Speech by M. Scholer for the presentation of the Gourmet Coffee Project at the informal JAG,
Wednesday 12 April 2000.
Mr Chairman, Ladies and Gentlemen. Good Morning.
I would like to tell you about the activity of the Gourmet Coffee Project which received most attention in international coffee circles and in the press: The World’s first on-line Internet coffee auction.
Let me give you the background:
During the 1990s, buyers of Brazilian coffee invented the so called Cup of Brazil contest - a competition where Brazilian coffee producers would bring their best qualities and compete for sale at good prices. A year ago, members of our Gourmet Coffee team got the idea of bringing this spirit of competition on to the buyers. The team developed the idea of selling the coffee at an Internet auction.
At ITC we were excited about this idea and arranged the Gourmet Coffee Project’s practical and financial support.
The event was split up in two phases:
- a selection of coffees for the auction - October 1999
- the Internet auction - December 1999
The selection of coffee was made through the "Best of Brazil" cupping contest. More than 300 estates brought coffees to the contest where only 10 would be selected for the auction. Leading professional coffee tasters of several nationalities participated in the "cupping".
The 10 best coffees made up a total of 900 bags. This is 54 tons.
So far so good.
Next step would be the auction itself. During the following weeks, the team had many meetings, coordinated by the Specialty Coffee Association of America.
This association had already assisted our project with traditional marketing. The Specialty Coffee Association of America has members all over the world. Their web-site is visited by a large number of coffee people and companies in the coffee business. It was therefore used to invite bidders to the auction.
23 applicants qualified as bidders. One of the bidders was a group of small companies that had joined forces to quality. In other words, this was not only for the "big boys". Bidders were from the US, Brazil, several countries in Europe and Japan.
The team worked out a very long list of all the things that could possibly go wrong – from a meltdown of the server to wrong coffee delivered to the wrong buyer at the wrong time. A lot of effort was then made to avoid such unfortunate events. I will spare you for details on legal aspects and just mention that the bidders were provided with instructions regarding the auction and small samples of all the coffees.
One week before the auction, a trial run gave the participants a chance to learn how to press their keyboards.
In addition to the Gourmet Coffee Project, the main players in all of this were :
- Brazilian Specialty Coffee Association
- A Brazilian co-operative which acted as legal seller of the coffee
- Specialty Coffee Association of America
- 23 bidders
The bidders then got a pass word giving access to the auction. ITC also got a pass word – but as observer only. The auction should last for two days. It would be opened and – two days later - closed during daytime in the USA because the web-master was based in California and it was evident that the risk of failure would be highest around opening and closing.
column at the far left is called "Item" It gives a code for each of the 10 coffees.On 15 Dec. at 16:59 Geneva time, bidders and observers were able to see this on their screen. Let me lead you through it:
The
The
second column shows the number of bags available and the third column shows the minimum prices fixed by the coffee producers.Column four is the value of the bid in total – automatically calculated.
Column five is still blank. It is for the secret code for each bidder. All bidders were guaranteed full discretion.
The next column gives the names of the coffee producing estates. With a "click" one could get a long description of the coffee and a presentation of the estate, including pictures.
Next column indicates the time. It is still blank as the auction is not yet open as you can see at the far right.
Let’s look at the next picture – 17:00 Geneva time. The bidding is now open for the first coffee. As I said before, the auction would last for two days and as you can see at the right hand side in the column called "Time" there is still 1 day, 23 hours, 59 min. left for bidding on this coffee.
Every five minutes a new row would be opened.
Let’s take an example. Look at item 105. You will find it in the middle of the left hand column. The starting price is 1.26 US Dollars/lb. FOB Brazil. This price already includes an expected gourmet premium.
Let’s go to the last hour of the auction. As you can see the High Bidder column is now filled with codes. Item 105 has gone up from 1.26 to 1.48 – now offered by 20F0F4 – whoever that is in Japan, Brazil or Norway.
As you can see to the right, there is only 4 minutes and 18 sec. left for coffee item 105. There is still 24 minutes to go for the last coffee at the bottom.
The last picture is the closing positions. Within the last 4 minutes, item 105 went up from 1.48 to 1.91 You can imagine the hectic moments in 23 locations around the world.
Although we were not bidders at ITC, I can assure you that we also felt the excitement during the entire duration of the auction.
Was this a success ? Yes, in at least two ways:
- the technology worked, and
- prices were well above expectations.
Were everybody happy ? No ! The Japanese bidders were not very happy. They got no coffee although Japanese buyers often pay the highest prices for gourmet coffee. They gave us two explanations:
1. There is not much tradition for auctions in Japan and the bidders felt a bit unfamiliar with the whole event.
2. The auction closed in the middle of the night in Japan. Those who pressed the buttons had limited authority and when the prices really went up during the last hour they didn’t dare to wake up their bosses who were at sleep at home.
So, as the old song goes: They’ve got an awful lot of coffee in Brazil – but no coffee for Japan this time.
It is not possible to calculate the total cost of this event. But it is important to mention that although the auction got a lot of attention in coffee circles the total cost to the Gourmet Coffee Project for all of this was less than 60,000 US Dollars. A lot of mileage, we feel at ITC. And the balance of more than 1.3 mill US Dollars was used on the many other activities which you have heard about already.
Asked whether this could be repeated for coffee from other parts of the world or for other commodities – my brief answer is: Yes ! But, it is important to note, that although this is now a proven technology there will always be many elements that have to be tailor made. The concept will now be shown to all coffee producing countries who can investigate their own possibility of using this avenue in the future.
And as we all heard Mr. Peter Walters say earlier today: New technologies for traditional commodities. This is what ITC is all about.
Thank you for your attention.
I will now leave the floor to Mr. Caleb Dengue, Project Manager at the Common Fund for Commodities to express the donor’s view on the Gourmet Coffee Project.
