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The first two years of our business, I followed local coffee pricing pretty closely*.  I monitored local groceries every couple months, noting changes in pricing and availability.  This past summer, life started getting pretty crazy, and my last price check-in was in July 2009.  Given that we do all our food shopping in farmer’s markets, that was probably the last time I was in a grocery store.

Until yesterday.

My first reaction upon returning to the grocery store was to be glad I’m not in the ice cream business –  Breyers blowout in progress, but 2, get 3 free.  Man, that’s some tough competition.

My second reaction was, “What happened to all the coffee?”.  It was immediately evident that there was a much smaller selection than I saw in July.  Consulting my spreadsheet later, the numbers revealed that there was fully 33% smaller brand selection than in July 2009, and the brands that remained were large, national brands.  I’ve never tracked the SKU level, but my sense as that even within the remaining brands, the number of individual SKUs was reduced (essentially, there was just less shelf space devoted to premium coffee).  Bottom line, if you buy coffee at the grocery store, you have a lot less choice than you did just nine months ago, and you will be selecting from major national brands.  This isn’t entirely surprising, except that exactly the opposite has occurred in the beer aisle. Given there are just about 500 craft brewers in the US, and 1600 craft roasters, this is a little counter-intuitive.  My best guess is that structural aspects are driving the difference, e..g, beer has a better distribution network, and the profitability to retailers is higher.  But that’s just a guess.  Maybe people just like beer more – some days, I do.

The final unpleasant surprise came when I entered the prices into my spreadsheet.  In the past nine months, the average price of coffee has increased 3.7%.  This, in a period where the inflation rate was 1.06%.  The average price of premium coffee when I calculated it last night was $13.91 per pound, up from $13.44 per pound on July 27, 2009.

Interestingly, in July there was only one 16 oz. put-up.  Now there are none available in the grocery.  Most of the put-ups are 12 oz., a couple are 10 oz, and one is 11 oz.  This smacks of the incident with propane sellers about a year ago, where tank exchange companies quietly decreased the fill weight of tanks while keeping price constant.  It seems that coffee sellers are using the same cleverness to hide the fact that small increases in package price translate into large changes in the per pound price.

Now, you may think I’m going to argue that coffee prices are too high.  Well, I’m not about to argue that; in fact, I think coffee is still too much of a bargain, as are many food items in the United States.  Read the book Cheap to get some perspective on food prices.

But I am going to argue that if you buy premium coffee in the grocery store, you should be buying from us instead.  You like variety?  You like fresh?  You like local?  You like a good deal?  Our coffee averages in the low 12’s per pound.  We have about three dozen SKUs to choose from.  We roast fresh weekly.  We roast date the packages.  We can tell you about the pedigrees of the coffees we buy.  We are a local bricks-and-mortar merchant and tax-paying member of the community.  The only thing we’re not is as convenient as a grocery store.  So what’s the problem?  Why are you still buying coffee in the grocery store?

Break the habit of buying bad, stale coffee from the grocery store.  Come visit us and let us show you a real value.

http://www.muddydogcoffee.com

*Comment on methodology: I follow coffee prices in a few “mid-range” groceries in my area, e.g., Harris Teeter, Lowes.  I look at coffees I think of as “premium”, that is, comparable to what we sell – coffees like Peets, Starbucks, Green Mountain, and a few local roasters.  I do NOT include what I think of as commodity coffees, e.g., Dunkin Donuts, Folgers, etc.

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One year ago, President Obama came to office in the US with a wave of enthusiasm. Yes We Can was the mantra. Yes We Can to all kinds of things. Yes We Can end war. Yes We Can fix healthcare. Yes We Can promote equality. Yes We Can address climate change. Regardless of how you may feel on any of these topics, it’s the last point I want to address here. And I’ll give you a prelude to my opinion: the mantra should have been We Don’t Really Care. At a minimum, it’s safe to say, We Haven’t Yet.

