June 8, 2021

What are virtual coffee auctions?

Coffee auctions are nothing new. They have long since been a platform to showcase high-quality coffees to buyers from around the world, and to discover what the market is willing to pay for them.

In recent years, coffee auctions have started to go virtual. Online auctions have been held since 1999, and have continued to grow for the past 20 years.

Today, many of the most prominent auctions in the coffee sector, including Cup of Excellence (CoE) and Best of Panama (BOP), have a notable online presence.

To learn more about virtual auctions and the role they have in today’s coffee sector, I spoke with four industry experts. Read on to find out what they told me.

You might also like our guide to green coffee auctions.

Virtual auctions: An overview

For many years, coffee auctions have been a staple of the coffee sector. They are a good way to drive sales and also to create awareness about coffees from a specific origin. They can also support producers to build relationships with buyers and get higher prices for their coffees. 

Auctions are either held in person or online. Each format has its pros and cons. They also often take place in tandem with regional or national coffee quality competitions – the winning lots are often then offered at the auction.

In-person auctions are naturally more intimate, and allow producers and buyers to develop relationships and network. It’s also a good opportunity for buyers to get to know the farms, as they usually take place at origin. 

However, it can be costly for producers to travel to and participate in the auction. Beyond that, there is also the opportunity cost of not working on the farm.

On the other hand, virtual auctions provide a more flexible and cost-effective alternative that can be more appealing to buyers. For producers, they offer the chance to reach a greater pool of international buyers, and potentially sell their coffee for higher prices as a result.

Both online and in-person auctions also generally take a fee, which is typically a percentage of the lot’s final sale price. 

Willem Boot is the CEO of Boot Coffee. He is also the auction manager of Gesha Village and Port of Mokha, auctions that take place in Ethiopia and Yemen, respectively. Alongside this, he is a co-owner at Finca Sophia in Panama, which won several awards at Best of Panama 2020.

“Virtual auctions are a great opportunity to discover the quality of unique coffees and to find out [the] price [at which] these coffees can be sold,” he says. “I think those are the two main benefits: discovering quality and discovering price.

“[Virtual auctions] are such a suitable way of exploring those two, because the work that importers normally do doesn’t necessarily always allow the quality to shine,” he explains. “It also doesn’t always allow the producer to get the maximum benefit from their work. So, for that reason, I think auctions for that reason are a great platform.”

Virtual auctions & Covid-19

Throughout 2020, the Covid-19 pandemic led to widespread event cancellations across the coffee industry, including the World Coffee Championships and a broad range of other expos, competitions, and trade shows.

In response, we saw the rise of virtual coffee events, the popularity of which spiked thanks to the various travel restrictions put in place to combat Covid-19. This has continued into 2021.

Understandably, most in-person coffee auctions in the past 12 months have been reorganised, rescheduled, or cancelled in the face of the pandemic. But what did it mean for auctions that were already supposed to be virtual?

While many would naturally assume that a virtual auction would have been easy enough to organise through restrictions imposed by the pandemic, Willem explains that there was a host of new challenges for organisers to contend with. 

This is because most online auctions are preceded by coffee quality competitions or other associated events, which typically have a limited number of in-person attendees. It was at this point, he explains, that the challenges started to arise.

“It put more emphasis on the organiser and their logistics,” he explains. “It has meant that coffee producing countries have to be more creative when organising them.”

Willem also notes that the logistical burden of moving coffee has made organising auctions of any kind difficult – virtual or otherwise.

“One limiting factor is the logistical difficulties of moving the coffees,” he says. “In some countries it was hard to get the necessary permits for producers to be able to move the coffee from A to B. At the beginning of the pandemic, this was the real issue.”

Wilford Lamastus Jr. is a producer at Lamastus Family Estate. He explains that the biggest changes for BOP 2020 were not to the structure of the auction (which has been online since its inception) but with the associated competition. 

“The BOP auction is designed to be completely virtual and remote,” he explains. “The only change was the celebration, because [the producers] did not meet in one place to see the auction as in previous years. The auction in general was exactly the same system. 

