December 2008 by CoffeeTalk Magazine

December 2008

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Welcome

e are proud to bring you this compilation of articles written by some of the brightest and most inďŹ&#x201A;uential leaders in Coffee. As

our industry moves into 2009, we carry the legacy of 2008, a year that demonstrated just how dynamic, and volatile, coffee can be. Kerri and I are privileged to watch the sweep of events during 2008 and, in small ways, to also play a part. We exist in a global village predicated on mutual understanding. The challenges of agriculture in underdeveloped countries does not exist exclusively from the challenges of the specialty roasters and retailers. We are all locked together in a circle of dependency. In this publication, we present you with views from many different perspectives, each with unique and very personal opinions on the course of our industry. Taken as a complete piece, these articles will provide you with a broad view of the direction and purpose of the coffee industry during 2009. We hope you enjoy, and we look forward to next year.

Miles Small Editor, CoffeeTalk Magazine

ÂŠ copyright CoffeeTalk magazine 2008

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How to use this document T

his State of the Industry Report is a document of exceptional value if viewed as a whole idea. Each article is a unique perspective by an industry leader. Their topics address key qualities and challenges they, or their companies, professionally face. If you decide to cherry pick a few articles to read then you will be greatly enriched. However, we recommend that you read the entire document. If you do, you will ﬁnd a deep three-dimensional view of our Global Industry and gain insights into the interactions and shared responsibilities we all play in continuing the success of specialty coffee. Maneuvering around the document is easy. The report is in .PDF format and is easy to download to any computer. You will require Acrobat Reader to view it on your computer. If you do not have Acrobat Reader by Adobe, you can download a copy from Adobe free at http://www.adobe.com/. The Table of Content pages are hyperlinked to their matching stories. Move the hand cursor over the title of a story, when the hand turns into a ﬁnger, click your mouse and you will pop to the article. At the bottom of each article is a navigation tool that, when clicked with you mouse, returns you to the Table of Contents. Of course, you can also scroll through the document using your scroll bar or the ‘pages’ tab on the PDF desktop. You can easily print any or all pages of the document. Simply go to ‘File’ click print, and follow the prompts.

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his extraordinary document would not have been possible without the support and encouragement of the companies that sponsored advertising to cover the report’s costs. We appreciate their support of this report and encourage readers to support these sponsors too.

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Table of Contents and Contributors Welcome ...........................................................................................................................................................2 How to use this document .................................................................................................................................4 Editor’s Prologue.............................................................................................................................................10 Sponsor’s Index...............................................................................................................................................14 The ICO State of the Industry for 2008 ..........................................................................................................16 By Nestor Osorio; President, The International Coffee Organization It’s Not All Bad, Is It? ....................................................................................................................................18 By Judith Ganes-Chase, Commodity Specialist and President of J. Ganes Consulting, LLC Green Revolution at any price Sell Sustainability! ...........................................................................................20 By Karen Cebreros, CEO, Elan Organic Coffees The State of the Industry – SCAA ..................................................................................................................22 By Ric Rhinehart; Executive Director of the Specialty Coffee Association of America State of CQI ...................................................................................................................................................24 By Ted Lingle; President of the Coffee Quality Institute The NCA State of the Industry.......................................................................................................................26 By Robert Nelson; President, The National Coffee Association Credit Crunch…Subprime…those buzzwords are no longer strange to us .........................................................28 By Alain Najar; Professor at Ecole hôtelière de Lausanne (EHL), Switzerland. A Birds Eye View of the Financial Turmoil from the Top of the Quality Pyramid .............................................32 By Susie Spindler, Executive Director-The Alliance for Coffee Excellence, Inc. Remembering the Fundamentals ......................................................................................................................34 By Rick Peyser Looking at the hard data, 2008 views from Paciﬁc Bag ....................................................................................36 By Mark Howley Are We Really Recession Proof? .....................................................................................................................40 By Terry Davis; President, Ambex Roasters. continued... © copyright CoffeeTalk magazine 2008

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...continued

Integrating Sustainability: A Green Revolution for Coffee ...............................................................................44 By Tensie Whelan; Executive Director of the Rainforest Alliance Fair Trade Certified™ and Our Times..............................................................................................................48 By Paul Rice, CEO, TransFair USA Production Automation for Coffee Roasters ....................................................................................................50 By Karl Seidel, Cablevey Making ‘compostable paper products’ work in the real world Finally a solution to the increasing landfill crisis ........................................................................................52 By Carrie Anderson; Managing Director of Carrie Cups A report on the International Women’s Coffee Alliance first International conference ......................................54 By Launtia Taylor; Specialty Sales & Marketing Director for Probat Burns, Inc. Weathering the Economy ................................................................................................................................56 By Dub Hay; Senior Vice-President, Coffee and Global Procurement; Starbuck’s Coffee Company Online Community for Specialty Coffee ..........................................................................................................58 By Matt Milletto; Founder of BaristaExchange.com State of the Industry: A Year End Report from the Fields ................................................................................62 By Joan Nielsen Organic Coffee 2009: Stirred, but not Shaken .................................................................................................66 By Sandra Marquardt, Coordinator, Organic Coffee Collaboration, a project of the Organic Trade Association.

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Editor’s Prologue W

e are entering a period where every assumption

(and cafes) that approached coffee as a mission to teach the poor

and expectation of the business of coffee will be

uneducated consumer about coffee and produced roasts with very

challenged. Is coffee really recession proof? Can

limited long-term consumer appeal are in real trouble.

we really expect continuous growth of cafes for the foreseeable

An interesting statistic from 2008 is that for the ﬁrst time,

future? Is the growth of boutique third wave roasters a sustainable

consumption of gourmet coffee in the home exceeded gourmet

business model? Is there really no reason to expect a consumer

coffee consumed out of the home. This statistic arose before the

revolt over price and elitism?

market collapse so does not necessarily indicate economic reasons

During 2008 we experienced rapid acceleration of costs at

for the shift.

the producer and distribution levels of the supply chain. Soaring

I think that the cost and quality of home grinders and brewers

petrochemical costs and a crashing US dollar stripped away any

has reached an acceptable level for most consumers. If this is so,

potential gains earned from the high price on green coffee. The

2009 should see a signiﬁcant growth in roasted whole bean sales

changes in costs shifted so rapidly that rising costs were not

and a dramatic reduction of out-of-the-house consumption. In

recovered efﬁciently through pricing. Producers and importers

the 4th quarter consumer reports we will be looking for a spike in

will push to incorporated those losses into 2009 pricing. This

sales of home brewing appliances that will focus this trend.

will manifest in exceptionally tight money control and deeply

It will be interesting to see if home roasting becomes a

restricted credit terms. A great many small roasters will be reduced

signiﬁcant trend during 2009. Importers and roasters may want

to cash or COD in order to receive goods and the minimums

to consider packaging options and marketing materials that bring

will undoubtedly increase. In order to ﬁnd affordable coffee on

green beans to home roasters.

credit terms, many roasters will turn to purveyors of inferior

2008 has been a year of enormous shifts in the way we

beans. During this negative period, we expect that distribution of

price and ﬁnance our businesses. Early in the year we began to

high numbered gourmet coffees will weaken as the ﬁnancial and

see the separation of the traditional market pricing mechanisms

inventory carrying costs rise.

from actual speculator driven market pricing, causing a tear

Many of the newer artisan roasters in the US are cash poor.

in the fabric upon which our industry has rested for over 700

Heavily leveraged using bank debt and private lending, a number

years. Although we raised concerns that this could have a direct

of roasters have used debt to construct elaborate reputations

impact on the well being of growers, little did we know that it

and for the purpose of buying ﬂamboyant and pricey coffees

was actually the ﬁrst harbinger of a catastrophic meltdown of the

with extended carrying costs. Just like the internet boom, these

global ﬁnancial world. In 2008 we discovered that we were an

roasters depended on an absolute belief that the ﬁnancial bubble

economy predicated on credit. In fact, a recent report showed

would keep expanding until eventually the sales curve would

that all growth in the United States economy since 2000 was

cross the debt curve. It did not happen. Not only is the sales

built upon credit. If ﬁnanced purchases were removed from our

curve falling and the costs of goods rising, but also debt ﬁnancing

national GDP, the recast growth would have shrunk to yr. 2000

is evaporating. The smart roasters, who played the process

levels.

conservatively, built solid sales relationships, keep purchases of

The inevitable result of the global collapse of the ﬁnancial

exotic coffees to a minimum, and focused on a core of solid blends

credit markets is that there is a rapid loss of value in those things

and proﬁles that are buyer friendly will survive. Those roasters

continued... © copyright CoffeeTalk magazine 2008

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continued... typically purchased with credit. Land, machinery, inventory

Another barrier to entry is the un-quantiﬁable impact that

(in our case coffee), and other things purchase in 2007 are now

negative PR has had on the industry. “out-of-the-house” coffee is

plummeting in value. A part purchased in 2007 is now being

repeatedly cited as an example of grossly unnecessary consumer

assembled into a machine that cannot sell for a price high enough

spending. If the economic crisis continues to worsen, as it seems it

to cover the part’s cost. (Think cars.)

might, and consumer job security conﬁdence is threatened, then

The unfortunate outcome of this is that any company that is heavily ﬁnanced (greater than 60% leveraged) is struggling

out-of-the-house coffee does become a luxury. Grocery coffee will have a signiﬁcant rebound as well as OCS.

right now. Their business plans are founded upon a continuing

We are in a period of extreme ﬂux. Many of the institutions

happy relationship with their ﬁnancial partners, whether banks

and axioms upon which our businesses have been built are being

or private lenders. Not only will the ﬂow of cash

challenged to the core. As an industry we must react

infusions stop, but the patience and tolerance

in a way that ensures a sustainable business

for slow business periods will quickly

model. In many ways this means

turn to frustration and retaliation.

that we must move back to more

Now, do not misunderstand,

conservative ways of thinking

there is money to borrow out

and acting. Possible a lesson

there but if you are looking

from the growers is one

for money to restructure

that may be well taken by

and survive while saddled

roasters and retailers in the

with shaky debt repayment

US – the only guarantee

performance, your prospects

are not good.

things will never work out

There is a reality that

have

gained

that

pests and disease, civil unrest,

have to face. Many businesses, that

has

perfectly. Weather, pricing,

the coffee community may some

grower

and natural disaster all conspire

big

to challenge the farm year after

reputations, simply will not survive

year. A grower always listens politely

this downturn. Businesses built on debt

to the earnest people who know just

and repayments based on future business are not a sustainable model. What can we expect? If the “Starbuck’s

the thing to make him rich and happy. But a grower also always weighs this advice against what has

ratio” (1.63) holds consistent, then about 972 independent

worked before. Change comes slowly and carefully amongst these

retailers should be permanently removed from the US market for

conservative growers, they cannot afford to make big mistakes.

every 600 Starbuck’s that close. This is over and above the usual

At this time in our history we cannot afford to make big

attrition due to closures and business failures. I am concerned

mistakes either. The best advice is to listen politely and make

however that this number is based on market driven and not

very small changes. This economic downturn will end and when

ﬁnance driven inﬂuences.

it does, those who are careful will be there to take advantage of

Most independent retailers enter the market using loans,

the new day.

savings, and deferred-tax savings plans such as 401(k) plans. Due to the rapid loss of value of these assets, the barrier to entry for many typical café owners may just be too high. The need for additional assets to support the loan’s collateral value may not be

See you on the other side,

Miles & Kerri

possible. © copyright CoffeeTalk magazine 2008

Journey

the

. . . Become Part of the Tradition

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Sponsor’s Index Ambex Coffee Roasters, Inc. ...................................................727.442.2727........... www.ambexroasters.com...................37 America’s Food Technologies, Inc./Amfotek ..........................708.532.1222........... www.amfotek.com ............................3 Avalon-Whole Bean Single Cup Brewers ...............................800.561.6162........... www.avalonbrewer.com ....................57 Baratza LLC ..............................................................................877.701.2021........... www.baratza.com ..............................9 Boyd Coffee Company..............................................................800.545.4077........... www.boyds.com ................................11 Bunn-O-Matic Corporation .....................................................800.637.8606........... www.bunn.com .................................13 Cablevey Conveyors .................................................................641.673.8451........... www.cablevey.com ............................15 Cafe de El Salvador...................................................................503.2267.6600......... www.salvadorancoffees.com .............53 Capitol Cups..............................................................................334.321.3302........... www.capitolcups.com .......................67 Cappuccine ................................................................................800.511.3127........... www.cappuccine.net .........................19 Coffee Fest ................................................................................800.232.0083........... www.coffeefest.com ..........................27 Coffee Holding Company.........................................................800.458.2233........... www.coffeeholding.com ...................25 CustomCool ..............................................................................718.220.1140........... www.customcool.com .......................51 Elan Organic Coffees ................................................................619.235.0392........... www.elanorganic.com.......................17 Everpure ....................................................................................800.323.7873........... www.everpure.com ...........................31 F. Gavina & Sons ......................................................................800.428.4627........... www.gavina.com ...............................7 George Howell Coffee Company .............................................866.444.5282........... www.terroircoffee.com ......................29 Georgia Paciﬁc-Dixie ................................................................800.257.9744........... www.dixiefoodservice.com ...............59 Ghirardelli .................................................................................800.877.9338........... www.ghirardelli.com .........................61 International Paper Foodservice Business ..............................800.537.4141........... www.ipfoodservice.com ....................33 IWCA ....................................................................................................................... www.womenincoffee.org...................35 Java Jacket .................................................................................800.208.4128........... www.javajacket.com .........................21 Michaelo ....................................................................................800.545.2883........... www.michaelo.com...........................41 Millrock .....................................................................................800.645.7625........... www.millrock.com ............................5 Probat Burns, Inc. ....................................................................901.363.5331........... www.probatburns.com ......................43 Quikserv Corp ..........................................................................800.388.8307........... www.quikserv.com ............................47 School of Coffee........................................................................802.244.6176........... www.coffeelab.com/courses ..............55 Superior Imaging Group/Identabrew™ ...................................888.872.5620........... www.identabrew.com ........................63 Swiss Systems Inc. ....................................................................310.689.2372........... swisssystems.com ..............................65 The Good Cow Company ........................................................208.884.8654........... www.goodcow.com............................45 Torn Ranch ...............................................................................800.721.1688........... www.tornranch.com .........................23 Wega USA.................................................................................336.662.0766........... www.wegausa.com ............................39 Wilbur Curtis ............................................................................800.421.6150........... www.wilburcurtis.com ......................49 © copyright CoffeeTalk magazine 2008

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The ICO State of the Industry for 2008 By Nestor Osorio President, The International Coffee Organization offee year 2007/08 was marked by the transition to

consumption is not expected to suffer major adverse effects from

the new International Coffee Agreement (ICA),

the economic slowdown that is on the horizon. Moreover, the

which was approved by the ICO’s Member countries

rapid development of the specialty coffee sector has contributed

in September 2007. Since January 2008, when the ICO was

to the growth of world consumption and brought quality coffee to

appointed by the International Coffee Council as depository

the heart of the mainstream market.

of the 2007 Agreement, the Organization has been taking the

In the current uncertain market environment, one of the

necessary steps to ensure that conditions are met for the ICA

most effective initiatives used by growers to boost the value of

2007 to enter into force as soon as possible.

their coffee is to differentiate it from that of their competitors.

