Text: Jonas Hult
It goes without saying that the past year has been very challenging, to say the least. For us at Johan & Nyström, restrictions and regulations have led to a drop in sales and volume together with many uncertainties about what’s laying ahead. However, that’s nothing compared to the uncertainties that coffee producers have been facing this year. Some of the challenges they have been facing and questions that they have been asking themselves are; Will the buyers/roasters even be there after the pandemic is over? Will they own up to their contract or will they default? If they are, will the coffee get shipped in time?
This past year we’ve seen massive disruptions in the logistical chain, which is crucial for coffee. Lack of containers, congestions in ports, not enough vessels, higher shipping costs all happening at the same time, in some sort of “perfect logistical storm”. Even if producers get the coffee out, what about next year? What necessary investments can be made in the farm? What investments can be postponed? Are they forced to sell the coffee to the lowest bidder at a loss to simply cover our losses the best they can?
As said earlier, we’ve seen a drop in sales compare to previous years. Obviously, that leads to less coffee being used and subsequently, less coffee that can be bought from producers. This year, it was especially three producers that were facing lower volumes from us at Johan & Nyström. When working with producers for more than 10 years, giving that sort of news basically makes you feel like the worst person in the world. Needless to say, you try your hardest to come up with a solution to at least ease the blow.
Together with the producers, we tried to find the best way going forward. Surely, us buying as much coffee that we could this year was a given. However, no one benefits from us over stocking on coffee. A big problem for many producers is access to finance, and often (ridiculously) high interest rates. Over 15% isn’t unusual, given the lack of collateral. A signed contract can act as such. That’s why, the second step was extending the length of the contract, to reach into 2023 and 2024.
The third thing was to pre-finance part of next year’s purchase. Meaning that we pay the producers now, for something that we will receive in 12-14 months. I.e., we’re paying for coffee that doesn’t even exist yet.
On a personal note, I’m very proud that we were able to do this, in the middle of a pandemic given the risks that comes with it, as well as the strain it puts on our liquidity in times when basically all other investments are at a stop. I also realize that this might seem like a big pad on the back for ourselves. In part, that’s true. Because I think it’s important for everyone working at Johan & Nyström to feel proud of what we’re doing. However, this is also a big pad on the back for all of you who’s buying our coffee. Without your support, it’s impossible for us to support the producers. So, a socially distanced toast to you!