Wake Up and Smell the Coffee: A study on procurement decisions at small specialty coffee roasters

Abstract

Raw material costs represent a large percentage of a company’s costs, making them a key area of focus for small businesses. This study evaluates the strategies used to procure green coffee beans in the specialty coffee roasting industry. Specialty-grade coffee is a booming industry with the potential to take over large market share from traditional premium-grade and exchange-grade coffees. Specialty coffee roasters are thriving in markets across the world; sourcing, roasting, and marketing high-quality beans in a methodical and intricate way. Through semi-structured interviews, the researcher gathered data on information used to make procurement decisions, strategies used in procurement, and business models used in the specialty coffee industry. Using this qualitative data, this study evaluates how age and size of coffee roasters can impact procurement decisions. The analysis reveals that the size of a specialty roaster’s production can impact purchasing decisions related to forward contracting of raw materials and the certifications held by raw materials. Mixed support of three hypotheses shows that age and size are often relevant to aspects of procurement, but not as impactful as the business model used by the roaster. The discussion of results explains that company strategy is often the most important factor in how purchasing decisions are made in a small business.