Starbucks is taking our beans.

Spilt_Beans

Here is some interesting news and figures:
Starbucks right now commands the purchasing of 5% of the world's coffee bean production.  This does not sound alarming, until you look to see which beans they are actually taking from the market.  Of the total world production of coffee, about 15% of this is what we call Specialty Coffee- the good stuff.  Right now, they take 5 of the 15%.  
Even more alarming- Starbucks is growing at 30% per year.  This means next year they will have 6.5% of the 15%.  The next year, they will have 8.45%.  in five years, they will have over 18%- there is only so much specialty coffee to go around.
This company is buying up all the good stuff and leaving the dregs for everyone else.  They are paying well above market value for the beans.
You can already see a lot of the world's specialty coffees prices going way up, while the quality is not as high- less competition for their product, plus, they are getting better prices for this lower quality.

This next five years should be very interesting in the coffee game here in Australia.  Those undercutting the market here in Oz by selling their wholesale beans at the low $16.00 to $18.00 are going to to have a very difficult time making ends meet- and they can forget about claiming to be using the best coffees in the world.  At those prices, they will not survive if they continue to buy the more and more expensive specialty coffees.  So they will be forced to lower quality- a huge amount!

The industry will be in dire straits if it does not come to terms with this situation due to hit very soon and is the smaller players who stand to get hit the most, if they are not paying close attention.

askthecoffeeguy

Really? I would like to see a hard copy of the facts to back up these allegations, coz I just don't think that this information is entirely factual. Also, who produces the data that the information is based on, and do they have a vested interest in the end product? And if SB really are buying up big time in speciality coffee, what happens to it? Certainly, it doesn't appear that these so-called quality coffees are ending up in their house blend, and even if they were, that still wouldn't explain why the coffee tastes so bad! Over-roasted still tastes like burnt to me, in any language, even if the raw materials are 'super premium' to start off with!!!! ACG

tommy

if thats true, i dont understand why starbucks would buy high quality beans as a presumably higher price when they know that their final product is well, just starbucks. wouldnt it make more sense for them to buy lower grade beans and then masacre them in the shops regardless? 30% annual growth is pretty massive too, talk about a profitable business!

nzroaster

Well I can vouch for the opposite. One of my baristas' father is a grower in Indonesia. He grows what he considers some of the best Mandheling and his "Gold" Grade is 4 faults/ 1000. Which in sorting terms is very, very, very high quality. He was selling the bulk of this to Starbucks, but has since started supplying a major U.S. Importer and SB has dropped him. As for Australian coffee losing quality, its nothing new. Look at the price Vs Quality of Vitoria over the past 7 years.

Spilt_Beans

Hopefully this thread will not be just another- 'hey, lets attack the points being put forth', and more a- 'what are we, as a coffee industry, going to do about this problem?' It would be difficult not to see these arguments about the topic as naive or just plain ignorant of the situation. It is a well known fact among roasters buying green beans on the market, that Starbucks buys the best beans in the world.  Roasters who do not know this, or accept this fact, have their heads in the sand and will suffer when the situation put forth in my first post comes to a head in five years.   Yes, of course we all know they roast their beans extremely dark- hence the "Charbucks" comments.  That is an easy fact to accept, because it means we can beat them on this front- so there is nothing to be worried about.  It is difficult to face the fact that they do buy the best beans- helps with consistency, as does the dark roasting.   A prime example of a missing high quality coffe- has anyone seen any Blue Batak Sumatran lately?  If so, I would pay $15.00 per Kg green for that!  We have been searching for months for another Sumatran of such high quality, but there is none available in Australia.  The Sumatran we are stuck with is secondary quality.  How many more quality coffees will become unavailable? Starbucks buys major percentages, or all, of these major estates.  They insist on paying more per Kg than advertised.  They insist of seeing this extra money goes towards schools, roads etc to improve the lives of those picking, and loabouring.  -purely a manouvre to escape any finger pointing in their direction by activists against major corporations forcing slave labour.  Starbucks is helping these economies.  They are also insisting on multi-year contracts, locking supply to come- with their growth factored into these future contracts. Anyone can do the research on Starbucks.  The question remains- how is this going to effect our industry, and what can happen to ensure we can continue to see the high quality beans coming this way?

