company - education - coffee

Friday, December 21, 2007

It's all about volume

I have long been a bit confused by the marketing of some of the larger coffee companies out there who set absolute terms for quality but the product has almost never really lived up to the pitch. It's as if by shaping the term quality to fit their own model, they can be 'right' or 'correct' in their approach or a hard to prove claim, the most ethical in their dealings. This is something that quietly is muttered by many a purist in closed circles but often doesn't get discussed in public.

So let me add a few thoughts on volume and quality.

Volume begets buying power. Buying power allows for purchase of better product or quite simply, purchasing discounts. The problem therein, the best product is only available in limited supply and at a high cost so scale becomes relevant to access and purchasing power.

Building for volume then means you may have the buying power to get the best coffees but then you also may get too large in volume to offer them to all your accounts or too large in scale to focus on producing the product at near peak efficiency. It becomes a relevant question if the end quality even exists to justify the purchase of the high grade product at certain volumes. Once you begin a volume model, there must be a minimum and a maximum to sustaining peak quality but I feel like many roasting outfits pass the maximum threshold well before the machines are running at max capacity.

Think on this, the best lots are tiny, the best roasts are at less than full capacity, the best brews are often manual and labor intensive. The best product must then be quite manual, labor intensive, and time consuming at every step in production. It's everything a volume business is not. Though every sustainable model currently in coffee focuses on volume and still screams about quality during every step of the way, it seems that the roasting part of the coffee business and especially the cafe end are about as volume oriented as you can get.

A true specialty model would be built solely on the top end coffees and focusing on producing them at maximum quality. Does a roasting outfit like this exist and could it survive under the current market OR would it simply lack access to top green coffees for lack of buying power? Could they even get through all the convoluted 'fairly directly organicaly' traded speak out there to a market segment willing to pay top dollar for detailed execution of a good cup?

Many roasters who dabble in the most expensive green seem to be buying a lot of low grade coffees to fill out the majority of their offerings which they sell in volume to a multitude of cafe accounts. In many cases, the margin on a sub $2/lb coffee can be much larger than on one of these top placing CoE winners. The truth is that you can jack up the cheaper greens once roasted several times the actual production cost but the price multiplier on an expensive coffee leaves a slim margin. This is built on a fear that consumers won't pay the high prices. It almost seems that buying the top coffees are simply marketing schemes to attract high volume accounts with some 'credibility' so a company can then push the lower tier coffees at good margins.

At low margins, as established by the current market, how can a business focus on solely top end 'gold bag' product without selling a lot of 'black bag' offerings to shore up the financials? How do they keep the disconnect out of the public eye and balance a commitment to both ends of the business? How can you commit to quality and charge a profitable price AND still be able to buy top product in the current market at a smaller production volume?