E C H E L O N C o l o m b i a E l J a r d i n C O E # 3

Story

Green Cost

The subject of paying for green coffee is inherently complicated. While the amount paid is very important, the payment terms and type of contract negotiated during the purchase are also paramount. Paying $5/lb of coffee can be a great price, but could be detrimental to a producer if the payment terms exceed that of their needs. Here we will dive into not only what was paid for the coffee, but how the coffee was purchased. There is a glossary of terms to be found below which will aid in your understanding of industry terms.

Farm Gate - This reflects what is paid to the producer of the coffee at the farm level. Oftentimes in terms of our relationship coffees, FOB is fairly close to the farm gate price, except for countries like Ethiopia and Kenya, when it is very difficult to trace back all the way to the producer.

FOB - Free on Board. This means that the seller is responsible for any overland fees that happen before the coffee is on board the ship. This is our most frequently listed green cost, as it is the most simple way to present what we pay a seller, but it does not reflect what the person growing the coffee was paid.

EXW- This most often reflects the 'spot' price that we paid for a coffee. All of the cost is paid by the importer, and more often than not the FOB price as well as the transport costs are unknown.

Transportation Cost

This number represents the cost we incurred while the coffee was moved from the producing country to our roastery in Arkansas. The amount of information we supply here is correlated to the transparency grade we issue the coffee. The better the grade, the more we can break down this information.

The price listed below is the cost we incurred while moving this palletized coffee from New Jersey to our roastery in Arkansas. All other import and export fees are unknown at this time and included in the Green Cost.

Production Cost

The following list includes many of the costs associated with producing our coffee. We have always maintained transparency as a principle but have lumped these things under the label of “production costs” without going into detail. While the following list isn’t exhaustive, hopefully it gives you a picture of the work, expense, and investment involved in executing coffee at the level that we do. At this time we are listing our cost of production for each pound of coffee at around $4.85. There are obviously many other aspects to running a business such as shrink, mistakes, new equipment and maintenance, but this works as an arbitrary cost associated with making one box of coffee. 

Fixed Costs
These are costs associated with simply having a business. Things like utilities of internet, natural gas, phones, rent, business licenses, fees, etc. These things increase every year. For example, most commercial leases increase by 2% every year. We periodically look at these costs and try to reduce expenses, but work in this area are small moves of the needle as these are mostly the same and usually increase every year. In 2019, we invested in a solar energy system for our roastery. It was installed in 2020 and we are seeing a great return in terms of monthly costs of electricity. 

Packaging
This is all the things that go into packaging the coffee from the roaster to your house. There’s the biodegradable bag, the recyclable box, the compostable mailer, different boxes for bulk shipping, the paper that pads the coffee, tape, and a few odds and ends. (Read about our new retail packaging HERE). These costs are separate from the green and roasted coffee but a part of the cost of producing coffee ready to ship and consume. We want our coffee to arrive in a secure fashion, looking like it did when it left our roastery: with style and design but also keeping the environment in mind. Shipping packages inevitably has waste associated and we’re working towards sustainability at each step. 

Labor
We are proud of our team and the way they are so thoroughly dedicated to excellence and to being the best at their respective roles across the industry. We work to make coffee jobs both sustainable and celebrated. We pay salaries, provide health insurance, and give regular raises. Our coffee doesn’t taste the way it does without all of our team working had and performing at a high level. Often we have a handful of staff that get celebrated, but everyone on our team contributes and is valuable. Our roastery production crew has earned a small commission on coffees sold since 2017. Onyx is not just a brand or a design or a café, we are truly made by every person on our team.

We all know it takes work to make anything. Our approach has more labor involved than you may think. Because we visit every Relationship Coffee producer, that means our green buying team of Jon and Dakota typically spend a total of six months traveling. We’re committed to visiting and cupping on the ground, this inevitably is an investment of time, of money, of long lay overs, of encountering government coupes and protests, and forging some of the greatest friendships and seeing some of the most beautiful landscapes imaginable. 
Another place we are highly invested in labor is in our coffee quality control. Our QC manager literally cups every single batch of coffee that we roast, scores it, makes notes, gives feedback. These records can be found in Find My Roast. This is essentially a full time job. This is something that we technically don’t have to do, but in chasing our goal of having the world’s best coffee we can’t know exactly how each roast measures up without cupping it. 

We have more roasters than we technically need. We roast in small batch size, meaning we don’t max out the capacity of our roasting machines. This translates into us roasting more actual batches and necessitates more time. This concept is driven by our desire for quality.
 
We have a creative team that helps create all things visible, digital, and print. These folks are very talented and have really helped push the dream of Onyx to the next level. We believe that coffee can inherently be great, but having something that looks and feels good helps inform expectations, helps bring value, and tells the stories in coffee in a way that is tangible and important.

These are a few of the jobs we feel really have more involvement than might be imagined, but throughout Onyx there are touch points of intentionally positioned team members to help create the best possible coffee experience. 

