How to Improve Profits: 4 Strategies for Coffee Producers

Increased profits can happen as a result of hard work and luck. But they’re more likely to happen thanks to hard work and strategy.

Strategy is the long-term vision of a company. It’s its path to success – to increased sales, greater demand, and lower costs. And it’s not just large businesses that need it. Coffee producers do too.

Here are four strategies producers can take advantage of – marketing, financial, operational, and disruptive – and how to implement them.

SEE ALSO: Farm, Mill, & Roastery: How Producers Can Vertically Integrate

La Palma y El Tuca uses social media to market their nano lots. Credit: La Palma y El Tucán

1. Marketing Strategy

A marketing strategy is centred on creating a strong brand. The key element here is your philosophy. Emphasizing this to premiumize your coffee and so raise the price. But to use this strategy effectively, it’s important to have high-quality products.

• How to Use a Marketing Strategy

Start by creating your brand. A good place to begin is with your story. Next, come up with a brand statement (a summary of your brand), brand mission (your goals), brand core values, and your brand personality.

Once you’ve done this, you must communicate it. I believe the top three methods of communication are attending coffee shows, using social media (Facebook and Instagram), and creating email campaigns.

Whatever your form of communication, it’s important to be consistent. A brand is created when you express the same message over and over again.

• Examples of Producers Who Use Marketing Strategy

Producers using this strategy include Santa Felisa in Guatemala, El Injerto in Guatemala, and La Esmeralda in Panama. They all attend major coffee shows, have their own cupping labs where they can entertain visitors, have good presence on social media, and have their own websites. This means their brand is well-recognized.

Additionally, many baristas use these farms’ products for competition, endorsing their brand on a world stage. And they all of them have their own private auction, where they sell their best lots. These facts both get them recognition and establish them as high-quality.

La Esmeralda’s booth at Cafe Show Korea. Credit: Hacienda La Esmeralda

2. Operational Strategy

In this route, you focus on reducing management and increasing efficiency. Companies invest their capital into new technology or other innovations that bring their operational costs down. They may sell at market prices, but they profit by operating at lower costs.

• How to Use an Operational Strategy

If you want to cut costs, you need to understand where your cash is being spent. A good first step would be to keep the accounting of your operation. You can then analyze this and look at how innovations can reduce costs. You can take an agronomical perspective and also a labor perspective.

• Examples of Operationally Strategic Producers

Many – but not all – producers in Brazil are operationally strategic. These are the ones who mechanize their farms, reducing their labor cost.

Café Salomão in Minas Gerais, Brazil. Credit: Café Salomão

3. Financial Strategy

Return on investment is the key theme here. You need to treat your farm as an asset. Then you create value by improving it or using it as a source of cash flow.

• How to Use a Financial Strategy

It’s important that you understand the real estate aspect of coffee if you want to be financially strategic. And the first principle is that developed land is more valuable than undeveloped land.

So how does this work in practice? You may decide to create a coffee plantation and then sell it in the future for more. Or you could find underpriced real estate that’s ideal for growing coffee. When you then grow and sell coffee, it creates cash flow.

• Examples of Financially Strategic Producers

This is a quiet operation; it’s hard to spot when producers are doing this. However, one example is International Coffee Farms in Colombia and Panama. They invite clients to invest in their land, focus on a return on investment, and take a 20% cut to invest in sustainability.

Cuatro Caminos is one of International Coffee Farm’s farms. Credit: International Coffee Farms

4. Disruptive Strategy

In this strategy, you succeed by challenging the normal way of doing business. This is often the most innovative of the four strategies: you need to notice changing trends and quickly adapt to them. Doing so can help you enter new markets as well as offer your existing markets new products and services.

• How to Use a Disruptive Strategy

There are few rules to follow when you’re disrupting an industry – in fact, you succeed by breaking the rules. But if you want to go down this route, it’s important to stay aware of trends both globally and locally. For example, many producers are now opening cafés near their farms – a trend you can take advantage of.

• Examples of Producers Who Use a Disruptive Strategy

Any of the producers who have a café – such as Elida Estate in Panama and their Bajareque Coffee House – are an example of this. It changes their profit model, as well as how people perceive the farm’s role in the supply chain.

Similarly, La Palma y El Tucán in Colombia has a barista exchange program. They’ve focused on creating strong relationships with baristas, leading to those baristas emphasising the importance of the producer. What’s more, many of their coffees have been featured in competition – which goes back to their marketing strategy.

Bajareque Coffee House in Panama. Credit: Bajareque Coffee House

How Can You Choose a Strategy?

As a producer, it’s important to know where you want to be in the next five, ten, and twenty years. It’s also important to evaluate your strengths. If you have a background in agriculture, it may be best to focus on operational strategy.  But don’t feel like you have to choose just route. You can use elements of each strategy to develop your business. In fact, this can make your company more resilient.

So list your strengths, decide where you want to be in the future, and work out the best strategies to get you there.

Written by Keith Pech. Feature photo credit: Herbert Peñalosa

Perfect Daily Grind is not affiliated with any of the individuals or bodies mentioned in this article, and cannot directly endorse them.

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