Distributor cancelled an order and we need to move 30k bags of coffee [updated]

It&#x27;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&#x2F;etc don&#x27;t line up. This is equivalent to not knowing that URLs can redirect, or that <a href="http:&#x2F;&#x2F;" rel="nofollow">http:&#x2F;&#x2F;</a> and <a href="https:&#x2F;&#x2F;" rel="nofollow">https:&#x2F;&#x2F;</a> aren&#x27;t the same thing. Distributors work with 1000 brands each and don&#x27;t have time (or margin) to babysit.<p>Also, when a company gets a much larger and different customer, I would expect any CEO to pickup the phone and talk with peers about how to manage the process. Brokers are outsourced commissioned reps, not shareholders.

Others have pointed this out, but no one has actually done the math yet, so...<p>6000 &quot;units&quot; for $250,000 is $41&#x2F;unit. At wholesale. For a product that retails for $16&#x2F;bag.<p>It is just inconceivable that no one noticed this discrepancy. This is not a &quot;grift&quot; by the distributor, this is an elementary and obvious fuckup by the producer.<p>In fact, it&#x27;s so elementary and obvious that it would not surprise me a bit if this whole thing turns out to be a publicity stunt that succeeded spectacularly well, at least for a little while, because once the cat is out of the bag all the people who bought that coffee will realize that they are the ones who got played.

This story isn&#x27;t EXACTLY what occurred here but<p>I worked for a company who was faced with a big customer interested in a deal that would roughly quadruple the amount of business that we did, possibly more. But as things went on all the assurances &#x2F; up front claims from big company had exceptions. &quot;Well that&#x27;s not always the case.&quot; and the complexity and frankly our trust in this big company seemed to erode fast. Yeah they said they&#x27;d pay for the extra work we&#x27;d have to do, but it wasn&#x27;t clear (specifically to me) if even they understood how much work that would be and from meeting to meeting expectations seemed to shift, sometimes wildly on the part of big company. The more clarifications we asked the weirder things got. It would take a dedicated team larger than our own company to really even approach &#x2F; get a handle on these guy&#x27;s problems.<p>We passed. Told them they were too big for us and frankly we weren&#x27;t setup to deal with them at their scale and potential complexity. We hoped to be one day but we just weren&#x27;t there yet. They took the news well.<p>Another similarly small company got the deal... 2 years later went bankrupt. They invested heavily to support big company, lost many of their smaller customers who were their main income (we know because they came to us), and the deal with big company failed because big company really didn&#x27;t know what they wanted and ultimately should have chosen a much larger software company.<p>Years later big company had a subsidiary that was largely independent but had some issues that our software could solve. Big company VP remembered us and told subsidiary &quot;just hire those guys&quot;. So we got a deal in the end &#x2F; handled the subsidiary&#x27;s problems easily &#x2F; quickly.

Super happy they unloaded the overstock! What an incredibly stressful time, been there before and it can feel like the world is crumbling.<p>In a past life, I ran a small business selling lip balm to small grocery &#x2F; specialty stores. It started small and then with some good ol&#x27; fashion cold calling, we got into more and more stores. Eventually direct store sales is too much for a handful of folks to operate (and if your goal is to expand outside of your local region).<p>The next step (which they are at) was to start working with one of the big distros (I&#x27;m guessing for them it was UNFI or KeHE). You eventually get to a point where most buyers at larger store chains (Kroger, Whole Foods, etc.) eventually just want to streamline their ordering, which means moving to a distributor (also the Regional &#x2F; National buyers for the categories eventually just push that way if your sales are growing rapidly).<p>Looks like they mentally had gotten to that point and did the right thing, find and expert to take you there.<p>If I had to guess on how this whole issue actually went down, the broker &#x2F; consultant negotiated all the terms with the distro and basically they (the biz owners) didn&#x27;t clearly read the contract details (putting all your trust in the expert without much verification). I was in that same position once and learning the distributors industry terms is tough to figure out without outside resources &#x2F; guidance. As they write in the post, the broker basically let them down, while they equally leaned on the broker too much for obfuscating industry knowledge.

Did I miss something in the article about how this was a grift? While these guys feel like they were screwed, and sure, they might have been screwed, making an order and then cancelling it isn’t a grift. No one stole from them, and I’m not sure how the multi-billion dollar grocery distributor got any financial benefit from the whole episode.

