Paying for Coffee: Inzá

In our previous series, Paying for Coffee: It’s Complicated, we talked about the various factors that underpin how we as a coffee sourcing company buy coffee, as well as how to discuss it. While that series looked at the larger picture and laid crucial groundwork for the discussion, this is something we feel we—and the industry at large—need to go deeper on. This series will take a closer look at the details that underpin how we buy coffee in our major supply chains, each of which is unique. 

 

Inzá, Our Oldest Relationship

In this piece, we take a deep look at Inzá, our longest-standing relationship at 13 years. In Inzá, we’ve seen other buyers come and go, dealt with hyper-competition, and experienced both success and failure; through it all, we’ve remained just as invested in the hardworking and honest members and leaders at producer association Asorcafe and the exceptional quality and consistency they produce. This is a group we’re completely committed to, and here, we dive into what that commitment looks like, talking about not just what we pay for coffee, but how we buy it.

What We Pay

First, the simplest part of the equation: what we pay. We visit our trade partners in Inzá each May to establish pricing for the following 12 months of harvest. Our motivation is not just to make coffee production worthwhile in Inzá, but to make sure that the extra effort it takes to produce the above-and-beyond quality we look for here drives the incentives producers receive. Asorcafe sells their specialty coffee production to us exclusively, so we also need to ensure that our pricing is superior to what they could get elsewhere in order to maintain our exclusive access to their specialty weight.

Farmgate Pricing

As part of this strategy, we set our base prices high and we don’t tie them to the C market in any way. First, as a comparative baseline, the local price offered by the Colombian Coffee Growers Federation (FNC) on our most recent visit was 837,000 pesos per carga (the standard price/volume measurement in Colombia—around 125 kg parchment) with no pricing incentive for better quality—a price that goes up and down with the C market. In Inzá, Nespresso is a huge commodity buyer, offering prices slightly higher than the Federation: at the same time the FNC was offering 837,000 pesos per carga, the Nespresso price was 850,000, also tied to the C market.

Looking at our prices, we pay a baseline rate for coffees scoring 84-85 of 1,150,000 Colombian pesos per carga, equivalent to 2.47 FOB (or free on board, the price of the coffee at export). For coffees that score an 86, we pay 1,250,000 pesos per carga, equalling 2.64 FOB. For coffees at an 87, we pay 1,400,000 pesos per carga, or 2.90 FOB, and for 88-89 point coffees, we pay 1,500,000 pesos per carga, or 3.07. For coffees at or above a 90, we pay 1,700,000 pesos per carga, or 3.42 FOB. Once again, our prices don’t fluctuate based on the C market.

Price Comparison:Farmgate (pesos per carga)FOB (USD)
FNC837,000<2.00
Nespresso850,000<2.00
Red Fox 84-851,150,0002.47
Red Fox 861,250,0002.64
Red Fox 871,400,0002.9
Red Fox 88-891,500,0003.07
Red Fox 90+1,700,0003.42

FOB Pricing

As we’ll go further into below when talking about how we buy, costs that take the coffee from farmgate to FOB include transportation from the interior to the mill (which Red Fox pays for directly), meticulous preparation for export, GrainPro for protection through transport and storage, transport to port, and loading onto the cargo ship. We expect a process and prep that’s close to perfect and we pay well for it.

As we explored in Paying for Coffee: It’s Complicated, just as exporting coffee adds costs over and above the amount the producer got paid, the importing and warehousing process also adds costs of its own. Once we factor in the cost of bringing coffee into port, getting it into a warehouse, holding it in the warehouse until it’s sold, and covering the additional operating costs of our business, we get to our ex-warehouse prices, the point at which roasters purchase our coffees.

Managing Risk

Another factor we have to account for in our ex-warehouse pricing is the risk we take when carrying a large spot position from these producer groups. Where many other importers and sourcing companies only buy what they can sell in advance, reducing their warehousing costs, we commit to the quality volume Asorcafe produces, selling it over a longer period of time.

