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Whole bean is better so why sell ground coffee?
9 May 2011

Kona Coffee

Last week we introduced ground coffee on our website. I discussed some reasons to purchase ground coffee but whole bean coffee is still preferred by most people and we don't expect to sell much ground coffee.  Keeping it in stock just for the website is not very cost effective for us.

We're selling the ground coffee in seven ounce bags instead of the typical half pound (8 oz.) bags.  It's the same price per ounce but the bag is slightly less full so the overall price is lower.  Under filling a bag to achieve a lower price point is a proven sales technique but it has always felt dishonest to me.  So why are we doing it?  And why bother if we don't expect to sell much ground coffee anyways?  Good questions.

KTA For the first time ever, Kona Earth coffee is now being sold in grocery stores.  Probably not a store near you unless you happen to live on the Big Island of Hawaii.  We're only in a handful of stores so far.  It's kind of an experiment but I'll get back to that in a moment.

Finding a local store willing to sell Kona coffee is not exactly easy.  It may be called the Big Island but it is still a small place and the market for Kona coffee is very saturated.  Any stores willing to sell Kona coffee usually have several dozen farmers all competing for shelf space.  Some of those farmers seem to be bad at math and happy to sell their coffee well below cost.  As tough as it is to compete is such a market, that is just the beginning of the problems.

We got our coffee into a fancy restaurant at one of the local resorts once.  Our coffee was selling great until another farmer shut us down.  The other farmer has a reputation for unethical business practices and is more of a salesman than a farmer.  He had somehow managed to get an exclusive agreement with the resort to sell only his coffee.  The restaurant wasn't really part of the resort but apparently that didn't matter, we were kicked out anyways.  The restaurant manager preferred our coffee but was forced to serve an inferior coffee instead.

Closed More recently, we got our coffee into a small independent store that sold nothing but 100% Kona coffee.  It was conveniently located right near the pier where all the cruise ship passengers arrive.  The competition was fierce but the store manager loved our coffee and it was selling great.  Our coffee was selling better every week and we had high hopes.  Then Japan's April 11 tsunami hit Kona.  Very little of Hawaii was seriously affected except the Kona side of the Big Island.  Very little of Kona was seriously affected accept some beach front properties.  Only one store was totally destroyed.  That store was the only store with our coffee in it.  We lost about $700 worth of coffee due to the tsunami and the store has gone out of business.

We have had other experiences with restaurants, roasters, small coffee shops, large coffee shops, farmers markets, drop shipping, wholesalers, retailers... you name it.  It almost always ends in disappointment.  I don't know if I'm being stubborn or tenacious but I haven't given up yet.  We recently got our coffee into some local grocery stores.  Doing so was neither cheap nor easy.

The first issue was finding the right person to talk to.  I would normally expect an inordinate amount of run-around and ignored phone messages but we happened to know somebody that knew somebody.  Insider favoratism like that used to really bother me when we were new to the business.  We've been doing this long enough now that it's finally starting to work in our favor.  To any new Kona coffee farmers that may be reading this:  I'm sorry but I'm taking my turn when I can get it.

The store's purchasing manager had a long list of product requirements.  Many were hard requirements while others were considered optional.  Even the optional ones aren't very optional since there are a zillion vendors all competing for shelf space.  Well established vendors get great shelf space, big displays and favorable terms.  I felt lucky to get any shelf space at all.

I already had all the UPC symbols and other packaging requirements squared away so that wasn't a problem.  I also had all my paperwork in order.  I repeatedly promised that I would not run out of coffee and I would keep my shelves fully stocked at all times.  All that was left to discuss was some of the options, like ground or whole bean.

Wrong I wanted to sell whole beans because they stay fresh much longer.  The store's purchasing manager wanted ground coffee.  I offered to sell both but he was only going to give me two shelf facings.  If I wanted to sell both dark roast and medium roast then I had to choose between ground or whole bean.  I suggested maybe whole bean medium roast and ground dark roast but the purchasing manager wanted both roasts ground.  We discussed it but he seemed sure.  Rather than risk losing the contract, I agreed to sell both roasts ground.

The next "discussion" was package size.  I had assumed eight ounce (half pound) bags since that is what I have always sold and what all my labels were for.  The purchasing manager felt strongly that seven ounce bags would sell better.  I mentioned that it felt dishonest but he didn't agree.  I also mentioned that I would have to print new labels, a significant investment, but he didn't care much about that either.  So in the end, I agreed to seven ounce bags.

The final "discussion" was about expiration dates.  We take great pride in having some of the freshest coffee possible so I was happy to have an expiration date.  The problem is, what date do you put?  Some say coffee is bad after a week.  Alton Brown says three months.  Some coffee is labeled with an expiration date as far out as a year.  There is no standard whatsoever.  Even people with strong opinions often can't reliably tell stale coffee from fresh coffee in a blind taste test.

One possible solution is to mark coffee with a Roasted On date instead of an expiration date.  That is more accurate and lets the consumer decide what is fresh and what isn't.  I wanted to use Roasted On dates but the purchasing manager insisted on expiration dates.  He was afraid that a Roasted On date would confuse customers.  It may seem far too simple to be confusing but after some thought, I agreed.

Labels At a small roaster or cafe, confused customers can ask about the Roasted On date.  In a grocery store, confused customers simply return the coffee, no questions asked.  Such returns may seem rare but I was assured that it is not.  I suggested maybe two dates, a Roasted On date and an Expiration date.  The idea was still rejected as too confusing.  So I stopped arguing and agreed to all the "optional" requirements.

It cost me a couple thousand dollars to modify my labels and add stickers for things like UPC symbols and expiration dates.  I also had to work through the logistics of supplying several stores around the island.  Once again, having local contacts really helped as I was able to combine forces with some other coffee farmers and share the distribution efforts.

Store We've been in the stores for about a month now and so far sales are very slow.  It will be quite some time before it ever becomes profitable.  This is just the first step though.  If this experiment goes well, we hope to expand to stores on the mainland.  That's where we will need the help of a few enterprising individuals that would like a little extra part-time income.

It may not be much money and as you can see, it does require some effort, but distributing coffee to local stores may be perfect for a soccer mom, college student, retiree or anybody else looking for part-time income on a flexible schedule.  If you're going to the grocery store all the time anyways, it's very little additional effort to stock some coffee while you're there.  We'll sort through all the big logistics, all we'll need is someone to physically carry the coffee to the stores.

There are certainly plenty of very successful coffee distributors out there.  In fact, some of the most successful people I know in the Kona coffee industry are the distributors.  They don't grow or sell coffee, they only distribute it.  I don't plan to become a distributor myself but I would like to learn some of their secrets.

We're not looking for distributors yet.  Baby steps.  First we have to figure out how to sell our coffee in stores.  Only after that can we start looking for distributors.




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