October 2012 Coffee News

-"Salud, Dinero y Amor"
-Local Dollars, Local Sense
-VFC Financial Update
-Managing for Success
-More News on Facebook

Guillermo has a cousin who, when someone sneezes, is quick to say "Salud, Dinero y Amor." That is to say, she expands the usual Spanish blessing of "Salud" to offer you wishes of Health, Money and Love. Since we talked about the blessings of love last month, it seemed appropriate to talk about Money this month, especially since we are long overdue in sharing our annual financial report. (Perhaps we'll need to write about health and coffee sometime soon too!) 

Local Economies
In contrast to all the typical talk about the economy being thrown around by politicians and pundits these days, we've been reading an insightful book from the Post Carbon Institute's Community Resilience series called Local Dollars, Local Sense that gives examples of people investing in their local economies. We've found inspiration in alternatives being created beyond Wall Street for investors and entrepreneurs alike. A short teaser of the book can be found in author Michael Shuman's article "10 Reasons for Financial Optimism (If You Invest Locally)".

VFC Financial Update
The book has also gotten us thinking about our own finances and we realized we hadn't yet shared our traditional Velasquez Family Coffee annual financial update. (Those of you who have been with us for a while know that we've been giving an annual financial report for quite some time now. 2010, 2009, 2008, etc.)

The truth is, after enjoying an average of 25% growth for the past 5 years, 2011 fell flat with only 1% growth in our gross sales. This concerned us, of course, and so we dug deeper into our numbers and found, to our relief, that sales from the core parts of our business -- Monthly Deliveries and Monthly Mail orders -- had continued to grow. Where we saw declines was in our wholesale and fundraiser customers in 2011. We've been monitoring things closely this year, and are pleased that for Jan-Sept of 2012, we are seeing an overall 20% increase in gross sales from the same time period last year, so hopefully we are back on track.

Nonetheless, we also have had to manage a significant increase in the cost of coffee. Due to world coffee prices spiking in 2010, we increased the price we pay our family members to $3.20 per pound in 2011 and have mostly maintained that at $3.00 a pound this year. In addition, we share with other Fair Trade coffee companies the ongoing cash flow dilemma of buying significant amounts of coffee upfront. Equal Exchange is quoted describing that reality in Local Dollars Local Sense,

"Fair-trade coffee actually requires a lot of up-front capital. Because we're fair trade, we take possession of the coffee as soon as it's harvested. We also provide for pre-harvest financing. So we're paying and financing the stuff we're selling long before we can ever sell it. We believe that manufacturers and sellers of coffee products should be carrying those costs not the farmers. But that means we have millions of dollars of our working capital tied up in inventory." 

Managing for Success
Thankfully we don't have Millions of dollars tied up in inventory, but we are thinking of alternative ways to pay for our large coffee purchases each year beyond our credit union's line of credit and a few low interest credit cards. One idea we've gleaned from Shuman's book, is to invite our customers to prepay for coffee, perhaps 6 to 12 months in advance, and in exchange pass on a slight discount for the interest we'll save. Another is to tighten up our policies around late payments. We might also add a line to our invoices for a strictly voluntary "tip." All of these ideas will hopefully allow us to avoid another price increase in the short term. We're working through the details of these options and hope to roll them out in the next few months.

To increase sales, we're also trying out a few new marketing opportunities that have come our way. Look for our ads in the City Pages Wine and Dine Guide later this month and in Edible Twin Cities. We'll be at our church's annual Bazaar and Art Fair on November 3rd. We'll be listed in the Metro Independent Business Association Local Gift Guide which will be highlighted at its November 19th buy local shopping event. And for the first time, we'll be attending the Green Gifts Fair on November 17th when the 2013 Do it Green directory will also be launched.

More News from Honduras and Fair Trade
October is Fair Trade Month and we considered basing this newsletter on that fine topic. However, since space doesn't allow us to write about everything, we've decided instead to use our Facebook Page to link to a few intesting articles about the current controvesies in the Fair Trade Coffee world as well two news articles from Honduras, one about coffee exports and the second -- just in time for Halloween -- about politicians giving away coffins! (And you thought our politicians had problems!) While you're there - be sure to "Like" us if you haven't already. 

Holiday Flavor Vote 
With colder temperatures and brisk winds, it definitely feels time to start thinking about our annual holiday flavor vote. Our plan for 2012 is to let you choose from among the many great flavors we've offered in the past. Look for an email with a link to the flavor vote survey in mid-October and respond quickly. This year we will be giving a free bag of holiday coffee to the first 50 respondents!