This week, I have the opportunity to be penning this missive from Europe. On this trip, I realize that I’ve been coming here quite often, for quite some time now (several times per year, for nearly the past 20 years – it’s safe to say I’ve probably been here 50 or 60 times in the last two decades). The advantage of being in Europe is that one is acutely sensitive to world news here. (To be fair, one reason for that is that world news in the only English-language television or newspaper available, aside from porn.). In addition to Europe, I realize I’ve been exceptionally privileged to have traveled extensively throughout the world. I used to keep track of the statistics – dozens of countries, hundreds of cities (thousands of excellent meals and probably an equal number of dreadful cups of coffee), but honestly, I’ve lost interest in scorekeeping. For one reason, I have nothing left to prove. But more to the point, everything is becoming the same, everywhere. It is a small world, after all. As one of my graduate engineering professors liked to point out, everything is connected, it’s a matter of how tightly. That extends to you, your coffee, and your future. As well as mine, and everyone else’s.

The news in Europe this week is the Climate Change summit in Copenhagen (show of hands – how many of you even knew it was going on?). The world must act, is the punch line of all the coverage. (Despite all the coverage, it’s not clear to me whether President Obama will be here; presumably he will send representation, at least.) So what does this have to do with your morning cuppa? That’s a fair question. The answer is, hardly anything. And that’s part of the problem. It’s hard to care about small things. But it’s hard to act on big things. The classic Catch-22.

Climate change, driven by man-made carbon emissions, is a multi-faceted problem. The elephant in the room is building heating, cooling and electrification generally, accounting for approximately 50% of emitted carbon by some estimates. Nobody seems interested in addressing this (not easy, or sexy), so we make noise about chipping away at other stuff. Auto emissions, maybe high single digit percentage on the Bad Actors list. Aircraft emissions, 2%. Coffee – the proverbial pimple on the ass of the elephant.

But pretend for a minute that we really do care about chipping away at the small things. Organic. Fair Trade. That’s the answer, right?

Let’s dismiss the obvious. Fair Trade has to do with prices, not the environment, per se. But to some small extent, the ability to make a living wage on a small plot might prevent some slash and burn to plant more coffee (though from a pure carbon perspective, the coffee trees are good, too), so Fair Trade probably has some de minimus positive influence.

Organic? It’s hard to argue that organic practices aren’t better for the environment than conventional agriculture (at least you avoid fixing nitrogen from fossil fuels), so you get some points there. But both of these things, organic and Fair Trade, are pimples on the pimple of the ass of the elephant. It’s been observed that better than half of the carbon emitted due to coffee consumption is due to things that happen after beans leave origin, namely roasting and consumption. (I should observe here that I am very favorably impressed with the Rainforest Alliance and what there certification implies for sustainability. They are really about much more than rainforests, and my opinion is that they have missed an opportunity to reach American consumers because they are narrowly branded with a topic that most Amercans, frankly, do not really care about. Maybe that can be the topic of a separate post.)

On the consumption side, it’s the disposables that are the big culprit. Want to make a difference? Reusables are the answer, wherever possible. Bring your own cup, in other words. But packaging is an opportunity, too. At Muddy Dog Roasting Company, we package all our coffees in biodegradable, compostable bags. How do I know they are compostable, aside from the claim printed on the bag? I compost them myself. Three months in my Earth Machine and there is no sign of coffee bags, just rich fertilizer. Buy one from us and try it, I dare you. To our knowledge, we are the only company in the southeast using this particular compostable bag, and one of the few in the nation using any type of environmentally friendly packaging.

So what about roasting? Well, in most cases, this is an activity that has not technologically changed in a hundred years or more. Essentially, most coffee roasters (machines) operate by continuously heating room air, and blowing that hot air out the ceiling in almost instantly. This activity requires a prodigious amount of fuel. Say what you want about natural gas being better than other forms of fossil fuel, burning less of it is better than burning more of it. At Muddy Dog Roasting Company, we partnered with US Roaster Corp to help develop a new type of eco-friendly roasting machine, one that oxidizes smoke and recirculates heat. We use 94% less energy than conventional roasters. We can roast coffee in North Carolina and ship it anywhere in the US with less total emitted carbon, from roasting PLUS shipping, than the same coffee roasted on site with a conventional system. We are one of only a few of these systems installed in the world. You would think that people would care about these kinds of improvements. To be fair, most people, when they learn of our environmental leadership activities, are favorably inclined (the rest don’t care, and they say so). But it’s also fair to say that they were going to buy from us anyway, regardless. They buy from us because we’re local, they like us, and in some cases, it’s convenient. And we sell excellent products. By and large, they don’t make environmental responsibility part of their purchase criteria.