askthecoffeeguy

Apologises.  I stand corrected. But the question still remains:  What are they doing with all these super premium beans?  I'm sure that there is a market for them, but I doubt many so-called serious coffee drinkers would consider paying a premium for a SB's product. If I was the CEO of SB's, I'd open a premium coffee chain in opposition to SB's, targeting the upper end of the market place, which does not appear to be adequately catered for at present. On a lighter note, I tried (on a whim) a single origin East Timorese coffee from Coffex today - purchased through Macro organics, with some sort of quasi-touchy-feel-good enviro credentials, and was actually pleasantly suprised, by the bright notes and lifted floral and citrus characteristics of the coffee! Seems it's hip to have green credentials all of a sudden. But I aint complaining, the coffee tasted good at a price that was right. P  

admin

Hi Split - thanks for raising this; great to have this important issue raised; anyone else who has any substantive information on this - feel free to add. -A

ARCAFE

FROM WHAT I SEE AT ORIGIN (AM AT ORIGIN 3 TIMES A YEAR AT LEAST)I AGREE THAT SB BUYS QUITE A BIT OF THE GOOD BEANS I COULD NOT TELL HOW MUCH THOUGH. ANY GROWER GETTING CONTRACTS FROM SB FOR LONG TERM SUPPLY ALSO AIMS AT PURCHASING MORE LAND, AT TIMES, SO SUPPLY STILL GOES UP. I HAVE SEEN THAT AT ORIGIN MANY TIMES. STILL GROWERS PRODUCE FOR OTHER ROASTERS AS IT IS TOO RISKY FOR GROWERS TO DEPEND ONLY ON ONE CLIENT ESPECIALLY SINCE SB HAS VERY DEMANDING TREACEABILITY PROGRAMS TO FOLLOW. SB HAS STOPED PURCHASING FROM SOME GROWERS IN THE PAST WITH EXCELLENT QUALITY COFFEES BUT THAT DID NOT MEET THE STANDARDS REQUIRED BY SB (PROGRAMS AND REGULATIONS). IT MUST BE NOTED THAT SB HAS GIVEN GROWERS LOTS OF SELF RESPECT AND PRIDE, FOR THAT REASON TODAY WE HAVE BETTER COFFEES. THE SPECIALTY COFFEES OF TODAY DID NOT EXIST 20 OR 30 YEARS AGO, SO I DO NOT SEE THE PROBLEM REALLY. THOSE THAT WANT TO BUY TOP COFFEE CAN DO IT AT REASONABLE PRICES STILL. WE ARE SELLING THE BEST DOMENICAN REPUBLIC SANTO DOMINGO BARAHONA AAA (THE MOTHER OF THE SPECIALTY COFFEE), PANAMA BOUQUETE SHB EP, NICRARGUA 19 SHB EP FULLY WASHED JUST TO GIVE IDEAS(AM NOT SELLING THOUGH, JUST MAKING A POINT)at very low prices. AVAILABILITY IS NO PROBLEM BECASUE SB ALLOWED THESE PRODUCERS TO BECOME BIG. SO WHERE IS THE PROBLEM AGAIN?

admin

actually, it's interesting to remember how big a force in specialty coffee SB is. Just because they've stagnated here in Aust. we tend to forget what a powerhouse (for better or for worse) they are on a worldwide scale. Will ask Scott Bennett from HA Bennett in Melb. to add any comments he may have. -A Arcafe - not sure if you're trying to make a point by writing all in caps, but from my point-of-view, all i find you've done is to make your post HARD TO READ.

coffee_head

Starbucks ;D ;D Can't stand the crap. Not sure if they are as bad as Hudsons or Gloria Jeans. Both are coffee for novices or possers.