During coffee year 2007/08, the world coffee market recorded

As part of its commitment to disseminating knowledge on the

a positive development in spite of some downward corrections

coffee sector, in May the ICO held a seminar about one such

toward the end of the year. Prices of all types of coffee improved

differentiation strategy - the use of geographical indications (GIs).

in relation to the previous year, with increases of 19.4 percent

Experts from both exporting and importing countries considered

for Colombian Milds, 19 percent for Other Milds, 20.4 percent

the pros and cons of this innovative tool, which under the right

for Brazilian Naturals and 28.6 percent for Robustas. As in the

conditions can make a powerful contribution to the marketing

preceding period, the beneﬁts of these price rises were not fully

strategy of coffee producers.

felt by many growers, since they were offset by exchange rate

In conclusion, noting that the promotion of coffee quality

movements and increased costs, such as those for fertilizers and

plays an important role in market development in the long term, the

freight.

ICO has maintained its Coffee Quality-Improvement Programme,

This generally favourable outlook took a signiﬁcant turn for

which has made important progress. The overwhelming majority

the worse at the end of the coffee year, when widespread turbulence

of Arabica exports already comply with the Programme’s

in world ﬁnancial markets spilled over to affect commodities in

voluntary quality standard targets. However, practical obstacles

general, including coffee. However, market fundamentals were

have so far prevented its adoption in many Robusta exporting

still favourable to ﬁrm prices, as the continued growth in world

countries. Efforts will continue to achieve a wider participation

consumption served to maintain a balance between supply and

in the Programme. I am conﬁdent that the future for the world

demand. Stocks in producing countries are at very low levels,

coffee sector remains bright and our Organization is ready to play

production is only sufﬁcient to cover existing demand and

its speciﬁc role in the sector’s development.

November 2008

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It’s Not All Bad, Is It? By Judith Ganes-Chase, Commodity Specialist and President of J. Ganes Consulting, LLC

t’s not all bad, is it? I grew believing there is a silver lining in every cloud. The glass must be half full, not half empty. It’s been a real challenge finding the good news of late with headline after headline of dreary economic statistics. Home sales are dropping. Job cuts are rising. Interest rate slashing is having little effect on stimulating consumer spending. The panic continues. But it can’t be all bad, can it? Commodity prices have fallen and fallen hard after spiraling upward at breakneck speed earlier in the year. This generally should be good news for consumers and manufacturers. Energy and fertilizer prices have both pulled back sharply, giving farmers a fighting chance at survival. Yet, on both sides of the spectrum, these factors don’t seem to be bringing any solace and both buyers and sellers remain glum about the bumpy economic road being traveled on. While usually on opposite sides of the fence, farmers versus roasters or exporters versus importers, the tightness in the credit market is taking a toll on every aspect of the supply chain and making it difficult if not impossible to conduct business as usual. Despite the drop in input costs, without proper financing, farmers can ill afford to make these purchases and are still being forced to make cutbacks which could jeopardize production prospects. Exporters can’t extend credit to producers to finance the purchase of new crop coffee and forward sales, bringing in necessary cash to operate farms and even pay wages to pickers. Roasters are finding it difficult to finance inventory purchases and may need to let coverage slip. Loans for new investment in plant and equipment are hard to come by and cash is being reserved for “rainy day” emergencies. The wheels of commerce are not being greased and are therefore slowing down. F u n d a m e n t a l l y, the coffee market has more “going for it” than most other markets. The global economic downturn is not expected to “kill” consumption. Coffee drinking habits Producer Coffee Stocks Million 60-kilo bags

are hard to break and relative to total household budgets, coffee remains an affordable luxury. There might be some downscaling in the purchase dollars spent on coffee, but not necessarily on the quantity consumed. Coffee is one of the more recession proof commodities, if one exists. Where I continue to see troubles brewing is on the supply side of the equation. While the USDA may still be forecasting production at record highs, total output is going to be about two million bags less than last indicated six months ago. Vietnam, the world’s second largest producer, is no longer forecast to be harvesting a record crop and accounts for most of the downward revision in the USDA numbers. Additionally, rains this year have simply been too plentiful in Colombia, Mexico, and parts of Central America. Production numbers may need to be trimmed to reflect this, especially the estimate for Colombia, which remains over 12.2 million bags when actual production may not be more than 10.5 million. The anticipated build in stocks in 2008-09 may prove to be rather limited. Differentials for better quality coffee have been firming as the market has sagged, reflecting the first signs of scarcity and difficulty roasters may have in sourcing better grades. The amount of coffee in certified warehouses has been declining with very little coffee being brought for certification to the Board given the premiums being paid elsewhere. What is left of certified stocks in the United States could quickly disappear, just as it did in 1996 prior to the sharp price spike in 1997. The situation is not expected to improve in 2009-10, but could become even more troubled as the effects of reduced inputs take a toll on production. As it is, Brazil is already expected to have a seasonal downswing in output and a hail storm that occurred earlier this year could have a lingering effect. Now some areas have turned a bit too dry. This too could also impact yields at a time when every last bag will be needed. The wet weather in Vietnam has caused a premature early flowering of the 2009-10 crop and this could hurt next season’s output if these blossoms are knocked from the trees as the 2008-09 harvest is still winding down. The lower the market sags in the weeks ahead, the more troubling the outlook becomes with potential for a sharp reversal even as soon as the first quarter of 2009.

World Coffee Production Million 60-kg bags © copyright CoffeeTalk magazine 2008

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Green Revolution at any price Sell Sustainability! By Karen Cebreros, CEO, Elan Organic Coffees

offee and economic crisis. This is not new news. We may think we are in financial turmoil here in the U.S. but it does not compare to the 125 million families living on $2.00 or $3.00 per day. Specialty and certified coffees are here to stay, grow and cost a bit more. These coffees have added value. They should cost more. It is our job to “SELL” the value, not discount the quality the farmers have worked hard to bring to us from the farthest corners of the world. The creative concept chef from Coco’s recently returned from coops in Chiapas looking for new sustainable blends. In discussing relationship coffees she explained her corporation does not believe in giving back to the grower groups after the fact. They do not believe in charitable contributions. What they do practice is paying the right price for the value upfront proactively preventing social and economic degradation. We know coffee is one of the big three agriculture pollutants. Agriculture represents 50% of the planets contamination from the direct application of petroleum based chemicals. The contamination of our soil, air, and water systems are poisoning the planet and all of us. “By failing to understand the down line hidden costs of the economic, social, environmental and physical way we live our lives we have put the world in grave danger” Sloan Barnet says in “Green Goes with Everything”, a book released this year, Sloan goes on to explain how we can protect our families and the earth with the choices we make every day. It’s like voting in an election. you choose to believe your vote matters. Now you have a choice to vote with your dollar and make every cent count. Coffee will take the leadership position. Sustainable coffees can connect the dots educating consumers on the world issues from tree to cup. Tell the story with your premium coffees. Educate with every bag, cup, bin, and container. Anyone can put beans in a bag. We must put added value in the cup and sell the difference. We are a service and product driven industry. Sales drive business and telling and selling what differentiates your company will help you realize sustainability along with profits. Name the company who made the ultra green pledge: 1.100% renewable energy in the future

2. Create zero waste 3. Sell products that sustain their Sources and the environment. Wal-Mart! By 2012 Wal-Mart declared it will reduce energy by 20%. Starting this year every new product stocked passes though a filter and sustainability lens. They can afford to do it. So can you! Mary Ann Baldaffarre the sales and marketing manager of Golden Valley Farms is a pioneer of distributing organic Smithsonian Migratory Bird Center coffees into the convenience stores through the U.S. The family and friends that run the small artisan roasting plant Golden Valley are committed to making a difference in their vertical market. When many of their competitors are cutting back, John Sachavok the owner flew to Washington DC to meet with Dr. Robert Rice to help better understand sustainable coffee; John has created a value added branding trademarked hot beverage program, promoting organic SMBC “Redstone Cafe.” He is a trendsetter in the OCS and C store channels. For a few pennies more they sell the save the planet message with a fantastic cup of coffee. Redstone creates loyal customers while understanding consumer choices in health, convenience and price value. This is the time for the Specialty Coffee industry to take the leadership position in the Green revolution on the planet. Paul Hawken key note at SCAA 2000 said he has consulted to 500 corporations all over the world helping move them towards the green revolution and “coffee” is leading the way worldwide, in his opinion. Given the current state of affairs, in the U.S we may be at the tipping point, this is when we often become our best. “America has a problem and the world has a problem. America’s problem is that is has lost its way in recent years partly because of 9/11 and partly because of bad habits that we have let build up over the last three decades, bad habits that have weakened our society’s ability and willingness to take on big challenges,” Thomas L. Friedman, “Hot, Flat and Crowded”. Certified coffees are on track. The Specialty industry has never been stronger. Demand is up and supply must catch up. All of us must step up onto the path. As the second most powerful commodity on the earth let’s harness it for good. Coffee can and will lead the change to save the planet! We are the change agent of industry. We all must be willing to pay. © copyright CoffeeTalk magazine 2008

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The State of the Industry - SCAA By Ric Rhinehart Executive Director of the Specialty Coffee Association of America

f I had to choose a single word to define 2008, that word would be uncertainty. From one day to the next, we have been buffeted by increasing insecurity in our financial institutions, our social institutions, and our beliefs about how we fit into the world. For business people in general, and more specifically for those in a business that revolves around an agricultural commodity, uncertainty is a constant companion. Widespread uncertainty is one of our greatest fears. Now, at the close of this tumultuous year, our greatest fears seem to have been realized. Many of us find ourselves paralyzed by our uncertainty, unsure of how to step out of our current reality and fearful of the unknown that lies ahead. If you find yourself in this place, take a moment to consider this bit of wisdom from Erich Fromm, “The quest for certainty blocks the search for meaning. Uncertainty is the very condition to impel man to unfold his powers.” This is the moment to think and act in new ways. When the established systems no longer work, when we can no longer have confidence in the institutions of our economy and society, we must unfold our powers, exercise our creativity, and build new systems, new institutions, and new ways of facing our realities. Those amongst us most willing to undertake this massive shift from existing within the current system to building and shaping new systems will reap the benefits of bold action. Those who sit and wait for change will be swept up by it. What does all of this mean to us in the world of coffee? It means that business as usual will not work. Tried and true patterns in every aspect of the supply chain, from the financing of farming activities to milling, grading, exporting, importing, and marketing, are now suspect. New approaches to these activities must be developed, tried, and refined. We cannot wait for systems to continue to fail, but must actively pursue new ideas, new approaches and new ways of thinking about complex problems. One of the initial challenges is to reframe the business questions we ask every day and start asking “why” in addition to “how,” not just at transactional levels, but at the most fundamental levels. Why do we do business? Why are we in the coffee business? Why do we act in the ways that we do? Former Federal Reserve Chairman Alan Greenspan was forced to challenge himself in this way, and he came to this conclusion, “I made a mistake in presuming that the self-interest of organizations, specifically banks and others was such as they were best capable of protecting their own shareholders.” Greenspan had to come to grips with a flaw in the most basic principles of his beliefs, those that shaped virtually all of his thinking about how the economy and markets function.

