It is my personal quest to ruin every coffee party by talking exclusively about purchase planning. Despite this, I feel that roasters still don’t fully get the concept or how valuable it can be to their businesses.
Planning is one of those crucial things that’s much easier to talk about than to actually commit to and it can be more art than science. Many experienced roasters and green buyers still struggle with this, but it is worth the effort, because planning is what allows us to sell you better coffees for less, and still pay the farmers great prices.
Did you know, on any given coffee we buy, the FOB price is consistent but the sales price varies, depending on your level of volume and the risk/commitment you want to take. Here’s what you need to know to lower your cost of greens while maintaining (or improving) the quality.
This means “on the spot” — it’s in the warehouse ready to go. All the sourcing, transport, finance, planning, and risk has already gone into this bag of coffee. And this is the price if you want to buy one or more bags. We’ll send you samples for free, you can decide how much you need, and we can finance it for you until you are ready to take it down.
This is like a fully flexible airline ticket, you can cancel it basically up until you go through the security line, but it costs more. This is the price you’ll see on our offer list and on every sample pack we send you.
We do this because it’s super clear. Everything is included up to the wrapped and strapped pallet and we guarantee the coffee will arrive at the quality stated on the offers list.
For customers who are taking bigger volumes from us, we offer a 7% discount on any orders over four tonnes (which we’ve done since the beginning). Most roasters are not buying four tonnes of spot coffees at a time, so we can also do this via a purchase plan. If you commit to buying at least four tonnes over a year, we can potentially offer a 7% discount on all coffees you buy from us. (Interested? Contact us!)
This is basically exactly the same as SPOT. You just gain from having some more volume and more commitment to working with us. We take all the responsibility for the coffee, we’ve brought it in already, we’ve done the quality control, we send arrival samples for you to confirm. Easy.
For the first years of Nordic Approach that was basically the only discount we offered. But we’ve grown and so has the specialty industry. We are able to understand our risk a bit better, and roasters have grown and are able to take more informed decisions. So now we’ve added another tier. Read on.
Many roasters we’ve been working with for years can travel to origin with us from time to time, come to Oslo to cup with us, or to get pre-shipment samples (PSS) before coffees actually arrive.
If you have done your planning, you will know what type of coffees you’re looking for, and you can take qualified decisions against PSS. This is super important — confirming against PSS means that you will take the coffee and the volumes you are committing to, unless there is a major problem on arrival. If you later decide that your reservations were too optimistic, we’re not able to be as flexible.
This might be something you do after buying a coffee for a year or two, where you know the coffees and have built a good customer base and a solid reputation for it. This is still based on minimum 4 tonnes per year and an agreement with your sales rep.
All three of these discounts are essentially SPOT. They give you the flexibility of taking a wide range of coffees from Nordic that fit your business, and to use your overall volumes (over four tonnes) to get better prices on all coffees you buy with us. You can still scale up when you get new customers, or buy small lots when you need them. You could buy one bag of every lot we imported last year — that’s 470 bags, or 28 tonnes… we’re happy to work together on that. 😛
Bigger commitments, bigger risks
Some roasters are looking to concentrate on certain coffees and producers, especially for bigger volume coffees like house espressos and filters. We can facilitate that in two ways: Nordic Approach Direct and FOB.
Free On Board (FOB) is widely used and widely misunderstood. It’s an Incoterm which just says that ownership of the goods changes hands when the goods go “on board” a vessel for shipment. In practical terms, we buy most of our coffees Free On Board from the port of Djibouti or Mombassa or Dar es Salaam or Buenaventura or whatever port it may be.
The key point here is that you own the coffee AND the risk the moment that coffee is on a boat. This should not be underestimated. The risk is greater, but the reward (in the form of a lower price) is also substantial.
Traditionally there is a big gap between specialty roasters’ ability to buy SPOT and FOB. A typical FOB contract is for a full container of 300 bags (18 tonnes) which has to be paid up front of arrival. Even for medium-to-large size specialty roasters, that’s a big lift. If you’re ready: reach out to our sister company, Tropiq!
To bridge the gap, we offer Nordic Approach Direct. Think of it like “FOB Lite”. This means you are committing to the coffee AND taking the quality risk. The difference is that we will import the coffee in one of our containers and finance it if needed, and the minimum commitment is 50 bags. The price for Nordic Approach Direct is FOB plus $1.90.
We’re not offering Nordic Approach Direct as a pure logistics service — we will not bring your aunt’s cousin’s friend’s barber’s coffee in a container. But for Nordic Approach suppliers and products, we can help you scale up on bigger lots that you can be proud of, where farmers are paid fairly and where you can increase the quality of your house coffee.
Here’s an example:
You’re currently running house coffees that you buy SPOT for around $7.50 USD/kg. You’ve tasted Pozo Negro Collective and think it would work perfectly, but can’t make it happen at $10.10 USD/kg.
If you are willing to commit to 50 bags of this coffee by confirming PSS, and you are willing to take the quality risk in the same way as if you were buying a container FOB, then you could have this delicious coffee as your house coffee at $7.63 USD/kg. Same coffee. Same price to the producer. Potentially a higher cupping score and more transparency than what you’re already using.
Get a 7% discount if you can commit to buying 4 tonnes of coffee from us within a year.
Get a 12% discount if you can commit to buying 4 tonnes of coffee from us within a year, and you are willing to commit to that coffee at the PSS stage.
Pay FOB plus $1.90 per kg if you can commit to 50 bags or more of the same lot, approval at PSS stage, and you can accept the full quality risk that you would if buying straight FOB.
And that’s it. Better coffee for less.
Now you see why I’m so boring at parties.
Mario Rojas · February 19, 2020 at 6:38 pm
Hi, I would like to know what’s PSS stage
Suzie Hoban · June 17, 2020 at 11:57 am
Hi Mario, PSS stands for pre-shipment sample. Approving at PSS stage means that you commit to buying a coffee before it is shipped.
Ethiopia 2020 Harvest Update – Nordic Approach · April 22, 2020 at 11:55 am
[…] or more, especially if you are seeking a specific profile, you should reserve your coffees now. We offer discounts for volume purchases. If you are looking for smaller volumes and you have more flexibility on the profile, rest assured […]