Spilt_Beans

Starbucks bashing aside... it is just far too easy to do. ARCAFE- yes, I see what you are saying, but I do find it a little optimistic.  Those receiving contracts from Starbucks might be buying more land- but their contracts account for the given gigantic growth Starbucks plans to gain, so they would have to plan to buy 30% or more land per year to keep up.  That is a lot of land purchasing! And yes, hats off to them for helping the growers in so many ways. But over the past five years, I have noticed many specialty coffees becoming unavailable, or just losing quality.  Costa Rican La Lapa was fantastic three and a half years ago- now it is very average- and very expensive!  Many Colombians have gone downhill as well.  Kenya AA and Limu have both become touch and go.  Is this a common thing in the green bean scene- the variability being so extreme? I do not mean to be a doomsdayer, and I find your comments comforting, but I am still worried about such a giant in our field actively buying the best beans at a self inflated price.   It would be great if people like ARCAFE could talk to the people at origins to investigate how much is being left to the rest of us.  And what is being done to ensure Starbucks does not swipe all quality specialty coffees from the table.

nzroaster

I think this is where developement programmes come in to play. Aside from the cons of Co-Op type programmes, their pros are that consistancy and quality are on the rise. I've worked with green importers in NZ before and the one thing that you notice when buying coffee is that the specialty coffees are not as volitile (price wise) as lesser grades. They still rise and fall over cylcles as does all coffee, but not as extremely as the cheaper coffees do. As for availablity, yes some plantations become hard to get beans from, normally a desicion from the importer not to import that type, but others are picked up instead. So it pays to discuss these issues with the green bean importer. It is definately not something to worry about as an end user because coffee prices and availability has been rising and falling as long as coffee has been traded. Its cyclic, and when times get tough, some roasters dissapear or struggle, but those at the top of their game seem to benifit from sorting the compition out.

Spilt_Beans

Yes, all this has happened in the past- but now things are definitely changing.  These are new times- with a monster like Starbucks making everything different.  The industry has never seen anything like this and the future is extremely cloudy.   There is nothing cyclical about this.  We have never experienced this before, so the past is not something we should put any faith in right now.  The importers will have less and less good beans to choose from, and less and less control on what they are buying for us.   Why would importers just stop buying beans we as their customers were enjoying so much?  Any importer that just does this because they want to is not a good company to stay in business with.  

nzroaster

Coffee is a crop, a changing product, consistency cannot be predicted. Look at the weather in central america last year, many plantations lost crops. The importers were unable to get this variety so substituted it with a similar. How many consumers said " oh, my coffee tastes like bean a has been substituted with bean b. If you think Starbucks is a green bean eating monster, you may be surprised. Growth of the industry will push growth of supply. What about the CO-OP growing corporations. Do you think multi-national companies that own many plantations around the world will sell there plantations when demand and price are on the increase? It won't happen, it's very simple economics. If the Plantations are flourishing - why sell? If you think its not cyclic have a chat to a long term green importer, somebody that has been doing it 40+ years. They will tell you about cycles and cycles within cycles. And panics, major players, crises, politics, etc... Its nothing new. With all due respect, how many SB's can there be, 1 for every customer? A limit will be met, I think we'll be right mate.

Spilt_Beans

Actually this entire discussion was brought about by a conversation I had with my major green bean importer to Australia whose business has been around for much more than 40 years.  I will not name this man, as I am sure he does not want to be inundated by people arguing what he sees to be a major happening on the green bean buying scene.  I will say- he is a major importer, and he is very serious in his claim that we should be alarmed. It was he who said that this has nothing like this has ever been seen in the industry before. It is not a matter of the industry being cyclical at all.  Any green bean importer who says that everything will be fine is avoiding the topic and the problem- and probably does not want to face the fact that there is a major shift going on that he is going to have to deal with. Of course, people will disagree.  But this Starbucks is growing at an astounding rate and they will continue to grow- regardless of how much we would prefer they did not. They are heading into new markets all the time and expanding around the world. Okay, so here we go- away from arguing about the situation.  We must find do something about this.  We must put pressure on our green bean importers to secure the coffees that we want, and we must also ask them what their contingency plans are regarding this new situation.  I, along with my customers,( my consumers), do recognize the difference from  bean a and bean b and we both do not enjoy being underestimated.