What this often means is that we’re managing some amount of inventory in the warehouse for a longer period in order to do this—a cost we have to account for. We’re also accountable for any quality risks involved in this process, paying what we’ve committed to paying even if the coffee doesn’t arrive at the contracted quality level.

Just like the price roasters charge per retail pound is higher than the green price per pound of the same coffee, our ex-warehouse prices are necessarily higher than our FOB costs. Just like the costs roasters face in taking coffee from a green to a roasted product, we face costs during the sourcing, exporting, importing, warehousing, and selling process that take the coffee from its FOB to ex-warehouse prices, while carrying the quality risks incurred at all these stages.

How We Buy

One thing we’ve seen over time—in every region we source, but especially Colombia—is buyers who attempt to pick off those they perceive as the “best” producers rather than working with producing groups like Asorcafe who provide resources, structure, and community investment. Critical to our success in Inzá over time is our investment in the community structures that support producers, rather than just an interest in skimming the highest-scoring lots and producers off the top.

The essence of what we do in Inzá is similar to everywhere else: we try to incentivize quality. We do this with the prices we pay, discussed above, but those aren’t the only incentives for producers to grow great coffee. Asorcafe works with an agronomist to help with nutrition, shade coverage, and pruning, as well as fermentation times and processing details. We pay 50% of the agronomist’s fees, making it easier for Asorcafe to afford the quality improvements that come along with better plant health and processing.

We also pay for transportation of the coffee to the dry mill, which is a significant cost, and one that producers usually have to cover themselves. From there, we buy the coffee in parchment. We take on the cost of removing the parchment and sorting via gravity tables or machines—the latter which not only has a process cost but also removes a minimum of 20% of the coffee’s weight but results in a significantly better cup.

We then pay for the coffee to get packed in GrainPro bags to preserve the careful work that went into processing and drying. We transport the coffee to the port and get it onto the ship that will bring it to its destination, selecting the fastest shipping option—which often is not the cheapest—in order to minimize the impact the shipping process can have on quality.

Cupping and Communication

As we talked about in Scaling Quality: Signal Detection Cupping, farmers in Inzá average just 1 exportable bag of coffee a year, but even though it takes a lot of time and energy, we feel it’s well worth it to taste what each farmer has to offer individually and blend in ways that truly represent their work. We apply the signal detection process to all offer samples, making sure we’re cupping samples anonymously to remove bias and quantifying our results in a way that’s easy to communicate back to Asorcafe.

Once we have our scores, we compose lots at various tiers custom-made from specific producers and communities to best showcase their work. We then send the results to Asorcafe leader Geovanny Liscano, who communicates them to Asorcafe’s membership.

Coffees that score below our threshold are typically sold by producers to Nespresso, which is why we work hard to both incentivize and assist quality production. For us to buy coffee at lower quality tiers at high-quality prices, we would need customers to both embrace and commit to that.

Paying for Coffee in Inzá

Inzá is a perfect example of how we buy coffee. As our oldest relationship, it’s an ideal vantage point to examine not just at what we pay for individual lots, but the other types of support and incentives we offer, as well as the specific logistics that move coffee from point A to point B in this unique supply chain. As we move through the year, we’ll continue to shine a light on our individual supply chains, going deeper in order to show what our sourcing really looks like, from the ground up. It’s critical to the future of coffee that we as an industry have conversations like this: conversations where we discuss not just what we as companies pay for coffee, but how we buy it.

New Fruits You Should Try: Nariño and Inzá

If you haven’t bought Colombian coffee from us yet, the time is now. We have delicious, versatile coffees from Nariño and Inzá on both coasts that shine on the cupping table and absolutely stun at production roast levels. Just as important as their quality, Colombia is home to some of our oldest relationships, and these coffees represent the absolute best of what community leaders can do from a local to a global scale, in terms of both impact and quality.

