Exit Strategy.

As the coffee price crisis looms over general discussions around coffee, there has been a push to study causes and solutions in the academic world. The Re:Co Symposium hosted by the Specialty Coffee Association this last year in Boston was centered around the coffee price crisis, and one of the featured speakers was Dr. Janina Grabs, a postdoctoral researcher at ETH Zurich’s Dept. of Humanities who focuses on sustainability and food policy. Although Dr. Grabs' talk hasn't been posted online to view yet (you can view other talks here), there is a very distinct metaphor that she borrowed to start her talk with: 

In a crowded theater, if there's a fire, everyone will be trying to escape through the same fire exits. Presumedly, this mad dash for the same exit would create a heavy backup, with many people then trapped and unable to get free. In many ways, the idea of paying higher premiums for higher quality coffee is a fire exit: this strategy can work for some coffee farmers, but is unlikely to provide a solution to the coffee price crisis that is sustainable for everyone. If every farmer demands a higher premium for higher quality coffee, the market will be saturated and prices will go down due to competition. 

Sourcing coffee at Ruby has limited impact for the coffee growing world as a whole, but we feel that Ruby can make a big impact for the individual farms that we partner with and with the import and export groups we work with. Previously we've examined in this series ideas that address the fire exit theory through initiatives that purchase a wider swath of coffee from single estates and small groups, but with Ruby's two latest releases, we want to examine how other initiatives can help address the core coffee price crisis.

Costa Rica Cerro La Cruz.

From Ruby co-founder, Jared Linzmeier:

"In 2017 we decided to bring some additional dimension to our lineup so we connected with Francisco and our friends at CoopeDota to coordinate some visits and develop some ideas for coffees that would be a good fit for our menu. Cerro La Cruz emerged as a great candidate for a variety of reasons: I absolutely love the sweetness-laden profile of the Caturra and Red Catuai grown in Tarrazu. When we began tasting through some of the projects, Cerro La Cruz’s coffees emerged over and over again as round, sweet, lightly fruited, and very balanced. We decided to make the trip to their new mill and get to know them some more firsthand. 

Rolando Esquivel Bararantes and his family are tucked along the Tarrazu mountains in an area that is absolutely beautiful to visit. The climate is warm, yet crisp and the layers of fog ebb and flow as the nighttime temps dip down and the daytime temps creep back up. One of my favorite drives in Central America is getting outside of San Jose and getting into the heart of Tarrazu, in the Santa Maria de Dota valley, and along the ridges. 

We toured the family’s newly installed wet mill (pulping station) and raised drying beds, walked through the coffee trees nearby, and then sat down at their dining room table to have a coffee and learn more about why they chose to invest in their own mill. We learned that for many years they’d been working with a nearby cooperative to mill their coffee and, while the co-op was very quality-oriented, the scale of the operation didn’t allow much variance for rewarding individuals that truly wish to build their own unique coffees and have them sold separately. They had seen neighbors finding direct markets for their coffees and decided to take the risk, make the investment, and hope that they could see the direct financial impact of marketing their coffee as a single farm, single lot directly to roasters. Of course we were thrilled to hear this, because the coffee was outstanding, and we were the first USA buyers to visit them and buy their coffee."

In the instance of Cerro La Cruz, finding success for their farm model couldn't fall back on simply improving quality and asking for a higher price. By taking a risk, investing in their own processing, and looking to establish direct contact to buyers through contacts at the dry mill, they were able to create opportunities for selling coffee in a way that creates better sustainability. 

The success of Cerro La Cruz, however, relies on a smaller farm operation being able to partner with a smaller roaster. This is Ruby's third year offering coffees from Cerro La Cruz and helps create a system where both operations are able to grow together. While the specifics of this arrangement help combat the impact of the coffee price crisis on an individual scale, the story of Cerro La Cruz is still a specific instance of success that isn't necessarily replicable for every coffee farmer: especially if the access to capital for building an internal processing mill isn't available. That's where groups like SNAP in Ethiopia come in.

Ethiopia Benti Nenka.

This coffee comes from the Hambela Wamena district of Guji that borders Gedeb in Yirgacheffe. The region is most well known for high elevation, a traditional history of quality farming and ripe cherry selection, and modern development of traditional processing methods. Coffees from this region historically were sold as coffee from Sidama — the larger area that this coffee comes from — marking decades of quality recognition for this coffee growing region. 

