Conversation with a coffee giant: MSP Coffee
Most of you might have heard of Arabica coffee. And some of you might be aware of single-origin coffee and single estate coffee. It gets confusing as times and recognising the difference helps develop an understanding of what coffees you're consuming. So, how is the coffee industry structured? One way to look at it is that you can move from species to the region to origin to an estate. This means that coffee can be Arabica, Indian Arabica, Indian Arabica from Coorg or Indian Arabica from Thogarihunkal Estate, Chikmagalur, Karnataka. The level of traceability grants value. And this can go beyond. You can deep dive into the estate by looking at terroir, varietals, processing methods and even what packaging they use to ship coffees. With this amount of complexity, there are only a few estates who can maintain control over what they produce due to constraints such as capital and scale. And there is one such legendary producer - MSP Coffee.
I happened to come across MSP Coffee as a matter of chance. After posting my first set of ratings, they reached out to me via Instagram congratulating me on the launch and how valuable it was to them. Delving further, I found out that 4/8 of my top-rated coffees belonged to MSP coffee. In certain ways, this was a revelation for me. I had to get to the bottom of this. So I connected with Navin Rajes, who runs MSP Coffee along with Ashok Rajes (older brother) and Kamalesh Pandianathan (cousin). The 3 brothers run this business together and Mohan Rajes (father of Ashok and Navin) oversees the entire operation.
Navin was kind enough to give me time over call and chat. To keep it as consumable as possible below is an abridged version of our conversations over the last few months.
NN: Producers are responsible for quality control at the green coffee level. And good quality needs a significant amount of investment in harvesting, traceability and processing techniques. There are only a few producers in India who have been able to achieve quality with scale. I believe that it has to be something related to the viability of coffee growing. Help me understand this.
NR: The economics of coffee growing is complex. We need to first understand what all factors play a role behind producing coffee. For us, it is all about striking a balance between commodity and specialty coffee:
Demand - Commodity coffee is traded via exchanges and they have set processes in place to determine prices. Specialty coffee on the other hand is driven via relationship sales. Here, we have to work with roasters to understand what their customers need and what they need. We get better premiums and recognition for our efforts in specialty coffee but the gestation period is much longer.
Sale agreement structures - When it comes to commodity, we have surety in payments as it is completely process driven. There are industry standards there. But when you look at specialty coffee, agreements can be nuanced. Some roasters may pay us a year in advance to book the harvest and some would want the flexibility to purchase from the safety bulk basis demand.
Paying salaries and seasonality - The coffee harvests are seasonal i.e only twice a year. But we employ people all year round which requires us to have working capital in place. While advance payments are great for business, we also try to maintain a cash flow all through the year so that it helps us plan better and not eat into our buffer. Specialty coffee can be seasonal by nature whereas commodity can be traded all year round. So that too becomes a key decision criterion for us to smoothen our running.
At times, we have to resort to selling specialty beans in commodity for working capital needs but we take a hit to our books in doing so. Hence, we think that vertical integration makes more sense. This is where the real money is.
NN: Tell us more.
NR: Let's look at the numbers. We have a 250 tonne capacity for specialty beans. 80% is sold internationally and 20% in India. Of the total, 160 tonnes is sold at specialty prices while 90 tonnes is sold at commodity. This is because of the balance that we need to maintain as explained earlier. Now, commodity coffee is sold a price which is a fraction of specialty coffee. Processing for specialty takes additional capital and operational expenses. When you account for damages and sampling, the cost for producing specialty at an aggregate level considering the specialty-commodity price mix becomes high enough to lead us to the same margins as selling only commodity coffee. At the end of the day, we do not have any real incentive to produce specialty.
Unless the 90 tonnes potential specialty that we are selling as commodity in can be sold for the right prices globally. Quality and scale can then go hand-in-hand and we start getting better prices.
NN: How about demand from Indian roasters?
NR: We are looking to build relationships with Indian roasters and personally, I am impressed by the talents of our roasters and the growth that I have witnessed in our home ground. While it is still nascent, we help Indian roasters with our best quality produce to create that desired experience for their customers. You will see some exciting launches coming up in the next few weeks.
NN: This is amazing to know. I have personally loved every coffee which belonged to the house of MSP Coffee. After our first interaction on Instagram, I was very interested to know more about MSP Coffee and your website was quite informative. So I won't delve in that. Instead, I want to understand your perspective on a few questions I had. I've recently seen that the hype of certain varietals like Geisha helps seek better pricing and further expedites the development of the coffee space. How are you as a producer looking at this given that it’s a long term game to be played?
NR: As an existing plantation, most of our planted areas are an average age of 15 years to 60 years old. Currently, we have done multiple controlled processing tests with the existing varietals to see what works best in the cup for each varietal. Terroir, elevation, soil type, shade patterns and process methods suited to them, all play a contributing role in the cup quality. We have worked out what works best for all our existing varietals. Moving ahead to re-planting for the future, we will take into consideration an evaluation of our existing seed material, disease resistance of new seed material in comparison to existing material and our changing climatic conditions.
