The hard business of selling beautiful coffee

Part 1

James Harper:

The landscape here kind of reminds me a little bit of traveling through Italy.

James Harper:

In April 2024, I find myself in the backseat of a car, going up and down Brazilian hills. Out the window, thousands of perfectly planted rows of coffee whiz past.

James Harper:

Totally symmetrical, very orderly rows. That's just like Italy, you know, row after row after row of vineyard.

James Harper:

And even though it's my first time here in Brazil, it feels familiar. If you replace the coffee trees with wine vines, hey, you're basically near where my parents live in Italy. And in front of me, driving the car, is a coffee farmer, Vicente Pereira.

And I gotta say, I like his taste in piano music. Vicente is driving me through a region here in Brazil, Minas Gerais. And the scale of the coffee farming here, it blows my mind.

Like, we pass by one farm that employs a literal village. And these coffee farms employing thousands of people stretch on for miles.

Vicente Pereira:

They have billions of coffee trees. Really? Yes, just here.

James Harper:

This region, Minas Gerais, it is the world's coffee growing epicenter. Brazil is the world's largest producer of coffee, and half of that coffee is grown here in Minas Gerais. Billions and billions and billions of kilos of coffee every year.

But all these mega farms we're passing through, they grow coffee the traditional way here in Brazil. They grow commodity coffees. They produce huge volume at low cost and sell the coffee for a low price.

And the flavors reflect that. To us specialty coffee drinkers, they're really uninteresting. They're going to be roasted pretty dark, used in cheap supermarket blends, instant coffee, hotel coffees.

You get the idea. These coffees produced at huge volume, very cheap. They fuel big global commodity coffee businesses.

Vicente Pereira:

It's very big.

James Harper:

But squeezed in the middle of these giant farms sits, and anonymously, a bit of a misfit. A farm a fraction of the size of its neighbors. It's a small farm.

Vicente Pereira:

We have 25 hectares only coffee.

James Harper:

Run by a farmer who is not interested in doing big economies of scale for corporate coffee. This is Vicente Pereira's farm, Fazenda Paraíso. Paraíso.

Vicente Pereira:

Paraíso. Paradise. Yes, like paradise.

James Harper:

And it really is a little slice of paradise. We arrive at the farm and although Vicente is almost 80, he bounces down the driveway in his striped farmer's shirt, suspenders and a well-groomed white beard. And he leads me to the veranda with a gorgeous view of rolling hills.

Okay, look. All the forests go around. It is extremely beautiful.

And for Vicente, this farm, Fazenda Paraíso, is one big experiment in pursuit of specialty coffee. A massive challenge to grow coffee the non-traditional way. Here's the thing.

For almost all of Vicente's life, he has not been in coffee farming. I am a chemical engineer. He ran his own successful business.

Vicente Pereira:

We had a mining consulting company. And at the end of his career, in his late 60s, we sold it for an Australian group.

James Harper:

And he then sunk the majority of that money into this coffee farm, Fazenda Paraíso. A coffee farm that, at the time, was growing coffee the traditional way, just like his massive neighbours. But partly because he loved specialty so much, in his late 60s, he set himself up for a huge challenge.

Transform Fazenda Paraíso from growing only commodity to almost entirely specialty coffee.

James Harper:

Why did you choose not to retire?

James Harper:

Retirement is not an award for me.

Vicente Pereira:

I like challenges. Every time.

James Harper:

And this was going to be a huge challenge because almost no farms at all in this part of the world grow entirely specialty coffee. It's really, really rare. But over the next 10 years, he hires people like Jessica.

A university-educated agronomist to be his quality assurance manager. And she loves the job.

Jessica:

This is the best of the world for me.

James Harper:

He trained himself up and built the facilities he needs to evaluate coffee. This one is electric. Maxim, fantastic.

Cupping tables, tasting rooms, grinders, sample roasters.

James Harper:

What was the investment price?

James Harper:

22,000. And after 10 years, he achieved something remarkable for coffee farms here in Brazil. He defied the traditional way coffee is grown in Brazil.

Huge volume for cheap, producing uninteresting commodity flavors. And instead, focused entirely on specialty and got there. The majority of your coffee is between 83 and 87 points.

The majority of what he grows is specialty coffee.

Vicente Pereira:

Let's drink a coffee. Sure, let's drink a coffee.

James Harper:

Vicente walked me from the veranda into the cupping room and we taste the fruits of his hard work. It's very nice, this coffee. These are gorgeous specialty coffee flavors.

Lovely. It's a lovely coffee.

Jessica:

Very easy drinking. Yeah, nice body, nutty.

James Harper:

These delicious, distinctive flavors of chocolate, nuts, caramel. This is the classic Minas Gerais flavor profile at its best. And looking at Vicente tasting his own coffee, I can see how much joy it brings him to produce these flavors.

Yeah, I like this.

Vicente Pereira:

I like this. I like to drink a good coffee. Everything, the challenge is to do better.

Every day, every month, every year.

James Harper:

But as it turns out, Vicente's challenge is not over. In many ways, he's actually only halfway through. Because if Vicente sticks to the traditional way coffee is sold in Brazil, his farm is not going to survive.

It's not enough. And this is what this episode is about. We are looking at how Vicente is trying to reimagine how coffee is sold in Brazil.

Finding the right buyers for your specialty coffee, it is life or death for any coffee farm anywhere that wants to prioritize growing specialty flavors. Every coffee producer who wants to walk the path Vicente is walking has to reinvent how coffee is sold in their regions. And in this episode, we're going to look at the journey Vicente is on to try to find better buyers for his coffee.

Will Vicente's journey of trying to find better buyers inspire other farmers in Brazil to also turn their back on commodity coffee and prioritize specialty? Or will his journey be a cautionary tale? I'm James Harper, and this is Filter Stories.

The untold stories hidden in your cup of coffee.

James Harper:

And this is series three of The Science of Coffee, a journey into coffee's hidden microscopic secrets.

