Okay everyone, quiet down. Just so you know if you’re in the right place, this is Anatomy of a Green Coffee Purchase 101, and I am professor Spought. This is not Anatomy of a Coffee Roast. That is taught down the hall with professor Maillard. Likewise, this is not Anatomy of an Espresso Machine, which takes place on an entirely different campus and is taught by professor Ristretto. Advanced Anatomy of a Green Coffee Purchase 201 will be taught next semester with professor Hedge. So, if everyone is in the right place we can get started.
As in all studies of anatomy, there is the body you can see and the body you cannot see without dissection. It is always the body that you cannot see that contains the vital organs, the really important stuff. Surely it is enough to know that they are there and to know their role, but it is better to understand something about how they work. That is the journey we want to begin today as we cover the basics.
Sample (The Tongue)
The beginning of almost every green coffee transaction is readily apparent to observation and, indeed, observation (by tasting) is the thing itself. Almost every green coffee transaction begins with a sample. A coffee roaster tastes some coffee and then decides what to do about it: nothing, offer to buy that coffee, or keep talking (also known as “delay”).
It is important to note when requesting, receiving, roasting, and cupping a sample that none of those things give a roaster “dibs” on that coffee. There are no dibs. A point that cannot be emphasized enough is that green coffee trading moves very quickly, so coffee is not set-aside or held for a roaster, unless, of course, the roaster owns that coffee. The coffee you are sampling can be sold to another roaster while you’re sampling it.
Price (The Stomach)
A great many factors go into setting the price for any given coffee, not the least of which are the dynamics of the futures market. Generally speaking, the price will remain as initially set. If negotiating is on your mind, note there are just as many factors contributing to potential for negotiating on price as there are contributing to the initial price. Clearly, purchase volume can play a role, but so can issues like decisiveness, clarity and ease of transaction, your history as a customer, and your payment history.
If you have an absolute price target, let your trader know before you start sampling coffee so they can work with you to find the quality that works for you at the price that works.
Buying (The Larynx) A Pop Quiz
Which of the following statements communicates to your trader that you want to buy the coffee under consideration?
- “Write that up.”
- “Let’s do it.”
- “Works for me.”
- All of the above and many additional active verbs.
Words matter and, as mentioned, coffee trading can move quickly and there are no “dibs.” If you’re clearly interested in a coffee, your trader is clearly interested in securing that coffee for you before it is allocated elsewhere. Active verbs mean action and should not be used to mask indecision. No need to be coy. Clarity is highly valued so just say, “I want to buy that coffee now please.”
Possession (The Arms)
One great advantage to decisiveness and clarity is it’s a speed dial to owning green coffee. Within minutes of you making perfectly clear you want to buy coffee, two important documents are generated: The Coffee Contract and The Delivery Order.
The contract is important not only because it puts meat on the bones of the implicit contract that already exists based on your words, but because only a contract can assign inventory. The contract allocates that coffee to you and thus ensures that coffee cannot be allocated to anyone else. When buying green coffee online, the order confirmation email is your contract. The contract isn’t dibs on a coffee, it’s a Star Trek Enterprise security shield surrounding your coffee so nobody else can touch it. And when it comes to inventory, a contract is also a Klingon cloaking device. Nobody else can touch it. Nobody else can even see it.
Which brings us to the Delivery Order. Nobody else can see the coffee anymore because (in addition to the Klingon cloaking device) it now belongs to you, the roaster. That coffee is now your inventory. You own it. The coffee itself has not physically moved, but it’s been moved in every other way.
This small bit of mental gymnastics is sometimes a challenge for new green coffee buyers, but it is very important to understand. Imagine every Delivery Order is accompanied by an old town crier who rings a bell and declares, “Hear ye, hear ye, this coffee now belongs to you and is wholly your responsibility and a manner in which it is not now your responsibility exists not.”
It’s your coffee now. It’s your coffee now. Olam is happy to offer our services in helping you work with and understand the warehouse that is holding your coffee; but remember, the coffee is now your coffee and the warehouse is now your vendor. Importers will arrange for some “carry,” or transitional storage of your coffee at the warehouse that is now your vendor, but it is critical that green coffee buyers understand warehouse rules. Why? Because that’s your coffee they have.
Transportation (The Legs)
One of the reasons it is so important to understand that a Delivery Order means you really really really own the coffee is because that means you own it when it’s on the road too. Once again, Olam is happy to assist you with shipping within the constraints of what you are paying for shipping. Your expectations of service from a trucking company should align with these constraints and not with what you’ve come to expect in terms of service from Olam directly.
Experienced green buyers understand that when a truck arrives late or with bags off-pallet, they take it up with the shipping company. Afterall, when your new laptop arrives with a gouge in the box and a broken screen, you take it up with UPS, not Dell. This is why experienced green coffee buyers tend to know a lot about trucking companies, who is reliable and who is not, and when there is value in paying a little more. The longer someone buys green coffee, the more likely they are to control the trucking directly. As with most things, one tends to get that for which one pays. This is worth mentioning because occasionally new green coffee buyers will think of Olam, the warehouse, and the trucking company as all one thing.
This concludes our review of the basics of the Anatomy of a Green Coffee Purchase 101. There is always more to learn and evermore details to master. Olam is here to help you navigate. Some of you may be thinking about dropping this class as too basic, but please note that this class is a prerequisite for Anatomy of a Green Coffee Purchase 201. Class dismissed.