10 tips for doing business with European coffee buyers

Europe has the world’s largest and most competitive coffee market. If you want to do successful business in Europe, you will need to have a clear picture of the international coffee market, specific European requirements and market trends. Use the following tips as guidelines on how to do business with European buyers. If you are already doing business in Europe, these tips can help improve your relationship with buyers. If you are new to the market in Europe, these tips will prepare you for your first ventures.

1. Comply with legal requirements

Complying with legal requirements means meeting mandatory European legislation and food safety demands. If you are unable to comply with these requirements, you will not be allowed access to the European market.

Buyers normally expect you to have food quality and safety management systems implemented to demonstrate your ability to control potential food safety risks. This ensures that your coffee is safe for roasting and for human consumption.

2. Understand traceability and social responsibility aspects in your chain

Many buyers in Europe are looking for coffee with a socially and environmentally responsible production background. As such, buyers will commonly expect you to meet additional requirements, which involve around corporate social responsibility and traceability. A traceability system is a good way of providing information about the origins of your products to all the parties in the supply chain. It offers reassurance to buyers about what they are purchasing.

Digitalisation plays a major role in bringing more traceability to the supply chain. One of the tools that is increasingly being used is blockchain. For an example, see the supply chain of trader Trabocca to see how the use of blockchain has made their coffee purchasing of coffee from Ethiopia more transparent and traceable.

In November 2021, The European Union proposed a ban on the import of commodities that are often associated with deforestation. European buyers of coffee, cocoa, soy, beef, palm oil and wood have to report the origin of these products to national regulators to prove that they are deforestation-free. Negotiations on the final law are expected at the end of 2022. This new regulation will increase the need to implement traceability systems in international value chains.

In addition to traceability, buyers in both mainstream and niche segments may expect you to have certifications that show your commitment to social and environmental responsibility. Certifications also help buyers control risks in their value chain. The main certification schemes in the coffee sector are 4C, Rainforest Alliance, Fairtrade and organic. Be aware that organisations offer different types of certificates and focus on various sustainability criteria. They follow consumer trends in different market segments in specific countries.

The high-end specialty coffee segment is less characterised by certifications and more so by quality, direct trade relations, high transparency and traceability from source to consumers. Specialty coffee buyers aim to establish direct contact with coffee farmers. These buyers want to know all details about coffee production and the value chain, often combined with information on the coffee-growing area. Many buyers know how costly certification can be for small producers and avoid demanding this from them.

3. Have complete information on your product offer

Buyers in Europe will expect you to have complete product specification sheets available, with up-to-date and reliable information about your product, farms and/or the coffee farmers. You should have these data available for the previous three years and work out a prediction for the coming two to three years.

Your product specification sheet needs to include detailed information for each type of coffee you sell:

• Coffee variety
• Characteristics and figures of the producing region, including its agro-climatic context
• The size of the farm or farms, in case of private estate
• The number of farmers, in case of a cooperative
• Amount of coffee you produce annually (availability), including cupping scores if available
• Coffee volumes that are available for exports
• Characteristics of the post-harvest protocols
• Existing certifications and up-to-date certificates
• Optional: spider diagram of cupping profile (for instance from Tastify)

4. Find the right moment to sell your product

The price paid for coffee depends on the futures markets. This is the marketplace where traders make futures contracts agreeing on fixed commodity prices and delivery dates. Prices for specialty coffees are usually linked to prices paid on the futures markets plus a premium, unless you have very exclusive specialty coffees. The two most relevant futures markets are New York (for Arabica) and London (Robusta). Export sales prices are always in US dollars.

Getting the right price for your coffee has much to do with timing, which means you need to closely follow these futures markets. Buyers do the same. They will try to agree on a price for a coffee contract when they see low prices. They might also want to try to agree on contracts for future deliveries. This means fixing a price and volumes with you when the price and timing are favourable for the buyer, but one or two years in advance of delivery.

Agreeing on contracts for future deliveries is only recommended if you are a big exporter in a large producing country like Brazil or Vietnam. For smaller-scale exporters and exporters from less prominent producing countries, the risks of futures contracts might be very high.

