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Shipping & Consolidation

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Receiving your coffee

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New buyers sometime ask how they will receive their money. Another common question concerns contracting and how they can be certain they will receive what they have paid for.

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The shipping element of purchasing coffee can be extremely complex.
Ideally you would buy a container of coffee, agree your contract and the container is shipped and arrives at the port of your choice.

However, it is not always that easy. It depends upon how much you are buying or whether you need to consolidate. It also depends upon the flexibility of the exporter. If you are buying less than a full container (LCL) it can be more challenging. For really small microlot purchases it is worth considering airfreight.

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Consolidation

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The more economic way to get a LCL purchase to you is to consolidate it with another buyer who has spare capacity. Or to consolidate it with a number of purchases you have made with a variety of buyers.  

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Typically for an auction containing many different purchases from similar sources we can help with the shipping. We can land the coffee for you in Europe or the USA and then distribute it onwards to your own warehouse. We work with a logistics partner, Vollers, to achieve this. When this is the case the contracting is slightly different, but not a barrier to making the sale a reality.

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Landed Coffee & Spot Purchases

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Once coffee has landed, things get easier. It means it can be dispatched to anywhere in the world. It is considered more flexible. This may mean it is in a warehouse in USA, Europe or perhaps in Dubai. The distribution networks are stronger from these hub areas. Also logistics companies can then work with their own network to make the onward dispatch cost effective for everyone.  

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Sometimes we auction coffee from origin, sometimes we auction it as Spot. This means it is auctioned or sold from the warehouse. The shipping cost is only from the landed warehouse. 

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So, what does this mean? It means we can help you navigate the challenges in obtaining your coffee once you have bought it. We have a good knowledge of the process, we know the questions to ask and we have contacts who can help you as a new buyer to make this work. We do create the direct trade and that gives you control over the purchase of the coffee, but we don’t drop you and leave you to it. We know how to get this done for you. 

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Agreeing the Sales Contract

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Navigating the Contracting and Sales Process

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You have cupped the coffee, you have decided to make a purchase and you have agreed an price. What happens next?

One of the most daunting things working with a new farmer or exporter, is the ability to build up trust between yourself and the producer. The sale is going to be managed remotely and you are unsure how it will all work.

It is OK, We are on hand to help you. This is going to be the start of a long-term relationship for everyone.

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Contract Types

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We think the easiest way to under the pricing across a range of origins is to work on a FOB basis. The producer will cover the cost of preparing the coffee for export, putting it in to the container and on to a ship. At this point he has covered his reponsibilities and it is over to you. 

However how can you be sure everything will go to plan?

Well this comes down to terms of the contract which sets out the responsibilities of both parties. We recommend one of 2 contracting methods. Either of these methods will work for farmers as well. It creates mutual trust and the responsibilities are clear to both sides:

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  • Letter of Credit (L/C)
  • Advance Payment (CAD)
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Both of these types of contract offer protection in different ways. The balance for each party is sightly different with each. In some cases one will work better than the other. The producer will be keen to receive payment in a timely fashion. Where as a buyer will be concerned their payments disappears and the coffee doesn’t arrive. 

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Letter of Credit

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Both of these types of contract offer protection in different ways. The balance is sightly different with each. In some cases one will work in a better than the other. The producer will be keen to receive payment in a timely fashion. Where as a buyer will be concerned their payments disappears and the coffee doesn’t arrive. 

“I think the possible terms of payment for all of us is LC. he open Lc to our bank using his Taiwanese bank then the coffee shiped acording to detailes in the contract. Then we shipped to he and we recived the payment by providing nessery documents including bill of loding. This is the LC terms of payment in international trade.”

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  • Pre-shipment samples
    • These will be supplied by the producer once the coffee has been through the dry mill and bagged.
    • The exporter will provide you with a representative sample of the coffee they are going to send you.
    • The representative sample should be taken across a range of the bags being sent to you
  • Bill of Loading
    • This is to confirm the container has been loaded on to the ship
  • Bill of Landing
    • This is issued when the container arrives at your designated port.
  • Payment
    • At the start of this type of contract the payment is set up at the bank between you.
    • Once all the contractual obligations have been completed your payment is released to the producer. 

