Sustainability, perception and price increase 2020

Intro

What follows is a one-sided explanation regarding our new pricing structure as from March 2020. Our first price increase in 23 months. It is a long read, so if you do not want to read the whole thing, skip ahead to the table. If you feel you would like to discuss anything within this notification, then please contact us.

Sustainability

At Quaffee, one of our cornerstones is sustainability. Sustainability is a stool with many legs:

• Environmental sustainability: making sure that the coffee we source promotes an environment that looks back to the source for the coffee as much as forward toward the future of coffee as a crop, and the world as a home from humanity and all creatures that are reliant on this third rock from the sun.
• Sustainable living for all along the chain. Ensuring earning of a fair wage, so that they want to stay within the coffee industry, growing with the industry.
• Business sustainability: all businesses within the chain should be able to remain in business and allow the world of coffee drinkers to enjoy this most affordably luxury still.

Consider these when reading what is to come.

Sustainable Coffee Prices

While we work hard on sourcing coffee that answers the first two as best we can, it is our clients that help us achieve the third. We are truly appreciative of those that have supported us, and especially those that continue to support us.

The price we are paid for our coffees, as well as the amount of coffee we sell, determines how sustainable our business is. Over the last 2 years, we have learnt that offering the highest level of coffees we can source from around the world is not a sustainable business model. It would appear that the market is limited, and even when offering them at a cost that barely covers our costs, we take over 12 months to recover the costs of sourcing the coffees.

It does, however, appear that the level of coffee that is enjoyable at a good price is sustainable, at least in quantity of sales. Most of the coffees we offer are in this range. They offer great value and good complexity for the price we pay, and hence you buy them. These coffees we take the most care in roasting, and typically find we are roasting them at below 80% of the capacity of the roaster, in order to keep them fresh and of a quality we are happy to offer.

All this considered, we all know that while the South African economic growth has slowed down or even stalled, salaries and expenses still need to be paid. For any business, the highest cost is the salaries of the people that work in the business. Inflation does not worry about economic growth; it affects the salaries expected from those within the business who are making sure coffee orders are processed, roasted and delivered. While last year Quaffee absorbed the increase in salaries, to do so two years running will place pressure on the profitability and hence sustainability of the business.

Price as a marketing tool

I personally (Warren) have a major issue with the ethics of the marketing and advertising industries. No matter how I look at these industries, I struggle to find even minor merit within them, of course apart from the hard-working people within these industries.

Advertising and Marketing’s goal is supposed to assist in getting the word out to like-minded people about the availability of a product. However, today the old adage about lawyers and lying applies to advertising and marketing. If something is advertised, it is a lie. Within the coffee industry, the lies, or to put it mildly the stretched truths, are more stretched than spandex that is 10 sizes too small. Of all the tools of perception that seem to have the biggest effect, price is it. A well-known study with wine placed the same wine in several bottles with different prices on them (and fancier and fancier stickers). All the people tasting the wine found the one in the most expensive bottle tasted the best.

So how does this apply to our pricing? Worldwide and in South Africa specialty coffees (read more here…) sells for between 4-8 times the price of your standard commercial coffees that you buy in the supermarket. Personally, I have never put much stock in prices. Over many decades of dealing with products at various prices, I have learnt that price as a measure of quality is not a yardstick I use (except perhaps for goods that appear to be too cheap, normally implying a planetary and humanity cost).

However, there are those that do not agree with me. So while we have always looked at offering pricing that meant our business was sustainable without being excessively profitable, we have had repeated comments by new customers and people within the industry that we are doing ourselves a disservice by offering coffees at prices that are significantly cheaper than our competitors. Specifically, our smallest pack size has come under strong criticism, since “we all know” smaller packaging costs more. So as part of this price increase, the smallest packaging has borne the biggest brunt of these increases.

Before we expose you to our new pricing, there are three more topics I would like to cover.

Subscriptions

There is one more note about advertising and marketing to consider. Both of these cost money, we would rather rely on word of mouth, and hence offer a subscription service to those that love our coffee and want it regularly. Pricing charged for this service will be at a discount, which essentially is paid for by our close to zero spending on advertising and marketing.