James Harper:

So Vicente, this previously successful entrepreneur, gets into coffee farming, throws out the traditional rulebook on how to grow coffee in Brazil, you know, bulk, commodity, cheap, and instead prioritizes specialty where his passion is. But now he has the challenge of finding buyers for his beautiful specialty coffees. In this episode, part one, I'm going to show you how Vicente's business model works and why selling coffee the traditional way just doesn't work for him.

And then in the next episode, part two, I'll show you all the ways he's breaking out of this traditional system to get better prices for his specialty coffees. Including through my partner sponsor for this episode, Algrano, a platform that connects roasters and producers directly. Now, broadly speaking, here in Brazil, there are two traditional ways you can sell your coffee.

One is selling your floor scrapings, and the second is selling to multinational exporters. And let's start with the funnest one. The floor scrapings.

So we're on Vicente's farm, and he's showing me around the back of his mill. And it's covered in fruit trees.

James Harper:

It's enormous oranges. They're like as big as a football.

James Harper:

And a little bit further behind is Vicente's shed, where I see the machine that makes Brazil the coffee growing powerhouse of the world.

James Harper:

Oh, here we go. Oh my God, this is it. This is the automatic picking machine.

James Harper:

Wow, look at this. This is a monster. It's enormous.

This is a coffee harvester. Jeez, it's like a tank.

James Harper:

You could take this onto the battlefield and scare all your enemies. Maybe.

Vicente Pereira:

I never thought about that. Brazilians are very peaceful people.

James Harper:

This is a tractor that passes over the top of coffee trees and plastic rods, like bristles, like bristles, like you see in a car wash, whack the coffee trees, the cherries fall off, and they're collected in a trailer in the back. What does this cost? One million.

James Harper:

A quarter of a million dollars. Yes.

James Harper:

Wow. But this coffee harvester creates the floor scrapings, because as this machine knocks coffee off the trees, some of those cherries inevitably are going to fall on the ground. Which is why Vicente has another machine, which goes around afterwards to scoop them up.

James Harper:

The RT-1200.

James Harper:

To collect the coffee on the floor. That's kind of like one of those robot vacuum cleaners with...

James Harper:

Like a broom. Like a broom. Yeah.

James Harper:

And so this machine collects the floor scrapings, which Vicente has to collect. Otherwise, it's going to create pests and problems, you know, under his trees. But these floor scrapings, it's still coffee, totally drinkable, and it's known as Escolina.

And this Escolina floor scrapings, it only accounts for maybe 10%, at most 15% of his harvest. And I was really surprised to learn that, here in Brazil, peeps adore Escolina. They like this.

They love this coffee. And it is so easy, effortless, for Vicente to sell this coffee. Like, what happens during harvest?

Small mom-and-pop roasteries.

Vicente Pereira:

Small family, small host company. They find him. Every year, they call us.

Do you have this Escolina for me? He sells it over the phone, and then they come to him to take the coffee. Do they bring their own trucks as well?

James Harper:

Yes. Small trucks. And the other great thing is, he gets paid immediately.

Vicente Pereira:

Maybe paid in the same day, one day after, two day after. It really doesn't get any easier.

James Harper:

But as wonderful and easy it would be for Vicente to sell all his coffee like this, there's a problem. $837, that's very cheap. The price?

More or less a dollar per pound of green coffee. And to explain to me why it's so cheap, Vicente took me to a local restaurant.

James Harper:

So here we are in a restaurant in Oliveira, trying some of the restaurant coffee. The most popular coffee in Brazil.

Vicente Pereira:

This coffee, the host is very dark.

James Harper:

No sweetness. No sweetness. Mostly just darker roast flavors.

But I gotta say, we have a chunk of raw, unrefined cane sugar.

Jessica:

Wow, this is a big piece of sugar.

James Harper:

It was pure candy dessert.

Jessica:

I couldn't finish this coffee without sugar. With a bit of cane sugar, raw cane sugar, it's great.

James Harper:

And so why is this floor scraping Escolina coffee so cheap? Well, this restaurant, they were giving it away for free. So, you know, go figure.

Vicente gets paid a dollar a pound for this coffee. Would he be able to have a viable coffee farm if he only sold coffee at a dollar a pound at these Escolina prices? What is the price you need to be profitable?

I can show you my plan. Vicente opens his old laptop and starts up Excel.

Vicente Pereira:

My production cost is between 900 to 1000.

James Harper:

Vicente's cost of production is $1.30 per pound. So short answer is no. He would be losing money on every pound of coffee he sold if he were to sell at Escolina prices.

Now, although his production costs are $1.30 per pound, that doesn't mean that's the price he needs. He actually needs a price that's much higher than that because Vicente has many, many more costs over and above just producing the coffee. And coming up next, I'm going to give you that number, the number he needs to be able to have a long-term viable coffee farm.

But mind you, it's not a fixed number, like, you know, $2 a pound or anything like that. It's a relative number that changes year on year. So as we saw, Vicente selling those floor scrapings Escolina coffee, he earned so little money from it that if he sold all this coffee this way, he may as well shut the farm tomorrow.

What price then does he need to have a long-term sustainable coffee farm prioritizing specialty coffee? Okay, now the short answer is the best differential he can get over and above the C price for his lower to mid-range specialty coffees, ideally best case scenario, a 40% premium. This is how coffee farms in Brazil look at their business models and how it relates to the coffee price.

And if that made absolutely zero sense to you, good, because I'm going to break it down step by step.

Vicente Pereira:

In Brazil, we needed to pay attention with the price in New York.

James Harper:

And the first thing to explain is the commodity market for coffee, or C market for short. New York, tall glass skyscrapers. Inside, you got guys in these pinstripe suits, a lot of monitors everywhere, and they're making trades, making money.

And some of the things they're trading are commodities. Steel, wool, soybeans, and coffee. And each sack of coffee is treated exactly the same.

Coffee is coffee is coffee. There's nothing special about this coffee. In fact, this commodity coffee might be 75 points on an SCA scale, the kind of coffee that's produced by all the mega farms all around Vicente.

It's not particularly sweet, no complexity, no discernible lovely flavor notes, just bog standard caffeine in a bean, roast it dark, put it in a cheap supermarket blend, boom, generic, interchangeable coffee, commodity coffee. And of course, there is a price for this kind of coffee. It's the global commodity price, the C price, which goes up and down every day.

