2013

Estate Auctions, a Growing Sales Trend?

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The first Internet coffee auction was held in 1999.  It was called the Gourmet Project and offered specialty coffees from Brazil.  Ten year later, Price Peterson, Hacienda la Esmeralda in Boquete, Panama engaged Mr. Malcolm Stone, Stoneworks Coffee Auction Platform to conduct the Esmeralda  Estate Special auction.  A total of 46 lots were sold for a value of $441,010.00 at an average price of $31.21 per lb.

It wasn’t until 2011, that Finca El Injerto and Santa Felisa Estate, decided to join Hacienda la Esmeralda  and sell their coffee via auction. They also decided to work with Stoneworks and, like Price Peterson, found an exciting new venue for selling coffee.

Table 1

Most notable are the average sale prices of auction coffees compared the spot “C” average price.

Table 2At first glance, the reader might be thinking, “this is a no brainer, every estate should have an auction”.  The reality of the situation is there is more to the estate auction business than selecting some coffees and hiring a platform and saying “start the bidding.”

The following Q&A with Mr. Stone helps us understand what is required to build and execute a successful Estate auction.

What makes an Estate a candidate for an Estate Auction?
•    Coffee must score +85 percent using SCAA cupping guidelines
•    Well known branded farms have a higher chance for success
•    Farm with an unique factor
—Certified …Organic, Rainforest, Fair Trade, etc.
•    Traceability from tree to export
•    Micro lots
•    Packaging
—Vacuum sealed in a box less than 70# per box
—Good art, logo and labeling
•    Back office to support billing and logistic
•    Ability to ship samples in a timely manner
•    Proficient in English and management skills
•    A committed and engaged staff

What are the keys to success?
•    Great coffees
•    Excellent packaging, promotional materials and website
•    Don’t offer too much coffee …less is more and quality is king
•    Good coffee descriptions…accurate, documentable coffee information
•    Keep lots small…same lot of coffee can be divided into small lots

What are the primary producer benefits?
•    Ability to sell small lots of coffee at a premium price
•    The price of the coffee is determined by the buyer not a commodity market
•    Enhanced recognition of the brand and reputation of the farm

What do you charge to conduct an Estate auction?
The cost to hire Stoneworks Auction Platform to manage and conduct an auction is a flat all-inclusive price for up to 100 lots.

What do the producers get for their investment?
•    Instruction and coaching with auction organization and promotion materials
•    Pre-auction promotion on Stoneworks website
•    Pre and post information management and tracking
•    Buyer registration
•    Sample order taking at time of bid registration…$250.00 per set
•    Active database of global buyers
•    Data input of auction coffee and promotional information
•    Run the auction
•    Post auction report
•    Recommendation for starting price and incremental pricing

What are the producer responsibilities
•    Selection of coffees and lots
•    Shipment of samples to bidders
•    Development of coffee descriptions and cup profiles
•    Development of marketing materials to accompany samples
•    Promotion of their auction through their network
•    Billing and arranging for shipment of purchased coffees

How long does the auction last?
Most auctions last 5-6 hours

What are the buyer’s responsibilities?
•    Register to bid and purchase samples
•    Cup samples
•    Develop a bidding strategy
•    Bid and purchase
•    Pay and arrange for shipping

Understanding the mechanics of the auction is interesting and helpful if you are a potential seller or buyer.  But there is more…what motivated these Trend Setting Producers to attempt marketing via auction. I was able to interview Arturo Aguirre S., Finca El Injerto, and Antonio Meneses, Santa Felisa Organic Estate.  Thank you to both for their time and openness in answering my many questions.

Why did you decide to auction some of your coffee?
Arturo and Antonio knew there were roasters interested in unique coffees but had no way to reach them.  The auction system provided a non-traditional way to build their customer base.  Additionally, Arturo wanted to sell some new varietals and small lots that they had found on the farm.  He had no idea how to price them.  The auction is a great tool for determining price.

What percentage of your production do you present for auction?
Arturo …3 percent    and Antonio…5 percent

How do you decide which coffees will be auctioned?
Both producers begin with cuppings on the farm to select the coffees they will send to either an independent professional cupper and/or to ANACAFE for evaluation.  This year Antonio invited Joe Hsu, from Taiwan, to participate in the final cupping panel. Arturo “selects only lot that cup 89+”.

Income aside…what are the additional benefits you receive from the auction?
Arturo…”First of all, it’s a great satisfaction for our family and our people that this was a successful project, since past generations we have worked hard to differentiate ourselves.  This has motivated our team to continue to work hard because they know we are making a difference.”
Farm recognition and access to new markets has been fantastic.  Antonia said that in three short years they have doubled the number of visitor they see on the farm.

What are your primary challenges of an Estate auction?
•    The need for traceability requires documenting every aspect of the coffee from the seedling to the exporter.
•    Working directly with the buyers, beginning with sampling and ultimately shipping the coffee, is a logistic challenge.
•    Must offer something unique and interesting and meet the wants and needs of the roasters.  Making these selections can be risky business.

Do you feel that auctions are a viable marketing tool for Estate coffee?
Both producers answered “Yes!”  But, caution fellow producers to only participate if you have proven exceptional quality.  It is helpful to be active in the industry.  It is important to be willing to spend money and time to utilize the auction for marketing.  Also, to understand that payment for the coffee doesn’t come until long after the coffee has been harvested.

Do you watch the auction?
Arturo…Of course, all the family meet and we have breakfast watching it!
Antonio…For sure, we get nervous and don’t sleep the night before.

There is a new organization in Estate auctions… Alliance for Coffee Excellence, ACE, the organization behind Cup of Excellence has entered the Estate auction arena.  On April 25, 2013, ACE conducted their first Estate auction in conjunction with Fincas Mierisch.  Fifteen coffees were featured, separated into thirty-nine small lots, in a selection named Los Favorites. The lots sold from $4.90 – 100.90 per pound.

Are Estate auctions a trend or here to stay? If you ask Price, Arturo, and Antonio then the answer is yes!  They will continue to seek those unique wonderful gems from their farm and take the risk of selling them at auction.  In November, 2013, Daterra Coffee of Cerrado, Brazil will be added to the list of Estate Auction participants.

Reference websites… If you want to learn more about Estate coffee auction contact
Hacienda la Esmeralda    www.haciendalaesmeralda
Finca el Injerto  www.fincaelinjerto.com
Santa Felisa Estate  www.santafelisacoffee.com
Stoneworks Coffee Platform www.auction.stoneworks.com
ACE www.allianceforcoffeeexcellence.org

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