SEATTLE COFFEE WORKS 2018 AUTHENTICITY REPORT

Authenticity

Statement of Authenticity

AccomplishmentsAt Seattle Coffee Works, we recognize that producing premium coffee requires talented and passionate people along the entire supply chain. In order to sustain thriving relationships with coffee farmers and maintain a consistent team of coffee professionals in Seattle, we do our best to ensure that everyone’s wage reflects the quality of the final product, your coffee.

Full price transparency holds us accountable, tracks our progress, and serves as a valuable metric forfarmers, consumers, and fellow members of the coffee community. Farmers can use price transparency to incentivize improvements in coffee quality and the quality of life for their employees. Consumers can use this report to see how their purchasing power impacts the livelihoods of coffee workers worldwide.

We appreciate our peers in the coffee community who operate transparently, and we hope to contribute to the effort of increasing equity in the coffee industry by revealing how we manage our business.

This report shows how much we pay for each pound of green coffee and what percent of that coffee is purchased directly from farmers. It also details how we provide living wages to our coffee professionals in Seattle.


Transparency

Part I: Transparency at the Farm

International trade is complex. For conventionally traded coffee, the task of determining what portion of the profit returns to the producer is arduous at best. With the multitude of parties involved including importers, exporters, cooperatives, and auctions, this task can even be impossible.

Through direct trade, we negotiate prices directly with our farmers. This often means substantially more money in the pockets of farmers, and more collaboration between our producers and us. It is a relationship that permits more room to experiment with and improve growing and processing methods, ultimately advancing the quality and value of the coffee we serve to the greater Seattle community.

Seattle Coffee Works Green Coffee Purchasing
Season: 2017-2018

REGION

ORIGIN

TRADE TYPE

SCA SCORE

INITIAL FOB ($/lb)

FOB 2nd PAY
($/lb)

FOB TOTAL
($/lb)

