In this episode of The Exchange, Mark Inman and Todd Mackey discuss the value of working with a coffee trader. They emphasize the importance of building a relationship with a trader who understands your business and can provide personalized service. They highlight the advantages of working with a trader who has expertise in areas such as market knowledge, finance, or social and environmental issues. They also discuss the red flags to watch out for when choosing a trader and the benefits of a long-term relationship, including assistance with equipment sales and acquisitions.
00:00 Introduction and Overview
03:01 The Value of Working with a Coffee Trader
14:26 Choosing the Right Coffee Trader for Your Business
33:16 Trust and Communication in Coffee Trading
35:09 Understanding Long Coffee and Legally Binding Contracts
46:07 The Importance of Fair Pricing and Value
53:27 The Role of Trucking Companies in Coffee Delivery
01:00:01 Building Strong Relationships in the Coffee Industry
Welcome to The Exchange, a coffee podcast where coffee people talk to coffee people about coffee and things coffee adjacent. Presented by Covoya Specialty Coffee, The Exchange is hosted by Mark Inman and Todd Mackey and produced by me, Mike Ferguson. The topic for season four, episode three, the 34th edition of The Exchange is all about coffee traders. The who, the what, the when, the where, the why, and the how of working with a coffee trader. Two notes up front, yes, Ford still manufactures the Taurus and no, We won't be explaining the Chipper Shredder comment, but feel free to email our hosts with questions. And now, here they are, Mark and Todd.
I'm your co -host, Mark Inman, and with me always is Todd Mackey and our producer, Mike Ferguson. Hello, Todd. Hi, Mark. Hi, Mike. Wonderful to join you. Yeah, well, wonderful me to join you. I'm actually live in your studio here in Providence, Rhode Island. Our studio. Our studio, but this is not, I have, I'm... mostly remote, so it's always a treat when I get to come in here. Yeah, yeah, and here we are, early June, summer is on deck, and we are sort of in the wake of all of our recording at the annual SCA Expo event, which this year was held in Chicago. And getting back to it, this episode, and that you're here for some management meetings, which went off wonderfully, I have to say. Team building tattoos, the team went and all got tattooed next door, and we'll have those photos up on our Instagram page later. Forthcoming. Not true. not true, all right. I'm just making this up. Well, there is a me in team. Yeah, apparently. Mark Winn got tattooed. I get tattooed regularly, so that's a... But the rest of the team had weird excuses why they could enjoy it. Yeah, there were a few monumental bails. Yeah, very much so. I felt personally in the wind a little bit having booked appointments and then having those canceled last minute. But I enjoyed myself, it was fun. I was good. I'm glad I did it. Yeah. And you got a pot of gold at the end of a rainbow, is that right? No, I did not. I did not do that, although that would have been funny. No, I got just a hammerhead shark this time. Very cool, very cool. Awesome, well today we're gonna be talking about the value of picking up a relationship and optimizing a relationship with a coffee trader. And this of course coming from two full -time coffee traders. Well, and former roasters who dealt with coffee traders. So, how we transitioned as well. things that we learned, I think we could approach it from both angles. Well, and I think one thing to recognize at The Gate is we deal with lots of other coffee traders. yeah. And so like as it relates to working on exports, you know, putting business together upstream, we're dealing with people who are managing our accounts in their books, just the same as we're managing our customers' accounts in our books. So. Lots of insights here. I think it's a great one. We hope that anyone who has sort of been curious about whether or not there's a good reason to pick up a relationship directly, maybe you're at a size that is just cresting volumes that it feels like that type of support might be great. We're gonna get into all of those details. Mark has prepared a, you've been up. almost all night preparing a riveting outline. Todd just strolls in and just riffs. So that's the difference here. Yeah. I'm feeling relaxed. I'm excited to work with you on your itinerary for us and take it away. Well, I didn't do an itinerary. I just have talking points. I guess I would want to kick it off by saying, you know, with modern technology and pretty much every importer having an online a source to buy coffee, there is a temptation as a coffee buyer to just order online. And I think that while that's convenient and easy, and when you're smaller, it works. As you get larger, I think you're missing out on a lot of key benefits by just buying Insular in that way. And the relationship with the coffee trader, depending on what your needing out of that relationship could put you miles ahead of where you were if you were just an online buyer. And while all of us, and I would put us included, are not really pushing, but we're encouraging people to do more online transactions, it's just a suite of benefits when you deal with somebody personally. Yeah, no, I mean, I think it goes without saying that given, you know, The nature of the business environment is such that I think every trade house is trying to separate what would be high value in the digital environment, what transactions, what business functions, where that size of account threshold would be. But also, you have what is in the system that's available to you 24 hours a day, which is fantastic. But then the coffee trader is, is the one in many cases loading what is in the system into the system and aware of what's gonna be, what's behind it, the human element, what's possible, the crop forecasting, what is available beyond just what is on the shelf, quote unquote. Well, I mean, yeah, and it's the personalized service that you get from a trader. I would say that as much as, I think one of the kind of, disturbing lessons I had when I was a buyer and I used to travel with a lot of other buyers and then I became a trader and I thought, I'll go work with these friends that I used to do buying trips with. And then all of a sudden there was this dynamic shift where it's like, well, you're a trader, you need to kiss the ring to get me to pay attention to you and jump through hoops and they approached an importer like. they were a used car salesman that's just begging for a sale. And I was really bothered by that for two reasons. One is I never conducted myself like that when I was a buyer. I always, I got an immense amount of value out of my relationship with my trader. And I just felt that those buyers didn't understand what a trader brings to the table. They didn't even try to learn. And so they, if you were looking at a trader as just a salesperson, then yes, you don't need a trader. You could just buy online if you know the qualities you want or whatever, but you're missing out on so much value that it's, you know, shame on them. And as when I was first coming up in trading, I just