What Goes Into a Coffee’s Price?

As we move through a year of volatile, ultra-high C market prices shaking up global markets, we’ve seen occasions where roaster partners find coffees at lower prices than ours. We want to use that as an opportunity to talk about value as a gestalt rather than a dollar value. 

To be clear, we know that for roaster partners, if the balance sheet can’t fit an extra number of cents per pound, period, we get it. We all have that balance sheet, and we all navigate the challenges it presents to purchasing ethics. 

But, back to the original question, what goes into the price of a coffee from Red Fox?

Independence

The quickest answer is that we aren’t the specialty arm of a large multinational, nor do we have investors—we are an independent small company with a laser focus on ethics that are uninfluenced by outside entities. 

What that means is that in order for us to run, we have different needs in terms of meeting our costs than multinationals or those controlled by wealthy investors—we can’t run at a loss and maintain our purchasing ethics, much less our fiscal sustainability. Multinationals (or those who don’t feel a need to maintain purchasing ethics) can.

Overhead

The above brings us to our next point: overhead costs. As we’ve written about in the past, we don’t do our own warehousing, instead choosing to pay third party warehousing prices in order to maintain agility and ability to change where we warehouse as needed. This past year has been a great example of that as we’ve shifted weight into DuPuy Houston due to port disruptions on the West Coast. 

In terms of sourcing, the legwork involved in our sourcing strategies is very labor intensive compared to most larger companies. We don’t work with exporters and cherry-pick from their lots—we source directly at the association level, or in Oaxaca, at the neighborhood or family level. We don’t buy in bulk based on type samples, we taste lot by lot and do our own bulking and bespoke lot construction to best represent the unique flavors each producer brings to the table, even if their lot is too small to be sold at the Producer ID level. We are at the cupping table with producers and association leaders constantly through each harvest calibrating and literally doing the work together. Same goes for the milling process. It’s not the easy way, and it involves hard work and paying prices that make it worthwhile for every stage of the value chain. 

Logistics

As we’ve said before, quality logistics don’t come cheap, and they’re more essential to coffee quality and menu planning than ever. It costs more to move coffee than it ever has before, plain and simple. There are no shortcuts on the logistics front. Either you pay more, make more bookings, and communicate constantly to make sure things are going as planned, or your coffee will not land when you want it to at the quality level you want it to. Whether it’s moving coffee along sea routes less traveled, landing in warehouses we wouldn’t usually use as a first stop and then trucking overland, getting your coffee in faster isn’t always done through the obvious channels. That involves tons of planning and communications labor, and more than ever, the details at every level costs money. 

Paying for Labor

Whether you’re talking about ethics or quality, paying for labor is non-negotiable. As inflation soared over the last year, hitting those at the lowest income levels the hardest, producers were lucky to land a C market that finally rose to a level that would allow them to meet their costs and even make a profit. Unfortunately, that welcome shift had complex consequences—as large multinationals rushed to ensure their needs were met and producers rushed to make sure they could finally benefit from C market prices (often strip-picking their coffee before it ripened), a hypercompetitive market arose. Even within decades-plus relationships, buyers who wanted to make it worth producers’ while to work with them had to pay much higher prices. It’s not enough to pay well above C market in low market years—when prices are elevated, producers still need to benefit at the same level. Compare it to the minimum wage in the US: in markets that increase to a $15 minimum, it’s harder to attract and retain skilled workers at the minimum wage. What might have been an attractive price before might not remain an attractive price. It’s only fair that producers benefit equally from loyalty during high C markets as they do from low C markets. 

If Something Sounds too Good to be True, It Probably Is

With all that said, while it’s possible to move costs lower by paying lower wages throughout the value chain, selecting lots on a general basis rather than a specific one, buying through exporters rather than working with groups to get their coffee to export, moving coffee through traditional or less expensive channels that lend themselves to unpredictable arrival and quality, and existing as part of a large multinational or investor-run company, if something sounds too good to be true, it probably is. If what you’re hearing from a vendor sounds extremely different from what you’re hearing from other vendors, it’s a good time to start asking questions. Coffee is more expensive than ever, so when belts are tightening on expenses, it’s okay to ask as many questions as you want before making a decision.

To learn more about our work, check out our journal and follow us on Instagram @redfoxcoffeemerchants, Twitter @redfoxcoffeeSpotify, and YouTube.