STiR coffee and tea magazine

STiR coffee and tea 33 Understanding which regions care about processing helps sellers more effectively market their coffee. Coffee varieties shift auction prices more than quality attributes which are too subjective. Looking for this type of data, differen- tiated by attribute, would be challenging if we were pulling it together from a wide variety of sources; the hyper-efficiency of the specialty coffee auction is another of its positive attributes. Instead of price ne- gotiations which drag out based on bank- ing, logistics, quality approvals, and more to 30, 60, 90, or even 120 days, buyers have a limited time frame (usually 12 to 72 hours) in which to make their deci- sions, thus giving all parties concerned rapid access to the auction benefits and information. Lastly, auctions serve as a hub for in- novation, allowing coffee producers to rapidly trial new processes, varieties, mar- keting angles, and more, and get real-time feedback from actual buyers. This leads to increased brand building for these pro- ducers, a further benefit. Auction-Derived Data So what do the auctions run by M-Cul- tivo for very high-end coffee originating in farms from Panama to Yemen have to tell us about pricing in the target markets of North America, East Asia, Europe, and the Middle East? First, process matters less than we think. "We view washed process coffee as the control for the data," Paparelli says, "and then factor for honeys, an- aerobics, and naturals." Data shows that anaerobic coffee is the only processing type which moves the needle for pric- ing in North America, while in Europe, interestingly, anaerobic coffee demands lower prices than in North America. The only buying region where coffee process seems to meaningfully affect price across the board is the Middle East—producers take note—process really matters there. What about variety? That's another critical pricing attribute measured by M-Cultivo. According to Paparelli's re- search, there are really only two variet- ies which have a relatively universal re- sponse, and in opposite directions from the control, which is a pool of "other va- rieties". Geisha variety coffee continues to do well and command higher prices than other varieties and Catimor variety is universally panned with lower prices than most across the board. Otherwise, there isn't a consistent read on whether Bourbon or Typica, Catuai or Pacamara wins out over the others, with the excep- tion that the Middle East consistently looks for these novelty coffees. However, Paparelli urges caution for producers aiming to enter that market, noting that new varieties take at least two to three years to imple- ment after planting, the Middle East market is tough to open to outsiders (leading to high cost of customer acquisition), and low volume is sought by these buyers. Although many specialty-focused buyers and sellers of green coffee assume that "quality" attributes signal high prices automatically, Paparelli points out that's not necessarily the case. He says, "This isn't true. Quality is super subjective." In fact, he adds, brand position is more important than the quality of coffee. "So if your coffee has various characteristics— processing method, variety—you've got to be sure that you're targeting the right market." Downsides of Auctions All this information might influence the reader to immediately sign up to host an auc- tion through M-Cultivo, but auctions aren't for everyone. They are not always profit- able or successful, and can be incredibly unpredictable and risky. Yes, a coffee might be heralded globally and command the highest price of its category, or it might not even find a buyer. This may leave the producer out the cost of production and overextended financially. Like any methodology, the auction is merely a tool and not an end to itself for business owners. Coffee professionals throughout the global coffee supply chain would do well to continue paying attention to the pricing data revealed by coffee auctions, while fitting it into the overall picture and avoiding leaning too heavily on a single source of data. The continuing effect of the global economy allows new players to establish themselves through differentiation, driving innovation. Paparelli concludes, "Coffees match to markets," and this is one of the ultimate benefits of the globalization of data: buyers and sellers can connect in increasingly democratized ways, and that's good for every- one, regardless of affiliation.

• Cover