Great, okay, but what drives those movements up and down every day? Well, the biggest driver is Brazil. Brazil, it's the largest coffee producing country in the world.

And historically speaking, every time there's been a bad weather event that hit Brazilian coffee farms, like frost, drought, the commodity price for coffee shot up, right? Like classic supply and demand, less coffee supply, higher coffee price. And at the time this episode drops in 2025, we are in a time of relatively high prices because of Brazil.

Brazil is producing less at the moment. Including Vicente. Vicente and all those mega farms all around him have seen their production fall.

Vicente Pereira:

It was terrible. It was a hard time. It was a big problem.

Look here. Look, pay attention, this.

James Harper:

Yeah, basically you're slightly more than half of where you used to be. So why? What happened?

Vicente Pereira:

Climate changed. We had a time without rain.

James Harper:

These last few years, climate change has changed the rain patterns in this region, Minas Gerais, and therefore changed how much coffee all the coffee trees produce, both on Vicente's farm and the farms of all his neighbors. And so Vicente, as a coffee farmer, is in an unusual position compared to other farmers around the world. When we are in these periods of high prices, farmers around the world are very happy because they're earning a lot of money for their coffee.

But for Vicente, he's kind of indifferent. The commodity price of coffee is high, most likely because he and all the farms next to him are not growing as much. Like if the weather was really, really good and he grew a lot, well, so too would all his neighbors and the coffee price would fall.

So although he has more to sell, each bag of coffee is now sold at a much lower price. And so what that means is that when Vicente thinks about what kind of prices he wants for his coffee, unlike most farmers in the world, he doesn't think about an absolute number, like, you know, $2 a pound. He thinks about it relative to the C market, the commodity price for coffee.

And he told me the average price he would love, love, love to get, the stretch goal price, best case scenario is an average price that's 40% above the C market. That is a number which is sustainable for you.

Vicente Pereira:

Yes, because with this money in Brazil, it's possible to invest and to improve, to keep the business every time investing, investing, improve, yeah?

James Harper:

40% above the C price, it's an average price that would allow him to take many, many more risks trying to produce different kinds of specialty coffees. He could take the risk to, you know, replant a big chunk of his farm with very exotic varieties of coffee that may produce beautiful flavors, but maybe they won't yield as much. It's a risk.

But if he doesn't get 40%, his farm will be okay, he'll survive. What Vicente needs at minimum, minimum, just to keep the farm ticking along to the next year is C price, maybe 10% above the C price, but 40% is where he would love to be. Now, you know, Vicente loves a challenge.

That's why he did this whole thing in the first place. But hoo boy, he has set himself up for one hell of a challenge. Okay, so let me explain.

The majority of his production is between 82 to 84 points, right? This is lower to mid-range specialty coffee. When you taste it, it has nice notes of cacao, bit of caramel, bit of sweetness, round body.

I mean, nothing crazy distinctive or unique, but very pleasant. Vicente's problem is that this kind of coffee, it really struggles to get much more than the C price. He would love to get 40% above the C price for this kind of coffee, but a lot of things are pulling it down towards just the C price.

Like what? Okay, so the first thing is lower to mid-range Brazilian specialty. It's mostly used in a specialty roaster's cheapest blend, their house blend.

This is an espresso blend that gets used for milk drinks like cappuccinos and lattes. And for cafes and roasters, cappuccinos and lattes is a high volume, low margin product. And as a result, they have a very strong incentive to use the cheapest coffees they can get that still tastes pretty good.

The other problem is that there is a lot of supply of this particular kind of coffee from Brazil. And so roasters actually are spoiled for choice for this kind of coffee. They can shop around.

And so what Vicente is trying to do here is get the highest price he can for a coffee where already there's a lot of supply and roasters are mostly interested in getting the lowest price possible. So with all that in mind now, we can go back to look at how Vicente sells his coffee in the traditional markets. And we're turning our attention to the multinational exporters.

How far off is he from what he would like? 40% above the C price. So Vicente, he would love to get an average price of 40% above the C price.

That's what will allow him to make big investments in his quality, really allow him to grow the farm in lots of interesting ways. Failing that, if he gets C price, maybe 10% above the C price, you know, it's not great, but he'll carry through. Now I showed you earlier, the first traditional way he sells his coffee is by selling the floor scrapings for way, way under the C price to the point where he may as well shut his farm tomorrow if he had to sell all his coffee that way.

But what about the second way, traditional way he could sell his coffee in Brazil? And that is to international exporters. Now, quick primer on what an exporter does.

There are many companies in Brazil who buy coffee from farmers. Once they buy that coffee, they own that coffee. And then they put that coffee on containers.

They send the coffee across the world and then sell the coffee to roasters. And once Vicente has sold his coffee to the exporter, he doesn't lift a finger. They take care of everything, the logistics, the paperwork, the insurance, finding roasters on the other side of the world to sell to.

And I was amazed at how easy these multinational exporters make it. For Vicente to sell them his coffee. The principal buyers of my coffee is Olam.

Currently, Vicente sells a lot of his coffees to Olam. They're a big coffee trader, does import, export. And Olam have made it so easy for Vicente to sell them his coffee.

Literally, all Vicente has to do is reach down into his pocket, pull out his phone. This app is from Olam. Yes.

This is Olam's app.

Vicente Pereira:

Olam.

James Harper:

Opens an app that Olam made specifically for people like him. So it's really on you to decide when do I want to sell?

Vicente Pereira:

Yes, I decide.

James Harper:

It's very easy. Vicente ponders, hmm, how much do I want to sell? He puts in a number, a ton, two tons.

The app gives him a price.

Vicente Pereira:

I can accept. Boom, coffee sold. The man call me.

When you deliver your coffee? Oh, next Monday. Okay, good.

James Harper:

Vicente flicks the WhatsApp to the local guy that will transport the coffee. Monday rolls around. Guy comes, picks up the coffee.

Vicente Pereira:

I deliver the coffee on Monday. And he gets paid really quick. And on Tuesday, they pay me.

Wow. That's really fast. Very fast.

Super convenient. Super. And I can do the sale where I am.