We are faced with the very same opportunity. We can and must actively reexamine the beliefs that inform our activities in business and in life, and be willing to challenge even the most fundamental principles upon which we have based our thinking, our planning, and our strategies. Do we believe that businesses exist solely for the benefit of shareholders? Is constant growth in revenue and profit an absolute necessity? Does our responsibility end at the bottom line of our income statement? These questions and many more like them need to be asked and answered as never before. The answers we find in the process will shape our thinking and activities for years to come. Perhaps the clearest example is alternative markets for green coffee. Now is the time for the coffee industry to stop flirting with auction and direct purchase systems, go beyond token buying and cut the apron strings with traditional price discovery mechanisms. The specialty coffee sector has been declaring independence from these systems for over a decade, and yet only a few have moved close enough to that reality as to not lose sleep at the hands of speculators who have no real skin in the game. There is perhaps no better time to plan for good times than in the midst of challenging times. Many leaders in the coffee industry are making gut-wrenching decisions daily about staffing, product lines, employee benefits, and managing payables without burning bridges. These types of decisions force clarity and humility, an ideal perspective from which to revisit your strategic planning. Current economic conditions will pass. It may take longer than anyone is willing to admit but it will pass. What will your company be like on the other side? Many of the impacts a recession has on your company are out of your control, and many of your vulnerabilities are unnecessary. Do not rely on painful memories to keep you from making the same mistakes again. Plan to be stronger and put it in writing. I share your uncertainty about the future, but this much I know for certain: we must change our course; we must revisit our beliefs, our motivations and our actions, and define them in the light of a new reality.

December 2008

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State of CQI By Ted Lingle; President of the Coffee Quality Institute

n both 2007 and 2008, CQI has been focused on a very singular goal: “ensure the structure and implementation of an internationally respected grading system for quality coffee.” We refer to this as the “Q Grading System,” and it is now in place in the key specialty coffee origins, including Colombia, Costa Rica, El Salvador, Ethiopia, Guatemala, Honduras, Kenya, Mexico, and Nicaragua. In 2009, it will be available in Brazil and Indonesia. At the backbone of this system are over 500 Licensed Q Graders, professionally accredited cuppers who work throughout the supply chain to evaluate cup quality. The accreditation standards for the cuppers have been established by the Specialty Coffee Association of America, SCAA, and are built into a week long training program that includes twenty-two individual tests, involving cupping and grading, as well as a set of sensory skills tests covering both taste and smell. In order to become a Licensed Q Grader, the individual is required to achieve a passing score on all of the tests. Once licensed, the cupper qualifies to grade coffees to determine whether or not the meet the requirements for “specialty coffee.” The Q Grading System provides an independent, third party evaluation of coffees at origin giving buyers an assurance of quality before it ever leaves the country. Nearly five million pounds of coffee were evaluated through this system in 2008. As the only certification for cup quality, this volume reflects a tremendous step forward in answering the fundamental question, “what is specialty coffee?” Not only has the question been answered through SCAA’s technical standards, now there is also a system in place to determine whether or not the coffee actually measures up to these standards. In each of the producing countries where the program is now operating, CQI has selected an “In-Country-Partner.” For example, in Colombia our In-Country-Partner (ICP) is the Colombian Coffee Federation. The role of the ICP is to: 1) receive and code the coffee sample; 2) select three independent Licensed Q Graders from the pool of graders available in each country; 3) receive and compile the results from the graders –

coffee are graded on a 100 point scale, with 80 the minimum passing score, and the coffees receive a physical grading as well; 4) issue a Q Certificate for those coffees passing or a Technical Report for those that don’t; and 5) notify the owner of the coffee who submitted the sample and send a copy of the Certificate or Report to CQI for posting to our website. It is also possible to have coffee graded in the US through SCAA, and in the future, the Specialty Coffee Association of Japan may be able to provide a similar service. For retailers, the Q Coffee System can also be a “branding system,” with the use of a “Q” mark printed on the retail package. Currently this system is in use by BJs Wholesale Club on the East Coast in five-pound packages for their Colombian, Costa Rican, and Kenyan coffees, including the actual Q score. In 2009, they will be adding four or five more origins and feature the coffee display prominently at the end of the isle. To date, they have sold over a million pounds of Q certified coffee. However, the Q Coffee System is more than a grading system or market promotion tool. It is providing an invaluable communications tool for both buyers and sellers of specialty grade coffee. It establishes a common language for quality, and it takes what had been an intangible aspect, cup quality, and transforming it into a meaningful format – a “flavor star” that provides the buyer with a picture of the coffee flavor before having to spend the time cupping the coffee. And while the system was never intended to replace the necessary process of cupping a coffee in order to determine its market value, the system goes a long way in helping buyers find the flavor profiles they are looking for in each origin. This accomplishment is the result of the enormous effort at origin where numerous partners and volunteers have committed their time to train, coach, and guide coffee cuppers. A special thanks goes to Mane Alves, Willem Boot, Craig Holt, Kelly Peltier-Amoroso, and Chris Davidson for their effort in their endeavor to transfer the knowledge of this critical coffee skill. To learn more about the Q Coffee System at CQI, visit www.coffeeinstitute.org.

About the Coffee Quality Institute The Coffee Quality Institute is a non-proﬁt 501(c)3 organization dedicated to improving the quality of coffee and the lives of the people who produce it. CQI has successfully managed a number of development projects at coffee origin. CQI is a highly efﬁcient organization with more than 90% of revenue going directly into programs. Its board and staff have more than 450 years of combined experience and its database of more than 400 coffee experts provide countless more. As the only organization in the world doing the work to measure quality, CQI is committed to working with industry to create market-based approach to sustainability. © copyright CoffeeTalk magazine 2008

December 2008

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The NCA State of the Industry By Robert Nelson President, The National Coffee Association

s 2008 draws to a close, these are indeed challenging economic times but the NCA’s mission remains the same: to continue to provide service excellence as a core NCA value. And whether it is in product innovation, member advocacy, or government relations, NCA is poised to bring enhanced value and successes to the industry. This past October, NCA ‘s Fall Education Conference offered new hands-on educational tools focused on how small, mid-sized roasters and by the cup retailers could increase revenue, grow profits, and other programming dedicated to helping these entrepreneurs learn to operate more efficiently and effectively in today competitive and challenging marketplace. NCA’s on-going Webinar series, continued to cover current topics of particular interest to small businesses in the retail/café and roaster sectors, as part of a broader expansion of NCA products and services geared to meeting the special needs of smaller businesses across the industry. The September 2008 webinar, led by noted sustainability expert Laurie Demerit, President and Chief Operating Officer of the Hartman Group, tapped into the consumer’s attitudinal and behavioral shift for authenticity in products from companies and industries that exhibit a concern for the greater good, clearly a blueprint for the coffee community to follow. In addition, Ilana Burk of Utz Certified, showcased how this research can be adapted and applied for the coffee industry specifically. And on January 13, 2009 the NCA’s first in a series of planned webinars on sustainability will kick off with a program entitled “Cutting Energy Costs, and Other Environmentally-Friendly Decisions That Will Win You Friends and Save You Money.” The event is being presented by Paul Corney, vice president of environmental affairs at Green Mountain Coffee Roasters and is a blueprint for how the Company has taken on the issue of sustainability On the government relations front every year brings new issues center stage. But again, NCA’s mission remains the same: to protect the industry interests in Washington and at the State and local level. In California, NCA responded to California’s Office of Environmental Health Hazard Assessment’s (OEHHA) Developmental and Reproductive Toxicant Identification Committee (DART) data call-in to add caffeine to the list of products under review to determine if caffeine should contain a warning label under Proposition 65 by updating relevant literature related to caffeine and reproductive health and submitting that material to OEHHA. The next step in the process is that OEHHA will issue a Hazard ID document during 2009, at which time the NCA will have another opportunity to weigh in on all the various scientific submissions. Also over the summer, OEHHA released “possible regulatory language” whereby dozens of chemicals would be added to the

Proposition 65 list automatically and without any review by agency staff or the State’s scientific experts, including substances identified as human or animal carcinogens by the International Agency for Research on Cancer (IARC). Coffee is listed as a carcinogen, based on animal data. Coffee clearly does not meet the criteria of “sufficient evidence of carcinogenicity” required by the “authoritative bodies” listing mechanism based on its IARC 2B listing of “limited evidence.” Nonetheless, if OEHHA’s actions results in coffee being listed under Proposition 65, coffee manufacturers, retailers, restaurants, and others who “expose” people to coffee in the course of doing business in California could be required to provide a Proposition 65 warnings similar to this: WARNING: This product contains a chemical known to the State of California to cause cancer. Shortly after OEHHA’s summer announcement, the NCA, along with other trade associations, submitted formal comments objecting to a possible regulation to formalize Labor Code listings. In September, 2008 the Sierra Club filed a motion for summary of adjudication, asking the court to order OEHHA to list all chemicals identified as carcinogens and reproductive toxicants under the California Labor Code. In 2007, the Sierra Club, had along with six other plaintiffs, sued OEHHA to force the agency to list dozens of new chemicals under Proposition 65. The judge in the lawsuit will hear the motion on December 9th. The NCA has joined with the California Chamber of Commerce in a lawsuit whose intent is to slow the process or force the decision to a higher court. As we head into 2009, we look forward to the NCA’s 98th Annual Convention, to be held at the Boca Raton Resort and Club from March 19-21. Registration is already open just by going to the NCA’s website at: www.ncausa.org. With its extensive educational and networking opportunities, the convention is a once a year opportunity for coffee industry executives to sharpen their business expertise and make the right connections – both key ingredients in moving business forward. Also to be unveiled at the convention is the NCA National Coffee Drinking Trends (NCDT) study, which provides exclusive data on Americans’ coffee-drinking habits and preferences, tracked since 1950. It is the only study of its kind, revealing trends and patterns over a five-decade period, and has become the industry’s gold standard for market research on American coffee consumption. It has been a very busy 2008 with much activity and many successes. To continue that in 2009 we must work as one global industry to keep it vital across the board. © copyright CoffeeTalk magazine 2008

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December 2008

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Credit Crunch…Subprime… those buzzwords are no longer strange to us. By Alain Najar Professor at Ecole hôtelière de Lausanne (EHL), Switzerland.

n the contrary, these buzzwords gives us nightmares

economy that hurts our customers hurt us.”

and impact the overall economy in such a way that many companies are bankrupt and might still be (i.e

This reality is reﬂected in a study conducted in October 2008

General Motors, Chrysler, Ford…), many people are unemployed

for the new edition of the Zagat guide and the result was that 40%

(City Bank laying off 50,000 employees as well as hotels and

of the 38,000 diners surveyed in New York mentioned that they

restaurants) and no one knows what will come next!!!

were coping with the economic slowdown by eating out less often

Even if the credit crunch has hit the US economy harder

and more cheaply. A similar survey conducted by PwC shows

and faster than other economies still, in a global world, no one

almost the same trend. Another reality is that for the ﬁrst time

is protected. The Euro zone countries are also facing similar

since 2003, restaurant openings in New York are in decline.

problems, stock markets in Japan, China, India and Russia are

Starbucks Corp, the world’s largest coffee chain, decide to

reacting negatively (on the 16th of September, the Russian stock

cut its plans for new international coffee shops and lowered its

market recorded the deepest fall in stock prices for the last decade

2009 forecast after posting a steeper-than-expected decline in

in the market), the oil price which was up to $ 120.- the barrel is

fourth-quarter proﬁt. According to Deb Trevino, global director

now down to around $ 35.-…

of communication at Starbucks, customers still continue to visit

In a crisis situation we all know that a market which generally is hit more rapidly is the hospitality and travel industry (see 11th of September). The National Restaurant Association on September 25th, 2008 issued the following statement from President and CEO Dawn Sweeney, saying:

their stores, but are doing it less frequently than in the past. However, the slowdown of Starbuck’s might not affect overall coffee consumption too much as out of the 128 million bags consumed yearly, only 2.3% is bought by them. On the other hand according John Derkach, managing director for Costa Coffee, (a unit of Britain Whitbread Group PLC), it was wrong to believe that Costa Coffee was directly

“On behalf of the restaurant industry’s 13 million workers

dependent on business customers and, for him, there was still

in almost one million locations, we strongly urge Congress

a potential growth even under current actual situations with

and the Administration to act quickly to stabilize the U.S

customers just coming for spending free time and/or meeting

ﬁnancial system.”

friends. (Reuters-13th November 2008)

“Our industry, 70% of which is single-unit, independent

Illy Caffe S.p.A, the world’s largest roaster of Espresso coffee

operators, has been buffeted by soaring food prices, growing

also mentioned that the actual crisis would only have a marginal

labor costs, and energy price spikes. This ﬁnancial crisis left

impact on the global coffee consumption around the world.

unaddressed could have a more serious impact on restaurateurs

The upper class and high-spending customers and

than any of these factors. And, at a fundamental level, an

continued... © copyright CoffeeTalk magazine 2008

December 2008

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...continued businessmen will still be going out to restaurants but will spend

There are deﬁnitive signs that the employment market

less; the lower socio-demographic groups and families with big

is changing. There will be changes in ownership also; the

mortgages are more likely to stop eating out or to be going less

market might see the emergence of more small entrepreneurial

often to restaurants.

opportunistic funds, and it seems as if the emerging markets are

However, for Nestor Osorio, executive director of the

those that will live better through the current global crisis and

International Coffee Organization (ICO), the decline of some

offer more opportunities. However who knows what the future

coffee shop sales due to less customers (mainly corporate) and

will bring. Looking at the bright side, the tourism industry is

spending less will not necessarily affect the overall consumption

the fastest growing industry and it will always offer employment

as more coffee is drunk at home and in ofﬁces than in stores.

opportunities globally. Even if there is a recession, people will

But whatever happens to coffee houses/ bars and or restaurants

not stop traveling all together and will not stop eating out. A

one thing is sure; coffee, as the most traded commodity in the

market adjustment was bound to happen, and these corrections

world after oil, cannot stay unaffected by the lethargy spreading

are positive even if this crisis was a major slap in the face.

over the world.

