As a company that strives to source coffee sustainability and have a positive impact on the world, we see transparency as an indispensable tool and driver for our goals.
Counter Culture Coffee is committed to transparency, including price transparency. Price transparency is essential to us because it shows our appreciation for amazing coffee, a historically under-valued product. Additionally, we believe everyone in coffee’s value stream––from producers to consumers––can benefit from the information.
When we are transparent about how much we paid for a coffee (you can find that information on every coffee product page!), you can be sure that the higher price you are paying is directly related to the green cost. For producers, seeing how much we pay provides more context around their price and increases their ability to negotiate.
Price Transparency Is Complex
Transparency can get complicated. Money changes hands many times in a coffee’s journey from seed to cup and variables like the type of coffee being exchanged and local economic context are unique and often shifting. Knowing exactly how much money ends up in the hands of particular individuals or businesses can be challenging to verifiably calculate.
The context around that number also matters significantly and can be difficult to communicate. Here, we are going to explain how we talk about a coffee’s price, the meaning of that number, and some factors you should be aware of when comparing the prices we display for coffee vs. others.
Ready to dive into the deep end? Here we go!
FOB: Free On Board
Starting with the most straightforward fact: when Counter Culture reports the price we paid for a pound of coffee, we always quote the FOB. FOB stands for “free-on-board” and indicates how much was paid to the exporter, per pound, to get the coffee onto a boat that will sail across the ocean to its destination, which, in our case, is the United States.
We choose to use this number because of three main reasons:
- It is written into every export contract. No matter what country the coffee originated from or who is buying it, the FOB price is extremely traceable and verifiable.
- It’s directly comparable to the Fair Trade minimum and the C market (coffee commodity market) prices, both of which are expressions of FOB.
- By reporting this specific price in the value stream, people can compare “apples to apples” what Counter Culture Coffee is paying to other known pricing benchmarks. These benchmarks are important because, whether we like it or not, the market is the arbiter of pricing expectations throughout the value stream. We pay the most competitive price we can for coffee regardless of the market and putting our prices in this context helps illustrate that.
Additional Coffee Costs
Though FOB is very straightforward, the big picture is more complex.
Our actual cost per pound is always higher than the FOB price. In getting the coffee from the boat at origin into our roasting facility, we incur costs of shipping, importing, warehousing, and financing as well as overland transport, adding $0.30-$1.00 to our cost on average. We also pay for equipment, labor, and packaging in order to transform the green coffee into a product ready to sell. You can find more information about these costs in our annual Transparency Reports, but you won’t find prices that include those costs next to C market or Fair Trade prices at our point of sale because they don’t belong in context with one another.
On the other side of the value chain, the FOB price is almost always higher than what a farmer was paid (except in the rare cases where the farmer is also an exporter). The FOB price represents the sum of money that was paid to farmers, cooperatives, mills, transportation companies, warehouses, and exporters to turn the raw good of cherries growing on coffee trees, into a specialty product ready for export. Farmgate price––the value captured at the farm––is important, but it is also difficult to quantify, compare, and contextualize for the following reasons:
Difficulties Quantifying Farmgate Price
Payments to farmers for their coffee, particularly when sold to a cooperative, may come in installments, with the second payment coming in after the season has completed and sometimes after Counter Culture has started selling the coffee. This schedule is necessary for financing, but it hinders accurate reporting.
Currency exchange rates fluctuate and this matters not only at the point of export when the contracted price is remitted, but also throughout the season as organizations access financing and farmers sell their product. Tracking the actual value of many months worth of transactions is difficult to do without making some assumptions. We would rather report facts.
Difficulties Comparing Farmgate Price
There are different ways that farmers commercialize coffee and they earn different amounts depending on the value added. Some farmers sell cherries, which means they cultivate and pick the coffee but do not process or dry it. Others have processing systems that enable them to prepare a more finalized version of exportable coffee, increasing the value of the product they sell. In each case, the farmgate capture varies significantly, even if the FOB prices end up being similar.
Yields also play an important role in the actual value captured at farmgate. The amount of coffee cherries or dried parchment needed to create a bag of clean, exportable coffee varies from farm to farm and season to season. Reporting the farmgate price, especially of a lot comprised of many farmers’ coffees, requires making assumptions that may or may not be valid.
Difficulties Contextualizing Farmgate Price
Arriving at and publicizing farmgate prices at the point of sale can require assumptions, but there’s also the option of a more precise approach which is to report the farmgate price by type of coffee sold x local currency. Think, the farmgate price was 1,500,000 pesos per carga or 8,000 birr per kilo. While more accurate, we believe this approach to be a more ambiguous way to describe value, especially to a broad audience. It requires either an immense amount of knowledge about how coffee is commercialized or a lot of explanation in order to be meaningful. It is transparent, but it is not, broadly speaking, the most effective way to convey fairness, at least at this end of the value stream.
The Value Of Coffee
Counter Culture Coffee believes sustainable sourcing means valuing the human and environmental costs necessary to produce it. The commodity market for coffee has done a poor job setting sensible trading prices which is why we and other organizations have felt compelled to create new strategies and benchmarks. However, saying you’re paying a good price for coffee and actually showing that price are two different actions.
That’s why we’ve been transparent since 2009, always striving to provide honest data and appropriate context. We believe that transparency is fundamental to any ethical credibility or any claim of sustainable sourcing. Making the information accessible and understandable is an important part of our communication process. Being aware of this information is important as a responsible coffee consumer.