James Harper:

You could be in China and you could do a sale.

Vicente Pereira:

Yes.

James Harper:

So, so easy. But the big question, how much do they pay?

Vicente Pereira:

Olam, the last year, the price was not very competitive.

James Harper:

Unfortunately, this is the trade-off. Olam offer Vicente. Get ready for this.

20% below the C price. Not above the C price. Not the C price.

20% below. So these are the prices you are being given, which are below C market prices today.

Vicente Pereira:

Today.

James Harper:

Okay. Which I got to say, I found this really wild that a specialty coffee, 83 points, would be bought at 20% below the commodity price. A coffee that tastes so much better than a commodity coffee is selling for below the price of a commodity coffee.

Ah, now there are many, many reasons why Olam and other exporters pay about 20% below the C price for Vicente's 83 points specialty coffee. I won't list them all here, but a big one worth mentioning is the fact that, you know, the way Vicente's coffee is used, you know, in house espresso blends for milk drinks, Olam are going to struggle themselves to sell this kind of coffee for maybe much more than the C price. And look, they're a business.

They've got to make their margins. And how are they going to do that? Well, you pay the producers less than the C price.

This is the traditional system. Now, those mega farms all around Vicente, they will take that price offered by the multinational exporters like Olam. And their coffee farms are going to work financially because their entire business model, the way they produce coffee, it's all about economies of scale.

But Vicente's taking a different approach to prioritize specialty. And his costs are much higher. He hired Jessica.

He puts all that time and investment into roasting, sampling the quality of his coffee. All this to say, if Vicente were to keep selling his coffee into this traditional system to these multinational exporters and receiving prices that are 20% below the C market, that would drive a nail in the coffin of his business model. There is no way he could have a coffee farm that focuses on growing delicious specialty coffees.

Vicente Pereira:

It's not enough. It's not enough. Because with this, I'm using my capital to increase, to add value, to invest in the farm.

James Harper:

And that is why Vicente has to break out of this traditional system of selling coffee and find a new way. Different buyers who will offer a better price. And if Vicente can pull it off, many farmers in the region might be wondering to themselves, could we do what Vicente did as well and prioritize growing specialty over commodity?

James Harper:

We too don't need to play by this old traditional rulebook.

James Harper:

In the next episode, part two, we look at Vicente's journey, stepping out of the traditional system, throwing out the rulebook and trying to find a better buyer.

James Harper:

Will he be the beacon of inspiration or a cautionary tale?

Part 2

James Harper:

Welcome back, this is Filter Stories, I'm James Harper, and you're listening to part 2 of Vicente Pereira's story, a Brazilian coffee farmer who is trying to do something bold. He's trying to find better buyers who can pay better prices for his beautiful specialty coffees. Vicente isn't just any farmer, for most of his life he ran a successful mining consultancy which he sold in his late 60s and instead of retiring, which he is dead against, he embarked on one hell of a challenge.

He bought a farm with 25 hectares of coffee, Fazenda Paraíso, which 10 years ago was growing commodity coffee for cheap, and he then invested the better part of a million dollars, transforming Fazenda Paraíso to a farm that now produces beautiful flavours of cacao, nuts, caramel, the iconic flavours from this region in Brazil, Minas Gerais. And there are many coffee farmers in the region, and globally too, who would like to transform their coffee farms and prioritise specialty coffees, like Vicente did. The challenge though, is the price.

Producing specialty coffee takes more time, and it can take more money, you need a higher price to justify it, but the coffee industry is littered with examples of producers who tried to prioritise specialty, they did it, but then they couldn't find good enough buyers, high enough prices, and their farms failed. You can listen to one of my early episodes, Firefly, to hear a sobering example. Link in the show notes.

In Vicente's case, his challenge is that the traditional way he can sell his coffee does not get him the prices he needs. Like I showed you in part 1, and I really recommend you listen to it before you listen to this, when Vicente sells his 83 point specialty coffee to a multinational exporter, he gets almost 20% below the C price. This is one of the traditional ways of selling coffee in Brazil, and Vicente will not be able to continue producing specialty coffee if he can only sell at this price.

So for any coffee producer that wants to grow specialty, the other half of the challenge is they have to find better buyers, who can pay higher prices, and that is what this episode is about. This episode shows you what it looks like when a farmer breaks out of the traditional way of selling coffee, and tries to chart their own path to find their own buyers. Vicente is in the middle of this journey, we'll see what it's like for Vicente to export his own coffee, in a container, he's experienced using Algrano, a direct trade platform that connects producers with roasters, and my partner sponsor for the episode.

But let's start where Vicente first started his journey, the local specialty Brazilian market. So on a sunny fresh day, back in April 2024, I step out of my Airbnb in the beautiful little town of Oliveira, Minas Gerais, and walk down the steep roads to the house of Vicente Pereira and his wife Marta. And when I reach their house, I'm greeted by Filo, a tan slender dog, who had just come back from the vet, and her face is covered in star stickers.

We sit down at the living room table, and his wife Marta brings lovely coffee from the farm and pão de queijo, baked breaded cheese balls.

Eliane:

It's very common to have here in Minas Gerais.

James Harper:

Oh my god they're so good. Very dangerous. It's a dangerous combination.

Because I could eat a lot of these.

Marta Pereira:

We eat a lot.

James Harper:

Vicente joins us, wearing his traditional wide brim hat, shirt and suspenders. So what do we do? And he tells me the story of selling coffee a very non-traditional way, directly to specialty coffee roasters and cafes in Brazil.

We have these clients, we present them our quality. So 5-10 years ago, while Vicente was busy transforming the farm from producing mostly commodity to specialty, his daughter Marina was living in Brazil. She no longer lives here, but that's a story we'll come to in a bit.

But back then, she's living in Brazil, happily married, kids, a lawyer by background, but she was actually spending a lot of her time helping the family farm with the sales and marketing. And it was in Rio de Janeiro, the massive international city a 6 hour drive away, where she built relationships with roasters and cafes one to one. And I was even lucky enough to meet some of them on a Google Meets call.

Eliane:

My name is Eliane, I have a coffee shop in Rio de Janeiro.

