Coffee merchandising

CHAPTER XIII
SELLING ROASTED COFFEE
AT WHOLESALE

How coffees are sold at wholesale—The wholesale salesman’s place in merchandising—Ten things every master salesman should know—Profit sharing for salesmen—Some coffee costs analyzed—Common sense in cost finding—Terms and credits—About package coffees—Coffee-selling chart—Various types of coffee containers—Labels—Coffee-packaging economies—Practical grocer helps—Coffee sampling—Premium method of sales promotion.

In the United States in 1923, some 1,500 coffee roasters and 4,000 wholesale grocers were engaged in the business of selling roasted coffee in a wholesale way. A number of these also sold green coffee to retail distributers who did their own roasting.

Most of the roasted coffee sold is ground, although in some parts of the United States there is a growing consumer demand for coffee in the bean. Of the coffee sold in trade-marked packages in 1919 in the United States, about 75 percent was ground ready for brewing.

The larger wholesale houses generally confine their operations to the section of the country in which they are located, but some of the biggest coffee-packing firms seek national distribution. In both cases, branch houses are usually established at strategic points to facilitate the serving of retail customers with freshly roasted coffee at all times necessary.

In recent years, too, it has become a general practice for the home offices, or main headquarters, to advertise their product in magazines, newspapers, street cars, and by mail and on billboards; while the branches solicit trade in their territories by means of traveling salesmen, local newspaper advertisements, booklets, circulars, and demonstrations at food shows.

The Wholesale Salesman

The traveling salesman is probably the most effective agency in securing the retailer’s orders for coffee. A good coffee salesman not only sells coffee, but he teaches his customer how he can best build up and hold his coffee trade. He acquaints the retailer with all the talking points about the coffee he handles, how to feature it in store displays and advertisements, how to stage demonstrations and to work up special sales.

If he is a good salesman, he does not permit the merchant to buy more coffee than he can dispose of when it is still fresh, and he shows the dealer the folly of handling too many brands of package coffees. If he sells coffee in bulk, the efficient salesman has also a sound working knowledge of blending principles, and is able to suggest the kinds of coffee to blend to suit the particular requirements of each grocer’s trade. In short, he takes an intelligent interest in his customer’s business, and cooperates with him in building up a local coffee trade.

In order to become a master salesman in any line of business, here are 10 things which it is essential salesmen should know:

1. He Should Know Himself. Happy is that man who has found himself, who is “onto” himself, who appreciates himself at his true worth, neither more nor less, and who, having discovered himself and his right relation to society, resolves to be true to himself. “To thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man.” The master salesman is the man who has found the secret of all salesmanship, and that is sincerity, also the basis of true character, without which there can never be a master salesman.

2. He Should Know Human Nature. The poet has said, “The proper study of mankind is man.” Know your fellows. So shall you become more tolerant, and tolerance helps you to learn patience, another of life’s most important lessons. Knowing human nature comprehends a study of its weaknesses as well as its strength. All kinds of people go to make up the world of your prospects. Try to understand their little frailties and learn how to turn their psychology to their own, and incidentally to your, advantage. But never take an unfair advantage. Always be the gentleman. If you can’t afford to be a gentleman, you have no right to be a salesman. Keep your head high and your voice low. Every merchant is your friend, or will be when he knows you. Treat him as such.

3. He Should Know That He Is First of All a Soldier in the Army for the Common Good, and that as such he has a duty to perform in rendering a real social service to his customers. He needs to get the thought that it isn’t a package of goods that he is selling, but something bigger and better, and that is an opportunity. It is his good fortune, by means of the sale, to open wide the door that will lead his customer to greater efficiency, to success and happiness.

4. He Should Know His Goods. Let no detail, however small, escape you. Get full of your subject. This is the one safe dissipation for every salesman. Get intoxicated with your line. We sometimes say of the successful salesman, as of the genius, “He’s a crazy Indian.” There is more truth here than we are wont to recognize; only he is not crazy, he’s just plain drunk, drunk with enthusiasm for his line. He is literally full of it, and that’s the only way to impart knowledge of any subject to others,—first get filled with it yourself. So, find out all you can about your goods. Be a walking encyclopedia on the subject.

5. He Should Know the Laws of Approach. There is valuable psychology in the right salesman attitude. Always be agreeable, but not effusive. Don’t argue; never lose your temper. Anyhow, the customer is always right; you know that because George Boldt proved it years ago in the success he achieved by building the Waldorf-Astoria on the dictum.