Under this situation here are some basic rules to follow.

Oil prices have already fallen by half in the last three months

Cut costs, but the right ones

Sell and negotiate hard

According Mr. Henry Ngabirano, managing director of

Innovate, innovate, innovate

Uganda Coffee Development Authority, a similar situation is

Improve customer relationship

being seen in the coffee market as the tonne of coffee which was

Focus more on performance management

being traded at $ 2,400 is now being traded (November) at $

Be realistic… and even somewhat optimistic, do not be

from $ 147 a barrel to $ 60 a barrel in November...

1,700 which shows a decline of 30%. If this situation continues, countries like Uganda will enter into a deep instability for a long

only pessimistic 7.

Get ready to invest

period of time. (Daily Monitor-Wednesday, November 26th) Even if some contradictory opinions arise still one cannot deny that our industry is and will be directly hit by this crisis.

Alain Najar Alain Najar is Professor at Ecole hôtelière de Lausanne (EHL), Switzerland, since 1992. He is an EHL graduate, holds an MBA from the Business School Lausanne and is a certiﬁed hospitality educator (CHE) by the American Hotel & Lodging Educational Institute. His industry experience spans 13 years; Hilton International (10 years), Sheraton and the Accor group, in countries like Kuwait, Dubai, Madagascar, Syria and Egypt. His areas of expertise in F&B include management, control, ﬁnance, quality assurance and auditing, HACCP, concept development and marketing. He also facilitates professional seminars at departmental head and supervisory level in the annual Summer Programme at EHL, and around the world (India, Hong Kong, Shanghai, Romania, UAE, Egypt…) for LHC (Lausanne Hospitality Consulting - EHL). Alain is a professional member of FCSI (Food Service Consultant Society International) - (http://fcsi.org), a member of the International Food and Beverage Forum – (http://www.foodandbeverageforum.com) and member of SAQ (Swiss Assurance Quality). Several times he also delivered speeches at annual FCSI conferences like in Milan, Vancouver and Malta. He also writes regularly articles in the EHLITE magazine (magazine of creativity and innovation published by the Ecole hôtelière de Lausanne) and the Consultant magazine. In October 2008 he received the Award for the best article written by a consultant for his article published in the Consultant (2nd quarter 2008) for the article “Service and Disservice” © copyright CoffeeTalk magazine 2008

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December 2008

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A Birds Eye View of the Financial Turmoil from the Top of the Quality Pyramid By Susie Spindler, Executive Director-The Alliance for Coffee Excellence, Inc.

he Cup of Excellence® program is at the pinnacle of the quality pyramid for premium coffee and in 2008 the winning farmers were enjoying a banner year with midyear average prices at around $7.00lb and record-breaking blowout top prices as high as $80.00lb. In the Fall, both Rwanda’s auction and Colombia’s auction produced even better average prices but it was apparent then that the North American roasters were increasingly less able to keep up with the Asian and Europeans in the bidding wars. Europeans, especially in the UK, had been elated with the devaluation of the dollar against the European currencies and since coffee is traded in US currency, the COE program gained significant strength in Europe in 2008 and added buyers in markets that could take full advantage and purchase phenomenal coffees much cheaper than their US counterparts purchase. In November, after many multinational banks had failed and credit seized up for everyone, it was the Bolivian winning farmers that watched prices shift dramatically downward during their auction. With an average of $5.82lb, still good by most standards, the auction was dominated by Japanese companies and many wondered if the Cup of Excellence was proving to be the ‘canary in the coal mine’ for the industry. Business as usual has vanished along with easy credit. The US specialty industry may now undergo significant restructuring. It is predicted that up to 40% of specialty roasters will disappear mostly due to cash flow issues. Roasters and importers that have been building reputations and paying huge premiums for coffee on loaned money without a sustainable business model are in trouble. Farmers accustomed to these large quality premiums and to easy credit, will also have to tighten their belts. However, the troubling situation for quality farmers did not start in the third quarter of 2008. The instability of global currencies and the sky rocketing rise of oil prices hit farmers hard early on. Even though coffee prices seemed pretty solid, high fertilizer and energy costs coupled with less actual money paid out to them in their own currency began to make the production of expensive coffees less attractive. By late 2007, some high quality farmers not actually gaining ground economically started moving to less costly production methods

and more productive varietals. Even a few of the best Cup of Excellence winning farmers have not been able to sustain their quality focus and in some locations, entire cooperatives paying loans for expensive milling equipment are looking at serious financial difficulties. At the end of 2008 what was a tricky balancing act between currency values and cost of production has shifted. The dollar is rising in value and oil prices have tanked. Obvious good news to farmers except that at this same time the availability of credit has dried up for them as well, the US economy is heading for a depressing holiday season, and most Europeans are unwilling to spend currency adjusted 40% more for coffee. However, it is not all bad news and there are increasing opportunities to build support for exquisite coffee. Many consumers love great coffee and the more educated ones will always be willing to pay higher prices for coffees that match their palate requirements. The change in the short run will be where they consume their favorite coffee. Home consumption will grow for all coffees but may grow more for coffees whose flavor is based on the intrinsic quality in the bean. For creative specialty roasters there are still demanding consumers with discretionary incomes. They may take more work to attract but can be a loyal niche market especially when informed how inexpensive per serving these coffees really are in comparison to their quality. Those that market great coffee as an affordable luxury will win. Those that stop marketing will lose. Selective roasters will still pay somewhat higher prices for good quality so many farmers, will do okay if they do not have a lot of debt. While not garnering record profits, they will be enjoying lower production costs and higher currency valuations. The biggest risk to a bright future for specialty coffee is that the highest and most unique qualities disappear again, as in the past. For farmers however, other marketplaces are growing exponentially. Just as roasters need to do their homework to find the right clients, so do farmers. Premium coffee consumption is not going away it may just shift in definition and geography. This may be the time for the entire global specialty industry to focus on ways we can partner in the promotion of higher quality, higher priced coffees to consumers everywhere. We already know that in producing countries the farmers that work together do a better job and win more awards. Many Cup of Excellence buyers also work together, learn from each other, and are stronger for it. If there is one consistent view from the Cup of Excellence® perch it is that we are a global family and we need each other.

Susie Spindler Susie is manager and co-creator of the International Cup of Excellence® (COE) competition–auction program. She has years of producer and consumer marketing related experience having worked for the ICO and on several consulting projects at origin before co-creating the COE. She also has a unique understanding of environmental sustainability having been director of an endangered wildlife facility and holds a graduate degree from The Thunderbird Graduate School of International Management. © copyright CoffeeTalk magazine 2008

December 2008

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Remembering the Fundamentals By Rick Peyser

ooks can be deceiving. A year ago, our national economy was robust. Few imagined that the solid pillars of our financial world would crumble so rapidly the way they have over the past few months. What has caused this collapse, and the ongoing failures? Many suggest that “fundamentals” were ignored, and in their stead new and more complicated wealth-creating instruments were developed and embraced by investors, many of whom may not have understood exactly what they were investing in. As we look back on the recent past of the greater coffee industry we also see practices that have made it difficult for consumers who seek high quality coffee to know exactly what they have been “investing” in – intended or not, beneficial or not. New roasting technologies have been developed to “enhance” the cup quality of blends that are based upon less than mediocre quality beans. Specialty milk beverages have been developed that include a shot of espresso, sweetened fruit flavored syrups, steamed milk and more than one dollop of whipped cream with toppings, all with enticingly hip names. And now, these and other once “special” beverages have left the café culture behind, and are being embraced by customers of fast food outlets across our country. Certainly the greater accessibility to beverages that use high quality coffee is positive. But what has become of the fundamentals upon which our industry has depended to feed its growth and its soul? How strong are our industry’s fundamentals? One of the key “fundamentals” in our industry remains coffee farmers and their families. Without the high quality coffee that he or she carefully grows, tends, and processes thousands of miles away, few of us reading this article would be where we are today. Like the fundamentals of our financial system, this “fundamental” element of specialty coffee is under siege. In 2008 coffee farmers and their families were harshly challenged by: UÊ Sharply rising food prices – According to the World Bank, between March 2006 and March 2008, the international food price index rose 82 percent. During this period, the price for wheat increased 152% and corn 122%. UÊ Increasing energy costs: The increases in food prices are directly linked to higher energy costs, climate change, and the increasing production and use of biofuels. More than

UÊ

UÊ UÊ

UÊ

40% of the global consumption of maize between 2006 and 2007 was due to biofuel use in the U.S. alone. Increased costs of production – Even as petroleum prices have moderated over the past few months, the prices for chemical and organic inputs in many countries remain very high. Over the short term, this may result in lower yields and lower income for many coffee farming families. Currency fluctuations continued to make it difficult for farmers to plan and maintain a reasonable living from coffee. Climate change – World agricultural production is expected to significantly decrease as rainfall patterns change. The areas most severely affected are expected to be developing countries and regions – Africa in particular. This year, the crop in Ethiopia is anticipated to be off 58% in two of the country’s primary growing areas due to lack of water. Sharp swings in commodity prices (including coffee) - As petroleum prices dropped from nearly $150 a barrel to under $40 a barrel, coffee joined other commodities in a rapid price decline – dropping over 30% from its high in 2008. This lost income is presenting serious challenges to coffee farmers around the world. The global economic collapse now promises to have a significant impact on many areas of life in coffee regions. Very few, if any economies and sectors will escape unscathed, including coffee at origin and here in the U.S., as consumers take steps to adjust their consumption habits to the new economic reality.

Most of these challenges are not new to coffee farmers, who are among the most resilient people on our planet. Many of us have experienced economic downturns before. Thankfully organizations that have grown up in our industry like Coffee Kids, TransFair USA, Cup for Education and Grounds for Health among others, are helping to cushion the impact these challenges pose at origin. What is different this time is the scope and the compressed timing of these threats, which combined have the potential to unleash a near “perfect storm” on our industry. Fortunately, our industry is largely based upon strong working relationships. By working together to support and strengthen each link in our value chain, we can help stabilize the “fundamentals” of our industry and weather the global economic storm far better than most other sectors of our national economy.

Rick Peyser

is Director of Social Advocacy and Coffee Community Outreach at Green Mountain Coffee Roasters where he has worked for over 19 years. He is a Past President of the SCAA, Past President of the Coffee Kids Board of Directors, and is a member of the FLO (Fair Trade Labeling Organizations International) Board of Directors. © copyright CoffeeTalk magazine 2008

December 2008

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Looking at the hard data 2008 views from Paciﬁc Bag By Mark Howley

ﬁlled up my car tank with gas this weekend and the price/

abundant, grocery stores aggressively market “upscale” coffee

gallon was $1.66 after my $0.30 per gallon rebate for

and many families have a grinder on the kitchen cabinet. In fact,

customer loyalty. The ﬁll up cost was $33! Doesn’t it seem

many of the tough guys I know demand a good latte (ﬂavored or

like it was + $75 last month? The unemployment numbers are

with skim) or a freshly ground WB cup of drip coffee to start the

up; the housing market is a mess and the BIG 3 are begging for

day.

bail out money. What the heck is going on?

How did all this happen? In the past twenty ﬁve years trade

Closer to home in the specialty coffee markets, Starbucks

shows like SCAA and Coffee Fest, associations such as SCAA

is taking it on the chin and closing stores, McDonalds’s is trying

and NCA, trade magazines like this one and a huge number of

to punch into the specialty segment with a nasty cup of brew,

passionate specialty roasters and retailers have grown and made

and Dunkin’ Donuts has been identiﬁed (rightly so in my humble

consumers enjoy and demand specialty coffee. As a group, we

Northeastern opinion) as a “good value”. What is happening

committed to every aspect of the market, and consumers, more

to our markets? What will happen in the next few years? Is the

than ever, want good coffee.

specialty coffee market in for a long painful downsizing? What do

retailers and the allied industries are not going to sit back and

we do? Answers: What’s happening?... “The economy is stinky.”

watch three decades of success fade away.

Consumers, growers, roasters,

The next few years? …“It will be tough.” Are we in for a painful downsizing?... “I don’t think so.” Read on!

2008 (versus the recent past) I won’t mince words, we were not happy about the year 2008;

Perspective

the sooner we end it the better. Reality can be unpleasant and hard

People love good coffee and, in our opinion, that is not going

to explain. Our reality included a banner year in 2007 followed

to change! Specialty coffee may take a hit as more companies

by 2008; a year of tough economic times, a protracted election, a

eye the segment and we will likely need to rethink some things.

housing meltdown, and fortunately, cautious optimism.

