Frickin Coffee!!


I have been in coffee now for over twelve years. What is maddening to me, is that the price of coffee (c market) is virtually the same today as it was when I first started. I know all of the excuses that are flung about within the market; supply, demand, drought, speculation, too much rain, overproduction, etc. etc. And while all of these might explain in part the insane volatility in coffee, it does not excuse it.  

What the market volatility does not convey, is the devastation the broken coffee pricing model has on the people growing coffee all over the globe. What it doesn't convey is the greed and profits made by big coffee companies when the market does what it does.

I won't make this a long rant, but it needs to be said. The human toll that the ongoing volatility in the coffee market has is a travesty. I can sleep at night because Transcend does not participate in the c market pricing madness, but far too many companies do, and it simply needs to end. Producers are due, at a minimum, an ability to cover their costs of production and more than that, they are due a standard of living that reflects the amount of work that goes into growing coffee. Alas, I know that I am dreaming of an alternate universe where fairness and decency triumphs over profit and greed, but one can always dream.

If you want to be part of the solution, stop supporting coffee companies that perpetuate the existence of this global crisis. Start asking questions about transparency. Where does the coffee come from, how much did the farmers get paid, what was the FOB (free on board) price for the coffee you are selling? If your coffee provider can't answer these questions, it might be time to start shopping elsewhere. 


Extreme Coffee Prices are not good for the industry

There has been a growing trend of late for unique one-off coffees to sell for extreme prices via online coffee auctions. For example, recently, at the Best of Panama 2018 online auction, coffees sold for as much as US$803 per pound. To put that price in perspective, using that coffee in the cafe, we would likely have to charge $150 per latte to justify the cost of goods for that green coffee. Most of these outrageous prices are being paid by Asian coffee companies, where one can presume that there is a market for these ridiculously expensive coffees. Even with the assumption that is indeed the case, that in Japan customers are prepared to pay those amounts for coffee, I still have a huge problem with the trend of outrageous prices for exotic coffees when the bulk of the coffee sold in the world, sell below the producers cost of production, and keep most coffee producers around the world in perpetual poverty.  

I think there has always been a fascination in the marketplac with high priced goods. I too have participated at times in this marketplace, albeit a wine market, where high prices are assumed to correlate to increasing quality. While this relationship between price and quality are often true, it cannot be said to be a universal truth, and expectations around price will definitely skew the consumer's perception of quality. Many experiments have been done in the wine world, where consumers were presented with the same wine, at different price points, and without exception those who were given a more expensive price point rate the wine a better quality than those who are told the wine is cheaper. So it is not the objective quality of the wine that is at play, but the consumer's perception of the quality based on the price they are told it costs.

Much like fad coffees such as Koppi Luak (the Indonesian coffee consumed by Civets) which achieve crazy prices, these extreme coffee prices only serve to skew the market towards the fadish and the fantastic and diminish the value of coffees that are excellent but still are priced far below their true value.

What I want to see in the marketplace is a consumer base that understands the value of great quality coffee and is willing to pay a fair market price for that coffee, so that vast majority of coffee producers on this planet can live sustainable lives. I would argue that almost every quality coffee shop in North America discounts and subsidizes the cost of coffee to the consumer out of fear that the consumer will not pay the price that the coffee should be sold for.

Unlike cafes in North America, I point to the prices charged for coffee in countries like Norway and Denmark as positive examples, not simply because the cost of living is high in these countries, but because coffee companies are not afraid to charge their customers for the true value of the product that they sell, and their consumers are willing to pay higher prices for better quality. 

Even at Transcend, we are guilty of this tendency to undervalue and sell our coffee at prices below what we ought to. If you factor in the quality and prices we pay for our green coffee, the cost of roasting it, the fixed costs of our staff, our cafes, our labour, etc., our prices should be at least thirty percent more than what we currently charge. And yet, largely because of fear, we maintain a pricing structure similar to that of our main competitor Starbucks, which is a company that has efficiencies and economies of scale that we could only dream of, not to mention comparatively lesser quality when it comes to the coffee that they source and roast.