SNAP is a processing and export company that operates out of Addis Abada, where they have recently invested heavily in warehouse updates and construction and a modern cupping lab. One of the key focus points for SNAP is operating wet mills that establish better pay rates and partnerships with regional farmers, but SNAP also operates a transparent export operation. By tracking and detailing how wet mills were collecting coffees and relaying consistent information to import partners, SNAP has been able to develop stronger relationships between wet mills and potential buyers. The impact of the network that SNAP has worked on building spreads wide — thousands of farmers involved with the wet mills that SNAP works with have access to high quality processing and higher prices for their coffees without the need to invest in processing operations themselves.

The impact of this operation also addresses the funnel of premiums paid for higher quality coffees: traditionally that would filter out only the best coffees available from a specific farmer or cooperative and then leave the bulk of the harvest to be sold at commercial pricing. With SNAP's network of buyers, they're able to work with specialty importers like Atlantic to place delicious coffees at a variety of quality points that meet consumers' preferences. 

We're very proud to partner both with Cerro La Cruz and Atlantic importers on bringing these coffees to our menu, and are proud to support efforts to combat the coffee price crisis at a variety of levels.



From the start.

The most important part of coffee sourcing is building lasting relationships. In these newsletters, over the last few months, Ruby has examined the coffee price crisis, and looked at how our sourcing model strives to create more sustainable models for farmers. With the newly released offering from Finca Natamaya in El Salvador, we wanted to take a deeper look into what that really means, so we went straight to the source. 

Hermann and Nena are 4th generation farmers, and the land at Finca Talnamica has been in Nena’s family for 100 years. In 2005, Hermann and Nena bought Finca Natamaya, a parcel of land that had been used for coffee farming but had been abandoned fifteen years ago. As coffee farmers, their involvement traditionally ended with the fruit:

“We grew fine arabicas with the best agricultural practices available at the time. Our farms produced fruits that were sold to processing companies (Beneficios) and exporters.  

This practice of selling the coffee to Beneficios coupled with a lack of feedback on issues such as process, cup quality, storage and packing, made us blind to quality and limited for the commercialization of our product.

Naturally, if your commitment ended with the delivery of fresh fruits, you miss the rest of the game. And we were. We found ourselves ill prepared to value our product and sell it in a market where quality is rewarded by better prices.“

The transition to specialty coffee farming presented an opportunity for their coffees to fetch higher premiums and help stabilize farm income in the face of rising production costs and falling coffee prices. Nearly ten years ago, during a visit to El Salvador, Jared, co-founder of Ruby, was introduced Hermann and Nena at this crucial transition period for them, and he was able to share his input as a roaster and green coffee buyer. While Hermann and Nena had learned and built experience farming beautiful coffee cherry quality, many farmers are often in the dark about how that is translated into amazing quality in the cup, and how many steps along the way can affect coffee quality. Those early conversations with Jared helped Hermann and Nena examine the idea of quality continued through processing, and how negotiating for prices with roasters and importers based on processed coffee dried in its parchment rather than cherry could greatly increase the prices paid for their coffees.

The next steps.

Those initial chats at the farm led way to strong relationship foundations that Jared recalls:

“With continued dialogue and conversations while Ruby was starting, I knew that Talnamica and Natamaya would play an important role in our menu and our identity as a company. Finding myself in a sea of new options for coffee sourcing, it was the relationships I had built that felt the most gratifying to explore, even if that sometimes meant more work.”

The relationship that Nena and Hermann built with Ruby was immediately different from the other people that Hermann and Nena were selling coffee to:

“First of all it very rewarding to know our coffees are in Ruby’s hands. Jared has walked the farms with us, has met some of the workers, has visited the school he has sent funds to, he has seen the trees where the coffee comes from. So the fact that he chooses to buy our coffees is specially meaningful. 

Jared tastes our coffees and corresponds with us giving needed feedback on quality, he is enthusiastic and passionate, he invites improvement through better processing practices. 

Other buyers, are anonymous! We only meet with their employees, thus there is no personal contact or special feedback about our coffee. The difference is from night and day.”

One of the earliest projects between Jared, Hermann, and Nena was setting up a massive lot separation plan. Instead of bulking all of their coffees together, Hermann and Nena worked with Cuatro M, a coffee mill in El Salvador, to set up an experimental approach of sorting coffee by the day it was picked and the location of the farm, which Jared remembers fondly:

“I believe it was in 2013 that we tasted roughly fifty tiny lots from their two farms when I went down to visit them in El Salvador. It was just remarkable, like a veil had been lifted, to see the broad range of flavor that was present. Some batches were fruity and juicy, others rich and creamy. We were able to use that sensory data to better understand quality potential of the farm plots, with the additional understanding that these may change over time (although they’ve remained quite consistent in years since). When I would walk the farms on that and later visits, I have an enriched and expanded sense of association between flavor and place. Some of those lots we tasted were only 300 pounds of coffee from tiny tracts of land and we could identify the small cluster of trees the coffee came from. I also developed a much keener understanding of the logistics involved in such lot separation and that such experimentation, while enjoyable that first year, wasn’t a practical or economical manner in which to process coffee in this market. In short, it costs way too much to the producer and exporter. So in the years since, we have struck a balance in building larger 3000 lb+ sized lots to build high quality lots that are more manageable logistically and reach a better margin for the producers."