Remember, the enormous growth of specialty coffee did not

The roasters we know tell us the economy is hurting them

happen by accident. This is not a passing fad. I am just old

(not surprising). Nonetheless, we see robust new product activity

enough to remember the early days of the

and core strength. Several pieces of data from the past three years

“specialty coffee” when folks back East,

help us offer a map, a plan, for 2009.

my home turf, giggled and joked about

Our data mining includes a review of

expensive lattes and frappacinos. What

a) how many pounds of coffee were

respectable dude would take a date to a

“moved” in our bags, b) how many

café over a pub? Talk about a ball game

custom print jobs were received from

at a café? Who would grind whole

roasters?, and c) what size bags did

bean coffee at home versus scooping

roasters use to deliver coffee (8oz,

good ole’ ground Folgers and Maxwell

16oz, 5lb) . Reality from our vantage

House?

point looks like this:

“No way”…Au’contraire...

times have changed. Today, cafés are ubiquitous, retail specialty stores are

continued... © copyright CoffeeTalk magazine 2008

6YkVcXZY gdVhiZgh [dg Vc VYkVcX^c\ ^cYjhign

We have been hard at work on the science of roasting so that you can dedicate your time and energies to perfecting the art of coffee. PLC and PC based real time data-loggers, maintenance loggers, proďŹ le control systems, more controllable digital valves and more efďŹ cient burners are just a few of the new features incorporated in the Ambex RT family of roasters. Most importantly these advancements make it easier for you to work on cupping, blending, sourcing and proďŹ le development - the skills that allow you to showcase the art in your coffee.

ROAST

CONTROL

w w w. A m b e x R o a s t e r s . c o m

Roast Control Systems

Roasters

Grinders

Automatic Scales

$ ( & $( & $

+ )

Bagging Equipment

December 2008

www.CoffeeTalk.com

CoffeeTalk

...continued a) Pounds of coffee “moved”. This

(and should be) monitored in 2009.

is our term for total roasted coffee put

On the other hand, business activity

in our containers - stock and custom

designed to identify new niches is

designed. In most years we estimate

robust.

+/- 25-35 million pounds of coffee

encouraging to the overall longevity

move in our bags. The year 2007

of the specialty coffee market.

That’s good business and

was strong and not surprisingly we

The “economy sizes” are

estimate “pounds moved” will down

growing. Consumers want good

about 9% in 2008 (see chart 1)

products and better prices. The 2009 business environment will

b) Total jobs in 2008 are up nicely

likely be similar to 2008; we advise

(18%) versus 2007 and 2006, but

roasters maintain product quality

the orders are much smaller when

and stringent customer service. In

compared to 2006/2007 (see chart 2).

today’s culture customers, competitors

This trend bodes well for the future, as

and consumers are wary and looking

specialty roasters are ﬁne tuning their

for alternatives. We would not try

products.

any fancy changes like “down sizing” or “product downgrades”. Instead,

c) Package weights (the amount of

offer more options and watch your

coffee put in the bag) shifted to larger

extraneous expenses like a hawk. In

bags. The 8oz and 16oz category dropped

the packaging world, we think shorter

off and the 2lb through 5lbs bags held

run custom jobs or products in different

up nicely.

style stock bags, such as matte ﬁnish

We think this indicates

that whether roasters like it or not, businesses are responding to

bags with “catchy labels” are a safe bet.

market conditions, which demand better value (i.e. lower cost). To wrap it up, create a list of your core customers; write down Conclusion:

your questions, visit and listen! An old Japanese saying goes

The recent down turn hurt sales and proﬁts for many

something like, “you are not selling unless you are belly to belly

customers and suppliers to the industry; nonetheless roasters

with the buyer”. If a physical visit is impractical, spend some

did not “sit still”. There is increased activity with new products

quality time on the phone. Customers need to know you are

and new designs, albeit on a smaller scale, and packages sizes

engaged in their business, and you will learn about their needs.

were adjusted to meet the economic pressures on customers. It

Happy Holidays and New Year … good luck.

is obvious inventory levels and cash are tight and they will be

December 2008

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CoffeeTalk

Are We Really Recession Proof? By Terry Davis President, Ambex Roasters.

n December 1st, the National Bureau of Economic Research declared that the United States economy has been in recession since December of 2007. While this hardly came as a surprise to most Americans it did seem to deepen the concerns of many small business owners as they seek to forecast the upcoming year. For the modern Specialty Coffee Industry, an industry that has seen spectacular growth since the short recession of ’90-’91, it may well answer the question of whether we are a recession proof industry. Because we zoomed through the small downturn brought on by the tech crash and 9/11 many have assumed that ours is an industry that could not just weather any economic storm, but actually continue to grow during the down times. This belief has led many roastery owners to tolerate practices, and labor/equipment combinations that were and, in most cases still are, inefficient; and yet still grow and survive. At least until now… It is pretty easy to see, at least anecdotally, that the Specialty Coffee Industry is entering trying times. From Starbucks dramatic closures and near moratorium on building new stores to the closure of local independent coffee retailers this industry is at best in a period of transition. And while the consumption of coffee may in fact be recession proof, as measured by overall per capita consumption, obviously the Specialty Coffee café side of the industry is not. Most small and medium sized roasters have grown their businesses with this community as their primary market. Café’s are a great consumer of espresso blends- a consistent and, up till now, a reliable source of profit for most Specialty Roasters. As consumers begin to relearn to brew coffee at home, not enough of them currently have home espresso machines to make up for this potential loss of revenue from café’s. And while espresso blends are not going away anytime soon, we may well be entering into a period of renewed interest in drip coffees. To survive this transition, roasters may well need to rethink the three Ps- Pricing, Production and Presence. While profits fall and retail outlets close it may be time to sit down and rethink how your company approaches marketing and sales (presence), revenues and profits (pricing), and costs (production). This is hardly a seamless undertaking and some of the areas overlap, especially in the areas associated with costs.

In fact, in an era of falling revenues, all costs need to be on the table. The following is a list of questions that can help kick start this discussion: Presence UÊ ÀiÊÌ iÀiÊ >À iÌÃÊÀi} Ã]ÊÃi} i ÌÃ]ÊiÌVo®ÊÜ iÀiÊÜiÊV> Ê no longer afford to be? UÊ ÀiÊÌ iÀiÊ >À iÌÃÊÜ iÀiÊÜiÊV> Ê Ê }iÀÊ>vv À`Ê ÌÊÌ ÊLi¶ UÊ ÀiÊ ÕÀÊ >À iÌ }ÊV ÃÌÃÊ Ê iÊÜ Ì Ê ÕÀÊÀiÛi ÕiÃ¶Ê7 iÀiÊ can we cut? Where can we not afford to cut? UÊ ÀiÊ ÕÀÊÃ> iÃÊV ÃÌÃÊ Ê iÊÜ Ì Ê ÕÀÊÀiÛi ÕiÃ¶Ê7 iÀiÊV> ÊÜiÊ cut? Where can we not afford to cut? Pricing UÊ ÊÜiÊÀi> ÞÊ ÜÊ ÕÀÊ>ÛiÀ>}iÊV ÃÌÃÊÌ Ê«À `ÕViÊ>Ê« Õ `Ê vÊ coffee? UÊ 7 i Ê Ü>ÃÊ Ì iÊ >ÃÌÊ Ì iÊ ÜiÊ ` `Ê >Ê «À `ÕVÌÊ LÞÊ «À `ÕVÌÊ analysis? UÊ > ÊÜiÊi>Ã ÞÊiÝ« > Ê ÕÀÊ«À V }Ê ì ¶Ê UÊ ÃÊ ÕÀÊ«À V }Ê ì ÊV Ã ÃÌi Ì ÞÊ>«« i`¶ Production Production is the area where many roaster owners have the most immediate control over costs and where many exercise the least amount of that control. From too much or inefficient labor to poor maintenance and outdated or outmoded equipment to poor layout and design to poor inventory control – many roasters are leaving money at the roastery door. In the roastery the overarching question should be, “How much does it cost to produce 1 bag of coffee?” This question is always relevant regardless of whether a coffee is whole bean or ground, or packed in 5 lb bulk or 2oz fractionals. A roastery owner simply must know how much it costs to produce. Unfortunately, the Specialty Coffee Industry currently has no published operating ratios for an owner to compare. Fortunately, however, production ratios from other manufacturing industries can be used as a general guide. Good business and good operating ratios are nearly universal ( in a small range) for businesses of similar sizes and markets. But, first a company must undertake to honestly evaluate its production continued... © copyright CoffeeTalk magazine 2008

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December 2008

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...continued operation. There are software tools currently available that are specific to coffee roasting that can be very helpful with this endeavor, or any number of other business software packages can be used as well. Once an analysis is complete then it is up to the owner to make the requisite changes necessary to improve profitability and subsequently to ensure the survivability of the company. The following is a list of products, changes, or procedures that should be investigated to help reduce costs, remove inefficiencies, and improve profitability. Data-loggers Data-loggers are not just for recording temperature anymore. Many of the newer generation data-loggers can store profiles for reuse, track roaster utilization, track maintenance, generate discreet batch numbers, track organics and even be used in lieu of a time clock for tracking labor utilization and efficiency. Profile Control Systems Most good roast profile control systems can do everything a good data-logger can plus ensure a more consistent roast while simultaneously reducing per batch labor costs, and reducing waste from inattention. It is a blatant falsehood that these systems are “robotic” or that they take the “skill out of roasting”. In fact it is just the opposite! These systems can allow truly great operators to create ever better coffee, more consistently while eliminating the inconsistencies caused by multiple operators. Automatic Scales A good automatic scale-weigh and fill, volumetric or auger filler, can greatly reduce your costs of packaging coffee; the smaller the package the greater the saving. It is a good time to also look at band sealers. Production Layout After a roastery has been operating a few years it has a tendency to pick up inefficiencies in layout caused by increasing capacity or capability. Now is a good time to look at fixing problems with poor layouts. Creating work flow charts can not only help with reducing labor it can reduce mistakes as well. This can also be a good time to move a roastery, or at least to

CoffeeTalk

renegotiate leases. Moving a roastery allows an owner to take advantage of all the mistakes that developed over the last few years, a reduction in rents can also help offset expenses from changing layouts. Remember, a landlord won’t reduce rents unless asked – try trading a longer term for cheaper rent. Equipment Overhaul/Maintenance When the economy is down, it is generally a good time to upgrade, overhaul, or even to give production equipment a good maintenance turn. Investigate what can be added to a set-up that gives you better control, reduces your chances of breakdown, or increases your energy or labor efficiency. Roasters should always look at stack installations with an eye toward reducing or eliminating horizontal or overly complicated installations. Clean stacks reduce the chances of fires as well as allow the roaster to operate more efficiently. Personnel Perhaps the most difficult duty any owner or manager faces is the letting go of employees. It is important in this economy that managers set clear and realistic production goals and then hold production personnel accountable for meeting those goals. A weak economy is no time to hold onto marginal or problem employees, as they ultimately put the entire operation at risk. It is often difficult to get good control of an organization when growth rates are very high – this is as true in the coffee industry as any other. Now however, as things appear to be slowing with no discernible end in sight, is the time to try and fix the inefficiencies caused by furious growth. Looking at replacing the most amount of labor with the least amount of capital, pulling back from unprofitable markets, and honestly evaluating a company’s sales and marketing plans are all ways to begin reining in costs and/or increasing profits. Most businesses can be made recession proof simply by gaining more control; in the process they often find themselves making more money and even creating a higher quality and more consistent product. All it takes is an open mind, an honest eye and a strong stomach.

Terry Davis has a bachelor’s degree in International Studies and Economics from the University of South Florida. He is a founding partner and owner of Ambex, Inc a coffee roaster manufacturer, New Harmony Coffee & Tea a retail roasting company and co-owner of Cinnamon Bay Coffee Roasters a wholesale roastery, and founder and administrator of the Davis Demitasse Coffee Poetry Contest, all based in sunny Clearwater, Fl. Terry is a member of the Roaster’s Guild, the Tampa Bay Area Committee on Foreign Relations and is a former U.S. Navy Aircrewman and Rescue Swimmer. Terry is also a Merry Roaster. © copyright CoffeeTalk magazine 2008

December 2008

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CoffeeTalk

Integrating Sustainability: A Green Revolution for Coffee By Tensie Whelan Executive Director of the Rainforest Alliance

onfronted by both

party certiﬁed coffee such as Rainforest Alliance, organic and Fair

ﬁnancial

and

Trade. Traders such as ECOM, Neumann, Volcafe, EFICO and

climate crises that

Armajaro train farmers in these new practices along with NGOs

threaten to undermine global

such as CATIE and Technoserve. National Producer organizations

economic

ecological

such as ICAFE, ANACAFE and the Colombian Coffee Federation

stability, businesses have an

have embraced new ways of doing business, working with their

unprecedented

opportunity

members to help them make changes. Financial institutions

to overhaul their current

such as IFC and Root Capital have provided loans to farmers

approach and to lead the

who want to invest in redesign of their practices. Multilateral aid

way toward a 21st century

and development agencies such as USAID, UNDP, UNEP, and

green revolution.