6. He Should Know How to Tell His Story Simply, Truthfully. There is an art in “getting it across.” The mechanics of it are not hard to learn. They are based upon a recognition of the four laws which govern every sale,—Attention, Interest, Need, and Closing the Sale. It is important not to become involved in these laws, or to overemphasize any one of them. There is a time to listen and a time to stop.

7. He Should Know His Prospect. Put yourself into his place. Get his viewpoint. Familiarize yourself with his problems. Be ready with helpful suggestions for their solution. Always talk your prospect’s business. The proposition should ever be, “How can I help you?—how this line will help you, save you money.”

8. He Should Know How to Make His Prospect a Satisfied Customer. To do this don’t sell him something he doesn’t need, or isn’t ready for or doesn’t want, and don’t oversell him; but, having sold him, make good on all your promises. Make the sale fool proof. Follow it through.

9. He Should Know How to Render Service. The transaction isn’t over with the delivery of the goods. For the master salesman this is only a beginning, the starting of an endless chain of goodwill. There are helpful follow-up calls to be made, friendly counsel to be given, a sincere interest to be taken in the merchant’s welfare, and this leads naturally into:

10. He Should Know How to Make His Customer a Goodwill Agent. A continued lively interest in the merchant not only holds his trade and keeps him satisfied, but it soon transforms him into a hard and fast booster for your line. Then the master salesman does not need to be told how to capitalize a grateful customer. The customer himself will show him!

Profit Sharing for Salesmen

In a report made by the Bureau of Business Research of New York University to the National Coffee Roasters Association, the results were given of a comprehensive questionary, answered by 76 leading coffee roasters, and it was recommended that commissions on net profits were the best method of paying salesmen, with the addition of special bonuses and prizes, charging them with 50 percent of the loss on their accounts.⁠[2]

Some Coffee Costs Analyzed

In estimating the price at which he must sell his coffee to make a fair profit, the wholesale coffee merchant has many items of expense to consider. To the cost of the green coffee he must add the cost of transportation to his plant; the loss in shrinkage in roasting, which averages about 16 percent; packaging costs, if he is a packer; the items of expense in doing business, such as wages and salaries, advertising, buying and selling, freight, express, warehouse and cartage, postage and office supplies, telephone and telegraph, credit and collection; and the fixed overhead charges for interest, heat, light, power, insurance, taxes, repairs, equipment, depreciation, losses from bad debts, and miscellaneous items. The average loss for bad debts among grocers in 1916 was 0.03 percent of the total sales, according to the director of business research, Harvard University, who estimated also that the common figure for credit and collection expense was 0.06 percent. The total cost of doing business has been estimated as ranging between 12 and 20 percent of the total annual sales; so that a bag of green coffee costing $16 in New York or New Orleans costs the coffee packer in the Middle West $22.33 to $24.56, according to the expense of carrying on his business.

Common Sense in Cost Finding

A special study⁠[3] of the statistical requirement of the coffee trade disclosed that roasters were prone to regard themselves as merchandising rather than manufacturing establishments, and many of them are neither one nor the other but a combination of the two. The statistical requirements of the wholesaler are comparatively simple, comprising largely a knowledge of the unit costs of warehousing, shipping, and distributing—all of which are frequently expressed as percentages to sales. As a concern departs from purely merchandising activities, however, its statistical needs increase; not only because of the necessity for knowing the unit costs of processing, but also because the manufacturers selling conditions are likely to be more complicated than those of the jobber.

Too much emphasis cannot be laid on the effect of unintelligent competition. A quotes a price; B quotes a lower price, because he needs the business badly; C quotes a still lower price, on the theory that he is a better trader than B; finally, A makes a still lower quotation, because he thinks that there must have been something wrong in his original figure. It is a vicious circle. The result is to debase prices, and to bring about a condition of affairs that can be corrected only by increased knowledge of cost.

The expenditures in the coffee trade may be classified in four major groups. The relative volume of outgo in these groups will vary in accordance with the commodities handled, the styles of packaging used, and the methods of distribution. In order that we get a broad picture of the problem, the various elements may be aligned as exhibited in the following tabulation. These percentages may be accepted as reflecting more or less closely those which might obtain in a house that is producing a wide line and selling to two or more classes of trade:

Raw materials	50% to 60% of outgo.
Packing materials	10% to 20% of outgo.
Manufacturing costs	5% to 15% of outgo.
Commercial and selling expenses	10% to 25% of outgo.

In cost finding, it is necessary to reduce all classes of outgo to unit bases, in elements that may be compiled as increments of the final cost of each product. In some items of expenditure, the unit will apply to only a single product; in others, it will apply equally to a class of products and in some cases to all products.

