The Importance of Inefficiency and the Danger of Detail

 

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Processing microlot coffee in Costa Rica.

Specialty coffee is overwhelmingly inefficient. This inefficiency might be the one unilateral criterion that makes certain coffee special and also the one unilateral virtue—or opportunity for positive impact—that circumscribes specialty coffee as a category.

Between 275-320 bags (total varies depending on country of export and their standard bag weight) of coffee are packed into a shipping container sent from a tropical port to the shores of a consuming country, where they are offloaded and stored in a warehouse. All this coffee is documented, at minimum with a bill of lading and customs forms.

But.

If everything in the container does not come from the same place, if it’s not from the same farm, mill or producer, then each subset of coffee inside the container needs its own set of documents verifying what it is. One way the ports control for contraband and smuggling is through tracking weight. The container as a whole is weighed before it ships from its port of origin and again when it arrives at its port of destination. Both recorded weights must match. The internal contents of the container are also weighed and recorded, which doesn’t involve much calculation if all the coffee is the same. But, when you start splitting the container into “micro lots” of different coffees, each lot’s arrival weight must match its departure weight, and the total weight of the arrival contents must match the weight of the departure contents, requiring the extra steps of checking the lots independently and then tallying their collective total. This happens at the port, before the coffee even hits the warehouse.

Inventorying 300 bags of coffee requires record keeping from the farm to the warehouse and then to the roaster. But let’s say that container is divided into 10 microlots of 30 bags each, or into 20 microlots of 15 bags each. That means 10 or 20 times the record keeping for the same amount of coffee. It’s not such a big deal if just one out of every 100 containers is subdivided into traceable microlots, but when 10 or 20 out of every 100 or are filled with microlots, then you, as an importer or an exporter, start to hire new people to handle all those microlots, and people like me get new full time coffee jobs that didn’t exist before. This is not a post about pricing, but part of what makes a microlot more expensive than its non-microlot or “conventional” counterparts is that it takes more effort, labor, and time to keep it separate and to trace, track and log it as a discrete entity all the way from origin to consumption. The availability of farm backstories ready to put on coffee packaging means that someone has to compile them, edit them, fact check them. In the case of microlots, their inefficiency is not just in generating 10 or 20 times as many records, but in necessitating records that are many degrees more detailed. Traceability is a crucial first step to building more transparent and fair supply chains, but it is not free.

It is still worth it, though, and very much so. Before we see why, we have to take a closer look at how the inefficiency of a small lot of coffee is amplified as it continues to change hands.

Getting the coffee out of origin, across the ocean, off the boat, and into the warehouse is less efficient when coffee is organized into microlots rather than container lots, but the trickiest and least efficient part of specialty coffee is getting it out of the warehouse and to the customer. A container from, let’s say Costa Rica because they sell tons of micro lots, might be stuffed with 20 lots of 15 bags each, but most of today’s new micro specialty coffee roasters will not be buying a full lot of 15 bags; they’ll be purchasing one or two bags, or maybe three bags from one lot and three from another. Now, a container’s-worth of coffee that could be sold to a single large roaster and maybe even delivered in a single 300 bag load is further parsed and sold to 50 or even 100 different customers each buying six or three bags.

Every delivery that goes out of the warehouse generates a sales contract, invoice, delivery order, and bill of lading. A container’s-worth of coffee sold to 100 customers rather than to one means 100 times as much paper work; 100 times as many freight trucks pulling up to loading docks; 100 times as many quotes and phone calls and confirmations and chances for something to go awry. This might seem maddening on the theoretical level. All this work just to get 300 bags of coffee—300 bags that fit neatly inside a container that fits neatly onto a flatbed truck that pulls neatly up to a loading dock—to their final roaster homes?

But.

People are more important than efficiency. Obsession with efficiency alone and the seduction of finding the perfect size shovel and the perfect angle of shove for every task, every time, was the holy grail that drove the global industrial revolution, and history has more than enough examples showing that what’s good for the efficiency of the system is quite often the opposite of what is good for the individual. Usually, we think that the goal is to move away from inefficiency. In specialty coffee we’re adding layers of it, and this deep new inefficiency is actually supremely important.