And therein lies the opportunity.

All else being equal, selecting the organic, Fair Trade, locally roasted option is usually the best course of action. And nine times out of 10, when you ask the right questions, you’re going to find that your options are roughly equivalent in terms of roasting and packaging technology. Same circus, different clowns, as it were. But occasionally, when you peel the onion, and ask the right questions, there is something new. Something different. Something better. When you find them, select them. And make a difference.

Yes We Can.  Change We Can Believe In.  CHOPE.  Call it however you like it, just DO something.

http://www.muddydogcoffee.com

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Starbucks is the company that coffee people love to hate.  They’re an easy target, after all, our favorite whipping boy.

That’s why it surprises people when I tell them I don’t hate Starbucks; in fact, I owe them a debt of gratitude for doing the market development that enables our business.  They’re not my favorite, either.  But when I’m away from home, with no other alternative, I’ll drink an SBUX beverage.  Sometimes I actually enjoy them, like when I can get the Pike Place Blend at the flagship store in Seattle.  Other times, it’s good enough in a pinch.  Not their espresso, that’s never good enough, but their brewed coffee.  And I will even acknowledge the elephant in the room – while I am a strong supporter of independent coffee shops, they are all too frequently not nearly good enough and deserve to lose to the big green mermaid.

I hope I come across as I see myself – not a Starbucks hater, not a Starbucks lover, but someone who respects what they’ve done and the reality the operate under, and someone who acknowledges that for what they are (a big, multi-national corporation), they do a reasonably good job, frequently better than the independents who should be much, much better.

Single serving packet of Via.  Its a plastic pouch tube about 3 inches long with a perforated tear near the top.

Single serving packet of Via. It's a plastic pouch "tube" about 3 inches long with a perforated tear near the top.

But instant coffee?

I was surprised when Via, their new instant coffee, was announced.  Seems like a strange strategy for a “premium” coffee company.  But the reality is that Starbucks is a mass market company, trying to be at the high end of the mass market.  And after thinking about how much our own customers value convenience, I realized that if they have a decent product, it’s a brilliant strategy.  So I’ve been wanting to try Via, and this turned out to be my lucky week when somebody gave me a serving.

My first reaction was a kind of pleasant surprise about the package itself.  Overall, the form factor is quite attractive: a 2-3 inch long plastic tube, kind of like a sugar stick.  Easy to carry with you (my road coffee strategy may be forever altered).  I’m no fan of plastic, but I have to admit it makes sense in this application.  The other thing about the package is that it specifies two details I never thought I’d see on instant coffee: an origin (Colombia, in the case of my sample), and an expiration date.  An expiration date!  All in all, this package gives the impression they actually care about the quality of the coffee.  I did find a little irony in the expiration dating, however.  While SBUX does not stamp their bean coffee with a roast on date, they do put an expiration date on it, and the conventional wisdom is that the product has one year dating (which, of course, is at least 10 months too much, but that’s another topic).  Well, my tube of Via had an expiration date of 25 July 2010, so it’s not a stretch to think it was made in July 2009 and has the same dating as their bean coffee.

Each tube carries an expiration date.  Pardon the poor image quality from my cell phone camera.

Each tube carries an expiration date. Pardon the poor image quality from my cell phone camera.

I think we’ve established that the package itself is reasonably well done.  The proof, of course, is in the beverage.  Here’s where I made a couple tactical errors.  The first involved the powder pour.  The Via powder has a strange consistency (relative to other instant coffees) – it doesn’t have good flow properties.  Instead, it’s almost “moist” though I find that hard to imagine.  It tend to flow in clumps, and is subject to static.  The net result of all that is that it wound up sticking to the side of my cup in a rather unsightly way.

Here's the rather unsightly stain left on the side of my cup as result of poor flow properties of the powder. The little boy in me cannot stop chuckling at the scatalogical parallels.