Total LBS PURCHASED

TOTAL $

Central America

Costa Rica Lajas Perla Negra Natural 2017

Relationship

Not yet released**

5.25

-

5.25

761

3,995

Central America

Guatemala Armenia Los Abuelos-Grotto 2017

Direct

87.5

3.40

-

3.40

3,651

12,413

Central America

Guatemala Rosma Nativa 2017

Direct

89.0

3.40

0.35

3.75

8,367

31,376

Central America

Guatemala La Esperanza Nativa 2017

Direct

89.5

3.40

0.48

3.88

9,127

35,413

Central America

Guatemala La Esperanza Nativa Natural 2017

Direct

90.5

5.50

-

5.50

761

4,186

Central America

Guatemala La Esperanza Pacamara 2017

Direct

90.0

6.40

-

6.00

761

4,566

East Africa

Kenya Karogoto Natural 2017

Relationship

86.0

4.25

-

4.25

672

2,856

Central America

El Salvador Divisadero Pacamara Natural 2017

Direct

89.5

5.00

-

5.00

761

3,805

Central America

El Salvador Divisadero Pacamara Honey 2017

Direct

89.0

5.00

-

5.00

761

3,805

Central America

El Salvador Alaska Bourbon 2017

Direct

89.0

3.75

-

3.75

1,521

5,704

Central America

Panama Teresa Nativa Honey 2017

Direct

89.0

4.00

-

4.00

2,381

9,524

South America

Colombia Villa Laura Washed 2017

Direct

89.0

3.40

0.35

3.75

6,173

23,149

South America

Colombia Finca Santa Isabel 2017

Direct

89.0

3.40

0.35

3.75

2,135

8,681

South America

Ecuador Finca Agua Dulce 2017

Direct

Not yet released**

3.40

-

3.40

2,200

7.480

South America

Panama Teresa GEISHA Honey 2017

Direct

92.0

25.00

-

25.00

132

3,307

East Africa

Kenya Kiriga AA 2017

Direct

90.00

4.50

-

4.50

897

4,037

Central America

Panama Carmen Washed 2017

Direct

88.5

4.00

-

4.00

661

2,644

Central America

Panama Carmen Natural 2017

Direct

89.0

4.50

-

4.50

661

2,975

East Africa

Ethiopia Chelelektu Washed 1

Conventional

89.5

3.97*

-

3.97*

661

2,624

East Africa

Kenya Chalem AA 2017

Relationship

91.5

4.25

-

4.25

596

2,533

East Africa

Ethiopia Limu Burka Gudina Natural

Conventional

90.0

3.22*

-

3.22*

1,058

3,407

East Africa

Kenya Rukira AA 2017

Relationship

91.0

5.30

-

5.30

1,390

7,367

East Africa

Kenya Karogoto Peaberry 2017

Relationship

91.0

4.25

-

4.25

1,720

7,310

East Africa

Ethiopia Yirgacheffe Haru Washed 2017

Conventional

90.0

3.91*

-

3.91*

661

2,585

East Africa

Ethiopia Yirgacheffe Dumerso Natural 2017

Relationship

90.5

4.00

-

4.00

5,291

21,164

East Africa

Ethiopia Yirgacheffe Wote Konga Natural 2017

Conventional

91.0

3.66*

-

3.66*

1,058

3,872

Asia Pacific

Bali Natural 2017

Conventional

89.0

2.72*

-

2.72*

1,323

3,599

East Africa

Ethiopia Yirgacheffe Wote Konga Natural 2017 (2)

Conventional

90.0

3.76*

-

3.76*

2,249

5,456

Asia Pacific

Bali Natural 2017 (2)

Conventional

89.0

3.04*

-

3.04*

397

1,207

Total Direct & Relationship Coffees

Direct & Relationship

4.00

52,189

209,169

Total Conventional Coffee (Ethiopia & Indonesia)

Conventional

3.07

7,407

22,750

TOTAL

3.89

59,596

231,919

For the 2016-17 growing season, we averaged $4.00 per pound Free On Board (FOB) for the 88% of the coffee we purchased directly from farmers and cooperatives. The minimum direct-trade price we paid was $3.40 per pound FOB.

*For coffees we buy conventionally, i.e. not directly from farmers or cooperatives, we only have knowledge of the price we pay for “Free on Truck” (FOT), i.e. a price that includes all import costs into the United States. We conservatively estimate that the typical differential between FOB and FOT is at least $0.25 per pound. It is likely higher, making the difference between what we pay for our direct-trade lots and for our conventional lots greater.
** SCA scores are not available for two lots we have not released as of this printing.

Minimum Coffee prices per pound in 2017 Our Direct Trade - $3.40 Peer Roasters - $2.00 Fairtrade - $1.35 NYME - $1.20

Price Benchmarks

Determining an industry standard to benchmark what we pay farmers for their coffee can be challenging. Below are commonly referenced prices for conventionally purchased and direct/relationship traded coffees:

  • At the New York Mercantile Exchange in 2017, Grade 3 coffee prices ranged from $1.20 to $1.55 per pound.1
  • The 2017 Fairtrade price of coffee fluctuated between $1.35 and $1.70 per pound.2
  • Roasters with comparable values reported an average $3.81 per pound FOB in 2016.3


Living Wage

Part 2: Transparency for Customers

Seattle Coffee Works is a small, independent company with no outside investors. Our business structure allows team members to grow into new roles and responsibilities within the company.In order to provide outstanding and enjoyable experiences for coffee drinkers, we hire talented individuals with diverse skill sets, and support personal and professional development.

True Living Wage

As team members grow and develop, so do their wages. As of May 2017, we eliminated the practice of tipping, allowing full-time senior employees to earn consistent wages up to $20 dollars an hour, while full-time apprentices earn $15 an hour. In their first year, new members of our team can expect at least $35,000 in annual income. They participate in profit-sharing after six months.

Benefits Beyond Wages

Seattle Coffee Works offer benefits to our team members including:

Commitment to Coffee Education – Employment at Seattle Coffee Works promises ongoing opportunities for team members to develop coffee mastery. Becoming a certified barista with Seattle Coffee Works requires participation in a 6-9 month training program covering topics from hospitality to espresso to Slow Bar preparation.

Trainees learn espresso theory, milk steaming, drink assembly, double-bar training, and Slow Bar preparation before they are certified to prepare drinks on the floor. During this intense period of training, we offer our trainees unlimited access to the training lab and provide support from a skilled team of baristas within the company.