In reaction to low market prices for coffee, there is a growing trend of buyers and coffee farmers negotiating prices independently of the futures market. Have a look at the Specialty Coffee Transaction Guide, where you can see numerous anonymous contracts to get an idea on how much was paid for which type and quality of coffee. Remember that labour costs are different across countries, making direct comparisons tricky.

In order to establish a selling price, it is important to know your production costs and desired margin. This helps you make informed business decisions, such as when to sell, how much, and for what price.

When it comes to preparing your offer, remember that it should include information about more than price alone. The table below gives examples of information that is usually included in a quotation/offer.

Table 1: Example of information to include in your quotation

NOTE: Above prices are valid for 60 kg bags only. Additional costs for different packaging given below.

BAGS, 40 kg with grain pro: add USD 0.10/lb to 60 kg bag price.
BOXES, 25 kg with vacuum packed bag: add USD 0.15/lb to 60 kg bag price.
Prices for NY + USD lots are fixed by mutual agreement based on NY futures market.

Source: ProFound, 2022 (based on information from an industry source)

5. Send samples to interested buyers

Offer interested buyers a sample of your product. Samples give potential buyers the opportunity to approve the coffee beans and make sure they match their quality requirements before committing to a purchase. Hence, when you send a sample, make sure it is a true representation of the coffee you will be selling the client.

If a buyer is interested in samples, make sure to agree on when to send them and what kind of samples to send, including quantities, packaging, labelling and accompanying documentation. Regarding documentation, samples are often sent together with a factsheet providing information such as:

• Variety
• Altitude, soils, average rainfall and location
• Annual production by grade or type of coffee
• Harvest and marketing season

Labour practices

• Processing system
• Anti-pollution measures
• Warehousing and dry processing
• Distance to port and shipping options

Buyers will assess both the physical and sensory quality of the samples you send. If you cannot match any particular aspect of the sample quality, tell your buyer as soon as possible. Always be honest and transparent about your samples and the quality of your coffee supplies. If you are not, you risk losing the trust of your potential buyer.

When suppliers and buyers enter into direct trade relations, this is usually upon approval of a pre-shipment sample. Buyers tend to include the right of refusal on delivery (with the ‘replace clause’), meaning that a new pre-shipment sample has to be offered in place of the rejected one.

Figure 1: Example of a pre-shipment sample

Source: Nordic Approach

6. Respect your contractual agreements

The coffee market is volatile, operating under market conditions and prices that may vary a lot over the year. If you want to establish long-standing and reliable relationships with your buyers, it is very important to respect your contractual obligations, regardless of the market changes.

Most European importers buy their coffee under the terms of a European Standard Contract for Coffee (ESCC). Note that the European Coffee Federation revises this document. If you honour your agreements and deliver according to the terms of you contract, your buyers are more likely to turn into loyal customers.

The COVID-19 pandemic and frost in Brazil led to volatile market prices. Producers sold their coffee below market rates under fixed-price contracts in 2021. Algrano reported that more producers have been choosing open contracts. Open contracts give both parties more flexibility. Suppliers can diversify their pool of buyers and roasters can worry less about changing consumer needs and wholesale demands.

7. Ensure proper packaging and transport

Green coffee is sensitive to moisture and can also absorb external flavour and aroma, resulting in quality deterioration. As such, proper packaging, storage and transportation is crucial. Always consult with your buyer about specific packaging and transport requirements.

Green coffee is traditionally shipped in woven bags made from natural fibres, such as jute or burlap. These bags typically hold 60 or 70 kilogrammes of green coffee. However, jute and burlap bags do not protect against moisture. As such, big plastic bags and plastic container liners are increasingly used, although they may still let some moisture in. These plastic bags range in size from 60 kilogrammes to full container-sized bags of 20 tonnes.