NN: This form of traceability and control over scientific parameters is mind-blowingly complex for an average coffee consumer. Most of us don't understand how it affects the output in a cup. Tell me more about role of terroir, harvesting and processing.
NR: Terroir is extremely important and contributes to the base material you have to work with. It would be fair to say that 60% is contributed by terroir and the remainder 40% can be worked on via the after harvest processing methods. Nature too has to take its course. We have noticed a vast variation in the cup from a cherry harvested at optimum colour/brix that has spent 9 months and below on the plant vs the same cherry that has spent more than 9 months on the plant. We have worked on several processing methods, each of which is well documented. Every season we incorporate approximately 3 new methods in smaller trial lots. Once found economical, repeatable and scalable we then establish this as a larger batch in the following season. The science behind the process is very important. Moreover, the documentation of various influencing factors are important to be able to replicate the process and produce identical batches of coffee.
Eg: A method used in December will not necessarily work in February with the change in day/night temperatures, hours of sunlight etc. However, the same field will be selectively harvested over several rounds from December to March. So this is where record-keeping and monitoring all aspects of the process play an important role.
NN: What do you expect to be much more disruptive to specialty coffee industry? I view processing as a key to disruption
NR: Processing is key. But repeatability of a process is much more important. As a large grower we focus on making larger batch sizes and we must factor in all the environmental changes that occur during the 3 - 4 months of harvest. Cleanliness and hygiene is essential and will contribute to the final cup. Delivering on quality is of utmost importance in specialty coffee. The entire batch should be identical in the cup with minimum to no variations.
NN: I couldn't agree more. They do say that "Consistency is Power". But this leads me to my next question. You told me earlier sometime that your move into specialty coffee has been fairly recent i.e. in the past decade. How did you do so much in such a short span? How did you get the attention of the roasters?
NR: As a family business, we took the joint decision to dive into 100% specialty coffee and do all it takes to produce absolutely amazing coffee. By focussing purely on the product we seemed to get all the right attention from the industry. It definitely helped that we have a family legacy in coffee for over 100 years. Making personal connections in the industry also plays an important role. All our roasters are like extended family, most have visited us, stayed with us and we often have a casual chat on all matters industry related and non related. Building relationships, maintaining those relationships and making them work for both of us are very important. We tend to be rather casual and laid back, and keep our relationships light and built on trust.
NN: I have heard a lot about the relationship that you share with roasters of all sizes. It's great to see that you do not differentiate and we need more people like you to support the industry. But I am sure you too feel the need to differentiate from other producers. How are you doing that?
NR: We believe there’s not enough specialty coffee producers and that there’s a place for everyone to capitalise on. Specialty coffee production involves dedication, failure, heart break and then the rewards once you find your place in the market. Those willing to take the plunge will be rewarded. As a company we keep pushing the boundaries higher each year. We have quadrupled our specialty coffee output in the last few years, and raised our average score from 83 to now 85. We strive to set our average score around 90 in the near future and are well on the way to achieving it.
NN: Quick question - one word to describe MSP Coffee?
NN: I sensed it all through our conversation and in your coffees. I want you to outline a few asks from the key stakeholders in the coffee ecosystem - customers, roasters, traders and consultants.
NR: Customers should give us feedback - positive and negative. Roasters should trust us, share proactive feedback and maintain traceability. Traditional traders are slowly dipping their feet cautiously into the specialty sector, and this is a positive sign. We anticipate it to grow more. And working with several roasters and cafés around the world, slowly but surely making a mark in the specialty sector globally is what we look forward to.
NN: What else is there to MSP Coffee other than coffee? Tell us something we should know.
NR: Giving back to Nature.
We replant around 20,000 native tree saplings every year to return the Shevaroys more towards its native tree population.
We currently harvest 4% of the rainwater received by means of contouring, storage ponds, channeling streams, building revetments (there's more than 40 Kms of revetments built on the farm using native rock and traditional building methods).
We are now consistently increasing the water storage capacity to harvest more of our rainwater.
We adhere to all waste water management procedures - we are UTZ and Rainforest Alliance certified.
We have stopped the use pesticides and now adhere to more eco friendly methods of pest control. This we believe has a huge influence on the taste profiles of the coffee (some of our fields overgrown with weeds have come up with some amazing taste profiles, we are yet to ascertain whether the weeds played a role in influencing this).
NN: This just keeps getting better and better! I am sure there is more to come. Let's wrap this up here.
Getting to know Navin Rajes and how MSP Coffee works was an information bomb. I cannot thank him enough all his insights and more importantly, the patience with which helped me understand and process all of this. Honestly, I am not sure if words can justify the amount of effort he and his team has put in behind MSP Coffee. But I am confident enough to say that the legacy of MSP Coffee is in safe hands.