James Harper:

Eliane, who's been running a cafe in the north of Rio, in a shopping center for the last 10 years, serving a lot of specialty filter brewing methods.

Daniel Hobbs:

Clever, Aeropress.

James Harper:

And I also met an Australian.

Daniel Hobbs:

My name is Daniel Hobbs, I'm the owner of Aussie Coffee.

James Harper:

Who I interviewed while he was strolling the streets of Rio. You drew the very iconic spot to do the interview, because you're on the beach, there are palm trees behind you. And I think the iconic Rio Christ statue is behind you.

And I couldn't help wonder, why not just set up a cafe in Australia?

Daniel Hobbs:

James, why would I open a cafe in Melbourne with a saturated market, where it's going to cost me an arm and a leg to live, I'm going to be working on my life to kind of compete with hundreds of other cafes?

James Harper:

Yeah, he's got a point. And the other great thing about being in Brazil is that Daniel and Eliane can buy directly from Fazenda Paraiso and get great flavors they love.

Daniel Hobbs:

Chocolatey and caramel, that really shines through in all my drinks.

James Harper:

So Eliane and Daniel are the sort of buyers who value the delicious flavors of Vicente's specialty coffees. But how much do they pay? Now, to remind you, in the last episode, I explained how most of the coffees that Vicente grows is lower to mid-range specialty coffees.

And this particular segment of coffee from Brazil is extremely competitive. I mean, Daniel tells me as much.

Daniel Hobbs:

One thing in Brazil is there's not a shortage of people wanting to sell you coffee.

James Harper:

What this means is that this lower to mid-range specialty coffee struggles to get any premium at all over the C price. And despite that, what Vicente has managed to do, selling directly to roasters in Rio, is get a 10% premium above the C price. And even though it's only 10% above the C price, Daniel made it clear like, I know I'm paying a lot.

And how does the price compare? The price you're getting from the farm, how does it compare if you were to go find green coffee elsewhere?

Daniel Hobbs:

I know it's probably on the higher end of what maybe other people might pay for the coffee.

James Harper:

So to get this 10% premium, what Vicente and Marina have done is show to Daniel and Eliane, look, it's not just beans that matter. There is much more value we can give you that will help you run your business. For example, at the farm, Vicente's quality control manager, Jessica, showed me the roast profile she had developed for Fazenda Paraíso's different coffees.

By becoming experts on how their coffee roasts and what flavors you can get, they can then recommend coffees to Daniel. And he tells me he appreciates this because it allows him to outsource the coffee expertise to the farm, which allows him to just focus on the business.

Daniel Hobbs:

I'm basing a lot of my trust with the farm.

James Harper:

And then back at Vicente's farm, he shows me another valuable service he offers roasters like Daniel.

Narrator:

And I see, yeah, like 100 sacks of 30 kilo bags. Warehousing.

Vicente Pereira:

Offer guarantee for clients to have coffee all the year. All year round, yes. They don't need to stock the coffee.

I see.

James Harper:

And Vicente also organizes the transportation, a service Daniel just loves.

Daniel Hobbs:

For me, when I need coffee, it's just a message in WhatsApp and a payment and it's sent. And for a small business to actually have to go out and get quotes for transport, that's huge.

James Harper:

So these are the services Vicente offers over and above just the green beans. And it's what enables him to get 10% over the C price for his lower to mid-range specialty coffees. But of course, what he would love to have is 40% above the C price.

But Vicente tells me that's a tough sell in Brazil because Brazil, it's just not wealthy enough. You know, he tells me a story about how a specialty cafe in Brazil will offer an espresso for $1.30. $1.30 espresso in Europe and America? That's amazing value.

But in Brazil, people's first reaction is, oh, it's that expensive. And so if Vicente could sell all his coffees for an average price of 10% over the C price, his family will be in an okay position, but he really wishes it were better. Just 10% above the C price, look, he can afford a modest salary for himself.

He might just be able to afford Jessica, the agronomist as well. But what he can't do is take big risks to grow better specialty coffee. He can't, you know, take out a quarter of his production to grow an exotic variety and, you know, wait five years to see whether it's going to produce amazing flavors he could sell for much better prices.

At 10% above the C price, he's treading water. But if you could get higher, ideally 40%, he could be really thriving and reinvesting big into the farm. And so coming up next, Vicente turns his sights to a much richer country, America.

So Vicente has been trying to find buyers outside of the traditional way of selling coffee. He had success selling to cafes and roasteries based in Rio, but because Brazil is not the wealthiest country, he feels like he's hitting a price ceiling. 10% above the C price.

What he would love is 40%. And so Vicente decided to take another big risk, exporting coffees himself directly, shipping his own coffees on his own container. Now, this is not an uncommon way for many coffee farmers to sell coffee directly to faraway places like America.

But as a coffee professional in the global north, I still forget sometimes how much of an undertaking this is for a farmer, especially a farmer who's as small as Vicente is, you know, only 25 hectares of coffee. Financing your own container of coffee is expensive. Ballpark, $100,000.

And for Vicente and his small farm, it was actually too much money. He needed a partner. And Vicente very kindly took me in his car to meet his business partner, another coffee farm.

All right, here we go. I hop out of the car at Fazenda Santa Maria. Oh man, Brazil is such a beautiful place.

This farm is just gorgeous. A farm stretching over rolling hills, little town just in the distance, huge eucalyptus trees towering overhead. Wow, that's a tall tree.

Wow. We walked to the door of the office building, through to the kitchen, and there they had another huge pile of pão de queijo. Oh my God, this was so good.

Narrator:

Oh my God, homemade pão de queijo.

James Harper:

This is amazing. So while I'm scoffing down my thousands of pão de queijo, Vicente explains how this partnership is going to work. The first content is half to half.

So a few months back, Vicente and this farm, Fazenda Santa Maria, they got a container and they filled it half, half. Half Vicente's coffees, half Santa Maria's coffee. And when I was visiting, that container was literally on the seas.

A big metal box full of delicious specialty coffees bobbing up and down on the ocean and scheduled to dock in a couple of weeks.

Vicente Pereira:

I think this week or next week. Its destination, Texas. Houston, United States.