You also have high-barrier packaging, which is available in all sizes, including container-size. This type of material keeps out both oxygen and moisture. Although there is no standard for ideal moisture content, the International Coffee Organization recommends that coffee not have a moisture content below 8% or above 12.5%. Exceptions to this are specialty coffees characterised by a high moisture content, such as Indian Monsooned coffees.

Materials such as Grainpro are often used to pack specialty coffees inside jute bags. The most exclusive specialty coffees are often vacuum-packed to preserve the green coffee quality. Take into account that these materials are relatively costly, so make sure to budget for these costs.

Exporters that roast their own coffee should be aware of stricter requirements for consumer packaging and for European market entry in general. In 2019, the European Commission launched the European Green Deal (EGD). The EGD is a package of actions to reduce greenhouse gas emissions. As a result, all coffee sold in the EU market must be in reusable or recyclable packages by 2030. In addition, European consumers are demanding packaging made from recyclable materials. These regulations and concerns may impact which packaging material you use for your samples.

8. Communicate honestly and openly and be aware of cultural differences

European buyers appreciate suppliers’ reliability, transparency and good communication. Good communication means involving your buyers in your considerations and providing them with clear and prompt information, especially regarding price, contract, quality and transportation. Poor communication can put your business at serious risk.

Transparency means developing an open relationship to jointly share, discuss and address risks appropriately. In all cases, keep your promises, be punctual and recognise the value of a contract. In your communication, also be aware of the differences in business cultures. Cultural awareness is key for success as an exporter.

Email is often the preferred way of contact for buyers. As a producer, consider sending professionally written emails to get the attention of potential buyers; for instance, specialised importers and roasters sourcing directly from origin. These emails are preferably in English. Study their website and understand what the buyer is looking for.

Draft a simple, but complete email, containing a short description of your company and of your products. End your email with a clear call to action, such as a request for a phone call or Zoom meeting, or ask them if they are interested in receiving samples. Add precise information to your mail, such as the link to your website, links to videos about the company, and attach a brochure and cupping scores, if you have them. Increasingly, WhatsApp is used in business. It is tricky to use this platform to contact a potential buyer for the first time, as it may be perceived as too informal.

Read more about business cultures in Europe, and use the tips when communicating with potential (or existing) buyers. Passport to Trade 2.0 also provides a good overview of differences in business culture in Europe. An example is that North European buyers are often straightforward and will tell you what they think, whereas Southern European buyers tend to be less direct.

9. Prepare well fo a farm visit from (potential) buyers

Buyers of specialty coffee increasingly prefer to visit farmer communities and coffee plantations they work with. They are usually eager to invest in social relationships with farmer communities, to discuss post-harvest techniques, and/or to find new interesting sourcing destinations and unique coffees. These visits will eventually strengthen your relationship with them, which lowers the business risks for both you and the buyer.

Due to the effects of the COVID-19 pandemic, visits to origin came to a halt during 2020 and 2021. By far most European specialty coffee buyers have indicated they are still very interested in travelling to origin to meet coffee producers and see production. As a result, most travelling to origin resumed in 2022.

Although personal and face-to-face contact is highly valued in the specialty coffee segment, note that digital communication is very important too. Therefore, consider offering digital farm visits to your clients to gain and maintain interest. A large share of specialty coffee buyers are increasingly interested in such virtual visits to origin. For example, Algrano and Fairtrade hosted a virtual tour of the Cafesmo co-op in Honduras.

Once you have an incoming buyer visiting your producing region, draw up a clear agenda and visit programme, containing specific locations and time blocks. Consult the buyer on what they would like to see and experience and design the program accordingly. Include aspects such as nursery/seedlings, production, farming communities, cooperative staff, post-harvest and warehousing infrastructure, and other elements the buyer may be interested in, such as joint cupping sessions.

10. Follow-up, follow-up, follow-up

Following up is a crucial element for any business. It helps you strengthen your relationship with a (potential) buyer and may provide you with successful sales opportunities. Also, good communication and follow-up provides you with a competitive advantage, as it shows you are a professional and reliable client to work with.

ProFound – Advisers In Development carried out this study on behalf of CBI.

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