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Demystifying the coffee supply chain

Written by algrano
on February 16, 2021

Companies start the year with a budget. Budgets are inflexibly based on history. Or did you propose or approve a 2020 budget that foresaw a pandemic? That’s why, during the year, budgets are updated to forecasts. Once the year is over, companies prepare their year end financials to finally know the success of their actions during the business year. Because transparency is at the core of Algrano, we decided to share the relationship between our 2020 budget, the forecast and the year end numbers with you. Let’s face the facts.

In March, with governmental measures to fight the COVID-19 pandemic, roasters’ budgets for the year proved to be wrong. The coffee market was split in two: on one hand, those who experienced growth - the roasters who targeted coffee drinkers at home, and on the other hand, roasters, whose distribution channels focused on out-of-home coffee consumption. One quarter in the year, it was obvious that Algrano’s budget would not hold. Because we knew that 70% of the beans purchased a year earlier on Algrano, were sold through out-of-home-channels. The forecast for the rest of the year looked quite pessimistic. We expected to lose most of the recurrent business and 2 years of growth. When the company’s topline is expected to decrease, managers are tempted to cut budgeted costs. Instead, Algrano decided to not rely on the forecast built on a historically grown customer portfolio and adapt together with the market. "When everything else slows down - we speed up" - said our CEO Raphael Studer when presenting the updated action plan for the year. 

Why did we decide to go full-speed? We had three reasons to believe that it was a great momentum for Algrano: 

 

  1. Roasters using Algrano are dynamic entrepreneurs. We were convinced that those affected negatively by the pandemic will adapt and develop quickly new ways to serve their customers at home, be that through capsules, or online distribution or retail stores. 
  2. Algrano’s business model is lean: unlike coffee importers, Algrano does not hold stock. There was no coffee that piled up and was looking for a buyer. We had more flexibility than the traditional players
  3. Like every business, COVID-19 forced roasters to think about digitalisation. With an online marketplace Algrano was better suited than anybody else to embrace the new opportunities. 

Mid-May there were first signs that our courage was paying-off. The team introduced amazing initiatives: Algrano had hosted the first online origin trip, organised a European wide webinar with Kaffeemacher, hosted a session with two large roasters Gringo Nordic (Sweden) and Neues Schwarz (Germany) on how to demystify digital relationships, gave roasters an online presence on Algrano, hosted a virtual cupping with IKAWA and much more to leverage the power of digital and create new opportunities for the two worlds to connect. And there was this one number that made us proud: we doubled the speed in gaining market share. 

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Compared to 2019, the number of trades between roasters and growers doubled on Algrano: every 4 hours a coffee purchase was registered. 70 new growers sold coffee for the first time on Algrano. 111 new roasters bought coffee for the first time on Algrano. In other words, every week more than 2 new roasters bought from a grower online! With the increased activity on the online marketplace, earnings increased by 50% compared to 2019.

 

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In a nutshell; in 2020 Algrano proved the forecast wrong. Based on this strong achievement, the budget of 2021 is ambitious. Despite lockdowns continuing throughout Europe, 6 weeks into the year, the forecast for the first quarter result looks promising. But remember: while budgets give you guidance and forecasts are your benchmark, both are never as dynamic and flexible as you are. Our strategy is clear: full speed ahead!

 

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Do you want to be part of the transparent green coffee community and drive the change with us? Sign up for Algrano and start sourcing coffee directly today!

 

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