While it is true that the producers who are paid US$800 per pound for coffee are being handsomely rewarded, we are talking about the sale of 200 lbs of coffee. This is but a thimble in the vast ocean of global coffee production and is not helping in any way to alleviate the chronic poverty model upon which the global coffee industry is built. What is needed is for all producers, globally, to receive truly sustainable prices for their produce, which not only cover their true costs of production but also allow for surplus, so that their families can thrive. This is the ideal for the world of coffee.

Old dog - new tricks

You would think that I of all people would know better? I have been involved in the coffee industry for over twelve years, and I was reminded yesterday of how easy it is to simply accept poor quality coffee.

I am not talking about poor quality in terms of the bean, as Transcend Coffee, under the direction of Josh Hockin, does an amazing job of sourcing quality coffee. The poor quality I am referring to is the shoddy execution of brewing coffee by yours truly at home. 

While I measure my beans every day (60 grams per 1 litre of water) and brew with water filtered by and Everpur system, I was destroying my daily cuppa Joe via my crappy grinder. I have been using the same Baratza Virtuoso grinder for the past six years and it was doing a terrible job at grinding coffee. Why should this matter so much, you ask? Well I have recounted countless times to many people at our coffee tastings during the past decade the importance of a good grinder at home. And like the shoemaker with holes in his own shoes, I have been guilty of ignoring the negative impact my old grinder was having on the quality of my home brewed coffee. 

This came to light recently as I have been dissatisfied with my coffee experience at home, and then randomly get to drink the same coffee at the cafe, flipping the switch in my brain as to what my problem was. This morning I employed a new grinder, and the results were dramatic! The coffee had life, vibrancy and complexity. The flavours were back. 

So you can teach old dogs new tricks, or at least get them back on track. If you are drinking bad coffee at home and want to learn more about how that could change, reach out, or check out one of the home brewing courses at Transcend Coffee. I should probably do some upgrading myself come to think of it, I have been coasting for too long on skills acquired many moons ago.

CBC Summer Coffee Column

This summer I have the privilege of being a columnist on the CBC Edmonton AM morning show. In addition of being sleep deprived out of fear of not being downtown on time, I am afforded the opportunity to talk with Mark Connolly about some timely topics facing the coffee industry. 

You can listen to the column here

This morning we chatted about the fact that the commodity price of coffee has essentially not changed in the last thirty years. If you look at the New York Stock Exchange price for coffee on July 27, 1999 (this was as far back as I could online), coffee was trading at $0.97 per pound. The price for coffee on the NYSE today is currently at $1.10 as I write this post. It doesn't take a rocket scientist to figure out that there is something shockingly wrong with this picture. How is it possible that the price of green coffee has only appreciated by thirteen cents when the cost of everything else has gone up significantly more - for example, the price of gas in Edmonton was $.51 per litre in 1999 and today is $1.25 per litre. Not only has the price of green coffee not kept pace with general inflation rates, the amount of money flowing back to the vast majority of coffee producers has not changed significantly. A troubling reality is that most coffee farmers globally do not get paid enough at farm gate to cover their cost of production. 

There is much debate around what the true cost of production is for coffee producers, and given the global nature of the industry, and the changing economics from one country to another, this is fair. With that said, it is estimated that an average cost of production is roughly US$2 per pound. The c market price referenced above is not referring to high quality coffee, and most companies do pay price differentials for better quality coffee. However, what is clear is that despite price differentials, fair-trade, and countless other certification programs, a vast majority of coffee growers around the world live in perpetual poverty.

This reality has perpetuated during my entire tenure within this industry. What can we do about it? What can be done? As a consumer, you can begin to ask questions of your favourite coffee provider, you can start to inform yourself about the issues facing the coffee industry globally.

Ask your coffee provider if they know who grows their coffee, how much the farmer gets paid, what percentage of the price they pay goes back to the farmer. You could ask if they know what the FOB (Free on Board) price is for their coffee. If your favourite coffee purveyor can't answer these questions, you may want to start shopping around for one that can. Transparency in the coffee industry is really the best mechanism to ensure that coffee producers start to receive their fair share of the money derived from this global industry.

For more information the World Coffee Research site is a great start.

A link to the WCR Annual Report is located here for your easy access.