I have never heard anyone describe it from that perspective. I really appreciate that. It's being framed in the way that an important element is that the producer is happy about where that coffee is going. Man, that's big.
Yeah, I mean, this is the danger, right? Yeah, I think one of the biggest challenges is the dynamics of the power dynamics of who has the power to actually set pricing. I've often leaned against, like, whatever makes sense for us to build our own wet mill or something in Honduras. But when you do that, you're conglomerating all the coffee before it ever leaves the hands of the producers.
So I much more want to work with coops that have more producer ownership and those that have it. Like, we facilitate, but they get to choose whether they work with us or not. The coffee is still in their hands through to when it's actually sold. And so I like that model.
In some ways, we could control the quality better and do some things if we bought all the coffee and then processed it ourselves. But I think that the power dynamics that are completely disrupted from the producers if you do that. I had an interesting Instagram message the other day. And if you're the person who sent me this message, you know who you are.
And a big shout out to the folks in Fiji. The message was, Hey, we've got people who have come here and they want to buy our coffee, but we don't know how to set the price for the coffee. They want to have a direct relationship with us. We don't know how to tell them what the price is.
And therein starts the essence of a problem with a direct relationship. You don't have any anchor. Like in everything else, everyone's using the sea market as an anchor. Direct relationships or whatever we want to call them, end up creating, they bring all the problems that we're having around pricing right to the surface immediately.
Right? Because now, the person who's buying it, wants to have this relationship because they want something long-term. And they're leaving the responsibility, rightfully so, on the producer to set the price. And the producer's like, Well, I want as much as I can fucking get for this coffee, but how do I know what that is?
Yeah, I'll give credit to Peter Roberts. I heard him mention this before, but I like how the way he termed it in that, okay, look at why is there the power dynamic so often in the industry. And one of the main things is what, the price references people have. Roasters typically have fairly good price references and they have the sea price and they have a whole bunch of people coming to try to sell them coffee.
So they know what they can get for different coffees, what prices there are. Producers typically don't have much information besides the sea price as price references to be able to have the market information. So like, what information they have to be able to figure out is, Okay, maybe an idea of cost of production, but typically it's just alternatively I can sell it to this one exporter over here at the sea price. And that's the alternative that they have.
So how do we change dynamics where there is more information of what it looks like to sell coffee differently and the dynamic, the power dynamics that are involved in that? I think if we could fix that and have more like other price references, whether it be at cost of production, specialty coffee transaction guide, or some of these other tools that we use to say how coffee is priced, that can unify some of the conversations between in the relationship. Because like you're saying, like, relationship coffee is great, but then also it's like, How do we price it? And everyone just point back to the sea price and I don't like that.
Well, and the problem with something like the specialty coffee transaction guy is that, and I had Peter Roberts on the podcast. You know this. You know what I'm about to say. You and I have spoken about this.
But I had him on the podcast and I had Chad Trewick on the podcast. And my big issue back then, right when it was starting, was that the integrity of the data, I wasn't convinced about it. And in the year since then, I have constantly heard back from people that said, Like, I've got mixed reviews and mixed opinions. Not me, them, other people.
Because I don't really pay attention to the specialty coffee transaction guide, because the basis of the data that it started with didn't convince me that this was something that was correct. Now, look, folks, if you're out there and you use it, I'm not telling you not to use it. What I'm saying is that we cannot go from trusting the sea market or using the specialty coffee transaction guide as a Bible for what the pricing should be because we don't have an alternative. But that's not solving the problem.
What we need to do, and we're talking about direct trade here for a reason. What I think is the best way to do this is, fuck all of those pricing structures, build partnerships, and figure out between the two of you as partners, whether it's the roaster, the importer and the producer, figure out what's going to work for the three. Like, this is why I was so drawn to what you guys are doing with the Honduran coffee alliance. You're not looking at just what the price is right now.
You're not just looking at what the relationship is right now. You're pulling data from a whole bunch of places, including the specialty coffee transaction guide, but that's not the only thing that you're pulling from, right? As things are fluid and things are changing and things are dynamic, that is a data point for what you're doing. But you are very much approaching this intelligently and saying, This is not just about right now.