Rather

GTZ are investing in this vision. Major retailers such as Wal-

than recklessly continuing to

Mart, Whole Foods, Sam’s Club and Tesco have made signiﬁcant

consume resources, companies

commitments to carrying sustainable coffee on their shelves.

can adopt a new, stable system that integrates sustainability into

Governments have begun to provide incentives; El Salvador has

its very structure.

reduced taxes on certiﬁed coffee producers. Most importantly,

and

Even in the midst of the recent economic downturn, companies around the world are seeing the beneﬁts of a sustainable

millions of farmers have invested in changing how they do grow coffee, something that is time-consuming and risky.

approach because it makes good business sense. Agriculture needs

Farmers who employ this radical new design enjoy increased

sustainable systems that conserve and protect water, soils and

productivity and quality as well as a better way of life. The

biodiversity; reduce chemical use and impact; improve working

Colombian Coffee Federation has found that thousands of

conditions; contribute to reforestation and avoid deforestation;

farmers

connect buyers and consumers with producers; and improve

Rainforest Alliance

quality, productivity and the long-term economic viability of the

Certiﬁed™

supply chain.

seen

Many companies ﬁnd that these new efﬁciencies reduce costs and increase their “reputation capital” among consumers.

embracing have

productivity

increases up to 20 percent. The quality

The coffee industry may be the farthest ahead in this redesign.

of their coffee has

The Rainforest Alliance works in forestry, agriculture and tourism

improved, and they

in more than 65 countries, and has done so for more than 20

have been able to

years. In agriculture, coffee is the only sector where we have

command a higher

seen the beginnings of a whole-scale transformation, including

premium, resulting

all actors in the value chain.

in $2.4 million in

Major brands such as Kraft (Yuban, Kenco, Jacobs and others),

premium alone to

Tchibo, Lavazza, Costa, Nespresso, Starbucks and Caribou have

coffee producers in

made mainstream commitments to sourcing sustainable, third-

Colombia last year.

December 2008

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CoffeeTalk

...continued Kraft has been the biggest driver of this change in

Everyone in the coffee industry must embrace bringing trees

Colombia—buying a large amount of the coffee for their Yuban

back into the coffee system. Sun-grown coffee is contributing

and Kenco brands. Kraft’s commitment

to soil erosion, biodiversity loss, watershed

has put over 106,000 hectares (262,000

destruction,

acres) of farmland under sustainable

climate change. Twenty percent of global

management

direct

carbon emissions come from deforestation

beneﬁts to an estimated 530,000 farmers,

and 70 percent of that is caused by

farmworkers and their children. But it

chopping down forest for agriculture.

and

provided

chemical

leaching

and

has also helped Kraft secure a future

We must also address the treatment of

supply of high-quality beans and land

seasonal and temporary workers. In many

a contract with McDonald’s to sell its

countries, these workers often are not

Rainforest Alliance Certiﬁed coffees

paid what they are due, live in miserable

in thousands of stores across Europe.

conditions without adequate housing,

Caribou coffee has also driven demand

latrines, or health care.

with their commitment to more than 60

The coffee industry can help by asking

percent of their sourcing from Rainforest

for shade-grown coffee, and providing

Alliance Certiﬁed farms.

funds for community tree nurseries and

An example from the banana sector

ecosystem services. It can also demand

shows you what happens when a large,

proof of adequate housing, wages and

multinational embraces a transformation of its management

access to potable water.

system— Chiquita measured results on plantations that had been

If the coffee sector is already active in promoting sustainable

in the Rainforest Alliance Certiﬁed program over a ten-year

and ethical practices why do we need to invest in radical change?

period and found that farm management costs had dropped by 12

Because we have only picked the ﬁrst red cherries of sustainability

percent and its productivity increased by 27 percent.

and there are whole ﬁelds full of challenges. The coffee business

Companies promoting sustainably grown coffee are seeing a

really can make a signiﬁcant contribution to reducing carbon

beneﬁt to their bottom line—McDonald’s in the UK has seen a

emissions, protecting water and providing better conditions for

20 percent increase in sales by offering Kenco Rainforest Alliance

workers. We will have a more stable, sustainable and higher-

Certiﬁed coffee.

quality coffee industry as a result.

While visionaries in the industry have made signiﬁcant investments already, we now need all hands on deck.

Tensie Whelan Tensie Whelan serves as executive director of the Rainforest Alliance. She has been involved with the organization since 1990, first as a board member, and then later as a consultant, becoming the executive director in 2000. Whelan has been working in the environmental field for more than 25 years, during which time she served as the vice president of conservation information at the National Audubon Society and executive director of the New York League of Conservation Voters. Whelan also worked as a journalist and environmental communications consultant in Costa Rica, and was the managing editor of Ambio - an international environmental journal based in Stockholm. Prior to joining the Rainforest Alliance as its executive director, Whelan worked as a management consultant to nonprofit organizations such as the Environmental Defense Fund. Whelan serves on the boards of the Brooklyn Bridge Park Coalition and Social Accountability International, is a member of the advisory board for corporate social responsibility at Fortis, as well as the sustainable agriculture advisory board for Unilever, sits on the governing body of the U.N. Foundation’s World Heritage Alliance, and is the co-chair of the steering committee of the Sustainable Food Lab. She holds an M.A. in International Communication from American University’s School of International Service and a B.A. in Political Science from New York University. Whelan’s published work includes one of the first books on ecofriendly tourism, Nature Tourism: Managing for the Environment (1991, Island Press). © copyright CoffeeTalk magazine 2008

December 2008

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CoffeeTalk

Fair Trade Certiﬁed™ and Our Times By Paul Rice, CEO, TransFair USA

008 has passed in to the history books. And, as 2009 begins, Producers, Industry and Consumers might rightly pause, to consider our uncertain times. Yet, though Local, National and International economies sputter and lurch, LOHAS Consumers (Lifestyles Of Health And Sustainability), in record numbers, recognize, seek out and purchase products that are ethically and responsibly sourced, in spite of, or even as a result of the times. In addition, they leverage the assurance that a trust or certification mark provides them, as they consider manufacturer and brand sourcing claims. Fair Trade Certified™ (FTC) is just such a trust mark. With global consumers, Fair Trade may represent the most widely recognized set of sourcing standards. For producers, in almost 60 countries of origin, Fair Trade means direct and stable buying relationships, supported by guaranteed minimums, access to preharvest credit, democratic and transparent business practices, freedom of association and fair working conditions. When LOHAS consumers in the U.S. patronize manufacturers and brands that are aligned with their values, increasingly, they buy FTC products. By purchasing Fair Trade Certified, they “vote with their dollars” and support real choice in the market, reward companies and brands that embrace sustainability and lift farm families, workers and their communities out of poverty. TransFair USA licenses the Fair Trade certification mark in the United States. And 2008 was a banner year, as TransFair celebrated its Tenth Anniversary and embarked upon its eleventh year of serving producers, industry and consumers. It remains the only 3rd Party, Not-for-Profit 501(c)(3) certifier of Fair Trade products in the United States. Fair Trade Certified Coffee was TransFair’s first product certification, and remains the most significant, both in U.S. volumes and sales dollars. What began as a trickle, in to the U.S., of some thousands of pounds of Fair Trade Certified green coffee, in 1998, has, after a decade, become a veritable river. Almost 80 Million pounds will enter the U.S. in 2008. Nearly 500 Fair Trade Certified Licensees, large and small, import, roast, label, transport and market that coffee to their customers. Some sell directly to the public. Others serve as vendors of specialty and gourmet beverages to thousands and thousands of distributors, cafes, restaurants and retailers. Many of these distributors, cafes, restaurants and retailers, who feature Fair

Trade products, are independently owned. Others are operated by Franchisees and Managers of multi-unit regional, national and international corporations. In 2008: The world’s largest retailer, Wal-Mart, in combination with member-driven Sam’s Club, expanded their line of FTC coffee SKUs, both in absolute number as well as in blends and countries of origin. Supervalu, across several store formats, promoted their Wild Harvest line of Fair Trade coffees. Starbucks committed to doubling their purchases from Fair Trade farmers. Green Mountain Coffee Roasters converted almost 30% of their annual coffee volume to Fair Trade Certified. Dunkin’ Donuts served a selection of Fair Trade Espresso beverages in every location. Folger’s grew the volume of their Millstone Fair Trade Certified Breakfast blend. Member of the U.S. Congress, in the House of Representatives, were provided with Fair Trade coffee by their concessionaire. These are but a few of the year’s coffee successes. U.S. purchases of Fair Trade Certified tea pushed past 1,200,000 pounds. This tea expansion was driven by brands and blenders such as Choice, Numi, Bigelow, Zhena’s Gypsy, Celestial Seasonings, Rishi, Republic of Tea and Stash. Honest Tea, in the ready-to-drink category, committed to convert its entire line of glass-bottle RTD teas to Fair Trade. FTC Coffee and Tea were joined on the shelf in 2008 by Fair Trade Certified Sugar, Herbs, Cocoa, Cut Flowers, Bananas, other Fruits, Honey and Wine. Many other product categories are in final stages of Standards Review, and will, very shortly, add to the number of available Fair Trade Certified products and ingredients. Other market segments and industries have indicated strong interest in the potential for certification. Tiffany has provided a substantial grant to TransFair USA to investigate the possibility of certifying some gemstones and precious metals. And Levi Strauss has funded a TransFair feasibility study around Fair Trade garments. TransFair USA’s mission is to enable sustainable development and community empowerment by cultivating a more equitable global trade model that benefits farmers, workers, consumers, industry and the Earth. And the metrics of success measure the growth, in SKUs and transactions, of Fair Trade Certified products. Our estimates are that the 2008 U.S. market value of Fair Trade transactions will exceed $1.5 Billion US and that the World value should exceed $4 Billion US., which represents a greater-than 45% growth overall, compared to 2006 figures. Given recent past events and tomorrow’s visible challenges, consumers and business decision-makers naturally consider, more closely, their budgets and purchases. In that context, ethically and responsibly sourced products and ingredients gain value. Fair Trade certification offers the assurance that that value is real, and is not merely a claim.

ABOUT TransFair USA TransFair USA is the only independent, third-party certifier of Fair Trade Certified products in the United States. TransFair USA audits and certifies transactions between U.S. companies offering Fair Trade Certified products and their international suppliers to guarantee that the farmers and workers producing Fair Trade Certified goods were paid fair prices and wages. For more information, visit www. FairTradeCertified.org. © copyright i h C CoffeeTalk ff T lk magazine i 2008

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Production Automation for Coffee Roasters By Karl Seidel, Cablevey

t is no longer okay to get beans out of the roaster and throw them into any moving container. Imagine the path to a roadside café. Unlike the gravel on the path, the coffee served inside the café is food. Exposure to air, jiggling, or rough handling may not harm gravel but it does jeopardize how coffee looks through a pretty cellophane bag or tastes after it is ground, brewed and served to the customer in a cup. Coffee production automation is doing very well because it is efficient and economical. Smart technology now moves coffee beans inside tubes – sealed tubes that can be flushed with nitrogen gas. Forced air is now avoided because it clogs filters with coffee dust. Custom layouts are efficient and easily within price reach, which was not true ten years ago. Stainless steel surfaces are food safe and preferred. Variable speeds suit coffee production and deliberately slow speeds are used at key points in coffee production to reduce bean degradation. In fact, vacuums and pneumatics are falling by the wayside if only because of their intensive use of energy! Bucket elevators less so – although cleaning them is labor-intensive. In the past, the process of adding a new piece of processing equipment was time-consuming, expensive, and required automation experts. Roasters today use the Internet to chat with engineers, revise what non-engineers call what-goeswhere sketches, and approve quotes. New designs are emailed and typically include a discussion early in the design process of where along the packaging line would the roaster prefer to place multiple inlets and discharges. It no longer takes many months to get custom equipment up and running and the Internet takes a good deal of the praise. Coffee roasters independently research their options for different types of systems, review proposals, and accept designs online. Equipment fits the roaster’s layout, not the other way around. To stay competitive in tough economic times, a roaster has to grasp the basic technology. He must understand horsepower to volume ratio, know which options are better and why, and be able to name pounds processed per operational minute. If not, he hops on the Internet or talks to colleagues. Gone are the days when only an automation technician, an engineer, or a floor manager could rattle off those items. Therefore, another big factor in coffee production right now is that roasters are more demanding. And why not? They seem to love self-education and look for what is proven. Turn-around boxes for example automatically adjust tension to avoid pinching the bean or breakage of the fragile whole bean after it has been roasted. Clear inspection tubes allow the operator to see how the beans are progressing through the system. Roasters want systems that do not break down and do not require frequent maintenance. Look around the inside of any roastery. Every roasting operation uses something to move beans: people, buckets, tubes, augers, and big rolling containers. Ask yourself, “What are the levels of dust, noise, and breakage; how much space does the

machinery take up; do people have to fix and connect gaps anyway?” Ask the employees if the automation pretty much runs itself. Later in the process, open a bag of beans and see if the coffee is dusty or if the whole bean is broken - did the automation prevent such problems? What is the cost of manpower? Are roasting operations still efficient if people are moving beans from one process to another in rolling totes? If you have one employee moving coffee from the roaster to the degassing station and then to the grinder or the packaging machine you’re talking about the cost of a conveyor – minus the physical liability to the worker. Many coffee production systems today had their antecedents designed to move industrial or agricultural particles, like gravel, grain, feed or seed. Those did not suffer much from rough handling. The process usually involved the use of buckets, augers (screw type) or belts. Systems were not designed to handle delicate food products like roasted coffee – especially the more expensive specialty variety. Other systems that were suitable for food had never been refitted to enclose coffee after roasting. Roasters pretty much conformed layouts to the existing machinery for sale. Older machinery left a big footprint. It was large, bulky, noisy, and delivered as is. For coffee roasters, this was a good reason to keep on moving beans by hand. Roasters today can choose ultra-high molecular weight plastic disks mounted on Teflon-jacketed cable. They pull the coffee along with no problems and minimal breakage. Updated technology now incorporates lighter construction materials. Tubular drag conveyors for example provide easy material flow and excellent bean protection. The former means little clogging and few delays. Systems are not intimidating to employees and assembly is very straightforward. Also available are direction and incline control, lower horsepower requirements, and a smaller footprint. Variable speed is especially important so that movement can be varied to dovetail with bagging, sorting, and other key steps. Newer set-ups are greener. They use less energy, are more efficient, and do not blow up or break down as often. Enclosed tubes protect the coffee from outside elements and are durable. The discs move the beans along while the self-cleaning effect avoids build-up. The lines are automatically tensioning so that no adjustment or constant supervision is needed. The environment is cleaner and quieter for employees. Based in Oskaloosa, Iowa, Cablevey Conveyors is an industry leader in coffee process automation. Food grade stainless steel systems incorporate the latest technology. This new technology protects coffee and is designed to fit what the roasting situation requires for maximum benefit. Traditional machinery like augers and bucket elevators leave food exposed to ambient conditions and is often rough on whole coffee beans. It is not just about moving gravel anymore. The difference is in the delivery. © copyright CoffeeTalk magazine 2008

