Short Title:
How to do business?
Sector:
Coffee
Reading time:
9
Updated at:
Friday, May 13, 2016
Document name:
Tips doing business with European coffee buyers (2016)
Intro:
The coffee trade is a volatile business and Europe has the world’s largest and most competitive market. If you want to do business in Europe successfully, you will need a clear picture of the international supply chain, specific European requirements and national market trends. Use the following tips to help in your dealings with European buyers.
Content study:
Title:
Comply with buyer requirements
Body:
Complying with buyer requirements means meeting mandatory European Union legislation and food safety practices. If you are unable to comply with these requirements, you will not be allowed access to the European market.
Buyers commonly expect you to have implemented a quality/food safety management system. This enables you to demonstrate your ability to control food safety hazards and ensure that food is safe for human consumption. Get your system certified and prove to buyers that you are a reliable supplier, one who is concerned with quality control.
Tips:
Tips:
Read our study about buyer requirements on the European coffee market.
See the EU Export Helpdesk for information about the requirements for exporting coffee to Europe.
Title:
Understand traceability and social responsibility
Body:
Buyers commonly expect you to meet additional requirements. These often involve traceability and Corporate Social Responsibility (CSR).
A traceability system is a good way of providing information about the origins of your product(s) to all the parties in the supply chain. It also offers reassurance to buyers about what they are purchasing.
Many buyers in Europe are looking for products which originate from socially-responsible production programmes for example and environmentally-friendly producers. This is especially important to buyers in the coffee sector.
Buyers in the mainstream and niche segments will expect you to have certification to prove you are concerned with social responsibility and the environment.
Get certified. Be aware that different countries offer different certificates focussing on different issues. These tend to follow consumer trends in a particular country or market segment.
Tips:
Tips:
To find out more about Corporate Social Responsibility (CSR) and certification, refer to our study about buyer requirements and consult our country-specific factsheets for related market trends.
Check the specific governing body International Coffee Organisation (ICO) and their programmes for producer support to implement sustainable practices.
Read the article Why Is Traceability Important to the Global Coffee Market to learn more about the subject.
Title:
Find the right price and the right timing
Body:
The price of coffee depends on the futures markets (unless you have a highly-exclusive speciality coffee). The two most relevant futures markets are New York (Arabica) and London (Robusta).
Getting the right price for your coffee is all about timing. This means you need to follow these futures markets closely. You can also check to see if your national coffee association publishes daily or weekly market updates. This can be helpful information to help you sell your coffee for the best price and at the right time.
Export sales prices are always in US dollar and are fixed against the price levels on the New York and London futures markets (with the subtraction or addition of a pre-agreed premium, which is called ‘differential’).
Your buyers will be watching the futures markets closely, as they have to follow them as well. They will try to agree on a price for a coffee contract when they perceive the world market is working in their favour (low prices). They will also try to conclude contracts for future deliveries. This means fixing a price with you for one or two years (in advance) when the price and timing are favourable!
Speciality coffees in general fetch higher prices than commodity coffees, but their prices still relate to the futures markets. However, there are some speciality coffees which trade on fixed prices. The fluctuations on the futures markets have no bearing on these prices. But this is very rare, and only apply to high-end coffees such as Jamaica’s Blue Mountain.
Tips:
Tips:
Watch the US futures markets closely at the Nasdaq: Coffee.
Check to see if your national coffee association publishes daily or weekly market updates. Examples are: Anacafé: estadísticas y precios (Guatemala) and Colombian Coffee Growers Federation: Economic Indicators.
The Intercontinental Exchange (ICE) website offers information on futures and options for coffee.
Find our information on the coffee market at Coffee Network.
Get price information from these futures trading charts.
Learn about the futures markets from the ITC Coffee Guide.
Title:
Send samples to potential buyers
Body:
Samples give potential buyers the opportunity to approve the coffee beans and make sure they match their quality requirements before committing to buy.
When you send a sample, make sure it is a true representation of the coffee you want to sell to the client. If you cannot match the sample quality in some respect, tell your buyer as soon as possible. If you cannot deliver the same coffee as the sample, make sure to match the same quality.
Be honest and transparent about your samples and the quality of your coffee deliveries. If you are not, you risk losing the trust of your potential buyers.
Tips:
Tips:
Do not send roasted coffee beans.
Send samples consisting of 500 grams of green coffee beans. Buyers will only be able to assess the quality of your product if you provide them with green coffee beans.
Pack your samples in a plastic zip-bag.
Use an attractive sticker with an accurate and adequate description of the coffee (see below).
Samples should be accompanied by a factsheet, providing information such as variety, altitude, soils, rainfall, location, annual production (by grade / type of coffee), harvest/ marketing season, labour practices, processing system, anti-pollution measure, warehousing, dry processing, distance to port, and shipping options.
Send your samples by courier, free of charge.
Read the ITC coffee guide for more information about sampling.
See the ISO Standards Catalogue for information about standards for sampling.