In addition to the barista training program, we invite employees to take initiative in leading and participating in workshops and events. These workshops cover cupping and scoring, sample roasting and coffee roasting fundamentals, total dissolved solids and optimal coffee extraction, Latte art, and direct trade practices. All team members can develop their cupping skills with our head roaster by attending weekly cuppings.

All training, workshops, and cuppings are paid time.

Annual Trip to Coffee Farms – Since 2014, we have sent 4 groups of team members (21 team members in all) for a week-long trip to Guatemala to visit Direct Trade partner farms, a dry mill and coffee exporter, and other coffee trading partners in Guatemala. Participation in the trip is considered paid work, and the company covers all transportation, lodging, and per diem costs.

Health Insurance – We offer company health insurance and a group dental plan to all full-time team members after 60 days on the Seattle Coffee Works team. The company covers 70% of the health insurance cost.

Paid Time off (PTO) – All team members receive 0.025 hours PTO per hour worked. (~6.5 days/year).

Profit-Sharing – 10% of profits are shared among team members. All members learn to analyze the company’s Profit & Loss Statements and contribute to business decisions.

Request Off Policy – In an effort to maintain work-life balance for our team members, we honor requests for time off whenever possible.

Team Discounts – All team members receive 40% off food and bottled beverages, and 20% off merchandise. Coffee drinks are complimentary (including days off), as well as one bag of coffee beans per week.

Unlimited Public Transportation – All full-time team members receive unlimited access to public transportation in the Seattle Metropolitan Area. Team members contribute $20 per month for this benefit, valued at over $99 per month.

Looking Forward

Part 3: Looking Forward

As our team members’ and business partners’ livelihoods have improved, so has the quality of the coffee we serve. Our experience shows that it is possible to grow our business and improve quality of life for coffee professionals at the same time. Our goals for the coming years are:

  • continue to increase wages and Paid-Time-Off for our Seattle-based team – effective July 1, 2018, café team members will earn up to $23.00 per hour
  • increase the amount of coffee we buy directly from our current set of farmers, and increase the number of farmers from whom we purchase coffee directly
  • increase our minimum purchase price for green coffee – effective March 1, 2018, we’ve increased our minimum purchase price for Direct Trade to $3.50 per pound

We look forward to cultivating coffee professionals working in our Seattle cafes and roastery, assisting coffee professionals abroad through our green coffee purchasing, and collaborating more closely across the coffee supply chain.

Frequently Asked Questions

Why does Direct Trade Matter?

Direct Trade has provided us the opportunity to establish meaningful relationships with people across the globe, and is a business model that has benefited everyone involved. We are not a charity. We have high standards, and the premiums we pay our farmers are well deserved, commensurate with the quality of their product.

As quality improves, so do prices, and through a mutual collaboration, both will continue to grow.

We believe that when incentives are aligned and businesses are well managed, it is possible for farmers, pickers, roasters, and baristas to live well – while providing customers an affordable price for an excellent drink. We have seen that it is possible to pay farmers $4 per pound and still offer a cup of coffee for under $3.

What is the difference between Direct & Relationship Trade?

Ideally, when purchasing green coffee, we visit each farm at least once per year, arriving at a fair price in a personal discussion with each farmer. This is what we define as ‘Direct Trade’. We use the term ‘Relationship Trade’ when we only have the means to visit a farm every couple of years and we rely on email to negotiate a price. In some regions, farmers typically have small plots of a few acres or less, so they form cooperatives that are collectively responsible for processing coffee and negotiating a price (i.e. in Ethiopia, Kenya, and Indonesia). When we visit cooperatives and negotiate prices with their representatives, we consider this to be ‘Relationship Trade’ because we do not have the opportunity to meet each of the farmers.

What Determines Each Coffee’s Price?

Price depends on quality and quantity. To determine quality, we adhere to a coffee grading system set by the Specialty Coffee Association (SCA), an international nonprofit that sets and maintains quality standards for the specialty coffee industry. Prior to and after purchase, our green coffee buying team holds cuppings scoring each coffee on a scale up to 100. These scores determine the baseline price of how much we pay per pound of green coffee.

88.0 points: $3.40/lb. FOB

89.0 points: $3.75/lb. FOB (or a $0.35 premium)

90.0 points: $4.00/lb. FOB (or a $0.60 premium)

For coffees we have previously purchased that consistently exceed a score of 90+ points, we typically pay higher prices, e.g. our Kenyan coffees generally start at $4.00 or higher.