Throughout the time I’ve spent in Costa Rica I’ve gotten to know the farms, mills, families and individuals many microlots come from. I also know many specialty coffee roasters who order three bags of coffee at a time. Both the microlot producer and the microlot roaster are very often family businesses, and most of those times they—both producers and roasters—operate in tight knit communities and provide employment in places in desperate need of economic revitalization.

The roasters receiving full containers of coffee to their loading docks also provide meaningful, adequately compensated employment to lots of people, but those businesses tend to be located at the end of a Corporate Drive in a light industrial park someplace removed from residential and commercial centers, whereas a significant portion of roasters roasting those three bags of a specialty micrlot have addresses on Main Street.

We know in America, especially at this moment, that a lack of employment affording living wage is crippling huge sections of the country. We also know that coffee shops and roaster-retailer spaces are magnate businesses; where coffee businesses open, other restaurants, shops, and activities follow. Small businesses are the fabric of America’s communities in the places where we most need “third spaces” to interact with each other and spend time talking to our neighbors, listening to open mics, hanging art of the walls, putting bowls of water for dogs on the sidewalks, and holding school bake sales and holiday craft markets.

If coffee is only sold by the full container load, it’s hard for that Main Street café roastery to get three bags of a product that will invite people through its doors. Any old coffee is available at the mall, the gas station, and the grocery store. Small business 101 is to offer something people can’t get at a bigger box retailer, a product and an environment that feels more personal and locally connected than what’s being offered at the mall or the grocery store. Big deal that getting those three bags of Costa Rican coffee from the warehouse to Main Street takes extra hours of paperwork. In the past, a full container of coffee would arrive in bulk and then be distributed to small coffee businesses, but that meant that their coffee was often identical to that of larger vendors, and the only thing that differentiated a Main Street café was the vibe of the space. Now, it is possible for Main Street to have a safe, neutral gathering space where immigrants, long-time residents, kids, retirees, students, tourists, and anyone else can casually pass the sugar and interact in a low-risk setting. The Main Street cafe not only creates a space that makes a place a place, in that space it serves small-lot, traceable products that are totally different than what is sold by large vendors.

It’s inefficient but it’s also quite miraculous because back at origin those microlots are doing the same thing: keeping communities strong and adding opportunities for employment. A profitable coffee farm or a mill can hire people and pay them well. Urban migration is stressing many tropical nations and, in the case of Costa Rica, land that has spent several generations dedicated to agriculture is now at risk of being sold to tourism developers as the would-be farm inheritors pack up and head to the capital or to the US. Agriculture and land management are basic human activities that supply food and, when handled smartly, mitigate rather than accelerate climate change. Paid fairly, smallholder farm businesses foster dignity and drive local economies in lieu of creating dependency on credit and aid.

It’s inefficient, but’s it’s a perfect match. Small family farms and mills provide coffee to small family roaster business. The parallel is scalable. Larger estates with a roster of employees supply coffee to larger roasters with their own teams of staff. The smaller end of the scale spectrum is less efficient, but history has taught us that too much efficiency leads to the production of widgets when people need food. Inefficiency is not the enemy.

The microlot-to-full-container volume range allows businesses to apply efficiency where it makes sense (foodservice, price sensitive customers) and apply inefficient, traceable differentiated products where they make sense (Main Street USA). Business-to-business scale-matching in the coffee supply chain has evolved rather organically, with small roasters often seeking out small farms, but the vital inefficiencies that have the capacity to make small family businesses possible also allow for an unexpected and dangerous downside: detail.

There is a knee-jerk connotation of inefficiency as a negative thing and attention to detail as a positive thing, but sometimes we need to challenge our gut and examine the system from a broad enough perspective to see the qualitative and quantitative consequences of our choices.

For a small Main Street roaster, micro lot coffees are great. Why? They are available in small quantities, offer different products from big box retailers, present a potentially superior product, and appeal to human connection of supporting small farm businesses. Those last two are where well-meaning, well-marketed details can become dangerous.