Coffee Roasting
Roasting itself creates loss in coffee. There’s the straightforward fact that when coffee is roasted it loses between 7% and 8% of its weight, meaning that if you bought 1000lbs of a lot you end up with 920lbs of roasted coffee. We also use what’s called an "optical sorter" which sorts all of our coffee after its roasted and kicks out 2% of all coffees. Sorting just creates an overall cleaner coffee, eliminating any outlying beans that are discolored, are quakers, etc. This totals around 10% loss of coffee before it even is bagged for retail or wholesale. We donate this rejected coffee to local food banks, non-profits and halfway houses.

Then there’s profiling the coffee. We roast test batches before we release coffees to dial in roasting profiles, and we often make multiple tweaks. The coffee is then cupped multiple times, used to create brewing recipes and guides and used in training. We also pull a sample of each batch of coffee to quality control. 

We are committed to shipping only the absolute best coffees to our customers, and these measures—although costly—are in place to help create trust between you and us.

Taxes
We all know what this is. We set aside and submit money every quarter for taxes along with paying all of the weekly and monthly taxes we are obligated to pay. This can be tough for a small business as there are ebbs and flows in cash flow, and taxes are often not paid in conjunction with the sales season.

Fair Trade Minimum

Since coffee was first sold, producers have sought to increase or maintain the price of their product. In 1988, the first certified Fair Trade coffee was sold in Holland as a partnership with a cooperative in Mexico. This was a major stepping stone in coffee trading, as it promised farmers a safety net when the volatile commodity market of coffee plummeted. Fair Trade ensures that farmers will be paid a minimum price for their product, which serves mostly as a safety net when all other prices drop. As the specialty market has grown, criticism for Fair Trade has grown alongside it. Consumers and coffee professionals alike have misunderstood Fair Trade Certified coffees to be the answer to a growing coffee price crisis. Many have used these ethical labels to continue to pay coffee producers a minimum price for a product that has exploded in popularity through the years. We are careful not to minimize what Fair Trade and other certifications have accomplished through the years, viewing a set minimum price as a stepping stone to a larger conversation about how the industry treats valuable producing partners. As we avoid settling for the bare minimum, we always pay at least double Fair Trade minimums based on the quality of coffee we purchase.

In a recent decision, Fairtrade International made a historic raise to its coffee prices. The new Fairtrade minimum price for washed arabica coffee will be $1.80/Lb, an increase of $0.40/Lb. Additionally, the guaranteed premium for coffee sold as both Fairtrade + Organic (FTO) is increasing from $0.30/Lb to $0.40/Lb. These changes bring the base price for FTO to $2.40/Lb, up 26% from the current $1.90/Lb level. The new Fairtrade prices will come into effect for contracts issued from August 1, 2023, onwards.

Cup Score

As we travel the world and taste coffees, we evaluate all the coffees we taste on a scoresheet developed by coffee professionals around the world. Through this, we can participate in and use the language of an industry standard set of guidelines. This allows us to honestly assign a numerical score to any coffee we taste, creating the ability for a starting point in a discussion of the quality of each coffee. We list the cup score of each coffee we purchase as part of our ethos of transparency, not as an end all be all statement of drinkability. Many of us agree that we’d rather drink an 86 point coffee rather than an 88 point coffee. We list it because the cup score serves as a reference of quality, allowing producers to negotiate higher prices based on the hard work they’ve done to achieve this quality. This is the imperfect industry answer to the commodification of coffee, which can be bought and sold based on economics, rather than the nuances and sweetness in the cup…

For more information on coffee sensory science, check out the Coffee Quality Institute.

Lot Size

Lot size is seemingly straightforward when taken at face value, but it gets more convoluted as you look closely at the vernacular of the specialty coffee industry. Terms such as micro-lot and macro-lot get awfully blurry as we buy coffee from different parts of the world. Like many other things in the coffee industry, there is not one catchall term that will tell you if your coffee is indeed a micro-lot. The size of a lot rarely informs us of the quality of that lot, which is a difficult concept to shake coming out of the early years of specialty coffee. Lot size informs us of one thing: the size of that lot. We can, however, take this time to talk about how coffee is separated at the production level, and how we make sense of it from country to country.

The first way we see coffee divided up is by region. These lots are often built up of many farms, Coops, or washing stations. This often signifies that the lot was built to reflect the flavor characteristics of the region. Colombia comes to mind when we think of regional blends, and these blends can often be very valuable to roasters and producers if transparency is upheld and fair prices are paid. We partner with friends like Pergamino Coffee to build regional lots, where within we seek to uphold transparency and quality.