The second error was a failure to follow instructions.  I fully admit I did this on purpose, when I should have listened to the package.  The painfully simple diagram showing how to prepare clearly says to add 8 ounces hot water to one tube of Via.  My rather limited experience with instant coffee, however, is that the instructions result in weak coffee, so I always use slightly less water than instructed – in this case, about six ounces instead of the recommended eight.  The result was, well, strong coffee.  Overly strong.  I suspect that 8 ounces was the right number, but at that point I was already 200 feet from the hot water source and not looking back.  I like strong coffee, but my advice is RTFM and follow the instructions.

All of which leads us to the ultimate question – how did it taste?

My honest answer: not bad.  Recognize that not bad is a different thing than good.  But better than most of the swill prepared from beans in this country.

The flavor profile itself is rather flat.  Somehow this makes sense, as I would expect acidity, along with other nuances, to be a casualty of the drying process.  I would have been hard pressed to identify this coffee as a Colombian, but I’d like to think I would have correctly identified it as being from the Americas, as it did retain enough of its identity to distinguish it from, say, Africa or Indonesia.   I also have to admit that I probably would not have identified it as instant coffee. If I didn’t know better, I would have thought it to be a mediocre but not terrible brewed coffee.  And who knows, if I adulterated my coffee with cream and sugar it may have completely fooled me into thinking it was good.

Certainly this product is good enough for the mass market in the United States. Which is a sad commentary on the mass market in the US, but true nonetheless.  All in all, I suspect Starbucks may have a winner with this product.

http://www.muddydogcoffee.com

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I usually try to avoid the sensational.  Things like “Nescafe Turned My Child Into a Wolfboy!”, or “Starbucks Bankrupted My Family” (OK, that could happen).  But this one is just too bizarre not to mention; from the We Report, You Decide people:

Topless Coffee Shop Proposed for Small Maine Town

I can’t even think what to say about this.  Except, maybe, I wonder where they get their coffee?  Somehow I don’t think this one is consistent with our Brand Promise.

Thanks to Steve for alerting us to this important, breaking news!

http://www.muddydogcoffee.com

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If there is one thing I’m good at, it’s inventory management.  My graduate degree is in a field related to Operations Research, which is essentially the study of industrial efficiency.  My specialization was in mathematical models, which are used to predict demand, calculate safety stocks to avoid backorders, etc.  For many years, things I learned at Lehigh, and later while earning an MBA at Duke, have served me well, and that continued to be the case with our small business.  Until recently, when I’ve engaged in more green coffee buying, and have had occasion to speak with numerous importers and traders.

The dynamics of specialty coffee are interesting.  And difficult, in some ways.  The first thing to realize is that the coffee we buy is not commodity coffee.  Commodities are items that are always available and, recent price volatility nothwithstanding, are predictable or can be hedged.  Think oil, or corn.  The Big Four of coffee – Procter & Gamble, Sara Lee, Nestle, and Kraft – employee armies of people just like me, in fact I was a consultant to one of those companies early in my career.  Specialty coffee, however, is by definition the top of the quality heap.  Certainly the top 5%, maybe the top 3%.  So by definition, in short supply relative to the rest of the crop.  And with specialty coffee becoming a larger trend, there is more competition for that scarce resource.

Another nuance is the business model of the small importer.  While giants have the financial capacity to move large amounts of commodities without having to put up their own cash (or they have the cash), small importers like the ones we buy through stock their shelves the same way I stock mine – with inventory they actually own.  Bought and paid for, then resold.  (And we run a debt-free business, so I’m not about to stock more than I can sell.)  In any climate, this would limit the amount of selection available from a given importer.  But in these unusually turbulent and tight economic times, it’s even worse.  As importers have their credit squeezed, they can buy less coffee.  Which impacts my selection, and thus yours.

Lately, commodity prices have fallen.  Fill your tank recently?  Then you’ve noticed.  Yes, coffee prices have fallen, too, but don’t expect to see much of it flow through.  With commodity prices down, countries are demanding more price differential for the premium product.  And they either won’t sell at a lower price (good for them!), or they’re getting it.  We’re paying it.

Decaffeinated green coffees add another level of complexity, especially if you want organic and/or Fair Trade Certified.  Top quality growers, especially FTO producers, sell all they can grow for all the money.  They don’t need to submit coffees to decaffeination.  Of course, some top quality producers do produce decafs, but they are a minority – another short supply situation.  So when a good FTO decaf becomes available, they sell out quickly.  This means we need to buythem when they are available, from wherever they are available, instead of waiting to include them with a scheduled shipment from a specific importer.  Obviously this is inefficient, especially with respect to freight charges.  But we do it, and this is a big part of the reason why great decafs are more expensive.

