Agents.
Modern communications, especially email, permit regular contact with many more
clients than was the case just ten years ago and the traditional agency function
is increasingly making way for direct trade. Even so, it is not always feasible
to deal directly with individual buyers in more than just a few markets,
especially when time differences come into play, and many exporters still use
agents.
A local agent
is on the spot, speaks the language, knows the buyers and usually can discuss
more than just the one origin most exporters represent. This makes an agent an
interesting conversation partner who is more likely to get a buyers attention.
And for exporters, agents provide a two-way information flow because they know
local conditions and often gain insight into the activities of competitors.
Agency agreements must
make it clear what each party is permitted and expected to do. If an agent is
given exclusivity in a given market (sole agency) then the exporter can demand
that the agent does not market also for any of the exporters direct competitors.
Larger agency firms sometimes represent a stable of exporters, including some
from the same origin, and smaller exporters may have to accept this because they
cannot generate sufficient business to make a sole agency worthwhile for the
agent. Such firms who do not work under an actual agency contract really
function more as preferred sales channels than as true agents.
Brokers work within a given geographical area,
bringing local buyers and sellers together. Like agents they declare the name of
both the buyer and the seller, and receive a commission but do not represent a
party. Traders buy or sell in their
own name and for their own account. Agents or brokers who do not declare the
buyers name operate as traders because they take the coffee over their own
name.
Importers and traders. Growing interest in niche products
and markets, accompanied by the reappearance of small roasters (e.g. in the
United States), has revitalized many importers who are once again increasingly
fulfilling the traditional function of sourcing specific types of coffee
(specialty, organic, but also mainstream qualities) in producing countries and
bringing these to market. Today many importers represent single estates and
individual exporters under agreements where, in exchange for exclusivity of
supply, they undertake to stock and promote particular types of coffee. This
potentially attractive alternative to the commission agency option mentioned
above is discussed further in 03.00 Niche markets.
Their ability to carry
stocks is of great importance, as it also enables less widely traded coffees to
be immediately available in the main import markets. Larger, more vertically
integrated trade houses usually handle more easily traded coffees, standard
qualities which are relatively widely bought and sold. Some of the very large
houses at times almost operate as market makers in that their pricing becomes a
reference point, even for origin, as shown below.
First and second hand. Coffee sold direct from
origin is first hand (there were no intermediate holders). If the foreign buyer
then re-offers that same coffee for sale, the market will know it as second
hand. But international traders also offer certain coffees for sale independent
of origin: in so doing they are going short in the expectation of buying in
later at a profit. To achieve such sales they may actually compete with origin
by quoting lower prices than the producers. Market reports then refer to second
hand offers or simply the second hand. Traders can buy and sell matching
contracts many times, causing a single shipment to pass through a number of
hands before reaching the end-user, a roaster. Such interlinked contracts are
known as string contracts.