In considering the four major classifications of outgo enumerated, it will be noted that the unit cost of “raw materials” and “packaging materials” may ordinarily be identified with individual products very readily, and hence offer comparatively little difficulty from a cost-finding standpoint. It is when we come to the numerous items of “manufacturing costs” and “commercial and selling expenses” that the cost-finding difficulty arises. The vital statistical need of this industry is for closer knowledge of the unit costs of doing business, especially in these elements.

An operating-analysis book is recommended to those roasters who wish to install a system of uniform accounting. The plan provides for classifying the expenses. The information thus obtained may be utilized in building up the cost of individual products.

Wholesale coffee trade contract terms and credits are not dissimilar from those in other lines of commerce. The wholesaler helps the retailer finance his business to the extent of granting him 30 to 60 days in which to pay his bill, offering him a cash discount if the invoice is paid within 10 days of date of sale. Until recent years, these terms were frequently abused, the customer demanding much longer credits, and often taking a 10-day cash discount after 30 or more days had elapsed. This abuse was particularly prevalent from 1907 to 1913, when coffee prices were low and competition was especially keen. In addition, the retailers often demanded special deliveries of supplies, which added to the wholesalers costs, and some retailers refused to pay the cost of cartage from the cars to their stores.

With the coming of high prices after the close of the World War, the wholesalers showed a tendency to tighten up their credit and discount terms, the National Coffee Roasters Association especially recommending 30 days credit, or at most 60 days, and a maximum cash discount rate of two percent.

Another trade abuse which has been corrected almost altogether was the practice of “selling coffee to be billed as shipped”; that is, the wholesaler held coffee on order, and billed only when delivered, even after weeks or months.

About Package Coffees

Since the beginning of the 20th century, the sale of coffee in packages has increased steadily, until now (1924) this form of distribution competes strongly with bulk coffee sales. While bulk coffee is still preferred in some eastern sections of the United States, coffee packers are making deep inroads there, to the extent that practically all high- and medium-grade retailers feature package coffees, either under their own brand name or under that of a coffee specialty house.

The prime requisite for success in any package coffee is the composition of the blend. One of the leaders in the field, which we will call Y, is said to be composed of Bogota, Bourbon Santos, and Mexican. In 1924, it was being sold at retail in New York for 45 cents. A competing brand, which we will call Z, is said to be a blend of Bogota and Bourbon Santos. It was being sold at retail in New York at the same time for the same price. Simultaneously, in the retail stores of a well-known chain system, a bulk blend composed of 60 percent Bourbon Santos and 40 percent Bogota was to be had loose for 35 cents.

The second important factor that contributes to package-coffee success is the container. It must be of such character as will best preserve the freshness—the flavor and aroma of the coffee—until it reaches the consumer.

Package coffee has not yet won universal favor. Some of the arguments used against it are that the price is generally higher than the same grade in bulk; that it leads to price cutting by stores that can afford to sell it at about cost as a leader for other articles; that the margin of profit is frequently too close for some retailers; that, when the market advances, some packers change their blends to keep down cost and to maintain the advertised price; and that, when packed ground, there is a rapid loss of flavor, aroma, and strength.

Friends of package coffees point to the saving in time in handling in the store; to the fact that the contents of a package are not contaminated by odors or dirt; that the blends are prepared by experts and are always uniform; that the coffee is always properly roasted, and, in the case of package ground coffee, properly ground; that the brand names are widely and consistently advertised, and that the retailer has the benefit of the packer’s cooperation in building up sales campaigns, by means of booklets and local advertising.

Roasted Coffee Chart Showing Prices Necessary
to Bring Various Percentages on Sales