How do you establish that a small-business product is superior to a big box retailer’s? You make it yourself so it’s fresh and you can verify the ingredients (in this case microlot coffee). You communicate this to your customers by telling them the steps you took to acquire and manipulate those ingredients and you maybe even let people see into your workshop, so they can do some of that verification themselves. The end result is partly superior because it’s roasted by someone’s niece and served by someone else’s son in law and is connected to the consuming community by one or two visible degrees. It probably also tastes better.

But maybe we also want to prove that your small business product is superior not just because it’s made by people customers know and tastes good but because it scores higher according to an industry grading standard. So we commit to evaluating sample after sample to select the best available ingredients. This is the first place where the detail starts to become dangerous. If customers are satisfied with the taste and tickled that the artisans are friends, family, and neighbors, why does it matter how a product stacks up? To make a product with a score that outdoes most of the industry would seem to be a goal that takes for granted that most of the industry, and most of the industry’s customers, can taste that product and buy it instead of something sold by a big box retailer. If small businesses are good for Main Street, why does it matter how they compare to any broader standard? The problem with detail starts when small businesses become so obsessed with it that it is all they see. Selling a product that exceeds the industry average seems to be aligned with a goal that looks far beyond Main Street, that looks to compete nationally and internationally. Being locally focused and nationally competitive are two difficult agendas to maintain simultaneously.

It’s not to say that it can’t be done, but it does become problematic when a business proclaims to be all about community but devotes its detail-attention to cult-like preoccupation with exceeding a standard that does not particularly concern its customers. The refrain becomes “we strive and strain to achieve superior quality to be able to serve nothing but the best to our customers.” But is “the best” really what small business customers want and need?

The second place where detail becomes dangerous is when the quest for the best obscures the final reason microlot coffee is good for small businesses: its support of and direct connection with similarly small, family owned farm and mill businesses. Sticking with our Costa Rican example, those 15 bag microlots represent some of the most expensive coffee available for sale. This price, however, comes mostly from its small business provenance and less from its arbitrary quality. Costa Rica’s coffee infrastructure, like that of almost all coffee producing countries, was built for efficiency, for filling containers with a standardized product that represented an average (mean, which is usually also the mode but not usually the median) quality of the country. When small producers establish themselves outside of that system of efficiency, they replicate existing infrastructure on a scale that allows them to keep their coffee separate, which we know is inherently inefficient, and here inefficient is synonymous with expensive.

There is no such thing as a free lunch, and there is also no such thing as a free cup of coffee.

This inefficiency of small, new coffee production businesses means that even low or middle quality coffee produced on a family farm and kept separate by a family processing facility is going to be significantly more expensive than coffee of identical quality coming out of the efficient national infrastructure. Superior quality coming from an inefficient family business is therefore going to be substantially (think four or five times) more expensive than the global coffee benchmark price and at least twice as expensive as the national mean.

When we become too swept up in the details of superior quality, we risk that our laser focus comes at the expense of a broader awareness of what it is that we’re buying. Most of the attributes that make a micro lot superior are apparent not in the detail of the cup but in the way a microlot exists as a separated, preserved, traceable entity.

When customers walk into a Main Street coffee shop they might do so because the coffee tastes better or because friends of friends run the café. They might spend more, less, or the same as at a national chain retailer. The price is probably not the determining factor in choosing that product. But if price becomes the dominate criteria in buying coffee from producers, things get tricky again.

We have to remember to look up from the scoring sheet and the cupping bowl and survey the larger picture. Importers buy coffee directly from producers (or maybe a roaster even buys directly from a producer). The producers are paid out in full, up front. (Coffee sold on consignment or deferred “final sale” is a topic for yet another complicated discussion.) The price paid to producers is said and done by the time the coffee is on the boat and long since said and done by the time the coffee is in the warehouse. Importers exist to carry the coffee in the in between. There is a lot of rhetoric making it seem like intermediaries take a “cut” of what could or should be paid to producers. That is completely the wrong way to look at it.