We've got to put pieces of a puzzle together. Yeah, exactly. And how we price coffee, how we kind of decide. Again, I still think we need to find better solutions in some areas, but we essentially, like you're saying, having a whole bunch of conversations with producers or mainly our co-op managers, and to understand what is the local pricing, what is fair pricing if we want to, if it's an 85-point coffee, 86-point coffee.
We look at the transaction guide. We basically put all that together to say, Okay, this is what our spread of pricing is. And I think that's one of the key things. I think whether we want to argue for or against the transaction, the more the argument is like, We need more price references so people have conversations around pricing, not just the sea price.
Like, cost of production, I think, very much should be a better, figure it out better so there's more numbers. If we could get there, that would be the best, right? Yeah, exactly. I think someone in the conversation...
In our group. In our group. I'm forgetting who it was, but was talking about how a better way to do it would be cost-anchored pricing with margins. I think it was David was mentioning this.
And I kind of responded with, Yeah, it is very much the best way to do things. Like, say, Okay, here's what the costs are. Here's different margins based on agricultural practices, quality increases, but kind of base it off of that. That is, I think, the best way.
There's a bunch of challenges with it, but I think that is the best way. But I think the key is, Okay, how do we get more price references in the hands of producers so they can have those conversations better with roasters? One is, I think the key one probably is understanding the cost of production better. But, go ahead.
Well, Mallory Plax was telling me, she's from Technoserve. Technoserve are doing a lot of, if I remember this correctly, Mallory was telling us in the discussion group that they are doing a lot of work. Technoserve is trying to inform their smallholder producers in how to come up with a rough cost of production. So there are tools out there and there are people that are trying to make this happen.
But it's complicated. Like the example that you used is really fantastic for really highlighting why this is a problem. If a farm is four hectares and their yield is looking to be, let's say, for example's sake, 100 bags for that four hectares, and that's what the estimation is going to be based on how well the harvest is going. If in the middle of that harvest, a massive rainfall comes through and uproots half of their trees, now all of a sudden the price of whatever's left has to be double the price of what they thought it would be just to cover the same cost of production, guys.
Like, and that's why. That's one very, very basic, shallow level reason of just one reason why cost of production, and that's if one thing goes wrong. Now imagine if, you know, all the stuff that they had intercropped with. If they had any other harvest, none of them worked.
Or if they got coffee leaf rust one year, they lost the whole harvest. Now they have two harvests they have to make up for the cost of last year's harvest and this year's harvest. Or if something went wrong and they got berry borer beetle and now they have to spray extra stuff on that to cover for the berry borer beetle. Now we've got the cost of harvest for this year is much higher than the cost of production for last year.
How do you get? It's complicated. It's really, really complicated. Those conversations should be had more.
There's hardly ever like a, hey, what were your costs of production this year? What were the challenges? Or was it a good year for you? Like, those conversations just don't happen, partially because I don't think the information is there, but also because it's not a price reference.
It's not used as a reference to that pricing. No, we don't talk about it enough at all. So one thing I wanted to go back to the initial question of direct trade is I think there's kind of two categories of how we operate. And this is those kind of single origin and the specialty blenders.
And I talked a little bit on the single origin. I think this is where I see Austin. I got a lot of people, other people operate similar to us thriving where it works well in that like we are able to facilitate these long-term trade relationships of this roaster buy in 10, 20 bags of a really nice 87, 88 point coffee. And I think about a roaster Hyperion that buys from Josuario that has developed like these awesome, awesome coffees was kind of new to specialty and kind of just found us and was able to get us an awesome coffee.
We connected with Hyperion. That's turned into like four or five years of buying the same awesome like a one. And at a price that is great for Josuario, there's really little question of whether the price is good in that because it is the premium for the quality is well above. So it's like, it's almost simpler in that sense to set pricing because we have some price references that we can lean on and figure out, but we just know it's a thriving price and it also has the value for roasters and they can sell it well.
People love that coffee. And so that category is like, it's, there's a lot of good stories that we can lean into. Yes. So maybe it's like five to 20% of most specialty coffee roasters menu.
Um, but there's a lot of good stories that are to be celebrated as well. How does it change a producer's life when you could create that? Um, do you mind, do you mind sharing? Cause there are a couple of stories that you had shared with me in our previous couple of conversations.