By A. J. Dannemiller

A = Cost, Roasted and Packed
A	10%	11%	12%	13%	14%	15%	16%	17%
7	7.78	7.87	7.95	8.05	8.15	8.25	8.35	8.45
7½	8.34	8.43	8.52	8.62	8.72	8.83	8.93	9.04
8	8.89	8.99	9.09	9.20	9.31	9.42	9.53	9.65
8½	9.45	9.55	9.66	9.77	9.87	9.99	10.12	10.25
9	10.00	10.12	10.23	10.35	10.47	10.59	10.72	10.85
9½	10.56	10.68	10.80	10.92	11.04	11.17	11.31	11.45
10	11.11	11.24	11.37	11.49	11.63	11.77	11.90	12.05
10½	11.66	11.81	11.93	12.07	12.21	12.36	12.49	12.65
11	12.22	12.37	12.50	12.64	12.85	12.95	13.08	13.26
11½	12.77	12.93	13.07	13.21	13.37	13.54	13.68	13.86
12	13.33	13.49	13.64	13.79	13.95	14.12	14.28	14.46
12½	13.89	14.05	14.21	14.37	14.53	14.71	14.88	15.06
13	14.44	14.62	14.78	14.93	15.11	15.30	15.47	15.66
13½	15.00	15.18	15.33	15.51	15.69	15.88	16.07	16.27
14	15.55	15.73	15.90	16.08	16.28	16.48	16.67	16.84
14½	16.11	16.29	16.48	16.65	16.86	17.05	17.26	17.47
15	16.66	16.85	17.05	17.23	17.44	17.65	17.85	18.07
15½	17.23	17.43	17.61	17.80	18.03	18.22	18.45	18.67
16	17.78	17.98	18.18	18.38	18.60	18.83	19.05	19.28
16½	18.33	18.54	18.75	18.97	19.18	19.41	19.64	19.88
17	18.89	19.10	19.33	19.52	19.76	20.01	20.24	20.48
17½	19.44	19.66	19.89	20.10	20.35	20.59	20.83	21.08
18	20.00	20.22	20.45	20.67	20.93	21.18	21.43	21.69
18½	20.55	20.79	21.02	21.24	21.51	21.77	22.02	22.29
19	21.11	21.35	21.59	21.84	22.09	22.36	22.62	22.90
19½	21.66	21.91	22.16	22.41	22.68	22.95	23.21	23.50
20	22.22	22.47	22.73	22.99	23.25	23.54	23.81	24.11
20½	22.77	23.03	23.30	23.55	23.83	24.14	24.40	24.70
21	23.33	23.60	23.87	24.14	24.42	24.70	25.00	25.30
21½	23.88	24.16	24.43	24.71	25.00	25.29	25.59	25.90
22	24.44	24.72	25.00	25.28	25.58	25.92	26.19	26.51
22½	24.99	25.29	25.57	25.85	26.16	26.47	26.78	27.12
23	25.55	25.85	26.14	26.42	26.74	27.06	27.38	27.71
23½	26.11	26.41	26.70	27.00	27.32	27.66	27.97	28.32
24	26.67	26.97	27.26	27.58	27.90	28.24	28.57	28.92
24½	27.22	27.54	27.84	28.15	28.49	28.83	29.16	29.52
25	27.78	28.09	28.41	28.73	29.07	29.41	29.76	30.12
A	18%	19%	20%	21%	22%	23%	24%	25%
7	8.54	8.65	8.75	8.86	8.96	9.09	9.21	9.33
7½	9.15	9.26	9.30	9.50	9.63	9.75	9.87	10.00
8	9.76	9.88	10.00	10.13	10.26	10.39	10.53	10.67
8½	10.37	10.40	10.63	10.76	10.90	11.04	11.19	11.33
9	10.98	11.12	11.25	11.40	11.54	11.70	11.85	12.00
9½	11.59	11.73	11.88	12.03	12.18	12.34	12.51	12.67
10	12.20	12.34	12.50	12.66	12.82	12.98	13.16	13.33
10½	12.81	12.95	13.12	13.29	13.46	13.63	13.81	14.00
11	13.43	13.57	13.75	13.93	14.10	14.28	14.47	14.67
11½	14.03	14.19	14.38	14.56	14.74	14.93	15.13	15.33
12	14.65	14.81	15.00	15.19	15.38	15.58	15.79	16.00
12½	15.24	15.43	15.63	15.83	16.02	16.23	16.45	16.67
13	15.85	16.05	16.25	16.45	16.67	16.87	17.10	17.33
13½	16.46	16.67	16.88	17.08	17.31	17.53	17.76	18.00
14	17.07	17.28	17.50	17.72	17.95	18.17	18.40	18.67
14½	17.68	17.90	18.13	18.35	18.59	18.83	19.07	19.33
15	18.29	18.51	18.75	18.98	19.23	19.48	19.74	20.00
15½	18.90	19.13	19.38	19.61	19.87	20.12	20.39	20.67
16	19.51	19.75	20.00	20.25	20.51	20.77	21.05	21.33
16½	20.12	20.38	20.63	20.88	21.16	21.42	21.70	22.00
17	20.73	20.99	21.25	21.51	21.78	22.07	22.36	22.67
17½	21.34	21.60	21.88	22.15	22.43	22.72	23.03	23.33
18	21.95	22.22	22.50	22.78	23.05	23.37	23.68	24.00
18½	22.56	22.84	23.13	23.42	23.70	24.02	24.34	24.67
19	23.17	23.45	23.75	24.05	24.34	24.67	25.00	25.33
19½	23.78	24.07	24.38	24.68	24.99	25.32	25.66	26.00
20	24.39	24.68	25.00	25.31	25.64	25.97	26.32	26.67
20½	25.00	25.30	25.63	25.94	26.28	26.61	26.97	27.33
21	25.62	25.92	26.25	26.58	26.92	27.26	27.63	28.00
21½	26.22	26.54	26.88	27.22	27.56	27.91	28.28	28.67
22	26.83	27.16	27.50	27.86	28.10	28.56	28.94	29.33
22½	27.44	27.78	28.13	28.48	28.85	29.22	29.61	30.00
23	28.06	28.38	28.75	29.11	29.48	29.86	30.26	30.67
23½	28.66	29.00	29.38	29.76	30.12	30.51	30.92	31.33
24	29.27	29.62	30.00	30.38	30.77	31.17	31.58	32.00
24½	29.88	30.24	30.63	31.02	31.41	31.81	32.24	32.67
25	30.49	30.86	31.25	31.65	32.05	32.47	32.90	33.33