December 2008

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Making ‘compostable paper products’ work in the real world - Finally a solution to the increasing landﬁll crisis Carrie Anderson; Managing Director of Carrie Cups www.CarrieCups.com

his past October, I was at the International Women’s Coffee Alliance in Costa Rica and one of the speakers, Judith Ganes-Chase, was discussing the epidemic of overflowing landfills with disposable coffee cups and the social responsibility of the coffee industry to finding a solution to this problem. Each year billions of coffee cups, whether paper, Styrofoam or plastic are being thrown into the landfills. One of the solutions has been to encourage coffee shop owners to give discounts to customers for bringing in their own coffee mugs to reduce the trash. If people can remember to bring their cups and are willing to wash them out, I think this is the most eco-friendly and cost effective idea for both consumer and coffee house. Unfortunately, like most Americans, I like the convenience of drinking my coffee in my car and throwing it away once I reach my destination. So what is the solution? The disposable foodservice industry has risen to the occasion and come up with some eco- friendly products. Fabri-Kal, GreenGood, International Paper, and Solo have all developed various versions of an eco-friendly disposable cup. In terms of environmentally friendly, the best choices are either a paper cup made from recycled paper or a 100% compostable paper cup. Green Mountain Coffee is one of the pioneers in the green movement and is still committed to offer a biodegradable and compostable lid to combine with their compostable cup from International Paper. Because of all of the “green washing” in the market place, it is important to understand that the difference between a 100% compostable cup and an eco-friendly cup has to do with the lining. Most paper coffee cups have a PE (polyethylene) plastic coating to prevent leaks on the inside of the paper cup. Some cup manufacturers, such as GreenGood, International Paper, and other foreign manufacturers, have replaced the PE lining with a PLA (polylactic acid) lining that is 100% biodegradable and compostable. Compostable cups by definition will biodegrade within 180 days in a commercial composting facility. However, even if customers are throwing the cups in the regular trash, the compostable cups will eventually biodegrade as opposed to typical disposables that could be around for hundreds of years. (For detailed answers to questions about compostability and biodegradability, please visit http://www.greengood.com/faq/faq. htm).

In this economy, the main question on everyone’s minds is how can I go green and still survive. My question is how can you afford not to? According to an interview with National Restaurant Association President and CEO Dawn Sweeney published via nra@smartbrief.com 12/11/08 “...Consumers are increasingly interested in health and nutrition and want to adapt their dining-out habits to their dietary needs. Environmental sustainability is another issue that consumers are paying attention to, and “going green” will also continue to impact how restaurants do business.” Consumers are environmentally conscious and want to go green in their homes and dining choices. In today’s economy, consumers are choosier about where they are spending their money. If companies advertise that they are eco-friendly, customers are more likely to choose their establishment over another. Some cities, such as Laguna Beach, CA and Santa Barbara, CA have already mandated that restaurants and coffee shops discontinue the use of Styrofoam. As consumers demand eco-friendly products, the price of “green” disposables will decrease. Manufacturing companies are looking for ways to reduce the costs for green products. Currently the biodegradable Bagasse sugarcane products are competitive with the existing paper products like Chinet and Dixie products in the US Market place. GreenGood and Solo are in the process of launching 100% postconsumer waste cups and lids made from recycled PET (1) water bottles which will reduce the costs of the plastic cups. In the future, the price of biodegradable and compostable raw materials made from agricultural by-products, such as corn stalk, sugarcane stalk, bamboo, reed, switch grass, and potato starch, will be reduced because of an increase in processing capacity from NatureWorks and converters such as FabriKal, GreenGood, and International Paper. A common misconception about biodegradable disposables is that they are made from corn and sugarcane thereby taking food away from the world. However these products are actually made from the agricultural byproducts of corn, sugarcane etc that are often waste products normally being burned or plowed under in various parts of the world. In today’s economy, people often wonder, “Can I afford to “go green?”?” My question to you is “Can you afford not to “go green” for the sake of your children and grandchildren?”

December 2008

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A report on the International Women’s Coffee Alliance ﬁrst international conference By Launtia Taylor; Specialty Sales & Marketing Director for Probat Burns, Inc.

t is extremely exciting to be part of an event that was a “first” for our industry. In late October 2008, I was one of over 100 participants at the International Women’s Coffee Alliance (IWCA) first international conference in Orosi, near Cartago in Costa Rica. The conference was developed and led by the Costa Rican chapter of the IWCA with the theme “Coffee from Hands to Hearts,” with Dr. Nestor Osorio, Executive Director of the International Coffee Organization (ICO), as the keynote speaker. This conference was an excellent example of the unique role that the IWCA plays as a global peer network for women in the coffee industry. The participants came from 12 countries and represented all of the steps along the coffee value chain: farming, trading, processing, roasting, and brewing. The IWCA is committed to being an advocate for disadvantaged women from seed to cup and one of the goals of the conference was to ensure that all women, regardless of their economic circumstances, could participate. This was achieved through sponsorships that helped cover the costs for some of the women producers from the Central American countries. This type of event, along with the IWCA Breakfast at the SCAA conference, provides a forum for women to connect and share their experiences. In some cases, this may lead to an on-going business relationship as it provides an opportunity for growers, for example, to meet and network with people from other parts of the industry. In other cases, it may simply be an opportunity for two people with similar interests and whose paths may never have crossed, to meet and develop a friendship. Either way, the IWCA is leading the way in helping women connect and share their experiences. The Orosi conference focused on education and included workshops on topics ranging from cupping and brewing to “finca finance.” There were also presentations from the countries that have already formed their own IWCA chapters (Costa Rica, El

Salvador, and Guatemala) as well as countries that are in the process of forming a chapter – Colombia, India, and Honduras. Based on the outstanding results of this ﬁrst conference, the IWCA Board of Directors approved having the next conference in 2010 in El Salvador. Another unexpected outcome from this experience was the invitation from Dr. Osorio to have the IWCA participate in the ICO’s 2010 global conference in Guatemala. Both of these events will be important opportunities for the IWCA to continue its work advocating for disadvantaged women from seed to cup, providing access to resources (training and information), and providing a forum where women can connect. My responsibilities at Probat Burns provide the opportunity to work with both women and men from the coffee community and I value the opportunity the IWCA provides for me to interact with women in all aspects of the coffee value chain. On a personal level, I was born in an origin country (Jamaica) and understand the challenge of having coffee and cocoa farming as a family’s main source of income. If you regularly attend the IWCA Breakfast at the SCAA, I look forward to seeing you in Atlanta. If you have not attended this event before and will be at the SCAA conference, I strongly encourage you to join us the morning of Saturday, April 18. Our theme for 2009 is “Connecting Through Coffee” and this year we will be highlighting women’s personal stories of how, through connections with other women, they have seen the IWCA’s mission of empowering women to achieve meaningful and sustainable lives become a reality. All women and men are welcome and tickets can be purchased as part of your SCAA registration or on-site. I would also like to encourage you to become a member of the IWCA and support our advocacy efforts. Your membership contribution will help us provide the resources and connections that can make a difference in someone’s life. Information is available at www.womenincoffee.org.

Launtia Taylor Launtia Taylor is Specialty Sales & Marketing Director for Probat Burns, Inc. and she is also the IWCA Vice President. Ltaylor@womenincoffee.org Ltaylor@Probatburns.com © copyright CoffeeTalk magazine 2008

December 2008

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Weathering the Economy By Dub Hay Senior Vice-President, Coffee and Global Procurement; Starbuck’s Coffee Company

n 2008, the increasingly challenging economic climate hit like a hurricane, surprising even the most seasoned economic pundits. Comparisons are already being made to the Great Depression. Financial companies that were household names are gone overnight. Credit is not just tight, it is unattainable for many in the coffee business. It is understandable that many business leaders are focusing on the short term, retrenching and waiting for the world to become round again. But it is during such times of uncertainty that we need to make bold decisions that will bring stability and security. We believe now is the time to invest in areas such as corporate social responsibility and people, especially in an economic environment in which that might seem counterintuitive. Given the decline in consumer confidence, customers, now more than ever, are careful with how they spend their discretionary funds. They want to support companies and brands they find relevant and trustworthy. That is why we need to recommit to the principles and values that helped get us – as companies and an industry – to where we are today. We recently introduced Starbucks™ Shared Planet™, our commitment to doing business responsibly. On the coffee producer side, this means working with farmers to support sustainable agriculture and encouraging them to participate in our Coffee and Farmer Equity – or C.A.F.E. – Practices program while continuing to pay the prices high quality coffee deserves. Since its introduction in 2004, C.A.F.E. Practices has grown to represent more than 65% of all the coffee we buy. As part of our goal to buy all of our coffee through the program, we are also expanding our work with Fair Trade farmers to enhance coffee quality and profitability through improved environmental and agricultural practices. To support this effort, we are doubling our purchases of Fair Trade Certified™ coffee to 40 million pounds in 2009.

For our business to grow and to be able to continue to bring our customers the high quality coffee they expect of us, we need coffee farmers to do well and to invest in their farms and their families’ future. The Farmer Support Center we opened in Costa Rica along with an agronomist in Guatemala have helped us contribute to real progress for the Central American producers we work with who have achieved improved yields and soil fertility as well as reduced the use of chemical fertilizers and pesticides. We have seen improvements in growing practices lead to improved farmer income for coffee farmers. A new Starbucks Farmer Support Center will open in early 2009 in Kigali, Rwanda and soon thereafter in Addis Ababa, Ethiopia. These are investments we think are important to make in the future of coffee farmers in those regions and their efforts to improve quality and expand their production of specialty coffee. Now is also the time to invest in our people. In October, Starbucks held a leadership conference in New Orleans for 10,000 store managers and other company leaders. It was a bold move to reinvigorate our people, invest in their training, and inspire them around our coffee, our customers, and our stores. Together, we performed more than 50,000 hours of community service in an area still rebuilding in the aftermath of devastating hurricanes. We announced aggressive goals as part of Starbucks™ Shared Planet™ around how we ethically buy coffee, the environmental footprint we leave, and community service. We consider these moves as investments in our people and our business for today and, hopefully, for a brighter tomorrow. Of course, we do not have a crystal ball and we do not know how all of the investments will pay off. However, times like these require bold decision making and a commitment to the things that helped build our company and the specialty coffee business. Let’s not be bystanders during this crisis. Hard working coffee farmers need investment, access to credit, and demand for their product. We must act with a sense of urgency. Twenty ﬁve million people around the world depend on those of us in coffee consuming countries for their living. Now is not a time for us to put our heads in the sand and hope we can weather the storm.

Dub Hay Willard (Dub) Hay joined Starbucks Coffee Company in November 2002 as senior vice president, Coffee. Hay is responsible for ensuring that Starbucks serves only the best coffees the world has to offer, overseeing green coffee purchasing, roasting, blending, recipe development and coffee education of Starbucks partners (employees). In May 2005, Hay broadened his scope of responsibility within the Supply Chain Organization to include all Starbucks Global Procurement. In addition to his role as senior vice president, Coffee, and his leadership role in Tea, he has integrated the Global Procurement teams to include dairy, food, beverage, print/packaging, store development, capitol and Information Technology, merchandise and services. © copyright CoffeeTalk magazine 2008

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Online Community for Specialty Coffee By Matt Milletto Founder of BaristaExchange.com

ocused social networks

MyStarbucksIdea.com, where their customers can log on to share,

and interactive online

vote on and discuss ideas for Starbucks stores to implement.

communities are still

Using this example, the huge beneﬁts they obtain are not only

a very new concept across

a huge database of customers who they can now contact with

the board in many industries,

promotions, etc. but the mass collaboration of consumers of their

and it has been interesting to

products, and real live customers who can help shape the future

follow the evolution of how

of their company, for free.

the specialty coffee industry has

On a community site like Barista Exchange, members can

utilized many online resources

create a full proﬁle with photos, personal information, etc., which

over the last few years.

really puts a face on the web user and personalizes the experience.