James Harper:

Now, as I mentioned, the first big challenge with getting your container is financing the thing. But then the next big challenge is, well, who's going to sell the coffee when it lands in Houston? If Vicente can't sell those coffees at a high enough price, he's looking at a loss.

And a loss for a lot of coffee, half a container's worth of coffee. It's a big risk. But one way to make it less risky is have somebody on the ground actually selling the coffee.

And actually, it turns out that Vicente has an unfortunate but unique family situation, which is kind of the reason he's taking this big risk in the first place. So his own daughter, Marina, now lives in Houston. How are you today in Texas?

I'm good, I'm good. I just made my coffee.

Narrator:

Oh, perfect, great, great, great.

James Harper:

Now, I just want to spend a couple of minutes talking about the circumstances of Vicente's family. Because it's an unusual, unfortunate situation, an opportunity that under normal circumstances is just not available to farmers as small as Vicente. OK, so Marina, she's in Texas.

But as we heard earlier, she was living in Brazil very happily, helping the family coffee farm sell the coffees to cafes and roasters in Rio. And Texas? Not part of the plan.

Marina Pereira:

So I didn't have plans to move. It wasn't something that we were looking for. But in 2018, we had a family situation.

James Harper:

Marina's husband's brother, so her brother-in-law, he lived in Houston with his wife and kids, but he passed away. And so Marina and her husband, they uprooted their lives in Brazil and moved to Houston to support the widow of her late brother-in-law, help her raise her kids who now didn't have a father.

Marina Pereira:

So family for us is very important. It's the foundation of everything.

James Harper:

And I could tell it was a hard time for everybody. Even Filo, the tan slender dog who had stickers all over her face, because Filo is Marina's dog, but she couldn't take her to Texas. So she had to leave her with her parents, Vicente and Marta.

And it breaks my heart because every time someone comes to Vicente's home, Filo bounds down, hoping it's going to be Marina coming back. But it never is. So that's the situation.

Marina is in Texas. And while she's there, she figured, I'm going to be abroad.

Marina Pereira:

Can we take advantage of that?

James Harper:

And so Marina became the sales agent for the container that at the time I spoke to her was about to land in Houston. And so how is it going? What sort of price is Marina able to get when she sells it directly to American roasters?

Are Americans prepared to pay more than 10% above the sea price for the coffees in that container? Which are Vicente's lower to mid-range specialty coffees, 82 to 84 points. Marina says when roasters taste samples of the coffee, they like it.

Marina Pereira:

I'm very pleased with the feedback that I've been receiving from the roasters here after they cup the samples.

James Harper:

But when they get into price negotiations and she offers 40% above the sea price, which is what Vicente would love to get.

Marina Pereira:

I think last week I tried to offer that. It was a challenging number. It would be very difficult to make a sale.

James Harper:

It's more than a roaster prepared to pay. And Vicente, he was expecting this. We are opening the American market.

Vicente Pereira:

And actually in these early days, he wants to get a very clear message out to the American market. We need to have good quality and good price. We need to prove this for the market.

Marina Pereira:

Which is why at the time I spoke to Marina, I would suggest at least $1,300 to start.

James Harper:

The prices she was negotiating would actually mean that the farm earns below the sea price. Five up to 10% below the sea price. And Marina knows that it's not great.

Marina Pereira:

So yeah, I'm trying to be very positive.

James Harper:

One thing that this story really showed clearly to me is that building a reputation as a farm in a consuming market like America, this is a long, long journey.

Marina Pereira:

So we have to start, we say like in Portuguese, little ants, passos de formiguinha, baby steps.

James Harper:

To get known in the market, they're going to have to stick at this for years, sending a container every year for many years, and maybe even making a loss in some of them.

Marina Pereira:

It's challenging. So it's many compromises from everybody.

James Harper:

So at this point in Vicente's journey, exporting his own coffee in his own container, we don't know if it's going to pay off yet, this big bet. What I can say for certain is that getting your own container is really expensive. And just because you've exported your own container doesn't mean you automatically get better prices for your coffee.

And while I was learning about this container to Houston plan, I kept thinking to myself, there's an easier way! A way that Vicente basically admitted to me, he thinks is going to be the future for his farm. I think this way will grow a lot.

And that is to use a direct trade platform like Algrano. Coming up next, how Algrano works, and how much more Vicente is able to earn. So Vicente, he's looking for better prices than he can get in Brazil.

He thought America might be a place that could pay better prices. And he's experimenting with a container. But what about another part of the world that could pay a lot more for his coffees?

Like Europe. The problem is though, he can't replicate in Europe what he's done in America. Because he doesn't have anybody to sell the coffee.

And in any case, a farm his size, he would struggle to fill, let alone finance another container.

Marina Pereira:

Because for us, we don't fill a container with consistency every year.

James Harper:

And so for the longest time, this meant that it was almost impossible for Vicente to sell his coffee in Europe directly. But Marina, she was looking around and turns out times have changed.

Marina Pereira:

And then I was searching for possibilities to export directly in direct trade. And then I found Algrano and I talked to my father about it.

James Harper:

Algrano, a direct trade platform that connects producers with roasters and takes care of all the logistics. And I want to spend just a minute walking through how it works. So Marina, right, she signs up to Algrano.

And the first thing she discovers is that it's kind of like Tinder between coffee roasters and producers. So she creates her profile, makes it attractive, puts up beautiful pictures of the farm, writes a lovely farm story. And she puts up three different coffees roasters can choose from.

Marina Pereira:

So we have like three different coffee lots, which are the names, the nutcracker with very nutty notes. We have the bourbon that brings this sweetness and also the fruits. And then we have the lattes, perfect match.

James Harper:

Then roasters, they come onto the platform. They like the look of Marina's coffee and they ask for a sample. Now, Marina, she's already sent samples of her coffee to Algrano.

Marina Pereira:

I said, Algrano, those clients here, can you send them a sample?

James Harper:

Roasters get the sample. If they like the coffee, they then get in touch with Marina directly. Marina and the roaster then negotiate the price between themselves.

Marina Pereira:

And then they made the purchase.

