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New Harvest Coffee

In: Business and Management

Submitted By UserNo1
Words 798
Pages 4
Introduction

New Harvest Coffee Roaders is a brand which sells coffee. The firm “was founded in 2000 by RikKleinfeldt and Paula Anderson” (Retrieved from http://www.newharvestcoffee.com/about-us/who-we-are). They are located in the downtown of Providence, Rhode Island, in America but work all over the country.
The main goal of this company is to offer high quality product produced in a sustainable process. To that, they firstly worked a lot with Fair Trade which was its main supplier. But as it “doesn’t really fulfill [the brand’s] objective” (Contemporary Business, Boone and Kurtz, 2010, p 565), New Harvest stopped working with them.
Actually, the main point for New Harvest was they wanted to be able to select their product in view to control the quality of their final offer. And that was impossible by working with Fair Trade.
So New Harvest developed its own sourcing way. That impact on many factors about the firm’s product such as the price but also the quality. Those both factors increase. The price due to the fact that suppliers weren’t helped by Fair Trade and the quality because New Harvest started to select and choice the coffee they bought.
This way to sourcing the coffee is totally not concerning by the New York Stock Exchange regulation as prices didn’t follow the settlement of the “Big Board”. They are fixed after a negotiation between farmer and New Harvest according to the laws of supply and demand. The coffee is no longer considered as a commodity.
New Harvest expand its way to work in the coffee market by creating a movement so-called Artisan Coffee movement and which brought together “growers, roasters, and retailers who prefer to deal directly with each other as individual businesses” (Contemporary Business, Boone and Kurtz, 2010, p 565).
Finally, RikKleinfeldt found a way to adapt his market process to his brand’s goals. Thanks to his choice to create a method to buy and sells products, he permit to his firm to control the quality of its finals products and to use raw materials only provided to organic and sustainable practices.

The main benefits of treating coffee as a commodity should be the price. Indeed, coffee market actors who treat coffee as a commodity mix all the coffee production of several thousand of farm to unbalance the law of supply and demand by increasing the supply in aim to decrease the price. It results a low price which can even be the floor price. The price is fixed by the New York Stock Exchange.
But if this system offers low prices, it also has disadvantages. The first one is the firm which source its commodities couldn’t choose a precise product. It does not have any power on the upstream of the production process.
Moreover, there is no communication between producer and the firm and growers do not have any contacts with roasters. A third intermediate will link them; in this case, Fair Trade.
Another problem of this system is growers are requested to produce at low costs. And most of the time, they even product at lost and compensates their balance with Fair Trade helps. That means Fair Trade’s partners are not able to survive without its help. So in future, it can hardly affect all the system if Fair Trade is not even able to survive itself.
Fair Trade focuses on prices by believing it was the main customers’ factor affecting the purchase process. Its commodity system neglect quality and is really fragile as all the financial survival of suppliers depends of Fair Trade. And its own future is not obviously good as quality is becoming a more and more important factor in the coffee consumers’ choices.

If New Harvest decided to “offers stock for sale to the general public for the first time” (Contemporary Business, Boone and Kurtz, 2010, p 542), which is the definition of an Initial Public Offering, that means they will be listing in a stock exchange. For them, they are two major advantages which motivated this kind of decision:
Firstly, the brand image will increase. New Harvest will be visible in the stock exchange so its reputation will be improved.
The firm will secure new funding which will permit new investment. That’s probably the main objective of a firm when it goes in an IPO. Those new funds will help the company to continue its growth and help it to increase its production.
But an IPO also mean the company will be shared in several parts. So RikKleinfeldt must be sure to be able to keep the power in his company by being sure to handle at least 50% of the shares.

References

Krurtz, David L and Boone, Louis E (2010). Contemporary Business (14th Edition). John Wiley & Sons, Inc.

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