Coffee News: from Seed to Cup

How Can Coffee Auctions Enable Direct Trade Relationships?

Starting a direct trade relationship isn’t easy: you have to find a potential partner, organise farm visits, build trust, and more. It requires a huge investment of time and resources for both roasters and producers.

But could green coffee auctions facilitate the start of long-term direct trade relationships with high-quality producers? I spoke to Arturo Aguirre, the fourth-generation coffee producer of Finca El Injerto in Guatemala, and several of his coffee buyers to find out more. Arturo and his farm first rose to fame through winning an astonishing seven Cup of Excellence auctions; since then, Arturo has established his own private auctions for his prize-winning coffees, the next one of which will be held on June 19th.

Here’s why I discovered.

Lee este artículo en español Subastas de Café: ¿Permiten Una Relación De Comercio Directo?

coffee sampleCoffee samples at Finca El Injerto. Credit: Finca El Injerto

How Auctions Can Introduce Direct Trade Partners

While an auction might be for a one-time sale, Arturo tells me that it can also be the first step towards a long-term direct relationship in which roasters can purchase both exceptional micro lots and other, less distinctive but still good-quality, specialty coffees.

Ted Stachura, Director of Coffee at Equator Coffees & Teas, agrees. He tells me that they first purchased coffee from Finca El Injerto through auction, something that they then continued to do for several years. Then they visited the farm, and since then have moved to buying directly from Arturo. “With the auction,” he explains, “the producer can see you are a serious buyer… Arturo was a little bit more open to working with a new roaster. [The auction] was an entryway to start a direct buying relationship.”

Buying a coffee through an auction, he continues, allows you that direct access which then enables other purchases. “There’s an opportunity to learn more about what they have available,” he says. “If you want to buy other coffees, you can buy them at the time if they are available, or you could return the next season, which is more likely.”

Barry Levine is the Co-Founder of Willoughby’s Coffee and Tea, a café-roastery. He has had similar experiences, telling me that he and his partner went on to visit the producer of the first auctioned coffee they bought. “We did develop a relationship with him, buying his coffee outside of the auction circuit for a period of time. I wouldn’t say the relationship continued indefinitely. But it opened the door to our relationship.”

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coffee cuppersCuppers discuss samples for the Finca El Injerto Auction in Anacafé labs. Credit: Finca El Injerto

How Auctions Promote Producers

Barry adds, “While this opened the door to our relationship, it was at the same time very good for the producer, because his coffee wasn’t known, he wasn’t known, and gradually the producer developed a reputation for himself.”

It can be hard for farmers to make connections with buyers. Auctions provide a platform where coffees of the highest quality are made visible to roasters around the world – both during the event and, for the very best coffees, through the subsequent media coverage. And as farm names are mentioned again and again, they develop a reputation.

Barry emphasises that, by showcasing a country’s best coffees, auctions can highlight previously unknown regions, varieties, processing methods, and producers.

A producer who does particularly well may find that they no longer have to rely on the auction for promotion: enough buzz has been created that they can now find buyers on their own. He gives me Finca El Injerto, along with Finca La Esmeralda in Panama, as an example. “So at some point,” he says, “their reputation became so high that, even with not being in the competition that year, their products have a strong demand and small-enough production to ignore the auction channel.”

For successful producers, auctions can be a stepping-stone; they can use it to build their brand and create valuable connections so that they aren’t reliant on the process every single year.

Coffee importerThe Equator Coffees & Teas team visit the nursery on Finca El Injerto. Credit: Finca El Injerto

Marketing Coffees to The End Consumer

It’s not just producers who benefit from the additional marketing that comes with participating in a coffee auction.

Auction-winning coffees, especially from particular producers and farms, have become a byword for coffee excellence. Roasters and importers benefit both from increased visibility and from aligning their brand with these farms. It demonstrates to a large audience that they invest in quality coffees.

“Buyers like to have their names visible next to the auctioned lots,” Arturo explains. “It is very important for them to show who is buying the coffee.”

Of course, it’s possible to buy quality coffee outside of auction – but the event serves as a stamp of approval. Ted explains, “The roaster can market the idea of not just ‘the roaster is saying that the coffee is good’ but it’s the specialty coffee community – so all the roasters throughout the world competing in these auctions – that collectively says ‘this coffee is so good’ and that are willing to pay the highest price. And the roaster can remarket that to the consumer in a different way.”

Barry agrees, but adds that it also elevates the roaster above their competitors. Auctions, he explains, are “a channel that you want to use to acquire coffees that you can’t acquire any other way”.

“The roasters who bid and succeed in these auctions,” he continues, “that makes a statement about their companies, too… Their company is associated with these really cup-quality-dignified coffees that can’t be had anywhere else. If the end-consumer is looking for these products, there is only a handful of these top coffee roasters that have it.”

coffee cuppingCupping Finca El Injerto auction samples. Credit:Finca El Injerto

A Relationship Centred Around Quality

Arturo tells me that the auction experience was key to Finca El Injerto’s success. It demonstrated that quality paid and, in doing so, validated the farm’s investment in better farming methods and crops. From there, the team differentiated themselves by introducing new varieties, including Pacamara, Gesha/Geisha, and Mokka, and processing methods; becoming Fair Trade certified; and, according to Arturo, being the first coffee estate in Guatemala certified as carbon-neutral.

And, of course, auctions also result in high prices. Barry points out that a Mokka from Finca El Injerto sold for US $500/lb one year. Producers are paid prices that reflect the quality of the product, not the fluctuations of the international coffee market.

This allows them to also invest back into their farm, confident that it will be economically sustainable if they continue to do well at auction or have already developed a long-term, direct trade relationship from that auction.

For example, it makes experimentation less risky. New varieties, different processing methods, and micro lots… these all cost more to produce. Farmers may have to build or purchase infrastructure, invest more labour, spend time researching, and take the risk that the experiment will go wrong. Knowing that if it results in high-quality coffee, there is a high-paying market available for it, can give the producer reassurance. And this is even truer when they know they have a direct trade partner willing to support them in these experiments.

geshaCupping Gesha coffees during the Finca El Injerto auction. Credit: Finca El Injerto

Auctions represent the very best coffees in the specialty industry, but there’s more to them than just the headline-hitting prices. They offer producers a chance to make a name for themselves, to be paid for the quality of their coffee, and to fund investments in quality. Roasters gain the ability to purchase distinctive, exceptional lots; to publicly align their brand with quality; and to gain access to specialty producers.

And as a result of this, long-lasting direct trade relationships can be born – the kind of relationships where both partners work together to see improvements in quality and sustainability.

Written by Angie Molina.

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Enjoyed this? Check out Green Coffee Buying: 5 Tips for Bidding in Online Auctions

Please note: This article has been sponsored by Finca El Injerto.

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