James Harper:

Sale complete. Great. But this is still only half the story.

Because how do you get the coffees from Marina's farm in Brazil to the European roaster? Again, like Vicente can't afford another container. But it turns out that Algrano has their own containers, which go from coffee producing countries to coffee consuming countries like Europe all the time.

So Vicente gets his coffee down to the port where Algrano's container is, puts it on. Algrano fills up the rest of the container with other purchases from other roasters. That container floats to Europe and then Algrano distributes it to the roasters.

Marina Pereira:

There it is. Through Algrano, it was possible to send coffee abroad in small lots, which has never been possible for us.

James Harper:

Now, Fazenda Paradiso hasn't been on the Algrano platform for that long.

Marina Pereira:

Where is it?

James Harper:

Just a couple of years. But still, to date, they have...

Marina Pereira:

One, two, three, four, five, six, seven. We have done seven contracts with them during these last two years.

James Harper:

And so, what kind of prices are they able to get? So for their highest quality coffees, not the majority of what they grow, just the real top-end stuff, which they actually grow very little of, 87 points. Through Ograno, they were able to get the highest prices they had ever received for any of their coffees, 45% over the sea price.

Marina Pereira:

This quality, it was high. It was a different lot, which I named the secret garden. It was very floral.

James Harper:

I think they would have really struggled to get a price like this in the local Brazilian market. In any case, what matters the most is how much they can get for their lower to mid-range specialty coffees, you know, the majority of what they grow. And their story so far is what I would describe as a mixed bag.

So 2023, they were doing pretty well, 20% above the sea price. But in 2024, that dropped down to slightly under the sea price. Now, to me, these huge swings suggest two things.

The sea price at the time of this episode drops is very high. And that's doing all sorts of weird things with specialty coffee prices. I hear stories of producers who say, I'm selling my specialty coffees for below the commodity price because I just can't ask for a premium when prices are so high.

But I think what this mixed bag also shows is that, you know, at Vicente Paraiso, there isn't a fixed pricing model. There's no consistent formula, like we always chart 40% above the sea price. No, the way it actually works is Marina and Vicente, every time they go in Algrano to put up a coffee, they look around.

What does he price right now? It depends on the market, New York. What are other producers charging?

Marina Pereira:

We look what are the other farms doing?

James Harper:

Should we discount a coffee a bit this time just to kind of stay present?

Marina Pereira:

Or we make a choice. We want to stay in the game.

James Harper:

They're always figuring out pricing in the moment, trying to figure out like what the coffee is worth this time. And to me, that's a reflection of kind of how early on they are in their journey. Because pricing power, being able to say this is what our coffee is worth, take it or leave it, that only comes when a farm is able to offer really clear value.

But when you're in Brazil and your customers, roasters are over in Europe, America, what is that value, right? Because look, earlier in the episode, we saw how they add value to this Brazilian specialty roasters, you know, roasting profiles, warehousing, logistics. But when you're selling to Europe via Algrano, those advantages disappear.

And so what's left? Well, Marina knows that the relationship, you know, the service communication is really important.

Marina Pereira:

Yeah, so I tried to continue the conversation.

James Harper:

She's working hard on it. For example, sharing the insights from their agronomist Jessica on how the harvest is developing.

Marina Pereira:

And then she took some pictures and then said, OK, look, it's looking promising. This is the sugar level reading.

James Harper:

But again, I got the impression that they're on the right track for sure, but they're still taking these first steps. And it made me wonder, what does the next level look like? Who's already there?

Who's just nailed it? A producer who can set higher prices and confidently say, listen, roaster, you can either take it or leave it. And what kind of value are they showing to have that kind of pricing power?

Coming up next, I get a glimpse of that potential future for Fazenda Paraíso and what the baby steps today might one day grow into. To see what the future might look like for Fazenda Paraíso, while I was there down in Minas Gerais, I arranged to meet the CEO of a very successful farming group.

Fabrício:

Hello, hello. How are you doing? Yeah, we're doing good.

Nice to meet you. How are you doing? Oh, I'm Fabricio.

I'm a coffee producer. And these have been leading Sancoffee.

James Harper:

Fabricio picks me up in his car and we drive to Sancoffee.

Fabrício:

And here we are in the Sancoffee facility where we have all our coffee stored and especially prepared for our customers. Amazing.

James Harper:

All right, so Sancoffee. How to describe what they are? They're quite a unique entity.

20 Brazilian coffee farms came together to form an export house where their coffee would be milled to specialty coffee standards. And then this joint entity, Sancoffee, would work hard to sell their coffees internationally, many of which via the Algrano platform. And I've got to say, it was a really impressive operation.

Fabrício:

So here is how things start.

James Harper:

Okay.

Fabrício:

We start the tour.

James Harper:

So coffee from these 20 farms, they get driven into this huge dry mill.

Fabrício:

We have the capacity to store 150,000 60 kilo bags at once.

James Harper:

Which is super digitized.

Narrator:

Microchips. Oh, you have microchips in the floor? In the floor.

And also in the bags. No way.

James Harper:

The wall's so high that the workers who were cleaning them, they had these like modified extra long brooms.

Narrator:

A broom attached to a very long piece of bamboo. Cleaning the wall.

James Harper:

And once the green beans have been sorted, classified, next door in the offices is where they're graded for their quality.

Fabrício:

They cut like this. And again, the scale here was unbelievable.

James Harper:

The coffee table designed for maximum efficiency.

Narrator:

It's like a Chinese buffet table with like a spit bucket down on the floor in front of you.

James Harper:

Fabrizio and I, we eventually make our way into the conference room. Sit down. And there he explains to me how over the years, Zan Coffee has managed to sell to a lot of roasters.

113 roasters. In 31 countries. And now they're earning exceptionally good prices.

For the lower to mid-range specialty coffees, they're earning 20, up to 30% over the C price. Fabrizio himself tells me we are not the cheapest.

Fabrício:

If you take score and price, you are able to find better deals than Zan Coffee in the marketplace, even in El Grado.

James Harper:

If Vicente could earn what Zan Coffee are earning consistently, his farm would be in a good, strong place. He could take some risks to produce even higher quality coffees. Like growing very temperamental exotic varieties of coffee.