Our relationship with Inzá-based ASORCAFE dates back to 2006, when Geovanny Liscano farmed just one hectare of land with his wife and father. The coffee was superb and the infrastructure was humble, but over time, Geovanny reinvested profits back into the land, bought surrounding plots, and built up processing infrastructure into a thing of beauty for the whole community. ASORCAFE is incredibly well-organized with a laser-focus on ethics; they don’t allow corruption in their ranks, and this value shows in the cup. The coffees they produce are some of the most complete coffees in the country, bringing to the table a succulent sweetness, a juicy, ciderlike mouthfeel, and bright, clean acidity that can be malic, pear-like, and even kiwi-like. They’re perfectly structured and essentially flawless.

In Nariño, we’ve been inspired since 2007 by FUDAM leaders Raquel and Jeremias Lasso. With soaring altitudes and ideal varieties, the quality was always stunning; even more importantly, Raquel is an innovative leader that inspires the best work from her community and gives it in return. More recently, she’s formed a group within FUDAM called Manos de Mujeres, focused on the empowerment of women growers within her community, with projects ensuring they see a fair 50% of farm profits and a goal of opening an organic fertilizer facility. Currently in the process of becoming certified Fair Trade Organic, FUDAM is a perfect example of how community investment can and should represent an investment in quality. Flavor-wise, we see Nariño as the proverbial fruit basket: the best lots run the gamut from ripe, succulent stone fruits on the yellow flesh side (peach, apricot, nectarine) to tart, refreshing white grape and Granny Smith to perfectly sweet citrus of the most coveted varieties (tangerine, satsuma, and even sweet lime).

We have a ton of history with these coffees, and we want you to as well. Flavor profiles are diverse, so get in touch and we’ll help you find the perfect coffee for your menu.

Travel Journal: Colombia Inza June 2014

I’ve personally been working with the Asorcafe producer’s association in Inza de Cauca for 9 years now. There isn’t a relationship in the world that holds more weight for me both personally and professionally than this one. After moving on from my time spent in Costa Rica working at the farm and export level, it’s very fair to say that I cut my teeth as a buyer on the roaster’s side in Colombia and with Asorcafe in particular. After all of these years we have cultivated a mutual sense of trust. We know what we have to get done on our respective sides to ensure the continued production of top quality coffee. This is the most organized, motivated and responsible association I work with in the entire world. These are often our most popular coffees anywhere and it’s surely not hard to tell why. You can trust that these coffees are world class.

Cauca

Inza de Cauca is a 4-5 hour drive from Popayan, capital of the Cauca Department, depending on the weather really. Cauca is wet and rainfall is constant. Landslides are a common occurrence as are the road blockages they cause. After leaving the city we quickly begin the steep climb up the mountain through Totoro and across the paramo at upwards of 3,000 masl. It’s a beautiful drive and if you happen to know what you’re doing you’ll be sure to stop for the smoked trout breakfasts up at the top. From that point it’s another couple hours down the mountain into Inza, the gateway into Colombia’s historic Tierra Adentro and its pre-Columbian ruins.

Cauca

But we come for the coffee. The producer members of Asorcafe have farms ranging in altitude from 1700 – 2200 masl; extreme altitude. The group has done a miraculous job of warding off the newer varietal pushers and their Colombia and Castillo seeds. Inza is still full of Caturra with healthy doses of Bourbon and Typica to boot in certain fortunate subregions. Processing is standardized across the region in true smallholder Colombia fashion – great focus on ripe cherry selection, manual depulping of coffee beans from their cherries, 18-24 hour fermentation, washing in clean, tiled tanks and drying on raised parabolic beds to protect from the elements. We cup every lot within 15 days of it finishing the drying stage and put all approved lots into grainpro immediately in the association warehouse. These coffees don’t leave the grainpro until the moment they are dry milled, and they go into fresh bags immediately after. We re-use the storage bags again for fresh parchment.

Cauca

To this day these are still my favorite coffees in all of Latin America. The sweetness is so rich and laden with dark sugar notes of panela/muscovado, aged rum and ripe stone fruits. These are full bodied coffees. They are complete and supreme in the sense of balance. We buy from all over the valley – three larger regions in particular: Inza, Pedregal and San Antonio. Acidity can run the gamut from the malic flavors of crisp asian pear and fuji apple to tart, refreshing green grape. Asorcafe coffees demonstrate thought-provoking complexity.

Cauca

Cauca