Editor’s Note: This article is part of a series originally published in Tea & Coffee Trade Journal. It is reprinted here with permission. Part 1 is available on the Royal blog here, and you can visit Part 2 at the feature on their website, or download the pdf here, courtesy T&CTJ.
How Coffee Auctions Evolved into the Modern Era
In the first installment in this series, we looked at the history of auctioning coffee throughout the world. Part two focuses on modern iterations of coffee auctions.
By Chris Kornman
Many on-site auctions occur at industry events or at the behest of a particular exporter or non-government organization (NGO). I recently presented research for the Academic Agenda at the Colombia Coffee Expo in Bogotá, at which an auction of 30 or so coffees was held on site. My employer, Royal Coffee, has similarly partnered with Inconexus to host similar events in more remote locations like Huila and Nariño in Colombia. Many other importers, exporters, and coffee organizations run similar events. The format varies but usually centres around attracting buyers to meet producers, visit farms, cup their coffees, and bid against each other for small quantities of high-quality green coffee.
When efficiently executed with honest record keeping and diligence in export logistics, these on-site auctions can be a benefit to all parties involved, scoring high prices for good quality and legitimizing a trip to origin with tangible results for the roaster. However, the idea of easy money to be made at an auction can lead to sloppy record keeping, poor logistics management, and deflating failure to deliver for both buyer and seller, breaking down avenues of trust in the process. Thus, a degree of trust in the institution hosting such events ought to be a prerequisite for participation.
The advent of internet technology has enabled an entirely new type of auction, one in which the buyers need not be in the same room or on the same continent. In modern times, there is perhaps no more familiar internet auction to coffee professionals than the Cup of Excellence (CoE), run by the Alliance for Coffee Excellence (ACE) out of Portland, Oregon.
Two Decades of Cup of Excellence
The inception of the CoE program began in 1999, hosted by the Brazilian Specialty Coffee Association (BSCA) and funded by the International Trade Centre (ITC), dubbed “Best of Brazil.” It was the culmination of a three-year program undertaken by the ITC, International Coffee Organisation (ICO), and the Common Fund for Commodities (CFC), called the Gourmet Coffee Project that took place in multiple countries.
The auction component was something of an afterthought, inspired by a quality competition – still hosted by Trieste, Italy-based Illy to this day – with cash prizes for producers. However, in Brazil, without a precedent, farmers were unwilling to hold their coffee until the auction. The ICO stepped in at the eleventh hour with the necessary funds to purchase the coffee outright at market price, with the promise of a second payment after the event.
The high bid in this, the world’s first online coffee auction (which lasted a grueling 48 hours) was USD $2.60 per pound (per “The World’s First Internet Coffee Auction a Success – Some Lessons Learned” in the International Trade Forum Magazine Issue 3/2000). Despite hiccups, it was “the first NGO project with a fully funded marketplace component,” according to Susie Spindler, who, along with George Howell, had been hired to consult on the project by the BSCA’s then-president, Marcelo Vieira.
In the wake of the Gourmet Coffee Project’s end, the Cup of Excellence continued, adding Guatemala and Nicaragua. In 2002, Spindler founded the not-for-profit Alliance for Coffee Excellence (ACE) to oversee CoE, with the support of the BSCA and with a stacked deck on the board of directors including Vieira and Howell, and adding Hidetaka Hayashi, Alf Kramer, Silvio Leite and Ted Lingle. The program was a continuation of the quality promotion and auction function, expanding to an international market. CoE events grew to include El Salvador, Honduras, Colombia, Costa Rica, Rwanda, Mexico, Burundi and Bolivia.
Frequent CoE head judge and board member of ACE Geoff Watts spoke recently with me about the organization and its inception. “The idea behind every auction,” he told me, “is a discovery mechanism for the value of differentiated quality. How do we find quality at origin that’s not visible to the marketplace?” He told me that the competition and auction were “built to serve farmers,” and that the understanding of coffee quality “has always been and will continue to be about deliberate, repeatable craftsmanship. It doesn’t exclude, however, the unpredictable miracles of nature that can surprise us at any time.”
CoE competitions follow a fairly standardized format which includes submission of samples, vetting by a national jury, and the international competition that narrows the field of coffees from hundreds to around 25 or 30 finalists. Jury members calibrate under a head judge using a specific cupping form designed by the CoE. The top lots will have been cupped at a minimum of five separate sessions during the vetting period. Bidding takes place a month or more after the competition, once samples have been prepared for ACE members who are able to roast and taste the top coffees in their own time.
In 2014, CoE celebrated its 100th such auction, returning to Brazil for the occasion. The following year a major leadership shake up coincided with the organization scaling back to just five countries. Concerned participants, farmers and roasters alike, watched as a venerated organization imploded. Internally, board members struggled to re-brand, having been slow to adapt to seismic paradigm shifts in the industry, including a changing roaster demographic and the introduction of non-traditional coffees like dry processed naturals or the Gesha cultivar.
There was also a sense that in places like East Africa, the CoE had failed to adequately address the needs of the small farmer. In places like Colombia, Nicaragua or Guatemala, CoE put quality discovery at the forefront, contributing to the recognition of farmers in previously little-known regions like Huila, Dipilto, and Huehuetenango. However, Africa’s traditional cooperative and centralized washing station models for cultivation placed a barricade between the benefits of the CoE and the farmer. The solution to this problem, according to Watts, is still in progress.
CoE, however, has bounced back since 2015, returning to most of the countries it paused and adding Peru for the first time ever in 2017. Ongoing auctions still gather high prices, though Susie Spindler made mention that “the auction is not sacred” and current ACE executive director Darrin Daniel told me that he views ACE membership now as “participation on a mission and a community.”
Breaking Records at Best of Panama
While there are numerous independent coffee auctions that could mentioned were time and space no object, there is one country whose noteworthy auctions tend to command the most attention. The Specialty Coffee Association of Panama’s annual “Best of Panama” competition pre-dates the CoE by three years and in 2004 re-introduced the world to the Gesha cultivar.
Turning heads at USD $20 per pound in 2004 and 2005, Price Peterson’s coffee grown on the Jaramillo Farm of Hacienda La Esmeralda would stun cuppers and break auction records, more than doubling its value in 2006 and doubling again in 2007 capping at $130 per pound. Thereafter, the Petersons have held back their “most exclusive” lots from the Panama auction and instead host a private auction annually.
However, that hasn’t stopped them from being competitive. In 2017, the Peterson family hit a new record for highest dollar value per pound for green coffee at $601 in that year’s Best of Panama competition. That record was broken again in 2018, by a natural Gesha from Lamastus Family Estates at $803 per pound.
This is a remarkable moment in history, one in which microlots can gather astronomical prices, and as well-established, long running large-scale auctions seek to adapt to the modern coffee buying landscape. There seems no better time to step back and ask ourselves what we are doing here. What benefit is the industry as a whole reaping from auctions, particularly microlot specialty auctions?
This is the question the third and final installment of this series will seek to answer.