Ross_Quail

One important point to make out of all of this is that there is nothing illegal about what starbucks is doing.  Yes they are a predatory company and seek to eliminate competition by purchasing all of the available product.  Who can blame them ?  I don't like their coffee either, but the point is they are growing because some people do like their coffee.  That sucks but it is a reality.   So what is the solution ?  I am not sure I have one, but what I will say is that if we keep striving to produce better quality roasted and made coffee their will be a place for us.  But it is up to us to do it.  This is the real world and actions speak louder than words.

Bon

Hopefully this thread will not be just another- 'hey, lets attack the points being put forth', and more a- 'what are we, as a coffee industry, going to do about this problem?'

Kind of ironic when there have been a few threads on Fair Trade, etc. with people sayin there are too many farmers out there not getting what they deserve. Hat offs to Starbucks if they actually source good beans and pay a premium for them. As for what to do about it, why do anything? There's nothing stopping roasters paying a higher price for the beans... but the farmers would have to way up your premium on a small quantity vs bulk from starbucks at a reduced premium.

askthecoffeeguy

Spilt_Beans

I agree too with setting up relationships with growers. Hoever, I doubt the effectiveness of one single roaster nurturing a relationship that could withstand the real world market force of a buyer like Starbucks.  One roaster in Australia does not hold much clout, no matter how noble and lofty his goals are towards quality. It is our relationships with our green bean suppliers that must be nurtured and enhanced.  The green bean importers have the clout we need to keep our share of this small specialty coffee pie coming this way.  It is through them that we will keep our supply.  I believe more feedback and communication must be made with our suppliers and we cannot afford to be complacent.  We should be asking for long term commitments with respect to our main estates so we can start feeling more secure in this market. We should also stop buying origins that do lose their quality and special characteristics that drove us to them in the first place.  If we just keep on buying beans that are declining, there is no effective feedback.  It shows we will settle for second rate beans.  The importer could then take this feedback and vie for the higher quality stuff, if the case suits, or send feedback to the producers of why thier coffee is not in as high demand any more.  These actions would speak louder than words on the international coffee trade scene. We must also be prepared to pay for high quality, and not quibble with our friends in the green bean importing business.  The importers must be able to confidently buy the top beans at the same, or higher, price as Starbucks.  They must know that we will happily pay higher prices for the premium beans we all love.  So it is here that we must communicate with our importers as well.  They should have the same confidence in their buying as Starbucks- able to match prices, keep us happy, and help the estates they are buying from as well.

Ross_Quail

I couldn't agree with you more wise words

askthecoffeeguy

What about cup of excellence coffee? ACG

Unknown

I have only ever had 1 coffee at SB and never again! Why do they need premium quality beans to make poor coffee?

psaigh

I agree with the comment that the coffee industry (as we know it) is very young, and so with a major player such as SB in the picture who knows where the future may be at.  In terms of simple exonomics you can eaither hold an unbundance mentality or scarcity mentality. At the end of the day the market will work itself out.  An immediate example of this is the wine industry.  Somehow the tiny provence of Champagne in France manages to produce enough grapes (and enough quality grapes) to provide the entire world with quility wine.  At a time it was only the locals who consumed such a fine product.  Then only European aristicrats and nobels.  Then mainly just the upper class citizens of the world.  And now when supply is at an all time high with everyone consuming it (in varying degrees) that small little provence still manages to keep up.  And has the price of current vintage champagne risen dramatically through the years.  Not really.  There is still top quality wine available at a reasonable cost to the consumer.  Why is this?  Because new regions from california to germany to new zealand to spain are all producing equally good alternatives.  Regions which historically were not bleieved to be able to produce such fine quality produce.  Such is agriculture. I hardly think that because the worlds largest coffee shop is buying the worlds largest quantity of quality coffee and paying well for it, pouring millions into the land and governments surrounding the supply of that coffee, that this is a bad thing for our industry.  In fact just the opposite.  Never before have we had so much money directed our way, allowing us the spend more on R&D on all facets of coffee, from the agriculture of growing the plants to the very methods of extracting that lucious flavour from the beans. I for one am excited to see what the future holds, just look at how the wine industry has boomed.  Maybe someday we'll have uni students studying subjects of coffee making and marketing (well, maybe not??).

admin

re-surrected for comment -A