refused to work with people like that. It wasn't interesting to me because I always saw my value as, you know, I always say this to new customers, you could buy green coffee from anywhere. What? the advantage I bring is I used to be you. I know how to get into a Costco or I know how to price coffees for wholesale. And all of the things, the best interactions that I have with my clients have little or nothing to do with green coffee as the subject matter. But as green coffee as a subject matter, if I know you and I understand what you're doing, I am an additional employee that you're paying nothing for because I'm looking out for you. If I'm, you know, how many times have you cupped coffees that we've been offered and you're like, man, this would be a great coffee for XXX. And you get on the phone and say, look, we just saw this. I don't know if we're going to buy it, but I think it's perfect for you. There's no way they would have stumbled upon that coffee if you weren't looking out for them. And if you had relationships with maybe three or four import companies, that's three or four people looking out for your best interests all the time. And that is a far cry from just a salesperson at that point. They understand your business, they understand the pricing you need to hit, they understand the qualities that you like, they understand the origins you like to work with, and they're constantly looking to get you what you want and what you're gonna be happy with. I mean, we all are, you know, and I... Good traders are constantly chasing reward, whether it's, for some it's their bonus, and some it's the praise by their clients. They're like, wow, you really understand my business, you really look out. And those words of affirmation to me are why I do what I do. I love that. Yeah, no, I do think to back up, I do think the space is full of those people who are selling widgets. Thankfully, specialty as it's becoming increasingly differentiated, there's a lot of good options otherwise. But there's plenty of people who are just chasing a sale and just trying to get you to sign a contract, take delivery, cash it out, as though there is a sale you can do where you don't have to immediately go out and make another sale. I've always thought describing kind of what you're, you know, you. gave shape to, it's like the sales are the result of the relationship. And the relationship is expanded by being able to understand and empathize with the challenges that a business faces. And having been a roaster and a cupper and being in product development and having to troubleshoot distribution channels, you become a... in so many ways that satisfying position is to become the first call that someone's like, hey, I have this potential client who's looking for this, this being some combination of coffee in some other shape or form that always has a price requirement, that has a place requirement where it needs to be, chronological requirement when it needs to be there. And you're talking about like, you know, first and foremost, that conversation often looks like, hey, is this good business for you? Right. Is this on brand? Does this, does this make sense? Is it worth chasing? Hey, I've been there either myself or I've been there, you know, in the aggregated experience I have working with lots of different companies. You know, obviously the, the confidence that what we experience with one account does not get shared with others. Right. So I don't mean to suggest that in any way, but the fact that we have this broad kind of overarching view of the market and the relative opportunities, you can really right away sniff out like, hey, X is a good match for Y. And you should put resources here or hey, stay away, red flag. Example, yeah, Whole Foods is not the right vendor for you. Don't spend the next year. building capacity and trying to sell into this channel. And that's just one more practical example for our listeners, but also that answer would not be the same for every caller. But yeah, I think that the sales are a result of those conversations going well and business materializing and becoming lasting. To me, that's the most satisfying part of being the trader. But it's also the thing that I think what made the role of trader for me on the other side click. Because there's a constant stream of green coffees on offer. I'm sure all of the people listening are just, if you are kind enough to cup everything that everybody sends you. you know, that's a full -time job plus. Right, and we've talked about this in previous episodes, the etiquette of sampling and, you know, solicited versus unsolicited samples. If you are kind enough to cup everything, you know, hats off, but I wonder about, you know, how you're managing your day at that point. No, I mean, I would love to hear the feedback from any listeners that have been like clients of mine, because one of my early conversations is always, hey, just so you know. I probably will, I am never not interested in you, I just respect your time. And I don't wanna buy that time until I know that it's like worth you doing this. So like when I send a sample, like I think you truly, it matters for you to take a look at it. And if I send it and you didn't ask me for it, like I never would expect you to turn it around in a timely manner. Like this is, you know, hey, look, I'm. trying to ring your bell here. But even beyond that, like, yeah, that conversation of like, you know, hey, I'm not gonna patronize your time by just like trying to occupy four hours a week with you processing samples that you didn't ask for in origins that you might be covered or you don't even sell. Right, yeah, the only time I would send a sample, I wouldn't say it's unsolicited because what ends up happening is I come across something that I know a customer loves and I'll say, hey, I just popped this in the mail. I don't even know if you're even looking for this right now, but this has got these qualities or whatever they're looking for. And if it grabs you, give me a call or let me know what you think about it. But if not, it's fine, I'm not expecting anything. But that's just me just trying to show the customer I get what they're doing. So let's back up a little bit here. You're a small roaster. Let's make this mythical buyer up. You are the archetype to what I painted in previous episode. You're the garage roaster now who's growing. The hobbyist who's now a business person. The hobbyist who is making a quarter million dollars a year. On two one kilo roasters. I will stand by that number. And now you've graduated to a 10 kilo roaster and you're starting to engage with the trade. What do you think Todd, are the initial steps when you're looking for a trader to work with, what would you do as that customer? Like, and how would I identify the right trader for me? Or, okay, well, I'm gonna, there's the right trader for me question, then there's the function of the trader, like how do I get the most from my partner companies through this person or the persons who are holding these roles? And one of the biggest things is knowing your why, like having a strong sense of, where you exist in the market and why you're there. And often