Couple all this with unstable demand at the consumer level (let’s face it, you can live without premium coffee – we felt you hold your breath at the end of September as the markets began their free fall), and increased competition among specialty roasters, and it all adds up to more difficulty securing great green coffee at reasonable prices.  And it’s going to get more difficult as this current financial crisis becomes more severe.

You now have a little insight into my world.  But not to worry – we work with the best suppliers in the business, and we are well positioned to buy large enough quanitites of fine green coffees.  We’re placing an order this week that should arrive just before Thanksgiving, and I am very excited to offer our first Rainforest Alliance coffee (my cupping notes contained the words “balsamic vinegar” to describe its sweet, sharp acidity), as well as an excellent Mountain water Process Mexican decaffeinated.  Stay tuned!

http://www.muddydogcoffee.com

WWJD (What Would Jim Drink today?): Wow, this was a cupping weekend, so I’ve been tasting about a half dozen different coffees.  Right now, I’m drinking a Sumatra MWP decaf, which is wonderful, but not wonderful enough to overcome my current inventory position on Sumatra decaf and my immediate need for a Brazil.  One of those economic realities – I need to balance my taste with my forecast and budget.  Earlier today I cupped a Rainforest Alliance El Salvador that made my eyes cross, it was so good.  I’m buying that one!  But until it arrives and I find the sweet spot, then put it on the website, you can keep drinking our organic, Fair Trade Certified El Salvador El Jabali.

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I just came across an interesting piece on Slate’s website that is a variation of Freidman’s McDonald’s Theory of international relations.  For those who didn’t read The Lexus and Olive Tree, Friedman made the observation that no two countries that both have McDonalds have gone to war with each other (at least since they got the McDonalds).  Daniel Gross at Slate has an interesting observation, too – that countries with large numbers of Starbucks are getting creamed the hardest in the current economic meltdown.  Neither rule is iron clad, but generally both are good indicators.  Read the piece at Slate if you have the time.

http://www.muddydogcoffee.com

WWJD (What Would Jim Drink today?): Some light roasted Peru Piura FTO.  I was just in the mood for some zip and varietal nuance.  I’m also working on a new blend and was experimenting with that, too… stay tuned.

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The orders picked up this week, to an unusual extent, and I wondered what was driving the traffic.  Turns out it was a blind cupping of our Old North State Blend by Ken Davids (for those of you who don’t know, Davids is to coffee as Parker is to wine, and Coffee Review is the Wine Spectator of the specialty coffee industry).  You could have knocked me over with a feather.  I knew it was good, but to have Ken Davids validate your work with a 91 point score is an honor.

There was only one coffee reviewed this month that scored higher than a 91, and it was done by a great roaster who has been at it a heck of a lot longer than me.  We also outscored some local competition that I respect a lot, so that felt good, too.

Here’s a link to the coffee review site, and the review is posted below for your convenience.  You can buy some Old North State Blend HERE.

Muddy Dog Roasting Old North State Blend
Morrisville, North Carolina
Reviewed: July 2008

Overall Rating: 91 points

Aroma: 8
Acidity: 8
Body: 8
Flavor: 8
Aftertaste: 8
Roast (Agtron): Medium-Dark (40/47)

Origin: Not disclosed.

Notes: All coffees in this blend are certified organically grown. Based in Morrisville, North Carolina, Muddy Dog Roasting is a small batch roaster focused on environmentally and socially responsible coffees and eco-friendly roasting. Visit www.muddydogcoffee.com or call 919-371-2818 for more information.

Blind Assessment: Rich, spicy and chocolate aroma with a mild smokiness. Mellow acidity with soft suggestions of tangy citrus. Balanced and complex flavors open as a vaguely fruity sweetness, then fade to nut and earth tones. Pleasant toasty, earthy and cocoa qualities persist into the finish.

Who should drink it: For those who like to contemplate subtle complexity in a moderately dark-roasted coffee.

http://www.greenroasting.com

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