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Green Coffee Purchase Planning Pt 1: Understanding your business

Few tasks inside of a coffee roastery can have as significant an impact on your business as effective green coffee purchase planning. However, planning a business around an agricultural product like coffee comes with challenges, like fluctuations in harvest time and yield each year, or changes in flavor profiles due to any number of environmental factors. So then, how do you begin to forecast ahead and prepare for each season? And, how can an importing partner like Ally Coffee help set you and your customers up for success despite the unpredictable fluctuations seen throughout the industry each year?

In this two part blog series we'll explore the benefits and challenges of green coffee purchase planning with perspectives and insights from members of our Ally Coffee Sales and Logistics teams. In part one, we’ll explore how you can define your coffee program and needs through just a few criteria, the importance of understanding seasonality in coffee, and what to know about building your purchasing budget.

Defining your coffee program

Before you can begin creating your purchase plan, it’s important to take stock of your coffee program’s key components. “Generally when I’m just starting out with onboarding a new client, I ask what their main origins are, what kind of volumes they go through over a given period of time, and the price point they’ve budgeted for,” says Merisa Mangano, Northeast US Account Manager. These criteria will begin defining which coffees are most critical to prioritize in your plan, and will narrow down the lots that your account manager might recommend for each slot in your offering list.

Coffee Selection: Identifying the green coffee that fits your business

Choosing the right coffees for your business requires you to think about more than just which origins you and your customers may love. Green coffee, especially specialty green coffee, contains a broad spectrum of flavor profiles, quality scores, processing methods, and other differentiating characteristics that may or may not fit your offering list. Filip Odeholm, Nordic Account Manager, encourages roasters to consider the origins and types of lots that make up the core of their business. “If there are components like Core Coffees that are your bread and butter, you can’t run out of them; you need to be wise about planning for that.” Similarly, if your business revolves around exclusive or high-end coffees primarily, your plan will have to account for challenges that come with sourcing coffees like those due to factors like availability or price.

Fresh coffee cherries being pulped in Tarrazú, Costa RicaFresh coffee cherries being pulped in Tarrazú, Costa Rica, origin of our Guanacaste Core Coffee

Another important consideration for roasting businesses that will help define their buying choices are any social or environmental values that you want to uphold. These can vary broadly, and may come with official certifications like Organic, Fair Trade, or Rainforest Alliance. If your business is committed to carrying coffee from women producers, carbon neutral farms, or any number of other causes, including that in your plan early and communicating that with your account manager will ensure that they become a cornerstone of your program.

Coffee’s seasonality - a critical consideration

Forecasting your needs months ahead of time can seem daunting—which coffees will be available? When can you expect fresh crop samples? When will coffee from your favorite origin arrive at its destination warehouse? “The first step is realizing that coffee is a seasonal product,” says Filip. “You can benefit from knowing that, and also knowing that each year is a little bit different,” he continues.

In nearly every coffee producing region, the harvest period follows an annual cycle. While there are natural fluctuations in this cycle, with weather and other climatic conditions sometimes hastening or delaying the growth and development of the coffee cherries, a harvest calendar like the one below can give you general guidelines to use in your planning.

Ally Coffee harvest calendar

Understanding the annual seasonality of various origins can also aid you in determining your needed volume to fill an offering spot until the next harvest’s crop becomes available. “For example, Central American coffees I recommend people book spring to spring, because those origins harvest in the winter and coffee lands in the spring,” Merisa says. “Of course, there could always be a late arrival, so I do try to give a little bit of wiggle room. Like for Ceiba, I tell people to book April to May [of the next year], just to hold them over assuming there might be one month of delay for next year’s arrival.”

Once you’ve taken into account the harvest and shipment cycle of the coffees within your offerings, how early should you begin planning? “One to two quarters ahead is a good place to start,” says Filip, noting from when the coffee is expected to ship from its producing country. Merisa agrees, also recommending planning at least three to four months in advance for your purchases. “It’s never too early to get the conversation started,” she tells us. “It plants the seed on my side of things so that I can remember what clients want, whatever it is.”

Coffee flowers in bloomCoffee flowers in bloom at Fazenda Dois Irmãos in Cerrado Mineiro, Brazil. It takes several months from flowering to harvest in each annual production cycle.