Note for Example: Coffee costing 13.50 per 100 pounds (see first column), to realize 17% on sales, must bring 16.27; which really represents 21% on cost.

Various Types of Coffee Containers

Five types of containers are used for packing coffee; namely, cardboard cartons, paper bags, fiber or paper cans, tin cans, and composite (tin and fiber) cans and packages. Fiber packages include paraffin-lined as well as those which have been chemically treated with other water-proof and flavor-retaining substances.

The carton is popular, because it takes up less room in storage and in shipment to the packing plant, and also because the label can be printed directly on the package. Another economy feature is its adaptability to the automatic packaging machine, which transforms it from a flat sheet into a wrapped and sealed package of coffee. Moisture-proof and flavor-retaining inner liners and outside wrappers are generally used to prevent rapid deterioration of the coffee’s strength and aroma.

Paper bags are the least expensive containers to be obtained; and, when lined with foil or prepared paper, are considered to be satisfactory. Like the carton, the label can be printed directly upon the bag. They also lend themselves to close packing in shipping cases.

Another popular type of container is the paper, or fiber, can which is made of fiber board with a slip cover. Fiber cans are also made with tin tops and bottoms, the metal parts supplying a measure of rigidity to the package. These composite packages are made round, square, oblong or cylindrical.

Paraffined containers are characterized by an outer covering of glossy paraffin, and are made in various shapes. In some makes, the paraffin is forced into the pores of the paper base, making for added flavor-retaining and moisture-proof properties. In this type of package the label may also be printed direct on the package.

In recent years, vacuum-packed coffee has won great favor, first in the West and latterly in the East. Tin cans are used. Vacuum sealing machines close the containers at the rate of 40 to 50 a minute. Private tests by responsible coffee men are said to have shown that coffee in the bean or ground, when vacuum packed, retains its freshness for a longer period than when packed by any other method.

Labels

Coffee packers must give due attention to certain well defined laws bearing on package labels. Before the federal Pure Food Act went into effect on January 1, 1907, many coffee labels bore the magic names of “Mocha” and “Java,” when in fact neither of those two celebrated coffees was used in the blend. Even mixtures containing a large percentage of chicory or other addition were labeled “Pure Mocha and Java Coffee.” The enactment of the Pure Food Law ended this practice, making it compulsory that the label should state either the actual coffees used in the blend, or a brand name, together with the name of either the packer or the distributer. When chicory or other addition is used, the fact must be stated in clear type directly following the brand name. The reading matter on the label should contain statements of fact only, and should not bear extravagant claims of superior quality or of methods of preparing or packing that have not been followed.

Coffee-Packaging Economies

During the United States participation in the World War, tin became practically unobtainable, and coffee packers turned to paper and fiber containers as substitutes in packaging nearly all grades. In this war period, commercial economy became a fetish in the business world, and coffee packers worked to save not only material, but shipping space, labor, and time. Paper and fiber containers proved to be not only practicable but economical packages. Because of their wartime experience, many packers changed permanently to square and oblong containers. They found that these could be packed “solid” in shipping cases, leaving no unfilled space between packages, as is the case with cylindrical cans; also, that smaller shipping cases could be used. As a further measure of economy, several packers changed from the square “knocked-down” paper or fiber carton to the oblong carton that is made up, filled, and sealed by automatic machinery from a flat, printed sheet of cardboard. This type of container is generally lined or wrapped with a moisture-proof and flavor-retaining paper.

There has been a tendency in recent years to standardize coffee packages as a means of working out packaging and shipping economies. One of the leading American proponents of standardization said: