351–360 of 386 posts
People love a good story, and a "reason why" they can get a good deal.
Amazing to see so many people engaging deeply with the story, and not even notice how incredibly effective the sales pitch is.
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I wonder how you could word the contract such that failure to pay on time would be onerous enough that the big company would actually move on it. Something like penalties + legal fees + treble damages or something.
Ask a lawyer!
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You are making the assumption that there's some formal deal for $250k total. I don't think that was ever the case. My guess is that in these negotiations, you tell the buyer that you sell in packs of 6 for say $41/case. They run their numbers and come back to you saying "okay, we have all the info we need and we are going to take 6000 units and the formal POs will come over the next few weeks."
Why would you go into debt for $216k, if you didn't know you were going to make at least that much back? From the article, they said they knew that $250k was coming so it would be worth it. This is a major error on their part, to think they had really found somebody willing to pay $41/bag.
All that effort to get them over the hump and they're basically making $10hr at best. Future orders like this wouldn't be sustainable because you can't pay labor that little. They seem like a lifestyle business that got in over their head.
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The person's point, I think, is that even if you incorrectly believe a "unit" to be a bag of coffee, and you're purchasing 6k units (bags) for $250k, you're then, in your mind, being charged $41/bag of coffee. That price is far too high, higher than retail: i.e., you'd be selling at a loss, or at a price point that the market wouldn't take. So if you believe a "unit" is a bag of coffee, you're not making that purchas…
Because they didn't know the total was going to be $250k until they learned it was for 6000 cases.
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For me, the first thing that does not make sense is investing all of the below into a venture has a 99% track record of being low profit margin and low ROI (prepared food business, especially something as fungible, nonessential, and low barrier to entry as coffee): > Mid July, after 6 weeks of roasting 21 hours a day on the roaster in 3 shifts, working 12-16 hour days, regularly working until 11 pm to finish bagging…
There's important context: they had a signed contract that they were half way through executing on and they had been told to realise the full value of the contract they had to deliver the coffee. The natural conclusion in that situation is "we must do anything and everything to get across the finish line so all of our effort is not for nothing" and if the contract is due to pay out $250k in a few weeks, then taking o…
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If someone suggests a more accurate and neutral title that doesn't say 'grift', we can change it.
"Our distributor cancelled their order and we need to move 6,000 bags of decaf coffee"
Here is an anecdote from past experience. This is from the healthcare sector. Our client builds and installs systems for supply chain management in hospitals in North America and Europe. Think of hospitals ordering syringes, needles, gloves, implants etc., There are a zillion suppliers providing tons of SKUs and products will have multiple vendors supplying them (for supply risk management). Each product from a supplier also has multiple variants -- for eg: gloves could be in sizes Medium and Large etc.,
At the point of ordering (eg: the nurses' station) the hospital would have setup a mapping of the logical product SKU (eg: Medium Nitrile gloves) to two or three product item codes specific to each vendor. The hospital's material management system takes care of the local inventory management and reordering.
While most of the ordering happens through electronic systems, there are still orders originating through faxes! It is a small fraction of the total orders placed, but it is non-zero and fulfilling them is critical. Many times, the nurses maintain thick binders full of product catalog listings and ordering procedures specific to the hospital's preferred/certified vendors. Most of the time, the exception process is to hand fill a form and fax the order to the vendor designated fax number. (Yes, it still happens in 2022/23).
In the backend, the faxed order has to be entered (ie., entered into the supplier's ERP system). Our company was doing the order entry for these faxed orders.
Once we received an order from a hospital in a small European country. The order was for "baby blankets" or something similar that is used in a Neonatal ICU. Long story short, due to a two character error in translating the unit of measure from "EA" (i.e., Each = single unit) the hospital's unloading dock received two truck full of cases of baby blankets, enough to exceed the total annual birth-rate of that small European country.
True story.
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If you are unsure to what extent you can or cannot depend on the consultant, you might as well do all the work yourself at that point. They cannot add value to the process; they could have not paid the consultant and worked directly with the grocery distributor. The addition of the consultant led to a delegative mindset ("I'm paying someone to handle that problem") that ultimately didn't pan out for them.
>The addition of the consultant led to a delegative mindset That's it right there. I've rarely, if ever, seen that work out well honestly. The consultant has no real skin in the game and so you still always should be doing your due-diligence. They're there to help rapidly guide you to competency, but they won't do that work for you, you really need to be an active participant.
It's 101 that wholesale buyers order by the case and for producers to specify the casecount and price, and for errors like this to be caught when the prices/etc don't line up. This is equivalent to not knowing that URLs can redirect, or that http:// and https:// aren't the same thing. Distributors work with 1000 brands each and don't have time (or margin) to babysit. Also, when a company gets a much larger and differ…
In other words, the issue isn't that they were selling entire cases at a wholesale unit price; the contract probably stated something like pricing of "$x/case, 6 units per case," but the issue was that a noncontractual, oral term of "6,000 cases" was conveyed as "6,000 units," leading the company to assume they had the cashflow and resources to handle that scale of order. It wasn't, and they didn't. As a result, they went negative free cashflow because they weren't prepared for the capital outlay, payment terms were subject to the entire order being fulfilled (which was 6x larger than they expected), and then the order was entirely cancelled with no recourse or break fee.
So it seems to basically have been a perfect storm of a very small, retail roaster with very limited wholesale experience signing a contract for a single deal that was far larger than they could financially handle, having to take on a bunch of high-interest and friends-and-family debt to cover the costs of fulfilling the contract, then the contract allowing a unilateral out on the part of the resale broker with no recourse for the roasters. It's not the first time I've seen a company get stranded at the growth inflection point with insufficient cash or credit to get over the hump. Looks like they might survive this learning experience, and hopefully will be a lot more cautious about growth opportunities in the future. And it might serve as a cautionary tale for some folks on this site who could find themselves in a similar situation, taking on more growth than their business can operationally or financially support.