Broadly speaking, coffees can be divided into three commercial categories.
In today’s specialty market all three types of coffee are represented: exemplary and high quality coffees either as stand-alone or as a named blend component, and mainstream quality in many of the ready-to-drink and flavoured drinks that are sold alongside filter coffee and espresso.Obviously, for smaller exporters of top quality coffee the exemplary segment initially offers more promise. However producers or exporters of good quality coffee have three basic options open to them.
Premiums for specialty coffee can be considerable at the retail level but the premiums available for producers are inevitably much lower, although they can still be significant. It is sobering to realize that mainstream qualities, including robusta, account for an estimated 85%–90% of world coffee consumption, while the share of exemplary and high quality coffee is no more than 10% or perhaps 15% of the world market. This suggests that for many producers it would be inadvisable to ignore the mainstream market altogether. Instead they should concentrate on both: specialty for their top quality and mainstream for the remainder of their production.A further point to note is that sales to small roasters are mostly on extended credit terms, something only an importer can easily afford. Inventory costs, late payment costs and even the risk of payment defaults are therefore part of the cost equation. Also, most roasters purchase subject to approval of the quality on delivery. This means the importer will be left with any coffee that does not meet the roaster’s expectations. In other words, the premium for specialty coffee at the wholesale level includes many more factors than just the quality.Exclusive marketing arrangementsThere are times, especially with a new and limited coffee, that a producer may agree to sell this coffee only to a particular company, or to only a few companies who do not compete in the same geographic region. Importers and roasters at times like to have such an arrangement because it prevents their competitors from marketing the identical name at a different price in the same market place. They can then create a marketing strategy that sets them, and the coffee, apart from the competition.Potential benefits for the producer include
Potential disadvantages for the producer include
In conclusionProducers entering into such arrangements must make every effort to know their business partner. There certainly are companies that are less than serious, that make promises they cannot keep, and that sometimes may even forego the agreed payment structure when this suits them. It is imperative therefore that all contractual arrangements are reviewed by a legal adviser, both in the producer’s own country and in the buyer’s country. In order to be effective these agreements must be true partnerships. The producer must do his share to deliver the quantity and quality the buyer requires. The buyer must do his share to pay a timely, fair price and to promote the coffee to his consumer base in a way that ensures ongoing demand. In other words, create relationships that can be formalized in a marketing agreement