Coffee Buying

Holding Fees, Carry Charges and Other Things We Don’t Do

November 16, 2017
No carry charges, no holding fees, no palletizing costs.

Hotels, taxis, groceries — lots of industries have been “disrupted” and are now far more efficient, transparent and user-friendly versions of what came before them.

Genuine Origin is a start-up, born from a 200-plus-year-old coffee company, because a handful of folks believed green-coffee buying was aching for disruption — for a far better version of what it’s been for centuries. So, 65-lb. boxes a person can lift and easily stack? Static prices? Amazon-style online buying? UPS Ground shipping? These are big changes that now seem like no-brainers.

Some other changes we’ve made are less obvious, or clear. For example, our version of “holding” coffee.

The traditional model goes something like this:

• Call a trader, determine a price, create a contract for a coffee.
• Determine how much you’d like the trader to send immediately, and how much you’d like the trader to “hold.”
• You pay a fee, the carry charge, on the amount that’s held (think of it as a real-estate cost for the coffee to sit in a warehouse); and, you pay a fee each time you ask the trader to “release” some coffee—i.e., send you a portion of what you’ve purchased.

The GO model works like this:

• Go online, put coffee in your cart, pay the set price.
• Select a shipping date, up to 90 days out. Your card is charged the day the coffee ships.

With GO, automatic discounts include free shipping on 10+ boxes, and per-pound discounts on orders of 10+, 24+ or 48+ boxes (-5¢, -15¢ and -25¢, respectively).

Our version of holding is your ability to lay claim to that coffee, but to not receive it or pay for it for those 90 days. Because we’re not charging you to hold it, we don’t “release” the coffee in tiny amounts — we just hold it until the shipping date you’ve selected, and then we send the full order.

What if you only want 2 boxes? Then just place an order for 2 boxes. You could potentially place 24 orders for 2 boxes, and have them ship in 2-day intervals. But our 48-box discount (25¢ off per lb.) only applies if the 48 boxes ship at once.

Want to buy 100 boxes but not receive it all at once? Place 2, 50-box orders — you’ll still receive the 48-box discount (25¢ off per lb.), and you can select two shipping dates. (The beauty of our community lots is you don’t need to worry about a coffee becoming unavailable.)

Basically, we don’t dribble boxes out to you, because that would cost you more.

Want to see it in numbers?

Consider this real customer example. A customer goes through about 34 boxes a week (the equivalent of about 17 traditional, 150-lb. bags). Our recommendation to him was: Instead of ordering 34 boxes a week, order 48 boxes every week and a half, to take advantage of the additional, 25¢ off/lb. discount. (A reminder: 48 boxes is 2 pallets, or 3,120 lbs. of green coffee.)

Pallets of coffee

Delivery time! The adorable Tiffany and Steve at Noble Coyote Coffee in Expo Park, Dallas.

Below is a comparison (an approximation) of how such an order might work with a traditional importer and with GO. With a traditional importer, prices fluctuate with the C market. So, we made the initial per-pound prices the same, to eliminate a variable.

17 bags (2,550 lbs. total) with a Traditional Importer

Guatemala: 5 bags ($3.60/lb. x 150lbs = $540.00) x 5 = $2,700
Sumatra: 6 bags ($3.73/lb. x 150lbs. = $559.50) x 6 = $3,357
Brazil: 6 bags ($2.78/lb. x 150lbs. = $417.00) x 6 = $2,502
Total: $8,559
Avg. Per-Pound Price: $3.36
Pallet Shipping and Outload Costs: $300
Carry Charge/Financing for 3 Months*: $0.05/lb. = $127.50
(So, $8559 + $300 + $127.50 = $8,986.50 / 2,550 lbs.)
Actual Per-Pound Cost: $3.52
*If a roaster receives the full amount, and so doesn’t incur holding fees, the per-pound cost would be: $3.47.

48 Boxes from Genuine Origin (3,120 lbs.)

Guatemala Cubulco: 15 Boxes, $3.60/lb.
(After 25¢ discount: $3.35/lb.; $217.75/box x 15 boxes = $3,266.25)
Sumatra Blue Batak: 15 Boxes, $3.73/lb.
(After 25¢ discount: $3.48/lb.; $226.20/box x 15 boxes = $3,393.)
Brazil Washed: 18 Boxes, $2.78/lb.
(After 25¢ discount: $2.53/lb.; $164.45/box x 18 boxes = $2,960.10)
(So, $3,266.25 + $3,393 + $2,960.10 = $9,619.35 / 3,120 lbs.)
Carry/Holding Charge: None
Finance Charge: None
Pallet Fee: None
Shipping: Free
Lift gate charge*: $25
Actual Per-Pound Cost:  $3.09
*If you have a liftgate,  or let UPS bring the boxes in (a free service), the lift-gate charge would not apply, putting the actual per-pound cost at $3.08

A pallet of Genuine Origin green coffee.

The inimitable Ty Beddingfield at Tampa’s Kofe.

Because the GO model doesn’t include financing fees and holding fees and carry fees and shipping fees (the latter not on orders over 10 boxes), our prices wind up being lower. Often, even when the per-pound price elsewhere is lower, after all the fees are considered, you still pay less with GO.

And importantly, you’re getting that ultimately low price — $3.09, in the example above — and it doesn’t mean a producer wasn’t paid well. (Far from it; more than just paying producers the most competitive per-pound price, we work with them to ensure their farms’ business models, from the start, are efficient and profitable, so their livelihoods aren’t resting on just that per-pound price at the end of their season.) You pay less because we’ve simplified the system.

Questions? Want to chat about this with a real person? Email us at info@genuineorigin.com or call us at 646.828.8585 between 10 and 6 ET. We love to talk coffee. Alternately, just head over to the store, start shopping and see for yourself •

 

*Top photo: Pallet surfing with 2017 U.S. Barista Champion Kyle Rampage.

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