The second way we see coffee represented is by a cooperative, farm, or washing station. Oftentimes this is where you begin to see 'micro-lot' sized offerings, which can often be built from several parts of each farm, or a few farms in one area. (Sounds a bit like a regional blend, doesn't it?) These lots represent an entire harvest, where individual day lots are blended to form an offering that is of a decent exportable size. This ranges from just 100-300 kg all the way up to several full containers of exportable green. One thing is to note, forming a single farm lot can often take just as much cupping and profiling as the large regional blends, due to each day or weeks pickings being separated and cupped to ensure they fall into quality standards.

The final way we see coffee represented is by day lot. This is where terroir comes into play, due to organic variations in the environment such as shade, soil type, tree age, and many other factors. Nearly any quality control program that is on a farm level will evaluate harvest this way. This allows producers to isolate parts of the farm or crop that is facing some challenges, as well as to select truly remarkable day lots to represent the pinnacle of their work. These small offerings range from just a few kilograms up to several thousand. We see these lots most often during auctions such as Best of Panama and Cup of Excellence, where they fetch high prices. Each one of those lots not only represents the hard work of each producer, but they also represent the amount of coffee that was filtered out during this quality control stage. This focus on the minuscule may seem like semantics to some, but as you zoom back out to your cup you realize just how many decisions were made before it arrived in your hands.

Transparency Grade

These ratings do not signify the “ethical grade” of a purchased coffee, instead they are created to show data to everyone. These ratings simply signify how much we understand what the grower of our coffees actually make. This is not an “us” vs “them” mentality of Roasters & Producers against Importers & Exporters or Farmers vs Customers that narrative can be damaging and usually full of fallacies. All parties are needed for this beautiful industry to thrive and our position is that sharing data has no moral position. It is simply numbers and math. We’ll leave the morale high ground to others even if this data is filtered through preconceived notions.

A+

This rating signifies we have published the price and payment went directly to the producer as well as all parties involved in logistics. Money exchanged was only though Onyx and producing parties. No procurement payments or bank financing were made. Mills, Exporter, and Importer are all known and quality scores are published. Farm gate, FOB, Milling, Logistics proven.

A

This rating signifies we have published the price and payment went directly to the producer . Money exchanged was only though Onyx and producing parties. Importer was hired to move coffee in the United States. No procurement payments or bank financing were made. Mills, Exporter, and Importer are all known and quality scores are published. Farm gate, FOB, Milling, Logistics proven.

A-

This rating signifies we have purchased directly from a cooperative or association and published price of FOB and wire to the head of a Cooperative or Farmers Association who pays members we are working with at Origin. We ask and publish what farm gate price was that is reported from farmers. Mills, Exporter, and Importer are all known and quality scores are published. FOB, Milling, Logistics proven.

B+

This rating signifies a published price of payment that went directly to a producer but producer also buys cherry from other neighboring farms. Verbal confirmation and published prices of Farm gate are acquired for coffees, but we only pay producer in contact. Mills, Exporter, and Importer are all known and quality scores are published.
FOB, Milling, Logistics proven.

B

This rating signifies we have published FOB price and pay directly to Cooperative or Exporter at Origin. Farm Gate price is proprietary or lacks of records of payments. Mills, Exporter, and Importer are all known and quality scores are published.

B-

This rating signifies we purchased this coffee from an Importer and visited farm, cooperative or exporter with the importer. We negotiate the contract with the importer representative and not the producer or cooperative. We pay directly to the importing company, Farm Gate price is provided by importer and published. Price, Logistics and Quality scores are published.

C+

This rating signifies we purchased this coffee from an Importer. We pay directly to the company. FOB price was provided by importer and is published, Farm gate price is unknown or proprietary information and unshared. Price and Quality scores are published.

C

This rating signifies we purchased this coffee from an Importer. We pay directly to the company. FOB and Farm Gate price is unknown or proprietary information and unshared. Price and Quality scores are published.

F

This means we pillaged the farm and stole their most precious Gesha lots only to fatten our wallets and eat at prefix restaurants on the weekend.

C Market

In the modern world, coffee is valued as one of the most important agricultural exports of developing nations. Most coffee in the world is produced as an ubiquitous green seed to be roasted by large roasters and sold on a shelf with little information about where it comes from and who grew it. Like other agricultural commodities, coffee is traded in future contracts on many exchanges. This price is dictated by global economic forces such as supply and demand, which is set by the largest suppliers and the largest buyers. The price of commodity coffee has been in major decline since the collapse of the International Coffee Agreement, and also due to forces outside the coffee industry as a whole. The minimum price that a producer has gotten for their product since the collapse of the ICA has hovered around $1.20/ lb, but within the last few years it is most frequently found to be under $1.00/ lb, which many industry experts consider to be under the cost of production. The commodity price of coffee never dictates the prices we pay for coffee, due to the precedence that quality takes in the specialty industry. We factor in cup score, variety, process, country of origin, and other factors when drawing up our private contracts with producing partners. Choosing to list the commodity market price at the time of our purchase shows the distinct difference in markets, as we strive for a more holistic and honest approach to the way that coffee is purchased.