Do you want to share some of those? Yeah, definitely. I touched on Jose Riel. He had an interesting story too, that he grew up in coffee.
Uh, his father was a producer, but kind of very much saw that coffee doesn't work. It was a failure. And so he tried to emigrate, leave Honduras, move to the U S um, you know, took the trek up through Mexico and didn't make it down, turned away at the border, um, and came back, but he was giving up on coffee, um, but came back and, uh, another local, uh, eCafe that the Honduran coffee organization, one of their techs kind of convinced him, you should try some specialty coffee. Try, try to do some different things on your farm.
And he did. He got really excited about it. Um, first year or two, he wasn't able to find a home for us for the coffee. And then he found us and we were able to connect with Hyperion.
Um, and like it was this awesome success for him. And now he's producing like better and better coffee every year. Like the best coffee we've ever cupped was this last year. One of his like anaerobic natural process coffees.
Um, and so like he went from giving up on coffee to now like thriving and, and he's got his brother and sister now pulled into it and producing specialty coffees. I'll share one more too, but like, um, Freddie was one of my favorite stories as well. Um, he's a little different area that we work in and he kind of just founded like first year of getting into coffee. Um, and the first few years I failed at finding a home for his coffee.
It was very frustrating. It was like, he had awesome coffee. I just couldn't find a buyer for it. Um, and then I got to connect it to a roaster Java blend in Halifax.
Um, and they love the coffee. And just every year they buy whatever good coffee you have, we'll buy it. Not only this is one might collab. We'll buy your other ones as well.
Um, and, and we've got to go back to his farm recently and see like, he's now like basically built his house off of that from having a wood house to be able to like have a legit concrete home now because of these relationships. It's, it's cool. It really does. It really does make being in business for yourself.
So fucking different when you get to see that, right? Yeah, exactly. It's like, I think there's so many challenges we look at in the global industry, but I feel like I sometimes come back and say, like, I got to be a part of this relationship and what's happening there. um, and it's fun to see that, you know.
You know, there's, uh, I always tell clients of mine, like, you want to build a business to the point where there's moments you have to earn that you can't pay for. And that's one of them, you know? Yeah. There's it, like when, when somebody sends me a message and says, you know what?
You don't know me, but I've been listening to your podcast for years and your guests and on the podcast and the conversations that you have with them saved my business because I took all the advice that you guys were shelling out to me, man, I cry like a baby when I hear that stuff. Yeah. Like it's, they're moments you earn. You can't pay for that.
And folks, I promise you, I promise you building a values-led business, that's the only way you get to earn those moments. And you can live off that moment for months. I promise you. Like if you're building a business where you're eating brown rice, and I have been in that place where I've been eating like brown rice for breakfast, lunch, and dinner.
You can happily do that when you realize that other people are benefiting from what you're building. And it won't always be the way that it currently is. It is worth doing good things for people. It is so fucking worth it.
I promise you. 2025 has kicked the shit out of all of us. But these are the moments that it's worth it, right? When you know that, you know, this was a hard year, but one of my producing partners has, has a house out of the businesses that we've built together.
That must be incredible, Sean. Yeah, like you said, like, I think there's so many tough parts of this business, just so hard and questions and other things. But yeah, you have these moments. And like I mentioned, the two best coffees I've ever cupped were Jose Riel and Freddie O'Chore this year.
Like first time I've ever got like 90 point coffees according to our cupping panel. And it's like, wow. Like, see that and reflect on the past like four or five years of those relationships. Like, yeah, it's some good moments to be able to reflect on that.
It's good to remember now as well as I guess some of those other things behind. those other things you like write them down on a list. It's like my panic list. I go and read some good stuff that's happened, which is really nice.
Um, okay guys, there's one episode left, unfortunately. Um, and in the next episode, we're going to talk about the options for the future of pricing coffee. And you know, like when we look at, let's say the scene market does go away and it, and all about estimation, a lot of us are like, it's going to have to go away because it's the futures market for Arabica. So Arabica, by all indications, is going away.
What happens in that situation? So join us for the final episode of this series. Peace, love and peanut butter. Have an amazing rest of your day.
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