Volume: Understanding your green coffee demand

Some major factors in purchase planning can be determined by your goals and vision for your business, but your demand volume is an important figure to track specifically. “Being super organized is really key,” explains Merisa, “because if you don’t have that data, you don’t have anything to base those decisions on. Stay organized and really take notes, like ‘I contracted this coffee on this date, I picked it up on this date and I roasted through it one month later, that means I’m going through one bag of coffee every five weeks.’ Use that as your starting point and the more time that goes on the more data you’ll have to use to make those projections.”

In the early stages of running a roastery or establishing a green coffee purchase plan, Merisa finds it important to strike the right balance between purchasing too much and too little, “Some people can be overeager and say ‘Let me get 50 bags of this coffee—I know I love it, I know my business is going to grow,’ and then they find themselves too long in their position. Then there’s the other side of the spectrum where roasters aren’t sure if they want to commit to something, or aren’t sure about their cash flow or their business growth, a lot of data that roasters who have had years under their belt would know,” she tells us. “I try to hit it in the middle. I don’t want people to contract too much coffee, but the last thing I want to happen is for them to say ‘I loved this coffee, my customers loved it, I want another five bags’ and we’ve sold out of it.”

For brand new and small-volume roasters, a good way to start out with a handful of consistent options is purchasing small box green coffees from Ally Open, Ally’s platform providing green coffee in 25 and 50 lb boxes to roasters throughout the contiguous United States. Ally Open’s selection represents the diverse lots produced by Ally’s producer partners around the globe, and will give new and small-volume roasters an opportunity to try a variety of coffee profiles as they discover what works for their coffee program.

Stacks of coffee in warehouse in Charleston, SCStacks of coffee in warehouse in Charleston, SC

Price Point: Budgeting for your green coffee program

When it comes to green coffee purchase planning, cash flow and business finances are often one of the biggest considerations roasters will have to weigh. In many ways, the budget that you’ll need to keep for green coffee will be determined by the sort of coffee program you plan to run, as there can be notable price differences between an exclusive nanolot and a consistent regional offering. “I think you need to figure out as early as possible which markets inside of the specialty coffee audience you’re speaking to,” says Filip. “If your business model is to buy and sell the best coffee around, then your target customers should be ready to spend quite a bit on your coffee and your purchase plan has to make sure you always have access to the newest and best lots. But, if your business speaks more toward customers like hotels, restaurants, or other hospitality, then your plan should probably prioritize consistency and reliable pricing.”

Budgeting can be made more complicated by the dynamic pricing that much of the world’s green arabica coffee is subject to as a commodity traded on the New York C Market. Even looking back only as far as the beginning of 2020, the C Market has seen prices as low as $0.95 per pound and as high as $2.60 per pound, which can have a significant impact on the prices paid to many producers as well as the prices paid by roasters for their coffee.

Coffee from Finca Nazareth being dried for Natural processing in Ahuachapán, El SalvadorCoffee from Finca Nazareth being dried for Natural processing in Ahuachapán, El Salvador

“I think it’s a career-long journey for most people just to understand what the C Market is,” Merisa tells us. “Unless you’re really great in economics, it can be challenging.” Beyond the seemingly straightforward changes to the “base price” for most green coffees, coffee pricing and its relationship to the C Market is a complicated topic to begin to unravel. Even further, learning about what kinds of events impact the market’s level can be a challenge to understand without some guidance. “To understand why the market moves, it can help to subscribe to a good investment site,” Merisa continues. “They often have a lot of write-ups about why market movement is occurring, whether it’s weather patterns, political unrest, or any of the other myriad of factors that go into market volatility.” You can also find information about the market and the origins that Ally works with in our monthly Origin Reports found on our Get Inspired blog, detailing the latest news from around the industry and looking at changes in the market from month to month.

“Understanding that you don’t really have control over [the market], you may have to be willing to make compromises in certain places,” says Merisa. “You might really want a single farm lot but it’s just beyond your price range now, so consider a regional lot that will be more affordable.” Merisa continues, “I think this is important because nothing in the market is forever, it’s fluctuating constantly.”

Start Planning!

Getting started with your green coffee purchase plan may seem like a major undertaking, but beginning by focusing on these few main points can help you get over the threshold and on the path to better forecasting.

  • Identify your key coffees, volume, and price point.
  • Learn the seasonality of the origins you work with.
  • Always plan at least one quarter ahead.
  • Organization and tracking is key!
  • Communicate regularly with your Ally Coffee account manager to stay updated on harvest progress, shipping status, and availability.

In part two of this series, we’ll explore important considerations for how your coffee makes it to your roastery, the different ways to contract and purchase coffee, and how to use green coffee samples to find the right lots for each offering in your roastery.

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