these setup calls of which I can't even count in the rear view and you are many years my senior in the trade. Many, many years. But no, I mean you've had far more calls like this, right? And it's not to suggest that those blend in, it's to say like specialty coffee, the companies are more brands and lifestyle companies with a necessary point of view in their marketing and in their sort of procurement than they are makers, right? They are makers, roasters are makers, I'm not taking that away, but as they grow and they're successful, there has to be a point of view. And this has to make it back to how and why they're buying what they're buying. And so companies that have that distilled, or at least have the closets, the kind of, the hallways they wanna walk down as they're exploring the building, per se, they have to have that in line. Just to say, hey, I wanna buy the best coffee at the best price. It's like, cool, awesome. Yeah, me too. But. But yeah, like the companies that come in and they're like, hey, you know, either we're an existing company and this is the core of our business. This is historically how we've bought and when we've bought. And you know, these are the reasons when we bite, this is why we bite down. Then I have a crystal clear picture of how to go after them, which is expressly my job. And I don't mean, to chase them down. We also, as roasters and buyers do, I mean, anyone in any field, you're operating on a scarcity of time, focus and energy. And so the more that that can be distilled, memorable and transmitted, the more that we can take that as homework, marching orders, hey, okay, cool, I am gonna contact. these three suppliers, these partners, here's this farm operation that I'm gonna tie into, get a sense, and immediately turn around feedback and identify areas of opportunity that are great fits. And I can identify companies over the history of my work in this role where many of those connections that were drawn on the back of conversations that those customers came in distilled enough to say, hey, I wanna do, business that's like this for these reasons, with these ethics and values, and those relationships that were knit within one to two calendar years are still at the core of their purchasing. Some of these people have been buying the same farmers coffee as that farmer grows, and they grow every year since. And I could not get a greater satisfaction than to see that happen and to play a more and more passive role. I mean, obviously it's awesome because we have a finance function, a logistics function, we have a broad, being able to share market insights and understand environments as they change, whether through a normal year or a COVID year or what have you. But to be able to see those things lock in and people find their lane and then to build their business off of it is... is awesome. So yeah, having a very strong knowledge of like, this is our portfolio of coffees historically. If there's change afoot or opportunities on the way in, this is what it looks like. And those conversations can be immediately pointed. But yeah, otherwise it's, yeah, can you sell me coffee? Sure, plenty. Yeah, yeah. And I think that, you know, touching on that, it's, if you're, when you're looking for that initial company to connect with, it's do they specialize in the types of coffees that you buy? So you've got right fit trading or import company to roaster. And then secondly, it's what is it that you need out of the relationship? So I always say with traders that I work with, either in a management space or a mentor space, that each trader has... an advantage in the marketplace. Some people I know came up just through the finance side. So they know the market. If you want to talk about bear flag movement in the market and cup and saucer type technical aspects of coffee trading, there are people that were trained in that way and are masters at it. But that's their hook. That's what they do. And if you don't need that service, then that trader, their real talent is going to be wasted on you. if, you know, for guys like you and I, who came from the roasting and barista and manufacturing, you know, we had a shop or we had whatever, then you're connecting at a different level. Like as I grow as a roaster, this trader, you know, had a company that was bigger than mine and they can help me avoid the pitfalls that they took when they were building their businesses. And that's a different advantage. And then there are people that are, you know, very, you know, their hook is more environmental social stuff and they may have a degree in this and or, you know, went to college and or lived abroad was, were in the Peace Corps and that's their hook and they are connected to community more. And that if your company is based on those types of, you know, that type of ethos, then that trader is going to be very good for you. So it's trying to find right fit, I think first and foremost. So the, when you initially take your call with them, it's important for you to clearly, communicate your business, what it is based on. Because the trader is checking boxes in their mind as they get to know you. And so when coffees come across their desk that we receive offers, we resell offers as much as a roaster does. Just random unsolicited stuff that's for sale. If I have a knowledge of who you are and how your business operates, I'm trying to find fits for you always, 24 hours a day. Anything that passes the desk passes that. that sense of who this is. So it's clearly communicating who you are in your business, but it's also asking the question of the trader, what's your background? Where did you learn this? Where have you worked before? What have you done in the industry to find out what type of a person this is or what type of a resource they can be for you as you grow as a company. And they want to make you happy. They want to bring their A game to you. But if you're, If you're somebody who wants to talk about how do I build a great espresso blend and how do I get into Costco and you're talking to a pure financial trader, they're gonna be constantly frustrated because they don't have the answer that you need and they're gonna wing it, they're gonna try to figure it out, but they just don't have it in their background. And conversely, if you're talking to somebody who is in the Peace Corps and Burundi and then you wanna talk about market movements and real technical aspects of trading and they just don't have that background, it's going to always be an awkward, interaction and it takes some time to figure that out. But I always view the initial phone call as an interview, a two -sided interview, and the trader's okay with that. They understand that they're being interviewed and they're gonna just give you who they are. The person who's just looking for the sale, well, that's gonna come to light as well. And if that's all you need, if you're just looking for good deals in transactions, well, then there's that person will make that very well known, that they can find you the good deal at all times and they can get you rock bottom prices, but understand that's about what you're gonna get out of that person. So that would be one