“However, for the BOP competition there were changes. For the national round, the coffees were chosen by the judges and were tasted on different farms with a maximum of two people per room,” Wilford adds. “They were done individually, or with a few people to reduce the risk of infection.”

David Pohl is a coffee consultant, a buyer at 49th Parallel, and Farm Director at Finca Sophia. Much like Wilford, David says that it is much harder to organise cupping sessions when the judges aren’t all in the same room.

He says: “Harnessing technology to find the right way to help people calibrate was key, and giving time for that calibration to get accurate results [was similarly important].” Deliberations and final decisions on winning lots had to be carried out through Zoom or other video conferencing platforms.

From a financial standpoint, David says the biggest concern about BOP 2020 was that “people wouldn’t bid or that they wouldn’t bid the same”. 

“Because of the pandemic and all these variables with roasting, shipping, [the demand], everybody was super nervous.”

Despite this, the average bid at the auction ended up being high, and the world record was broken for another year running. Even through the economic downturn and organisational issues caused by Covid-19, interest in ultra high-scoring coffees continued.

Should every coffee producing country have an online auction?

Virtual auctions have been organised for more than two decades. Among the earliest are BOP and CoE, which are arguably still two of the most prominent and successful.

However, over the years, more and more have started to appear, giving producers who grow high-quality coffees better access to international buyers. The Port of Mokha auction in Yemen, for instance, was first held in 2018, and Gesha Village, which Willem is involved with, launched in Ethiopia in 2017. 

David says that more online auctions can have a benefit for more remote or lesser-known origins.

“[It can support] regions of the world that have been very cut off,” he explains. “It allows them to organise an event and sell good coffees at a virtual auction, where the price to participate [for buyers] is relatively low. 

“That means there is enormous potential for producers to reach a whole new market and much higher prices, and subsequently change the course of their lives.”

In these origins, David proposes a “hybrid auction” model, with simultaneous online and in-person bids. 

“You want to give people opportunities to participate in whatever way works for them. It’s like when newspapers are available in print or as digital,” he says. “I really think hybrid auctions are an intriguing possibility for the future.”

Willem says that he expects the online auction model to grow across different origins. “More and more, I think it will start to be an alternative to specialist importers,” he says. “Buyers enjoy auctions, and I think they are going to be more and more diverse. We’ll see more of that over the next few years.”

Breaking records at online auctions

Willem Boot and David Pohl are both part of Finca Sophia, which sold its Olympus washed Geisha for a world record auction price of US $1,300.50/lb at BOP 2020. At the time of writing, this is the highest price ever paid per pound for coffee. 

So what does this show?

Willem says: “Despite the economic decline that we are seeing with Covid-19, there are still plenty of motivated buyers for super high quality coffees. 

“I would say that the fact that we broke the record and increased it by 30% this year is an enormous encouragement.”

In addition, David says: “Our first action after winning the award and getting that incredible result was to give all the full-time workers on the farm raises. The idea is to build on that, and continue to give opportunities through the farm to do more, to have other opportunities to develop professionally.”

Plinio Ruiz is the former President of the Specialty Coffee Association of Panama. He says that these successes mean so much more than the revenue. 

“Reaching that level makes the name of Panama coffee resonate, and shows that we can sustain the sale of a coffee that costs a lot to produce. 

“[But] the prices depend a lot on the investment behind them. Without that investment, the result in the final cup will not reflect the quality associated with the price.”

The past 18 months have held no shortage of challenges for the coffee sector. Travel restrictions, logistical problems, and shipping delays have made buying green coffee a more complex process. Buying at auction is no exception.

But despite a challenging outlook at the beginning of the pandemic, most virtual auctions have managed to continue selling green coffee at high prices, with yet another record-breaking lot at BOP 2020.

Exactly what this means for the green coffee auction model is unclear. Some, like Willem and David, believe it will inspire a move towards a “hybrid auction” model, which will become more and more prevalent as time goes by. For less renowned origins, it may be a useful tool to raise awareness and improve producer incomes.

Enjoyed this? Then read our article on how green coffee is bought and sold.

Photo credits: Finca Sophia, Port of Mokha, Best of Panama, Specialty Coffee Association of Panama

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