Challenges.

While specialty coffee prices have grown in the last four years, the price paid for commercial grade coffees has stagnated and dropped. The cost of producing coffees for Hermann and Nena has consistently risen, but commodity pricing for coffee has dropped to dramatic lows that have never been seen before — returning to prices from the 1970s, but without any adjustment for nearly 50 years of inflation: 

“The principal challenge is economic; the low prices we have been getting over the past four years have caused us great difficulties. Overall the price we are paid for the total farm harvest is lower than the cost of producing the coffee.”

Jared also was concerned about the total production costs:

“This is something Herman and I talked about four to five years ago really extensively. Not just that the commodity price was an issue, but I asked questions like: How does combing off the top 5% of coffee impact the quality of the rest of the coffee. Do resulting prices/premiums make up for the drop in quality of the larger lots? Is the quality premium enough to justify the amount of work? And these questions have informed my requests and approach to other, new relationships and made me a more responsible buyer.”

Previously, commodity pricing had presented an opportunity to help cover the cost of producing specialty coffee, but as commodity prices have dropped coffees grown on the lower elevation portions of Finca Talnamica and Finca Natamaya had begun to be sold at a loss:

“Another huge challenge is climate change. Two years ago, it was harvest time, the trees were full with ripe cherries and then an off season heavy rain pour came down, and the ripe cherries fell and cracked and part of the harvest was a loss. These challenges can be minimized with better agricultural practices (Shade management, fertilization, plantation renewal with young more resilient plants).”

Staying connected with Hermann and Nena helped Jared better understand these external factors:

“I was actually there when this happened in December 2016. It was pretty devastating! Everyone was so optimistic about the harvest and then BAM, sudden windy downpour and it was a total shift of energy and emotion.”

While these agricultural difficulties from climate change can be mitigated with a number of different initiatives, each one of those costs money to implement, further creating a bottom line loss for the farm operation. To combat some of these factors, Ruby is proud this year to strengthen and push our commitment to our partnership with Hermann and Nena. The first is a larger purchase of coffees from both Finca Natamaya and Finca Talnamica to feature these lots in Creamery Seasonal Blend, while the second is establishing advanced orders and fixed prices for future coffee seasons:

“We welcome Jared's increased order, we actually look forward to having advanced orders/fixed price to secure the income to practice a better agriculture. Having the certainty of a purchase conveys a sense of economical security, peace of mind, decreased financial risk that encourages us to produce better coffees.”

Onward.

As Ruby has been able to grow, we’ve been able to invest more into our farming partnerships every year. With both a greater demand for coffee every year and more working capital for Ruby to pay higher prices, and with Finca Talnamica and Finca Natamaya pushing for quality improvements in their coffees, this year saw a massive order of coffees from Hermann and Nena at specialty coffee premiums for coffees that previously would have been sold at lower prices. This was an easy decision to make for Jared:

“As we developed a green coffee outlook for summer and fall 2019, part of that consideration is how we can maximize our impact with our existing partners and strengthen those relationships as much as possible. Rather than buying a coffee that meets our quality and cost needs but comes up short on social or environmental impact, we dug in to the opportunity to become a fuller partner with the folks in El Salvador. “

Every year, Finca Talnamica and Finca Natamaya have seen jumps in the quality of the coffees that are produced, but seeing the entire coffee production on the farm transition to specialty lots reserved for single origin releases isn’t a realistic shift:

“The ideal outcome is for the market to buy coffee for a fair price. For the past couple of years, since meeting Jared and since our incursion into the specialty coffees our higher altitude coffees get bought at better prices, this leaves us with the rest of the crop, which is around 80% sold at inferior prices.”

It’s important to note that stories like the one this newsletter is telling often end on a positive note — hope for the future, and a celebration of new initiatives. The issue with that is it ignores the reality of the situation. Even with more than doubling the amount that we buy from Hermann and Nena and setting up advanced contracts, it still leaves a large majority of their coffees to be sold at lower costs than they should be. The Coffee Price Crisis is just that: a crisis. With climate change rapidly advancing and no foreseeable shift in the commodity coffee market’s pricing, it’s important to note the amount of risk and uncertainty that coffee farms like Finca Talnamica and Finca Natamaya face. 