This means you have control over the coffee, the payments and the quality of the coffee being shipped to you. If this is something that works for you, then perhaps this next method of contracting will work for you?

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Advance Payment

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This is similar to Letter of Credit in similar documentation and obligations are present. However the flow of cash is different. In some ways this works well for the buyer as it means there is some control over whether full payment is made at the end of the day. In some ways this can work in a better way with consolidated shipments. 

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  • The buyer will make a 50% advance payment against the contract
  • The producer will start the export processing once they have received the payment
  • A pre-shipment sample will be sent to the buyer
  • A Bill of Loading will be sent to the buyer
  • A Bill of Landing will be presented once the container arrives at the buyers designated port
  • A period of time will be agreed (7-14 days) for the buyer to sample the coffee upon landing.
  • The buyer will make the balancing 50% payment to the farmer

For this process to work, the buyer has be comfortable paying in advance. If you wish the payment can be routed through our accounts and we will send it on to the producer. It gives you confidence the payment will arrive in the right place. It also means you have a hold over the quality of the coffee. It means the producer has make sure the coffee meets the agreed standard before they will receive full payment.

 

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Why buy coffee in this way?

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So why would you want to buy coffee through us?

As an importer or as a roaster you will have a number of ideas on what you want to do and how you will do it. You will also have concerns. Perhaps you have established relationships and you are happy?

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Addressing Your Concerns

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What might your concerns be? 

  • What coffee are you offering?
  • Can I buy small volumes?
  • How will it be shipped? 
  • How can I trust the quality will be good enough
  • I am worried I pay for the coffee and it won’t arrive?
  • This all seems really complicated.  
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What Are We Offering?

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We are offering a window to buyers for producers who wish to trade directly with their buyers. We are looking to provide new sales channels for farmers to people like you who care about sustainability. We have farmers who want to establish their own routes to markets. They want to change the way they work and their reliance on exchanges and large exporting companies who dictate the price of their coffee.

We are working directly with farmers and small exporters. We believe in a low entry to the marketplace for those producing the coffee. We want to create a shorter value chain. We want to work with buyers who believe the same. Who believe quality should be rewarded and reinvested in future crops. The virtuous circle of investment. 

We are looking to generate a sustainable living and return for the farmers who produce the coffee you sell. We imagine you are a buyer with the same ideas.

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New & Interesting Coffee

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This means we can connect you with new and interesting coffee. So for example, since regulatory control in Ethiopia was relaxed, farmers have been looking for new ways to sell their coffee. This in turn means you can create a competitive edge and pass on new and interesting coffee to those you work with. We provide you with the traceability and background information to the coffee, which means you almost have a ready made marketing package for you coffee.

This means we can connect you with new and interesting coffee. So for examples, since regulatory control in Ethiopia was relaxed farmers have been looking for new ways to sell their coffee. This in turn means you can create a competitive edge and pass on new and interesting coffee to those you work with. We provide you with the traceability and background information to the coffee, which means you almost have a ready made marketing package for you coffee.

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Coffee Quality

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We want to make sure the coffee going through our auctions comply with some level of quality. Whilst you are able to request sample to see for yourself, we will independently verify the quality of the coffee. 

  • We use an independent Q-Grader tell us what they think of the coffee.  We will provide a cupping report on the auction platform for each coffee. You can download this and refer to it.
  • If the coffee doesn’t meet our threshold then we don’t sell it. We have learnt coffee below 85 does not sell via auction. 
  • Are you worried about the coffee that arrives not being of sufficient quality?
  • We will hold back 15% of the total payment until you sign off the coffee as what you expected.
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Coffee Price

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We are careful to provide a price discovery mechanism for the producers. However we also want buyers to get access to good coffee at a fair price. 

  • We want to create a sustainable means of coffee production. This means we want the farmers to earn a living wage from their coffee.
  • This is important for you; it is important for producers. It creates a virtuous circle of investment, quality and standard of living for producers.
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