of my key elements that you look for. Yeah, to that point in that interview, what are some red flags? Well, red flags are wrong fits. I really need help on... building my wholesale up and I've never been in this before. I don't know how to do a distribution deal and if the trader's like, yeah, I know a trader who was a roaster, they're already trying to direct you to another place. The one that will act like they have all the answers, unless they have a varied background, dig deeper on that to make sure that they do. And for me personally, when I worked with some traders growing up, when I was a buyer, I learned an immense amount. My thing was I wanted to learn the market. I didn't really understand how the futures market worked. I didn't necessarily know all the terms. And the trader I worked with was extremely patient and just listened to my questions and answered them and taught me more than I could have ever learned on my own or certainly trying to accumulate books and figuring it out. I learned an immense amount and I returned that by loyalty. I was extremely loyal to that trader because I never could have built my company without their advice. And then other traders, when I got more into real, I was doing all fair trade and organic and stuff like that, people that were really on the ground in these places were helpful to me as well. But I needed that foundation of the market knowledge that I just didn't have. Regardless of if I was buying coffee that was fixed. or outright price, I still always felt like that was a missing hole in my professional development. And so that worked for me. And the people that I personally would pull myself away from were the wheeler dealer types. It wasn't what I was, I liked more passive traders that were like, hey, I'll come to you asking for what I'm looking for, but they're not pushing anything on me. They're just there for me whenever I'm calling on them. But if they were pushing anything, it's because they saw something that they knew I purchased or they knew I liked, but it wasn't always like - Or even better, that they're passionate about themselves, right? Right, right. Which a wheeler dealer does not give you. No, but I was always surprised by interacting with other buyers, roaster buyers, that - the type of trader that they worked with, it was like, wow, really, I wouldn't have suspected that you would wanna work with that person because they're very much like, what can I do to get you behind the wheel of this Colombian Supremo? And the roaster buyer themselves was the opposite personality. So sometimes I always saw the wrong fit and I always thought like, why did you go there? And understanding that, I think also, roasters that... are always hopping around to different companies, I think it's a mistake unless you're just trying to find your fit, but the real benefit comes when the relationship's established. That long term, like you said, it's years and years of seeing them buy the same coffee or helping them develop that relationship. That's when you really pay off for a roaster because you're creating legacy and. And at that point, you both really understand each other. You may have traveled together. Sometimes you're hanging out with them when you go into town and you really understand each other's business models clearly. And then it goes to the next level of, I'm looking to sell my company or I'm looking to acquire a company or I'm looking for a key person in my company and the trader is interacting with so many different people that they could help you make that happen. In fact, I have a it's a client friend that was saying, you know, I'm thinking about, you know, selling and I just don't know, you know, for these X reasons and I was able to make that connection for them. And there's - To a buyer. A buyer, yeah. And that person would have had to hire somebody to go out and find that buyer. Whoa, Mark, already the phone is ringing off the hook. People are - You guys realize this isn't live, right? Yeah, that was the joke. We'll write your questions in to, what's our email address? Mark, can you please broker the sale of my company? Yeah, that's not my primary function. It just happened to start a line. I don't mean to miss that. I think that that, or even things like, hey, I'm sizing up my equipment. and like who could be better to reach out to that like, hey, I have a UG22 that should go to a lovely home in Providence. And don't underestimate that because that has happened, that particular interaction happens all the time. Constantly. And if you're in the place of needing to buy equipment or needing to sell equipment, reaching out to your trader to just even bounce the idea off, amount of interactions most traders are taking, they are connectors. And they want, even though they're not even involved in the deal, like there's no commissions or anything, again, it's they want to be a catalyst to keep the relationship strong and happy. And yeah, in this past year, I've seen between two customers more roaster sales this year than I've seen probably in my career. It's crazy the amount of roasters that are. passing hands this year. So many one kilo roasters passing hands. No, no, no. I wish, you know, I, it's no, like large plant roasters. I mean, why would you when you're making a quarter million dollars? Yeah, why would you get rid of that? That's like an ATM in your garage. Yeah, I mean, I, you know, it's interesting because for all of these reasons, right? Like there's, it sounds like, a significant part of your week by how we're describing this, getting on and building these relationships with a handful of different traders at different houses, right? Especially as you size up, it's in your best interest to have diversified supply chains and have multiple options and make sure that all eggs are not in one basket. But I also think the threshold is lower than people imagine for when it's time to engage a trader, like I think that, you know. I think that's the case now. I think, I would say 10 or 15 years ago, before every import company had an online source, you got into a relationship pretty early, sometimes too early. But now, everything's pointing to you to take your sweet time. And I think that there's something nice about that, but you're also, yeah, I think it delays your development. Yeah, I just, I think the key is to have the, understanding of your business and your direction. Even if those are gonna be negotiated later, as they always are, right? Life is full of change and business is full of pivots and switches. You're not gonna find yourself five years down the road exactly where you thought you'd be today. But I think if you have that kind of wherewithal, the confidence and the security and knowing that that... that call is well worth someone in our position taking. And you are well deserving of that time and energy when you're prepared for it. I think that the next challenge is just leaning into it and trusting that insight and making decisions that probably feel bigger and scarier maybe than decisions have in the past around purchasing, right? Like maybe that's. hey, I need to put a spread in place and I need to engage the concept of storage