Title:
Draw up contracts
Body:
When you reach an agreement with your buyer on price (or the terms of long-term pricing agreements), quality, quantity, shipment and destination, amongst other things, you need to draw up a contract. The European Coffee Federation (ECF) provides standard coffee contracts which you can use as guidelines for your own contracts.
Note that the coffee trade in Europe deals in US Dollars.
Tips:
Tip:
Use the European Coffee Federation’s (ECF) standard contracts for coffee when drawing up contracts with buyers. The current editions are listed under the tab: Contracts.
Title:
Respect your contractual agreements
Body:
The coffee market is a volatile one with market conditions and prices that can vary a lot throughout the year. If you want to establish a long-standing and reliable relationship with your buyer, it is very important to respect your contractual agreements, despite (adverse) changes in the market.
If you honour your agreements and deliver according to the terms of your contract, your buyers will soon turn into loyal customers.
Tips:
Tips:
Consider hedging your coffee to protect yourself against price risks due to market price fluctuations and thus avoiding contract defaulting. Hedging is a trading operation that allows a person to transform a less acceptable risk into a more acceptable one.
Refer to the International Trace Centre’s (ITC) Coffee Guide: Hedging and other operations to learn more about risk management strategies.
Title:
Ensure proper packaging and transport
Body:
Always consult your buyer for specific packaging and transport requirements! Here are some general guidelines to remember:
Coffee is normally shipped in the form of green beans and thus prone to water absorption and desorption. Coffee beans are sensitive to moisture and can be shipped in woven bags made from natural fibres (jute or hessian) which allow free circulation of air. These bags, however, are vulnerable to hook and handling damage.
Woven polypropylene bags are an alternative, but you must make special agreements with European buyers if you want to use these for importing green coffee. These bags are usually transported in dry 20-foot containers.
For speciality coffee, there is a choice of innovative materials such as Grainpro for example.
For bulk transport, coffee is shipped in containers fitted with a polypropylene lining or a plastic inner liner for hygienic transportation. Container shipment is not suited for long journeys unless the containers are well ventilated: this is a condition you will need to specify in your contracts with European traders and roasters.
Tips:
Tips:
Choose the packaging in consultation with your buyers.
Check regulations for organic coffee beans. Organic coffee beans must be separated completely from conventional coffee beans to avoid cross contamination. Read our study about buyer requirements for more information about organic certification.
Be aware of the risks involved in transportation like damage from condensation, taint and infestation.
Transport your coffee beans in ventilated containers at the correct temperature and humidity.
Read more about proper packaging in the Cargo Handbook.
The Transport Information Service (TIS) has useful tips about the packaging and transportation of coffee.
Title:
Communicate honestly and openly
Body:
European buyers appreciate suppliers who are reliable, transparent and good communicators. Poor communication can seriously jeopardise your business.
Transparency means developing an open relationship in which risks can be addressed properly, shared and discussed.
Good communication means involving your buyer(s) in your considerations; providing them with clear and prompt information, especially regarding price, contract, quality and transportation.
Buyers will consider you to be a reliable supplier if your keep to your agreements and deliver on time.
Tips:
Tips:
Answer e-mails within one day or two.
Make sure you phone your buyer periodically to discuss issues properly, not only when problems arise.
Send your buyers regular information (e.g. four times/year) as a newsletter for example, with information and forecasts about the coffee in your specific area.
If a problem arises, tell your buyer immediately! In fact, they may even be able to assist you.
Title:
Consider the differences between European markets
Body:
European coffee markets differ dramatically from one another, for example in terms of market structure, business practices, consumer preferences and habits.
You can expect to find smaller-sized roasters in Italy and Belgium for example. These companies can offer interesting opportunities for speciality coffees and a more direct buyer-seller relationship.
In the Netherlands, the market is more consolidated with fewer but larger roasters. However, note that in the Netherlands itself, and in countries such as Germany and in Scandinavia, there is an upcoming trend towards small hipster roasters who pay increasing attention to telling the story behind the coffee they source.
In terms of consumer tastes, one of the most significant variables is the degree of roasting. Consumers in Southern Europe have a preference for darker roast, whereas countries in the north of Europe favour a lighter roast.
This geographical divide also applies to coffee blends. In Southern Europe, consumers prefer a higher share of Robusta. Most Italians, for instance, think an espresso blend should contain a Robusta component, while Germans and Scandinavians further north, prefer 100% Arabica blends.
Keep in mind that business practices vary widely too. Passport to Trade 2.0 provides a good overview of differences in business culture in Europe as does the Kwintessential Etiquette Guide.
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Tips:
Tips:
For more information about the different European coffee markets, see for example our factsheets focusing on Belgium, the Netherlands, the United Kingdom and Italy
Go to Passport to Trade 2.0. The website provides short videos introductions to each countries’ cultural peculiarities.
Visit the Kwintessential Etiquette Guide for a country-by-country guide to languages, cultures, etiquettes and taboos throughout Europe.
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