There is no contract to set up a subscription, you just ask via email, and we send you a price and add the subscription in. We invoice you once a month and auto add the delivery. You can read more about the subscription service here…

Our packaging

Another “marketing tool” is packaging. The issue with most packaging is that it is NOT sustainable at all. Most packaging is made outside South Africa, is triple-layered and extremely harmful to the environment. Paper-based packaging needs to have some way of holding the coffee so that it does not escape. Typically this means a plastic or wax lining is used. To recycle a product like this requires more energy and machinery than is typically available. Foil based packets have the same issue. Normally there is both a plastic outer layer and an inside layer. Once again, these are difficult and expensive to recycle.

What about biodegradable packing? For packaging to degrade, it has to be placed in an environment that helps it degrade. The environment needs to have a way to attract microbes that degrade the packaging (normally foodstuff) and must be exposed to air. Biodegradable packaging does NOT degrade in landfills.

Even if the packaging is allowed to degrade, if it originally was plastic, it actually does not degrade, it breaks down, creating small plastic pellets. These pellets are an environmental nightmare.

A recent move from fossil-fuel oil-based to vegetable oil-based plastics has occurred. These are properly biodegradable, under the correct circumstances. At the moment, due to our large oil industry (including Sasol) packaging that is made in South Africa of this type of plastic. We have not been able to source this type of packaging that is made in South Africa.

Besides how packaging is made, it needs to perform as packaging. It needs to keep the product fresh enough and ideally be re-sealable so that it can be opened many times until the coffee is consumed. With that in mind, in 2009, we tested a number of packaging materials and found that the medical-grade reseal-able ziplock packaging performed as well if not better than most packaging on the market. The exception was a glass jar or a seal-able plastic container stored in a dark cupboard or freezer.  The medical-grade plastic ticked all the boxes for us.

We found a local manufacturer that used the South African made medical grade plastics to make bags. Using inks to cover the bag to make it opaque was our second generation of these bags. You may be aware that the 250g bags are not opaque, that is because we had to do a minimum run of 30,000, and of these bags, and we still have quite a few over. To solve the issue of light degrading the coffee, we had always planned the box that we use. Once again, this box is locally made out of a sugarcane-based board. This board has a maximum grammage which we use. Since this box is essentially a second skin to the 250g packaging, this is a significant cost. Added to that cost is the fact that it is made in small batches in South Africa.

So, in summary, our packaging is specifically designed to be reused or recycled. Recycling costs of a type 4 plastic (the one we use) makes economic and environmental sense as local recycling plants are found to be plentiful. However, reusing these packets a few times before recycling is also a good idea.

Does our packaging harm our brand? We believe not. It represents a locally made product that is sustainable for the people within the country and the environment. It may cost us a little more, but the money spent stays within our borders and promotes team South Africa.

For those that collect their coffee, we will continue to add an extra 25g to your coffee if you collect and bring your own packaging or only take a 250g bag (excluding the box).

Just a note: if you are unable to recycle your packaging, we can assist. We have teamed up with a local provider who ensures our recycling is sorted and finds a new home.

Looking Forward

With consideration of status of our country and the planet, we will be using some of the moneys in the increase to donate towards causes that promote the three legs of sustainability we mentioned. While we will focus these efforts locally as much as possible we will also be looking further afield. We are already a minor contributor to World Coffee Research, and we hope to contribute even more.

New prices

The pricing below will take effect on 1 March 2020. It follows our standard categorization of our coffees. If you are unsure how we categorize our coffees, please have a read here…. Please also remember that there is uncertainty over whether or not VAT will be increased. We are hoping it will not be, or at least by a small amount only. These prices should tolerate a 1% VAT increase, more than that may be a challenge.

The prices listed below are our Recommended retail price; this is the price you will see on our website (if not a member), on the roastery price sheet (both Buitenverwachting and Vineyard) and within the CoffeeBloc at Buitenverwachting.