and carry for the sake of kind of controlling my costs and being able to forecast my pricing. All of which can easily be walked through, the hard part being it is a departure from going online and just buying a pallet of coffee. That said, again, a good trader is going to be happy to take the time. to make sure all of this is understood. I've always told my customers, you know, the one thing, and I have had seasons where I've mismanaged this, and you know, I've had to kind of just acknowledge it, grow, and like say my apologies and move forward, but like being too busy in this space is easy, right? Because - So if Todd's mismanaged you, please call in right now and we'll bring you live on the air, and Todd could explain himself. Line two, Todd. I'm sorry, we're not, we're live. But the idea that like, yeah, I think that there's probably a lot of people listening who've had that experience where someone was too busy to listen, made the wrong suggestion, flash forward, you get an email like, hey, here's your position. You're like, I didn't buy that, what is this? All this kind of stuff. And those are jarring experiences. I'm not suggesting that's what the name of my game. I'm saying, You know, to be in the situation where, you know, I try to remind my customers, I'm like, hey, if you have a conversation, even with someone else, and you're like, what is this term? Like, if we can't slow down and talk through, like, exactly what everything means, I'm happy to do it for everything I'm doing. I'm happy to do it for anyone else. Like, just to make sure that everyone's feeling security in whatever decisions they're making. I think that is a very important. step as you're having those early calls with a trader is to like, hey, can I trust this person just to give me like unbiased advice? Right? Because I think it matters, right? Like, I mean, you know, salespeople want you to say yes. Of course. You know, a good trader is going to tell you when you're buying too long. Yeah, a good trader for sure, because it doesn't do the customer any service and it does a huge disturbance to the company. It puts the company in a bad position. It puts the trader's company in a bad position. It synthesizes a market that doesn't exist for a farmer. Like the whole thing is dubious. So I think that there are these big, big green flags that come up if you're dealing with people who are looking at growing with you in a lasting way that you can identify. Yeah, I totally agree with that. And I also think the other piece that is important to note is that all these transactions that you're gonna be doing, especially when you're doing longer spreads and stuff, these are legally binding contracts. And they're not, this isn't Home Depot where you can say, yeah, I don't really need that. And I'm just gonna walk away from that. You are obligated to the purchases that you make. Mike Ferguson (35:09.39) Traders can help you manage that and they can help you deal with things like, we lost this massive account and I know we had contracted for this and I'm now long coffee. They can work with you to find solutions to your problems, but ultimately it's your responsibility to manage that. The trader's willing to help as long as there's a good relationship. And then I think also conversely is what I have run into in the past are customers that... you know, sign contracts, buy coffee, and then never keep their own personal records of what they own. And then they're like, when we send a position report, they're like, well, I don't remember buying this, and I don't remember buying that. And then you send them the signed contracts, and they're like, well, I don't even need that. And like, it's your problem. And understand that, you know, what we're doing is these are businesses that are bound by legal contracts, and these have been. created specifically to avoid these situations. So there is a personal responsibility as you grow to keep better records of what you're purchasing. Or I've seen customers that have bought the same coffee from multiple importers, not realizing that they've done that. And then they're now triple what they need. And what they try to do is just have the contract go away. And that doesn't work that way either. When in reality, what they need to do is buy another one kg roaster. Yeah, just one more and you're covered. We'll have to, in post, get some sound effects there. Just speaking of defining our terms, can you guys explain long, buying coffee long? Yeah, long would just be more than needed. So this would be, if we're talking, if you were to say I'm going to cover or buy coffee that would essentially fulfill my needs for a particular amount of time. long would indicate that this is above and beyond what would properly cover or fulfill those needs. So, you know, a salesperson, of course, hey, you want 10 containers of coffee? Awesome. Wait, you only used one last year. If they're not asking, you know, what changed? Right? Right? Like, like this is stuff that comes up in conversations all the time for me where I'm like, yeah, I totally, I get why this coffee's awesome, it's a great price, pricing is good, like if the market is low or whatever, I get why people want to pile it on or they're trying to get decisions made quickly. But if a trader's not asking, wait a minute, hey, this is 250 % of what we did last year. Did you switch up supply chains? Am I more of your total business? Have you grown that much? What is your growth, right? That's why I think those conversations we were talking about. hey, this is my business, this is what we do, this is what we're gearing at. All of this flows and sort of builds on itself with these regular, I try to have monthly calls or bimonthly calls. And those are really good questions to avoid things like finding, hey, I have 300 % of my coffee needs contracted. And... you know, someone like Mark who's gonna put me in a chipper shredder if I don't take him. No, yeah. Well, and I also think that a good trader, like the trader who just says, okay, we'll do 10 containers and doesn't ask those questions like for the fit is somebody who is the wheeler dealer, just trying to get the sales on the books. and is not thinking about the long -term ramifications if you don't need that coffee. It's problematic for all parties involved at that point. So, you know, when a trader is actually limiting your purchase, they're not trying to belittle you or discount you, they're trying to help you. And a prime example of that, I actually, I've probably told this story before on the podcast, but a long time ago - Wait, wait, wait. Is this a purchase you made from Ian Kluce of Ethiopia Organic? All right, continue. If I've already told this story, I'm not gonna. This goes way back and it's a sound time to invite our newer listeners to check out seasons one and two of the exchange by Covoya Specialty Coffee. Very much so. In fact, I have received a lot of email recently from people who have gone back in the catalog and have started to listen to it who may have heard this story. So for those of you who haven't, when I was a roaster buyer, I bought only organic. And the problem back then was in many cases, organic supply was