For a few years, I have followed and posted on some great

When you connect with others online on a more personal level,

websites like coffeegeek.com (www.coffeegeek.com), coffeed.

it helps create a level of trust and credibility. This is extremely

com (www.coffeed.com) and other coffee forum sites, which

important in the coffee industry as it is a very community oriented

provide a resource for education in the way of blog posts, product

industry with many layers. Open communication is key.

reviews, and communication thru forums. The internet, and the

When you participate and sign up on a focused social

ways people use it, have provided a huge source for the sharing

network, you meet people who know other people. It can be a

of information and a platform for users to interact on so many

very easy way to introduce yourself to others as well as ﬁnd friends

different levels.

that you may already know. In our industry, “who you know”

After reading a book called “Wikinomics: How Mass

can really open many doors and in the past year, we have seen

Collaboration Changes Everything”, I was intrigued to dive

many business owners, industry professionals and others interact

further into developing a website where the users could interact

with new baristas, coffee farmers, allied vendors, and even coffee

and share information on a platform that was brand new to the

enthusiasts, becoming “friends” online. These “friendships” or

specialty coffee industry. A place where any barista, retailer,

“connections” can really beneﬁt all parties involved.

coffee farmer, consultant, or enthusiast from around the world

A site like LinkedIn.com is extremely useful for those who

could go to interact. In December of 2007, I launched the website

have done business together to connect with other people in

BaristaExchange.com

their industry through colleagues as well as

There are many beneﬁts to an online

recommend those who they have worked

community. We have seen companies like

with. On a focused network like Barista

Starbucks jump on board with their website,

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December 2008

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...continued Exchange, you can see these connections ﬁrst hand, and interact

CoffeeTalk

day they have 20 responses from other members.

with other vendors, potential employees, coffee roasters, etc. and

Social Networks are not just for teenagers anymore. I foresee

at the same time see their overall interaction with the site. You

a large growth in focused social networks in the coming few

can review someone’s proﬁle before contacting them, check out

years, where internet users will have a handful of social networks

their photos and blog posts, and learn more about what type of

that they are involved in depending on their areas of interest.

person they are and their role in the specialty coffee industry.

Personally, I am a member of LinkedIn (www.linkedIn.com),

Other features of Barista Exchange that have proven successful

Twitter (www.Twitter.com), Barista Exchange, a local food, and

in the coffee industry are the job postings sections, the most

gardening network (www.localgro.com), a restaurant community

comprehensive global coffee events calendar, a map feature to see

(www.fohboh.com), one for small start up businesses (www.star.

where members are located, a coffee shop database and review

tup.biz) and another for photographers (www.fotocoma.net).

section, and online live chat feature along with other small beneﬁts like a member birthday notiﬁcation, etc.

Businesses can also utilize a focused social network as a secondary website or blog. Many businesses or coffee shops will

The site is also helping to connect our industry in a travel

link directly to their Barista Exchange page, instead of trying to

related and tangible way. Since the site went live I have heard

build the same functionality on their own website. This saves a

many stories about baristas who are visiting a city and want to

lot of time and money, and shows people’s involvement in the

meet up with other baristas at coffee bars, coffee shop owners

industry and their support of community. Anyone can also create

who want to vacation in a country of origin and how they set up

a “Group” on the site for their company or another interest; we

coffee farm tours, baristas setting up carpools to a coffee event in a

have a group for all graduates of the American Barista & Coffee

nearby city, and even a week long “barista exchange” with a barista

School (link to the group) for example.

from Seattle and a coffee

For

our

industry

shop in Puerto Rico.

in particular, the online

In addition, as most of

community that Barista

the content on the site

Exchange has become

is user-based, members

allows

can really shape the way

all over the world to

the site is used, and the

interact in many new

amount of information

ways. Everyone is invited

that is shared in the

to join, no matter your

forums and blogs is great.

position in the industry.

Members often ask simple

It just takes a passion for

questions

“What

coffee and the love of

coffee are you drinking?”

learning and sharing with

or “How will the current

others. See you online!

people

from

December 2008

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CoffeeTalk

State of the Industry: A Year End Report from the Fields By Joan Nielsen

hen asked a few key questions regarding the status of their business over this past tumultuous year of 2008, most of the retailers (and a few wholesalers) this writer interviewed where holding steady or better. No nose dives, no bailouts. Yet… How has the economic environment of 2008 affected your business? The prevailing view was succinctly put by Kevin Cuddeback, CEO of GimmeCoffe! in New York, who is “cautiously optimistic and generally realistic.” He says that his optimism “is further tempered by the somber messages put out by the mainstream media that we haven’t seen the worst of it yet.” In spite of that, GimmeCoffee! has seen a pretty steady growth through October. This can be explained by the well-endowed demographics of both the Manhattan and the Brooklyn shops, and the Ithaca University locations of the other four shops (the professors, staff and students are still there). On the opposite side of the country, the same steady pace is felt. In Los Angeles, LAMILL Coffee, with one hugely popular shop, hasn’t felt any severe crunch in retail sales, but then again, they’ve only been open one year, and so have no past track record to compare with 2008. Plus, they have been innovatively clever in their concept of BL&D along with their coffee, as well as opening a “coffee gear” store next door, improving their bottom line. In Vancouver Canada, 49th Parallel Coffee has seen a dramatic increase in business since opening their doors at the beginning of 2008. According to Vince Piccolo, CEO of 49th, “this in due in part because of our intense focus on the quality of what we sell, from

the roast to the cup. And in part because Vancouver is doing well, overall. Building and construction is booming and we are getting ready for the Olympics, so we are generally more optimistic.” But he ponders that “maybe we are a little microclimate of illusion; if so ﬁne. I won’t buy into the doom-and-gloom that the media is trying to sell.” During the past year, Gayla Moore, of Moore Coffee Roasters in Ojai, California, also has seen an increase in wholesale sales; three percent increase in total, with a whopping 40% increase in on-line sales. Her private labeling program is especially strong and growing stronger. Still, Moore admits, “Christmas sales are only so-so as compared to 2007. It’s like somebody put the brakes on November/December.” Leaping across the US to Italy, Umberto Urbano, Master Roaster of Miscela d’Oro (Sicilian Artisan Espresso opening up the North American Market), has some words of wisdom. “Consumer sales are not going down, because coffee is one beverage that no one is going to stop drinking during an economic crisis. In hard times, who would possibly stop drinking coffee? But where we hear about change is in the question of the total sales receipt at the café or coffee bar. A few months ago, the customer might come in and get their coffee plus a brioche or something else. Today, the customer might just order the coffee and that’s it. So the total dollars-per-sale appears to be going down some.” What are you doing to boost your retail sales? Urbano continues, “For us, our retail sales are strong when the consumer is well educated and they understand the meaning of true Italian espresso. If they continued... © copyright CoffeeTalk magazine 2008

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...continued

appreciate quality and they find us, then we gain a very loyal customer who is not likely to change, because our flavor profile is compelling and very unique. Next year we’re going to put some of our best whole bean blends into 250 gram cans, making them more accessible for home users.” Cuddeback also speaks to serving only the very best coffees he can source as a means to get and keep customers. And, he has added to his coffees’ appeal by offering new merchandise for sale; putting the GimmeeCoffee! logo on stylishly designed Italian demi and cappuccino cups for the first time. LAMILL Coffee has seen tremendous success in their coffee gear store, where they sell everything from the extraction equipment they use at tableside service (for example, the Eva Solo from Sweden and a siphon/vacuum brewer from Japan), to their service ware—elegant plates, glasses and cutlery. At their coffee shop, they offer a “recession menu” (items under $10) and a daily “barista cup” (a $2 Clover-brewed cup of coffee). “It’s our way of saying to our customers, ‘we know how tough it may be out there and we are responding to this downturn’” says Jean Min, co-owner. Although Moore doesn’t have to worry about a coffee shop, she has past food service experience and advice. “Some retailers may benefit from adding soup and sandwich service to boost sales in these hard times. But if you don’t know how to do it really well, better not do it at all!”

Piccolo has this to say: “Yes our whole bean sales are up, but it hasn’t had an effect on our in-store sales. We know that restaurant dining is suffering, sure. However, as I see it, people are saying ‘if I can’t have that beautiful expensive dining experience, then at least I will have my great cappuccino and a sweet pastry and enjoy reading my newspaper.’ They aren’t going to give that up.” Cuddeback echoes this sentiment and says, “Maybe people won’t buy that Escalade they want, but they’re not about to give up their cappuccino. Coffee is such a fixture in the quality of life. It is an affordable luxury!” Even though diligently monitored, GimmeCoffee! often runs out of whole beans and considers this a very good thing. Urbano responds, “Well, this depends on where people are buying whole beans. If people are buying whole beans in a coffee bar or café, then it’s likely this customer is a very serious coffee lover, because they are going to be paying more than the supermarket price. If people are buying whole beans from the supermarket, then chances are they are more influenced by price and less by actual quality of the final cup. If the trend is more whole bean buying at specialty stores and coffee bars, then I believe this is part of an overall trend towards demand for quality—both at home and in the café.” In conclusion: Given these tough economic times that we are experiencing, and maybe with more stormy times on the horizon, one thing is clear. You may lose customers who don’t truly care about a great cup of coffee, but you better not disappoint the ones that do.

We’ve heard that people are buying more whole beans than ever… is this true? Moore Coffee has deﬁnitely seen an increase in whole bean sales as evidenced through their on-line success over the year. And this reinforces what the economic downtown has dictated: more people are tightening their belts and choosing to eat (and drink coffee) at home than ever before. © copyright CoffeeTalk magazine 2008

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December 2008

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CoffeeTalk

Organic Coffee 2009: Stirred, but not Shaken By Sandra Marquardt, Coordinator, Organic Coffee Collaboration, a project of the Organic Trade Association.

ccording to a June 2008 survey by international coffee expert Daniele Giovannucci, approximately 81 million pounds of organic coffee were imported into the United States and Canada in 2007, with a retail value of approximately $1 billion1. The 32 percent annual average growth rate for the organic category documented by Giovannucci between 2000 and 2007 dwarfed the estimated 1.5-2 percent annual growth rate of the conventional coffee industry. With all the discussions about the impact of the recession on daily life, it’s only fair to ponder how the organic coffee sector will fair next year. When this question was posed to Giovannucci and the leading importers, decaffeinators, and roasters that make up the Organic Coffee Collaboration, a project of the Organic Trade Association, the overwhelming response was that organic coffee is here to stay, and sales will likely continue to grow in 2009, although at a slower rate than in recent years. “Judging by other organic grocery products that have slowed to very low levels of growth (about 4% overall) in recent weeks, one can expect a similar outcome for organic coffees,” said Giovannucci. “However, since organic coffees have a long track record on consumer shopping lists, they may not suffer as much. It is likely to get worse before it gets better, though.” Environment, health, and sustainability opening doors Karen Cebreros, president of Elan Organic Coffees, believes organic coffee will still be in great demand in 2009. “There is no turning back now that global warming is a household word and sustainable consciousness has hit the mainstream.” Exactly, notes Rodney North, Equal Exchange’s The Answer Man, “The public’s awareness of – and concern about - environmental issues will continue to grow and grow. For example, people are beginning to grasp how organic farming helps ﬁght climate change by eliminating the use of ozone-destroying chemicals and building the soil such that more carbon can be sequestered.” He added, “Given the increased ecological consciousness of the population today, and if you consider all the environmental and social beneﬁts that come as extras with a cup of great organic coffee, organic coffee could actually be a deal-maker for the retailer.” Ben Hieltjes, Vice President of Business Development for Swiss Water Decaffeinated Coffee, believes that “while the state of the economy may result in consumers becoming more selective in their purchasing decisions, when it comes to what they put in their bodies, health and the environment will still be high on the criteria selection.” Organic coffee easier to access Heiltjes says another reason the organic coffee market will continue to grow is that “organic items in general are increasingly being sold at more and more mainstream locations, and organic coffee is a category that has taken on a leading role.”

Sandy Yusen, Public Relations Director for Green Mountain Coffee Roasters, agrees. “Because of increased consumer demand, many retailers have increased their selection of organic products in a wider variety of categories, and are also now selling organic coffee in the primary coffee areas of stores. This brings organic choices to a broader array of consumers. We find that our Fair Trade and organic coffees have a much higher sales velocity when integrated into the aisle rather than being limited to the separate natural set.” Organic coffee on campuses and in restaurants Jim Moore, Vice President for Coffee and Sales at Dallis Coffee, believes the organic coffee market will grow not only in the retail sector but also in the educational and institutional sectors. Dallis, whose organic coffee is sold at both New York University and Columbia University, notes there are groups lobbying their food service partners specifically requesting that the schools provide sustainable coffee options, including organic coffee. “If anything, consumers’ commitment to organic is stronger than ever, and the market for the product is more diverse,” he said, noting that there are increasing numbers of fine restaurants and coffee bars, as well as colleges, offering organic coffee. With a slow economy, consumers will not necessarily drink less, but rather change their consumption habits, said Hieltjes. “Instead of popping into a café for their morning latte, consumers might instead opt to brew a pot at home, but brew more “premium” coffees such as organic coffees, to continue to deliver that sense of indulgence and self reward” while saving on the price of a latte at a coffee house. Ultimately, organic coffee could be just what is needed to keep decision-makers perking along as they contemplate ways to stimulate the economy in an environmentally sustainable manner. **** Note: You can find further information on the Collaboration, including recipes, purchase locations and fact sheets, at http://www.ota. com/organic_and_you/coffee_collaboration. html. Giovannucci’s study is available for sale from the OTA Bookstore: www.ota.com/bookstore/2. html. 1 Giovannucci, Daniele. 2008. The North American Organic Coffee Industry Survey.