Or maybe doing some crazy experiments on processing. Or simply paying himself back for all the capital he's already invested in the farm. The better part of a million dollars.

And what I found amazing about Zan Coffee, they set the prices they want 20% premium over the market.

Fabrício:

That's the value that Zan Coffee tries to add to the producers.

James Harper:

They don't discount.

Fabrício:

It doesn't make sense to sell off the coffees giving discounts.

James Harper:

And it's the same price for everybody.

Fabrício:

Prices direct to the roasters and in all the markets are the same, yeah.

James Harper:

This is pricing power. Zan Coffee has a lot of it. And this pricing power reflects the value they deliver to roasters.

It's taken them many, many years to get to this point. But what they have now is this secret formula. Well, not so secret actually.

Because Fabrizio, he's always very open to talk about it. And he told me what it was. First things first.

You don't just sell to anybody. You identify customers who would be the best fit for you.

Fabrício:

Those that are specialty driven. Not that much price sensitive. Able to purchase clothes or have the potential to one container load.

And are open to relationship. We've stopped doing business with roasters that were not open to that. And also value extrinsic attributes.

James Harper:

Extrinsic attributes. Like the story of the coffee. If you go on the website Zan Coffee, make it clear.

Like they provide work for almost a thousand families in this community. They have a set of values that I could see when I was interacting with Fabrizio. Transparency, innovation.

And when they find buyers who value these things. They approach them very carefully. This is not hard sales.

Fabrício:

We try to be doing it in a less active or aggressive way. We approach them to see them in the events and trade shows. We ask a lot of people to try to get in contact with them.

And then when they begin a relationship with a buyer, they stay super close to them. We take really good care of our customers. Quality wise, consistent service, communication, everything.

The whole package.

James Harper:

When my interview with Fabrizio comes to an end.

Narrator:

Should we have some lunch? We've been talking for two hours. Can you believe it?

Two hours.

James Harper:

I gotta say, I felt like I had been taken on a masterclass for sales. Not just sales for coffee farming, sales generally. This is how you build pricing power.

For certain roasters, there are very few other Brazilian farms that deliver what Zan Coffee are delivering. And offering all this value has allowed them to differentiate themselves. And this differentiation is what makes you special.

It's what gives you pricing power. And so when I think back to Vicente and Marina at Fazenda Paraíso, this is the future I see for them too. And I'm confident because, you know, Vicente, he brings to coffee farming this extraordinary mindset.

A mindset from the mining world. In the mining, our time is very different. In his former life as a mining engineer, his projects weren't measured in, you know, a year, five years.

Vicente Pereira:

A short time is 30 years. A medium time is 50 years. And a good time for a mine is 100 years.

James Harper:

And already in the first 10 years, he did something that was remarkable in Brazil. He transformed a commodity coffee farm to growing almost entirely specialty coffee. This is no small feat.

When I brought that up with Fabrizio Zan Coffee, he was super impressed. They had 85 percent, 80 plus.

Fabrício:

That's a great number. One of the best I've ever seen.

Vicente Pereira:

Vicente switches to Portuguese to express himself better. And says, look, those first 10 years, the plan was to get into specialty and we did it. Now, the plan is to get better prices.

James Harper:

So, watch this space. You might find a packet of Fazenda Parisa coffee in a roastery near you soon. And so, zooming out, we've seen the work that Vicente Meina have had to put in to break out of a traditional system of selling coffee in Brazil, mostly to multinational exporters.

A traditional system that didn't give him the prices to grow quality coffees. But by meeting roasters directly, face-to-face in Brazil, or abroad using, for example, Algrano, he now has an opportunity to speak directly to roasters, have some pricing power, and earn the prices he needs to keep this farm long-term sustainable. It is not an easy path.

It is not for everybody. But for those who want to do it, this is what lies in store for them. And for me, as a coffee professional, this story has humbled me.

You know, it's very easy to sit back in a consuming country, see all these coffees from all these different farms, and just think, ah, this is great. I'll just pick and choose what I want. But behind each one of these coffees is this challenge, a challenge for a family.

And sometimes, in the case of Fazenda Parisa, one person's dream to get connected back to the land, produce delicious coffee, and a daughter who wants to work closely with her family. In the next episode, we head over to the south of Colombia and work our way up the Andes mountain ranges to look at two farms, one commodity, one specialty, and ask the question, why don't we see more farmers getting the specialty? Thanks so much for listening.

Now, that melody you heard a couple of times in this episode, do you like it? I've been learning the gospel scale recently, and that's been like my favorite jamming tune for quite a while now. Now, are you curious to see Fazenda Parisa and San Coffee for yourself?

Judge, are they really as beautiful as James says they are? Visit my Instagram because I've got photos, I've got videos. Link in the show notes.

Now, here's a quick preview of what's coming up next in the series. We're heading to the mountains of Colombia to trace two coffees, a commodity one and a specialty one, as they make their way from the Andes down to the port. And on the specialty side, we're going to be following the path that coffee takes through the Colombian exporter, The Coffee Quest.

Things get messy, loud and dusty, but fascinating. After that, I'm creating an episode on water that I probably should have made a very long time ago. It's a simple, clear breakdown of how the minerals in water affect your coffee and how you can figure out what kind of water you have and how you should treat it.

Along the way, I'm taking you inside BWT's factory in Monserre, Austria, to show you just how rigorously they test their filters before they end up in your kitchen cafe. After that, I wrap up this series with a deep dive into a philosophical question. What is specialty coffee?

We take a look at its history, its values and where we might be headed next. Now, in case you missed it, at the beginning of the series, we went on a cold brew adventure with Toddy to discover why cold water brings out flavors you just can't get with hot water. Speak to some of the world's best coffee scientists to figure that out.

And then in the episode before this one, we go on this topsy-turvy journey into how flavor is created during roasting, including a visit to the Probat factory. To see a roast so fast, many people have literally said, I don't believe that happened. I'm not lying to show you, it did.

This Science of Coffee series from Filter Stories is produced by me, James Harper. Thanks so much for listening, and I'll speak to you next time.