really tight. And so when it became available, you had to buy it. There was not gonna be another opportunity a month from now. And there was a particular Ethiopian organic I liked, and there were three containers available. I believe my growth was going to take me there and I bought the coffee and I didn't, I slowed down and it took me three years to take that coffee and Ian was trying to talk me out of it the whole time and I wasn't having it, I wasn't listening. And the carry alone that I paid was over $20 ,000 by the time I pulled the last bag and it was... And I had every intent, this was the most painful lesson I had learned at the time. And it taught me to, yes, engage the trader more, have the conversation. Because Ian was saying, I can get this in nine months again. This isn't gonna be a problem. And I didn't trust it, but I always felt like, well, if I run out, I'm in real trouble here. And he was trying to save me, and I didn't allow it to happen. But it's a story I tell to roasters all the time, like just don't overbuy or the belief that, well, if I only need one container, but if I buy two, I'm gonna get a cheaper price because it's volume buying. The volume discounts just aren't what you think they are. I didn't even know where that misnomer got out there, but you hear that all the time. It's like, well, what if I buy five containers? Is it gonna be a dollar cheaper? It's like, we're not working with that big of a. of a range. Yeah, no, it's interesting you bring up the, you know, it's come up once for me and this is a good story pointing towards it where, yeah, there is a bridge also that you have to cross, like, you know, as you get to know your trader, like, can you trust them? I mean, I think that, you know, one thing to highlight is that, yeah, their livelihood depends on this too. I mean, we're here, you know, building a business in the same conversation. And it's, I think I get feedback or have had feedback over the years at times where it's like, you know, there is a distortion in the market that people think like, yeah, hey, if no one came in and we didn't do this well and responsibly and deliver value like this to the customers, like we would just still, you know, be, you know, just hanging out with bags of money over here, like, you know, which is absolutely 100 % not the case. I mean, it's a very detailed business and we have to manage things. like on a very high level to have a good business that the investors in companies like ours are happy to keep open and keep funding. So there's every reason that that trust has to work both ways. Yeah, and I think that that's another good point to bring up is having the conversation with your trader on how the numbers work. Because I love having that conversation. For two reasons, one is that, When I was a roaster, I always bought into the rumor that, well, all the money is being made by the importer. They're the middle man, they're pulling all this money and they're not bringing a lot of value. And that spurned a lot of roasters at the time to believe, well, the direct trade movement kind of was built from that. But the direct trade that went very far were roasters that are like, well, we're gonna start importing our own coffee because there's gonna be this massive savings. And that belief carries through to today. And I've had pieces of transactions on the line where they're like, well, we want to do this, but we need it to be a lot cheaper because of whatever. And I'll just break the numbers down for them. And in many cases, I'll say, look, I think what a lot of roasters don't ultimately understand is why we are selling green coffee. in many ways, we are your financier. I mean, we are tying up money. If you buy a container of coffee, we're not, you know, you're basically borrowing money from us until you pick up that last bag. And a container of coffee can cost a quarter million dollars. I mean, it's a significant purchase. And so if you were borrowing a quarter million dollars from a bank, they're going to ask you a lot of questions before they give you the loan. For us, it's a similar thing. And if I'm going to tie up a quarter million dollars, so it's easy to ask an importer, how do these numbers work? I just need to understand that. And then conversely, I think what always drives me nuts, my family were involved in Ross Dress for Less. That was the company that I grew up in. And Ross Dress for Less was always about valuing deals. Everything was a deal. I bought Ralph Lauren towels that you could have bought at Macy's for 70 bucks. I got it at Ross for 5 .99. And we have been taught as Americans to always try to get a good deal, like grind a good deal. And I think that in this specialty business, that doing that or believing that success means you always got a good deal. is a bad way of looking at success because it creates a lot of ill will across the board. And I have told them in many cases, like if you're buying a specialized coffee from a farmer that you want a relationship with and you have all these requirements, like you need information or you want photographs or video, this stuff costs money and takes time. And because of that, we have to account for those things. And if all you're looking for is the cheapest, then I'm not the person to talk to. I'm never gonna be the cheapest because I'm bringing other values to the table that cost money. And everybody wants a Ferrari for the price of a Ford Taurus, but it just doesn't work that way always. Now you could find deals like where there's a, you know, pass crop inventory or people trying to unload positions and. That's out there, but if you approach every time you're purchasing, like you have to get the best deal or grind people down to nothing, it's gonna make just for you as a buyer, a miserable existence because it's a sport in the art of getting a deal, but it's, you know, everything has a price to it and things start getting discounted. You're not gonna get what you're looking for at the end of the day. Well, if it's operating on the assumption that if you don't get a good deal, someone else did. Well, yeah, that's silly too. That's the toxic idea. Just to call back, unrelated, is Ford still making the Taurus? I have no idea. Don't ask me. I would assume so. It's probably the best -selling car that they make. Really? I mean, let's not argue that, but moving on, I mean, just a point of interest. I got your reference, but I'd be curious. Ford, please let us know. Call in right now. Well, you have a strong relationship with Ford. I did, many moons ago. Yeah. Sometimes smaller roasters, because they're taking the coffee in real time, it's delivered, though, or it's delivered, don't actually understand there's a contract in play. Yeah, true. So if you guys could explain, just review. Contracts and maintaining a position the relationship between a contract and having a position Yeah, yeah, so Contract would be the sale document, right? So for no matter what if it's a spot today sale that you're gonna pick up today we would and that's a matter of our system because Supply chain businesses typically operate in future periods. There are you know, there are documents that define and sure up the future sale and future purchase of coffee. And so in a system for a company like ours and the other comparable companies, when you come in, even if you're buying five bags right now, it's gonna be delivered, I'm buying it on the website, there is going to be a contract document that is created. In the case that you're taking that coffee and you might be paying with a credit card or processing payment immediately by wire or what have you. you know, we're not sending that contract in the same way that we would if you were saying, I would like to take 500 bags of coffee in the period between October of 2024 and January of 2024. In that type of scenario, we would be putting that coffee in the same type of contract document. But the...outline of all of those contract documents and your future obligations, whether that's future delivery of coffee that happens to be in a US warehouse right now, or coffee that might not even be the flower on a tree yet, right? That we are obligated to deliver you and you are obligated to take at a certain price at a certain time in the future. The combination of those things is what we call your position. So not unlike securities of different kinds, this is a commodities position. So you would essentially have price levels and volumes no matter how much or how little. And so yeah, we're talking about that migration from buying spot, which is right here right now. I'm gonna walk into the store and grab something from the shelf and walk out to a forward. buying mentality, which would essentially allow you the opportunity to capitalize on price management, which manages risk, and then also the risk of, to your story with Ian on the Ethiopia Organic, to managing the risk that that coffee wouldn't exist in the future. You wanted to make sure you had it. And I also understand that traders that will ask you, if you're going to do a string of coffees like that, like delivered January, February, March, you're gonna take a certain amount, that the trader, is looking for accuracy in that time, what's that time period? Because we've thrown this term carry around a lot, but carry is the combination of storage and financing because again, they're financing this purchase. The importer is purchasing the coffee in total that you have bought and you are only paying for it as you pick it up, which is in pieces. So while the rest of that balance is sitting there, that is money that is being financed. And then you add to that. the storage of that coffee, warehousing, whether you're an importer that owns your own warehouses, which some do, or we use a third party, even if you own your own warehouse, you're paying a mortgage on that warehouse and you have to pass those costs on, so that's your storage fee. So I often get a lot of roasters that want to aggressively negotiate carry costs, and carry costs are not a lot of people assume these are just arbitrary charges for throwing on to hold it. When you explain to them the finance and storage piece, like I can't negotiate with the warehouse for better storage for your eight bags. I mean, I have no ability to do that. I'd be left out the door. And the rate that the warehouse is quoting me is the rate and I have to reflect it accordingly. So, those are real charges. And if you exceed, and when you... buy a string, they already calculate all of that into the full spread of the coffee. But if you are slow, like I was to take it, then you get charged additionally after that period, which can get extremely expensive. So it's always looking at buying what your stomach can handle because it's a rough lesson if you don't. And I would say, just in general, a lot of coffee roasters pay. unnecessary carry just because of mismanagement. It's a tough thing to nail it all the time, but that's one of those leaky figures that you wanna control, and I want to control it for you as much as you want to control it for you. In essence, the contract is you promise to take delivery and pay for this coffee in the future, and I promise not to sell it to anyone else in the meantime. Right, right. Yeah, and that coffee's held for you that particular lot, that they're not swapping it out or. whatever. And then the one thing I wanted to also touch on while we were here, which I think comes up a lot is the issue of trucking and contract language when we talk about it. So, you know, almost every importer when you, you know, you buy coffee from them, if you're not picking this up from the warehouse yourself, they can arrange trucking for you. But the thing that I think gets mistaken a lot is that we are arranging trucking on your behalf. The coffee is sold, what's under an FOT basis. Our responsibility ends at the moment it goes on the truck. And from the moment the truck leaves the warehouse door to where it enters your door, that is by contract language, your responsibility. Now we will, you know, get you a good rate on trucking, line up a truck for you. But again, we are not a trucking company. We don't take responsibility for what happens in that transaction. Now, many times you'll see a truck is late. The truck, the coffee comes in, the pallet tipped over, broke, or bag got a hole in it from a forklift, and the roaster calls you and it's like, Todd, you guys messed up my coffee. And well, Todd didn't mess up your coffee, nor did the company that Todd works for mess up your coffee, the trucking company did. And we can, again, on your behalf, file a claim and help you mitigate the cost, but we're not the trucking company. The proper term, if you really truly wanted Todd to be responsible for the trucking, is delivered at plant. That's how you would be asking for pricing, where then Todd's taking responsibility for arranging the trucking and paying for, the company's paying for that delivery, and they're taking full responsibility for that as well. And I think that those two terms get mistaken all the time. They just assume because they bought it and you lined up trucking, this is a delivered at plant transaction and you are therefore responsible for anything that happens to this coffee from that point forward. Yeah, no, and I mean it's classically in this market that has not been the way that, until you are at a very large size at least, you are not offered. to buy coffee delivered at plant. No, but you could. You could. Yeah, yeah. And I mean, the reality to recognize is that, you know, someone in our position would then price in a risk premium for like, hey, if we do 2000, you know, delivered at plant deliveries over the course of a year, and we have X number of claims that we have to file, and here's the risk exposure, we'd have to add so many cents. or tens of cents to the final price of the coffee and we'd have to. But sometimes that's still worth it. totally. Yeah. Totally. No, but that is one of the biggest misconceptions. Yeah. Whereas like an Amazon delivery is more like a delivered at plant. And I think that's where this problem arises. A lot of people assume that the relationship with the importer is an Amazon type relationship where, you know name the import company, you could use Covoya as an example, Covoya is delivering on a Covoya truck to your plant. That's