What is Second Pay?

Occasionally, and most often when purchasing from new lots, our initial coffee score prior to purchase may be slightly different from the score after purchase. In the event our expectations are exceeded, and the coffee scores higher, we pay our farmers a second time (i.e. Second Pay). If a coffee scores lower subsequent to purchase, that is our mistake. The price remains what was previously negotiated. By following this pricing system, and engaging in direct trade payments to the farmers, we far exceed the prices paid by most other roasters, while providing incentive to producers to continue improving their coffee.

What Does FOB Stand For?

Free On Board (FOB) is the designation for the price of coffee prior to export from its country of origin. Although FOB does not account for the small margin taken by exporters and dry milling at origin, this is fairly good measure of how much money reaches the coffee farmer. It provides a standard baseline for price comparison across direct, fair, and conventional methods. Comparing FOB prices, we often pay farmers three, four, or even more times the amount of money that they would have received if they sold their coffee through the conventional coffee auction.

How does Seattle Coffee Works collaborate with farmers?

Our green coffee buyer, Oscar Garcia, is both a Q-Grader and Q-Processing certified. While visiting farms he is able to roast and taste coffee on-site, consulting farmers on how to adjust processing methods to improve quality. Oscar also introduces new methods of washing and drying coffee that may be better suited to climate conditions or can add diversity to the flavor profiles of each farm’s coffee.

Who provides your import services?

To transport our coffees from ports around the world we work with a few excellent importers, including Royal Coffee (Oakland, CA), Olam Specialty Coffee (Healdsburg, CA), Bodhi Leaf Coffee Traders (Orange, CA), Tusa Specialty Coffee (Baltimore, MD), InterAmerican (Houston, TX), Sustainable Harvest (Portland, OR), and others, on a fee-for-service basis.

Has green coffee purchasing improved over the years?

While maintaining an average FOB of $4.00 per pound, the percentage of coffee we purchase through Direct and Relationship trade has grown from 78% in 2017 to 88% in 2018. The overall volume of coffee purchased has grown
by 15%.

Thank You

As coffee professionals at Seattle Coffee Works, our vision is to make coffee better in terms of quality, equity, sustainability, and transparency. This Authenticity Report represents a step toward increasing transparency and equity in the specialty coffee industry.

Special thanks to our partners and friends at:
Finca La Esperanza, Guatemala
Finca Rosma, Guatemala
Finca Divisadero, El Salvador
Kangunu Factory, Kenya

…for your contributions to this report.


[1] https://www.barchart.com/futures/quotes/KCK18
Accessed 4/9/2018
Grade 3 or exchange coffee has to score at least 60 points on the 100-point scale of the Specialty Coffee Association (SCA). Seattle Coffee Works only buys coffee scoring 88 points or more. Barchart.com is a Chicago-based online platform that offers information on stocks, options, and futures.

[2] https://www.fairtrade.net/standards/price-and-premium-info.html
Accessed 4/9/2018
Numbers based on published minimum prices and the $0.20 and $0.30 (Organic) Fair Trade differential for Fair Trade Coffee. FairTrade International, a nonprofit based in Bonn, Germany, develops and reviews Fairtrade Standards.

[3] http://transparenttradecoffee.org/insights
Published 3/12/2018
Data provided by Social Enterprise @ Goizueta, an academic center at Emory University (Atlanta, GA), dedicated to sharing information and insights about appropriate compensation of coffee growers.

Contributors: Jake Donaghy, Trainer, Author; Oscar Garcia and Sebastian Simsch, Green Coffee Buyers; Pipo Bui, Editor; Photographers: Alan Alabastro, Dara Foti, Oscar Garcia, Devin Kahle

We strive to make this report as accurate as possible. We apologize for any omissions or errors. For more information, or to learn about how your business can participate in authenticity reporting, please contact us at service@seattlecoffeeworks.com

Symbol drawings credit: Ship - BomSymbols/NounProject; Globe - David/NounProject; Travel Symbol - Tom Walsh/NounProject; Seattle tower - Joni Trythall/NounProject; Education - Dinosoft Labs/NounProject

All photos are used with the active consent of the people depicted.
© Seattle Coffee Works • April 2018 • 2017 Authenticity Report