How are high-end roasters differentiating their coffees in an increasingly crowded and quality-obsessed marketplace? And what might this mean to the bargaining positions of coffee farmers?
These questions are at the heart of a new marketing analysis by the team at the Transparent Trade Coffee (TTC) Project, an initiative from Emory University’s Goizueta Business School that has been maintaining a retail price index of coffees from what it has identified as a group of 58 “blue chip” roasters in the United States. The program also involves a registry of coffee roasters who self-report prices paid for single-origin coffees, as well as packaged retail prices for those same coffees in roasted form.
The project’s latest insight surrounds the idea that retail coffee prices are higher on average when roasters identify the farms or individual mills where the coffees are produced. Examining quarterly data from its retail price index, the group found that among the 58 most expensive packaged coffees tracked in Q2 of 2015, those that identified growers sold for an average of $29.99 per roasted pound, nearly $6 more than those that did not. The pattern repeated itself in Q3, with the 35 coffees identifying growers selling for an average of $29.70 per pound, compared to $24.13 per pound for those that did not.
The group’s takeaway from the analysis was that “this $5.50 to $6.00 price differential speaks to the central role that coffee growers play in driving prices at the high end of the specialty coffee market.”
Digging deeper, the TTC group aggregated information from the web pages of 34 coffee roasters, seeking patterns relating packaged coffee prices to specific talking points such as individual farmer names, coffee awards at origin, processing descriptions, certifications, and farm-level socio-economic and environmental conditions and contributions.
While the TTC has far more analysis, it seems that, in general, talking points related to differentiation through quality are associated with higher prices compared to lower prices associated with talking points related to certifications or other socio-economic or environmental conditions. On the communication of quality differentiation, the TTC shared the following:
Factors mentioned on at least 50% of the websites describe a farm’s location, processes, varietals and elevation, as well as the given name(s) of the farmer or his/her family. Another relatively common practice is to list prior awards or accolades; most commonly, a positive result in a Cup of Excellence competition. One can make the case that each of these attributes gives roasters an opportunity to positively differentiate a specialty coffee based on expected bean quality and a quality-driven farm identity.
Conversely, the TTC had this to say about the communication of environmental contributions and, specifically, issues related to farmworkers:
At the other end of the continuum are two factors that emphasize environmental contributions and farm workers. When communication drifts toward emphasizing these more social factors, there is evidence of lower average prices. It is not that these factors are unimportant. Instead, it seems that specialty coffee markets are currently places where market valuations – and therefore prices – are driven by markers of expected coffee quality rather than indications of positive social impact.
To be clear, the TTC is not merely a data collection and dissemination initiative. A core function of the program is to help better “clearly and succinctly inform coffee consumers about the economic treatment of coffee growers,” with the idea that “the current structure of global coffee markets is such that these growers have a hard time being adequately compensated for the work that they do on their farms and in their communities.”
In other words, the project is not a marketing consultancy for the industry; rather, it exists to help strengthen the position among those people at the other end of the supply chain. The TTC suggests growers could improve their position in the market through a better understanding of their potential role as “protagonist” in the marketing efforts of roasters:
As we work to improve the competitive and bargaining positions of the best specialty coffee growers, these insights should be pushed to the forefront. This means making more growers aware of the price premiums that might come from being a named protagonist in marketing materials. It also means tracking and communicating about the factors that specialty coffee markets are currently valuing.
See the TTC’s latest insight in full here.