not what's happening at all, it's not the same. And the trucking company has their own set of contracts and obligations and legalese and all of that, but we are merely just, because we have so many contracts with trucking companies, we'll help you line it up, but it's your, you're getting billed separately for that trucking piece, it's not. internal to our company. It's not in the pricing of the coffee. No, no. But if you're doing, I would say, larger deliveries, it's worth asking and having the conversation compare a delivered at plant costs to having the company line up trucking and weigh that against your own ability. And I always believe, depending on where you live, of course, many times having your own trucking account saves you a lot more than having a company line it up for you. So always weigh those costs of those three ideas to somebody and go with one that works for you. In the long run, if you have your own trucking account, it means you're doing enough pickups to warrant that, you end up getting better service because the trucking company has you as the customer in that mind and they don't wanna get the call from you that something's gone wrong a lot. Having us do it for you, there's a... failed level of anonymity and the trucking company, yeah, is that the response is different. And I would see the same driver at my plant all the time when I had a trucking account and there was that relationship where, yeah, Mark likes it double wrapped and strapped and they don't have the best, easiest offloading or whatever, they get to know the situation at your particular facility. So. Way to end on a positive note talking about trucking. Well, we could add a positive note to wrap up on. We could talk about Todd's biggest wins with accounts, success stories. Success stories? Yeah, where you've had great relationships over time that have made for that customer that they found you to be a perfect fit. Why that? I mean, yeah. I also would say the same for them. I have accounts that I absolutely...I'm over the moon to work with them and I find my career and what I get to check in and do every day to be wildly satisfying, working with people like this. There's a good number. I'm not gonna call out anyone in particular. I don't wanna put the list out. I think it's the most enjoyable way to work. I think I get... a ton of value personally, you know, and ton of satisfaction. I think, you know, we're getting more work done. We're having more impact. Coffees that are going out are more suited for, you know, customers working this way rather than just kind of like, hey, here's the real time offer list. Grab samples passively. And, you know, I mean, all of that has value. And my honestly, my top performing accounts like we have a sort of a hybrid of using all of the features that we are able to offer in an online platform, where people are looking at our inventory, getting price quotes, pulling samples, but simultaneously setting up calls, and we're troubleshooting, and truck, and shop. And we sort of take, in the best case, an approach where all of those things are at our disposal. But yeah, I mean, I think that it's, to me, it's the people that, that open up a view into their business and are authentic in the good times with opportunities, but also the bad times where we can have conversations on both sides of the dynamic, where we capitalize on opportunities and then we fix problems. Like, hey, I mean, I can't tell you the number of people that I took calls from. In the pandemic, especially where it's like, hey, I'm, long, you know, like we talked about earlier. Or I'm short, I run out of coffee. These combinations. I'm roasting in my garage and I'm going through tons. These one kg roasters will not quit. And then I'll, I will actually call out somebody because this story, it always cracks me up and I still get reminded to this day about it. But when I was a roaster at the height, you know, like, so when I was a roaster, I'd, a major mentor to me who taught me an immense amount about the business of importing and the market was John Cassette at Royal Coffee. He's an incredibly gracious person and knowledgeable and somebody I admire immensely. And during the height of direct trade, I was buying a coffee direct from co -ops and then having not John, but another importer bring that in. And I was considering that direct trade. And I... did an interview one time in a newspaper and I said, you know, my company, you know, we have direct relationships with producers, which was a very fashionable thing to say at the time. And I said, once in a while, I'm forced to deal with the importers to fill gaps that I may have. And, you know, meaning more spot fills, but you know, I was being hyperbolic in the newspaper, like, you know, everything I did was direct. And John cut that. quote out and sent it to me on a Christmas card and said, Merry Christmas from your humble importer, John Cassette. And he has repeated that Christmas card about 15 times and it cracks me up every time. And it just taught me so much about me shooting my mouth off in the wrong context because that's not how I wanted to frame my relationship with Royal or John. And I didn't call them out by name in the paper, but. But the fact that he still brings this up to remind me of my humble days is something I very much appreciate and value. Nice. Well, I feel good about what we put together here, Mark. Thanks so much for sharing. Thank you. Mike, I hope we met your expectations. That was great. And again, feel free to call in on our direct line when we're on the air. And also write us, how can they... I wanna do like mailbag reading. We should read more feedback we're getting. It would be nice. That is something that has come up. We've seen a good amount of feedback. We've also seen some meaningful criticism about the two single kg roasters. And I've responded to all of them, by the way. I do respond to every email I get. But I think this could be very interesting for our listenership. Let us know if you think so too. Mike, what is the - I'll put it in the close. We'll have the email in the close, but I think this could get exciting because there are people that side with me and not just a few. I think they do it on sport. I am welcoming myself as the counterpoint to your point. All right, well, hey, in either case, many thanks to everybody tuning in. It's good to be here. Giving us a follow and we'll look forward to sitting together again very soon. Take care.
You've been listening to The Exchange, part of the Exchange Coffee Podcasting Network presented by Covoya Specialty Coffee. The Exchange is hosted by Mark Inman and Todd Mackey and produced by Mike Ferguson. Our opening theme was Good Deal by Tony Sound and our closing theme is Successful Deal by HD Studio. All music is free use. You can email me, Mike Ferguson, with questions, comments, and recipes at Mike dot Ferguson at Covoya dot com. Thanks for listening and now your postscript.
Mark: And then, you know, the other thing I was gonna say about that term is, I'm losing my point on that one, about overbuying is that, well, I've lost it. I've lost what I was gonna say there. We'll be cutting that in post.