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  • 11.8.1-COFFEE QUALITY-MAINSTREAM IS THE MAIN BUSINESS

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  • Mainstream is the main business

     
     
    Mainstream quality makes up the bulk of the global trade in coffee. Standard type coffees are used by large and medium-sized roasters alike. These roasters have a supply obligation to keep the shelves in supermarkets and other retail stores filled with their product: a product that is always available and that is always the same in terms of appearance and taste. The largest roasters use many millions of bags of such coffee each year. For reasons of blend composition, logistics and simple supply security they cannot depend on just a single origin. Their main requirement therefore is that the supply be reliable, which means such coffees must be relatively easily substitutable and so they must be available from a number of countries.

    To satisfy their long-term delivery commitments for roasted coffee, roasters also enter into long-term purchase contracts, usually on the basis 'price to be fixed - buyer's call' (09.02). Such long-term commitments almost inevitably mean the coffee trade sells such coffees short and expects to cover their sales later. Selling short is risky by itself but, as discussed in Chapter 09, most of the risk can be hedged.

    But selling a single origin short (in quantity and over an extended period) is exceedingly risky in case of later supply difficulties in that origin, so the trade instead sells a 'basket' of acceptable coffees from a number of different origins. For example, 'Guatemala, Prime Washed, and/or El Salvador, Central Standard, and/or Costa Rica, Hard Bean,' against the appropriate delivery months of the New York arabica contract, the 'C'. Or, 'Uganda, Standard Grade, and/or Côte d'Ivoire, Grade 2,' against the LIFFE robusta contract.

    The 'baskets' represent coffees that are acceptable for the same purpose in many blends of roasted coffee. Suppliers can fulfil their delivery commitments by providing one of the specified types. Each individual shipment is still subject to the roaster's final approval of quality on arrival, of course. By coupling the use of these 'baskets' with just-in-time delivery and the often imposed requirement that any coffee not approved on arrival be substituted immediately, one could say that the large roasters have taken most surprises out of the procurement process.

    All except price; but even here their main objective is not to pay more than their competitors, rather than to look for bargains or play the market. Exporters must understand that there is no place for emotion in these buying processes. All that counts is price and performance.