Each party who assumes responsibility for coffee adds a layer to it, but those layers never gouge from previous layers. $5.50/lb for three bags of that six bag Costa Rican microlot is comparatively high because what was paid to the producer is comparatively high. The percentage of margin on that coffee is tiny—barely over the costs incurred by shipping, customs, storage, etc.

It does make sense, as a roaster, to say, “I can afford to spend $4.00/lb on green coffee—on getting it all the way from the farm out of the warehouse—and I want as much of that green coffee price to go to the small family farm as possible, so I’m going to pay $3.25/lb to the producer and $0.75/lb to an importer and a warehouse to handle shipping and logistics and then pay a freight company another cost for delivery.” That logic is sound. Plenty of roasters are willing to take the time to coordinate with the farmer to ensure the quality and the volume of the lot and confirm the shipping instructions and then spend more time on the phone with importers to coordinate shipment and logistics. But time spent on those tasks makes that coffee more expensive.

The more common option is to select coffee from importers’ offering lists, meaning evaluating coffees that already have several layers of management behind them. Any microlot coffee on an offerings list anywhere has already gone through the (inefficient) processes that make small family coffee farm businesses viable. Small coffee farms and mills are only viable if we are willing to pay the price of their inefficiency. We don’t like to pay for inefficiency, but we do like to pay people living wage, eradicate any vestiges of slavery or exploitation, and promote sustainable agriculture. Which is why we should absolutely buy all the microlot coffee we can—even when it doesn’t taste like a rainbow.

There is a lot of excitement right now around being artisans who are so lost in our work that we see nothing else. This is dangerous. We have to understand that quality alone is not driving price. Separating out any coffee as a microlot so that a small family farm and mill business can create employment and opportunities in the rural tropics means that those microlots—even imperfect ones—need buyers. We can still pay more for the better (and a whole bunch more for the best) and financially reward the effort, investment, and luck that result in laudable quality. But in an environment of arbitrary quality Olympics, the importance of the coffee’s holistic value often gets lost, which is ironic because this the current specialty coffee environment is also one of storytelling Olympics.

What’s happening, sometimes, is that it only once a coffee clears all the quality hurdles that then a heartwarming story of sustaining families and communities is being retroactively applied to it, rather than allowing the facts—not just the narrative but the demonstrable reality—of coffee’s provenance to be a leading factor in the initial microlot selection.

The situation is tricky. Quality is tangible and measurable in the cup, making it as seductive as that efficient shovel. Being one buyer in a new system of many buyers that as a system makes it possible for smallholder tropical agriculture to flourish and reduce its dependence on debt from national institutions or aid from foreign ones is not tangible and is much harder to think about, let alone measure.

Attention to detail is very much about the “I;” “I selected the best quality, I meticulously crafted it, and now I am able to offer it to you,” as though it were a favor that could only be the product of  veiled, elite wizardry. Attention to the system, on the other hand, still involves the I but it also includes more “we’s;” “I bought this coffee from a small producing business and now we as a café and customers can be part of what makes their local economy thrive while also being a part of what makes our local economy thrive.”

Whether it’s I the individual or I the brand, the I can be more of an informed, functional facilitator and less of a glorified magician. This is the challenge: to resist the temptation of wizardry and recognize that we all live in a global world where we are interconnected, in increasingly expensive and inefficient ways. Coffee production, with its twisted roots in imperialism and forced labor, has been uncompensated or undercompensated since it was transformed from a forest fruit into a cultivated crop.

The prices for coffee we are starting to see today seem exorbitant because they have no precedent. Those prices, however, even at $4 or $5 a cup for straight black coffee, are the full true prices, the resultant cost from paying every single supply chain actor a living wage. Most of us want to help oppressed or formerly oppressed people in places with histories of exploitation, but we are unaccustomed to paying for that sentiment out of our own pockets or our own businesses’ bottom lines. Inefficiency is an expensive new way of doing business but a profoundly impactful one.

Specialty coffee’s inefficiencies are poised to be powerful; we cannot not let these opportunities go to waste because we are seduced by the allure of the highest (and thinnest) strata of superior quality. When we all pay fairly no one needs debt or aid and everybody gets to eat.

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