Desk Jockeys.

The most exciting thing about sourcing coffee in 2019 is how utterly mundane the process can be. There’s a reality show version of what coffee sourcing is (preserved for history by a television program showing a man running around hacking through bushes with a machete) and then there’s reality. Developing relationships, buying directly from farmers — these are tenants of coffee buying that are usually pictured as handshake deals on a rocky mountainside framed perfectly from a vista over a misty, green valley. Sourcing coffee, mostly, relies on commitment, patience, and communication.

Some of the biggest hurdles in coffee sourcing are logistics. A farmer might have amazing coffee cherry, but how does it get to the wet mill? A mill might have high quality standards, but how easily are those applied to large quantities of coffee as they're being processed? The best quality green coffee might be waiting, bagged, at a dry mill, but how will it get to the coast so it can be loading into a shipping container, starting a journey that will go by boat, train, and a series of trucks, all the way to the roaster's front door? 

As a coffee roasters, our specialty at Ruby is roasting coffee. Relying on import/export specialists allows us to focus our time and investment on the core of our goals: delivering freshly roasted, high quality coffee as responsibly and sustainably as we can. With that in mind, we're very proud to work with export groups and import groups that can bridge the gaps in the coffee sourcing chain that allows Ruby to have direct connections to coffee producers without needed to travel internationally on a regular basis.

We believe that traveling to meet farmers and producers to build relationships is important, but developing relationships with importers and exporters can be just as important, if not moreso. Earlier this summer, we were able to launch three new coffees from farmers and farmer groups that Ruby has been introduced to through three different sourcing partners. As we evaluate our practices from a sustainability standpoint, traveling to coffee farms utilizes non-renewable resources, and can mean a significant financial investment that impacts the amount of money available to pay higher premiums for green coffee, among other items. 

Over the next few months, we'll be examining our sourcing process in this space, and hopefully help break down why traveling to visit coffee farms isn't always responsible, when traveling to coffee farms might be necessary, and how utilizing the full scope of the supply chain can help coffee farmers create value for their coffees. 

Colombia Omar Torres

Last year, Ruby founder Jared Linzmeier and Operations Specialist Jesse Myers were able to travel to Colombia. That trip helped connect Ruby to the coffee producers behind Colombia San Antonio, the base for Creamery Seasonal Blend, but also connected Ruby closer to our longtime partners at Aguacate, and introduced us to Duvan and Over Rivera, which allowed Ruby to buy coffee from both brothers this year. 

Another key factor on that trip was being able to better establish a relationship with Pedro who helps run Pergamino, a coffee exporter based in Colombia who focuses heavily on farmer education, paying high prices, and connecting remote farmers to roasters. Through our connection with Pedro, Ruby was sent samples of Omar's coffee, which blew us away, and landed his coffee on our menu by way of Pergamino's efforts.

Guatemala Porfiria Martinez

Porfiria's coffee comes to us by way of our import partners at Shared Source. Though Shared Source's main office is based in Australia, they also have offices based in Colombia and the United States, and spend a large amount of time sourcing coffee on the ground in countries like Guatemala, where they were introduced to Porfiria Martinez, a farmer based in the remote coffee growing region of Huehuetenango. 

Porfiria doesn't belong to a farm group, which makes it hard to connect to specialty coffee buyers. Her son has helped introduce ceramic tiles to the fermentation tanks and advanced shading techniques, but those quality improvements could bankrupt a farm if Porfiria and her son aren't connected with a buyer willing to pay higher prices for coffee. Thanks to Shared Source, Ruby gets to be that buyer.

Mexico San Pedro Yosotatu.

This is our second year offering coffee from the San Pedro Yosotatu village in Oaxaca. The Sierra Mixteca group, who produces this coffee, took a major risk in 2013. As part of a large farmer co-op, their coffees were guaranteed price minimums, but by breaking away and forming their own group, Sierra Mixteca was able to push for high prices to be paid based on the quality of their coffee rather than the quantity produced. With heavy investments in worm-based compost farms and moisture/water-activity testing, Sierra Mixteca has greatly been able to increase the quality of the coffee they're producing, but at a higher investment cost per pound. 

Ruby has connected to Sierra Mixteca through Red Fox Coffee Merchants. Coffee in Mexico has had a long history of varying quality, and mostly organizations in Mexico have pushed to gain higher prices through certifications, like Fair Trade and Organic across large quantities, rather than quality incentives. Because these operations are large, beautiful coffees often were lost in massive bulked lots sold through traditional trading channels. By working intently on connecting smaller, quality focused farm groups with roasters, Red Fox has helped those smaller farm groups be paid what their coffee is worth. 

