The Ratnagiri Flywheel
Updated: Aug 23, 2020
Part 1 on Ratnagiri Estate was well received. The day I released the blog, Mr. Ashok Patre called up. He is the brains and the brawns behind this celebrated estate. And it was a brilliant call, for I got an insider view from the legend himself. He was kind enough to explain in details the workings of his business. I could finally try to fit the pieces together and see the entirety of it.
Before we deep dive, let me refresh you on where we left off in part 1. There were 2 aspects to understanding the Ratnagiri hype:
Try the product and be a judge of the what and the why
Get a view from the producer themselves and connect the dots
These are challenging yet beautiful coffees to work with. Gives you a bang for every buck you spend on it. But the amount of effort in terms of planning harvests, investing in processing and building relationships with roasters is gargantuan. And when an estate grows in repute, power centres shift and the ecosystem undergoes a transformation. Let's take a look under the hood of Ratnagiri estate and see how they did it.
Indian coffee estates have been exporting coffees all over the world for over decades. While we see the specialty coffee wave to hit India only in the last couple of years, the international markets have been creating demand for these estates since the 2010s. But this demand is critical to estates because they need to plan much in advance which requires an investment of capital and time. This in turn cannot happen without surety in business. So, international roasters place orders 1-2 years in advance which allows the estate owners to build capacity against this surety. And build capacity for what? Processing methods.
While investing in processing methods sounds fancy and in vogue, it makes little business sense if you don't do it right. There are various styles such as washed, semi-washed, pulp sun dried, black honey, red honey, yellow honey etc. (I can go on and on). Now, the commodity market has lesser variations in its prices as well as demand but the caveat here is that they are able to trade only washed coffees at market prices. If a naturally processed coffee ends up on the commodity market, it may end up getting sold at red bean defect rates which is roughly 30% of the washed coffee prices but costs about 50% more to produce (depends on the size of the estate). So what do estates end up doing? They invest in processing of coffees only on pre-order basis which is highly relationship driven. Well, any investment will take years to capitalise and hence this strategic choice.
The Ratnagiri Flywheel
To be able to achieve scale requires the ability and the capacity to scale. Ability to scale is determined by the demand and experience of fulfilling this demand while capacity to scale is driven by capital investments made by an estate. One of the routes to achieve this is by maintaining a continuous growth cycle supported by a system which picks up momentum over time aka works like a flywheel. This estate seems to have a similar play here. I took the liberty to put it out on a notepad and call it The Ratnagiri Flywheel (inspired by Jeff Bezos' Virtuous Cycle aka Amazon's Flywheel of Growth).
Ratnagiri estate is a result of decades of effort. A reductive chronology of events:
Invest in estate management practices
Demand from international roasters
Relationship building with clientele
Knowledge transfer on key improvement areas
Upgrading harvesting and processing methods
Establish a highly rated coffee
Invest further in capacity and processing
Cater to a growing domestic demand
Keep expanding portfolio
The cycle continues.
This is because the estate has scalability as a result of those decades of effort. Ashok Patre played to his strengths i.e. is systematic and meticulous. He implemented methods to increase traceability by logging the harvest against parameters such as varietals, elevation, etc. He also started looking into the role of terroir from a scientific lens by incorporating methods such as soil testing for nutrients and selective harvesting. This allowed him to map the quantitative parameters against the qualitative feedback received from the roasters, giving him the necessary information to understand the estate's strengths and limitations. And the key to unlocking scalability was demand.
The relationship with international clientele only grew stronger with time who then put their confidence in Ashok's bold step of exploring newer processing styles. Starting with a few drying beds to now housing over 100s of them, implementing every possible method of processing was an outcome of continuous knowledge transfer, relationship building and consistently delivering better quality produce every year. He solved points of friction at every stage. From shipping in vacuum sealed packaging to avoid loss of moisture and maintain that 10-12% level to running an experience center in Bangalore allowing cross-sharing of information on farming practices, Ratnagiri Estate has set itself apart as a specialty coffee powerhouse. As a result, their coffees started consistently receiving higher Q-grading scores and demand rose. Risk in subsequent investments reduced against a growing yet stable demand. The Ratnagiri Flywheel is now in motion.
Domestic demand starts picking up. Selectively associating with roasters such as Curious Life Coffee Roasters helped them test the waters, back in 2016-17. They start gaining confidence in Indian roasters. Come 2019-20 and they choose to give the Indian talent a chance to prove their mettle (and a business case). And the rest is history (read part 1).
If you look closely, the game has already flipped.
These are exciting times to see that an estate has taken precedence over a roaster.
Today, it's raining Ratnagiris. I know of 7 of India's best roasters retailing/about to retail their coffees. And we just may have more. The way forward I anticipate is that Ratnagiri estate continues doing what they do best i.e. work with roasters, take feedback on performance, keep innovating and blow our mind with beautiful coffees. Time will tell us how they take the Indian specialty coffee space to the big leagues. Till then, I'm gonna kick back and enjoy my cup of Ratnagiri.