the not-so-good news out of the way.
Coffee prices are not showing any sign of softening soon after touching 20-year highs during the last 12 months.
All reports indicate these high prices will remain until at least mid-2023.
Last month, the global roasting community was shocked by another round of unexpected 10+% hikes on raw coffees. With a weakened USD exchange rate, landed costs hold firm with no signs of retreat or reversion.
Twelve months ago, extreme frost events in Brazil predicted the rising global coffee prices.
Ironically, this time, it's mother nature again with a fear of potential drought as mixed forecasts of limited rains and dryer soil moisture levels during Brazil's critical spring flowering stage keep everyone guessing, adding to the volatility.
By far, the greatest disappointment in all this tension is that theoretical and speculative futures drive global coffee markets with prices set by traders in designer suits at New York exchanges, not farmers in denim and muddy boots.
That game of "shorts" continues (and becomes less believable by the day) using rubbery numbers from origin inventory forecasts. With no good news on crop harvest yields for so long, markets have nothing to help push down pricing.
If a few hundred thousand tons of raw coffee is not "certified" (or officially counted) in the origin inventory, it feeds the loop to push up prices.
It's hard not to imagine there might be some players gaming the system – subtle hiding or short-counting raw stock helps keep pricing high.
Those caught in the middle - roasters, cafes and retailers are experiencing a significant margin squeeze.
Undoubtedly, it is the most challenging market we can remember in 15 years. What needs to be clarified is that few coffee brands have shut, unlike the construction industry, which also has to deal with the big squeeze.
We are doing our best to soften the impact on our customers. Our prices are super competitive, and our bulk special on shipping has already saved customers more than $35,000 in the last couple of months.
The Stuff of SecretsThis month's Secret Label has been another truly excellent adventure.
Taming the wild beast that can be Blueberry allowed us to pull back and refine acids to control the cocoa length and finish. Sometimes, less is more.
The result is delicious and surprising.
We are making a significant pivot to save our coffee blends.
If you have noticed that almost all of our coffee blends have prominently featured fruit elements over the last ten months, you deserve top marks for your keen observation.
Fruit in coffee can be the equivalent of playing Russian roulette. You never, ever know how it's going to end.
Let me tell you straight up: after 40+ years in coffee, chocolate is what sells. Chocolate is the slam dunk for coffee.
So why are we trying to swim against the tide by showcasing more fruits in coffee?
Are we crazy?
Hopefully not; this may make sense once you read below.
The past 12-month period of high raw coffee prices has not been kind on quality. In effect, it's created a "shit-storm" of "shit-coffees", and finding gems has been incredibly difficult.
We have said that a few times now, and it seems to keep stretching boundaries for "how low can you go" on the quality scale.
You can't blame the Importers who ultimately select and choose what gets sold in Australia. They are trying to accommodate the massive gap between rational price and quality grades. Importers must feed colossal demand from coffee brands locked inside "extreme margin squeezes". It's where the majority of the market plays.
These coffee companies with big supply contracts to retailers or wholesales deal with awkward, painful and emotional moments when attempting to lift prices. Some can't, hence the squeeze.
So it stands to reason that some must do whatever is possible, which might mean using lower-grade coffees to survive.
Conversely, when farmers receive enormous premiums for anything resembling coffee, even if it tastes terrible, regular care and devotion are quickly replaced by zombie raw coffees churning like super-market sausages.
It is not unlike Australia's over-heated property market in the 3rd quarter of 2021 when B and C-grade properties, including absolute dumps, were sold for high prices in record time frames.
Those lovely, sweet chocolate lots abundantly available pre-2021 are now as rare as Hen's teeth. It's a universal problem across the industry, not just for us.
Many coffees with some chocolate have a complimentary side dish of other attributes that are not so pleasant.
Like prospecting for gold, we had to find a solution and strategy to combat awful-tasting lots instead of dragging through muddy rivers for that elusive hint of chocolate.
So, we boldly pivoted in October 2021 to the less contested fruity coffee arena.
Risky - yes. Difficult – you bet. Worthwhile - we think so.
Most of our blends and Secret labels have contained higher levels of fruity elements than at any point in the past. In context, we are talking about more than double and, in some cases, triple.
It has been challenging loading up on fruits as it changes the cup dramatically.
We have a strategy that is focused on safety and avoiding risk.
It was never about trying to save money. We spent much more to stay on the higher ground with cleaner flavours and complexity in the cup.
Call it an insurance policy on the drinkability of our coffees. As we don't operate with the safety nets of selling contracts, our business is only ever as good as the last batch of roasted coffee - we don't take risks of "dropping" quality.
September's Secret Label is yet another exciting example of this approach at play.