San Pedro Yosotatu garnered a huge response last year. When considering our options for 2019, Ruby was able to commit to 20 bags of coffee — around 3,000 pounds — doubling what we purchased last year. With a budding relationship connected by Red Fox, Ruby hopes to become even closer with Sierra Mixteca in 2020. 

A Crisis Brewing

There's a crisis happening right now in coffee production: prices have dropped below $1 per pound for green coffee on the commodity market, and have sustained themselves at these low prices for months. Compounded with the fact that coffee routinely costs farmers $2-3 per pound to produce, many coffee farms are operating in the red. While Ruby doesn't purchase coffees using commodity market pricing and has maintained high quality premiums for the coffees we buy, we felt it was necessary to address this issue openly and discuss some of the initiatives that Ruby has invested in.

While we feel that we consistently offer sustainable pries for the coffees that we buy, there's a good chance that some neighbors of our long time coffee farming partners might not be able to afford to keep producing coffee. We hope that by talking more openly about these issues and discussing initiatives to combat low C-Maket prices, we can help produce change in how coffees are purchased. 

Finca El Retiro, Colombia

This week we were able to release our new coffee from Duvan Rivera, who owns a plot at his family farm, Finca El Retiro. Our introduction to Duvan came from our partnership with Pedro from Pergamino exporters, who we met in 2013. He sent us green coffee samples from his treks through the Antioqua region of Colombia that we received in Nelsonville, tasted, and decided were exactly what we were looking for. Many relationships for roasters and farmers can start and end at the cupping table: for Ruby, we value long standing partnerships. 

While visiting Colombia last year, Jesse Myers and Jared had the chance to travel out further and visit Duvan at his farm. Meeting Duvan in person also introduced us to his brother, Over. Both brothers had recently starting pushing quality of coffee production on their own individual plots of the family farm, and their processing operations have yielded large jumps in cup quality. We made commitments to buy coffee from both Duvan and Over this year.

At face value, this decision is a good business proposition: Ruby was able to purchase a larger quantity of very high quality coffee, pay a sustainable premium for it, and offer it to our customers. Looking closer, building long standing partnerships with coffee farmers and increasing the amount of coffee purchased from a single farm can have a large impact. Specialty coffee premiums can often be 3-4 times higher than C-Market prices, which means that producers who have market access to high-end coffee roasters can see an exponential rise in income, and purchasing more coffee from the farm can build that rise even higher. Finally, by establishing relationships with the farmers, Ruby can help create a sustainable, reliable source of income year after year. 

These small steps aren't solutions: the Coffee Price Crisis will take years of systematic analysis and large scale efforts to resolve. Ruby's commitment to making an impact, however modest as it may be from a small roaster in rural Wisconsin, is still a way to move forward towards a more sustainable coffee value stream.

El Salvador

The longest farm relationship that Ruby has predates Ruby itself. Jared has known the Mendez/Ortiz family for over eight years, and knew that their dedication to farming matched his passion for roasting. Ruby's first year saw 7-8 bags of coffee from them. Last year, we managed to bring in 40. This year, we'll be bringing in 120 bags of green coffee from Finca Talnamica and Finca Natamaya. 

This year, coffees from Natamaya will be an integral part of Creamery, which allows us to make stronger commitments to this lasting partnership. We've grown together over these last five years: our renewed commitment to Talnamica and Natamaya has helped the family reinvest in quality initiatives, building new drying tables, focusing on lot separation, and pursuing quality control tastings.

Ruby has always paid high premiums for coffees from these two farms to showcase single origin releases, but that usually leaves a fair amount of coffee from those farms to be sold somewhere else, where pricing might not be as sustainable. A heavier commitment from Ruby to this partnership helps create sustainable, reliable pricing for the Ortiz/Mendez families for a wider swath of their farm. 

We participated in a similar program presented by our import partners, Collaborative Coffee Source, last year. While we'd previously been buying single origin lots from Pedro Sagastume's farm in Honduras, their RISE program bundled coffees from his farm that wouldn't normally get sold to specialty roasters and promoted them in a way that allowed Ruby to purchase all of Pedro Sagastume's coffee last year. 

These are the moments that make us proud to have such great customers — without people believing in Ruby, we wouldn't have the ability to keep growing and reinvesting in our coffee partnerships. 

We're hopeful for a sustainable coffee future, and believe that each of these small initiatives are chances to pave a way forward.