Great to see that all of these got sold!<p>The numbers in this story don&#x27;t exactly line up, in a way that tells a fun and clearly stressful story: (The cases have 6 bags each.)<p>The intro to the blog post mentions 34k bags of coffee actually made. The initial order was thought to be 6k bags of coffee, but was actually 6k cases = 36k bags of coffee. So it looks like some got sold off between the delivery fiasco and the blog post. Later in the blog post it&#x27;s mentioned as approximately 30k bags sold for half off + free shipping.<p>It looks like at time of writing there are $5277 in donations at $50&#x2F;case, so 630 bags from the fundraiser. The Fire Sale has sold out at 24k bags, short of their original 30k bag goal. (Edit: They sold out of all of the caffeinated coffee, not all of the decaf.) They raised between $173k (all $7 bags + donations) and $197k (all $8 bags + donations), not counting the substantial shipping costs for 4k cases of coffee.<p>The debt likely to be paid off first is $60k of personal credit cards, $65k of business credit cards, and $45k of personal loans (there&#x27;s a social cost to keeping these after such a successful fundraiser). $170k total here, leaving the $66k of other debt to be paid off more gradually.<p>(Edit: They only have decaf left from the sale coffees. The 4k bags not put up for sale, and some remaining decaf, are all of their excess inventory. Ignore following paragraph) ~~I&#x27;m guessing that they chose to keep the extra inventory after seeing the wild and immediate success of the sale. Knowing that they can pay off their worst debt, and getting a ton of new customers as well, they&#x27;d rather have the extra 6k bags around to sell at normal prices. It&#x27;s also possible that they sold out of one type of coffee first, and that helped them decide to shut down the sale, rather than keeping it updated with the different varieties still in stock.~~<p>Modest Coffee now seems poised to be successful. Extra stock, no longer extra warehousing space needed, exposure to a ton of new customers, and their worst debts paid. I wouldn&#x27;t be surprised if they look back on this fiasco as their biggest success in a few years.

Ouch. As others have pointed out, there were a number of missteps that compounded the problem but it is a nice after action report and ideally these guys have learned three things:<p>1) There is no such thing as asking too many questions.<p>2) Legal advice is expensive, getting into a bad contract more so, as a result make sure that you understand exactly what the contract says, and what &quot;bad things&quot; it is protecting you and them from.<p>3) Distributors don&#x27;t make &quot;big orders&quot;, their customers do. If a distributor tells you they have a big order then talk directly to the customer making the order about it. If the distributor won&#x27;t tell you the customer then don&#x27;t do the deal.<p>It looks like they survived this semester in &quot;advanced logistics&quot; and that will make them a much better company overall by incorporating that learning into their processes.<p>One of the interesting things about being at Sun from &quot;startup&quot; to &quot;enterprise company&quot; was seeing first hand the stupid mistakes that didn&#x27;t kill them but they successfully learned from. I am convinced this is part of the &quot;business experience&quot; for everyone but couldn&#x27;t prove that from my own experience (I might just pick companies to join that learn things by pain :-)

How on earth do you accept an order for X “units” without ever double checking what a unit means? Even if it was really individual bags, wouldn’t you at least want to know what weight the distributor expects?<p>They use the word “grift” so many times, but really it was just stupidity on their part. It’s your job to understand how the industry you are entering works.<p>The only grift is this fake sob story to get sympathy and get rid of excess inventory (and of course the internet ate it up).

I can&#x27;t put my finger on it exactly but there&#x27;s something about this story that isn&#x27;t making sense.

Sigh. Big business vs. the little guy.<p>I recall when I took basic accounting, we learned that common payment terms were &quot;2&#x2F;10, net&#x2F;30&quot; meaning &quot;2% off if you pay within 10 days, and it&#x27;s all due within 30 days.&quot;<p>So it was common practice to wait 30 days (or more) and still take the 2% off.<p>This is <i>in no way</i> blaming the victim, but &quot;for a total of $216,000 in debt&quot; I would hope I&#x27;d just say, &quot;no, we&#x27;re not doing that.&quot; One of those hard calls that nothing in business school can prepare you for.

Inventory financing is a severe pain in the ass for small businesses. It makes moving up to the next level incredibly difficult.<p>Math example:<p>You sell something for $20, and it costs you $5. You have free shipping, which costs you $3. Shop and CC fees are maybe $2, so you&#x27;re netting $10. Then taxes means you net $6.<p>So if you sell 10,000 units you&#x27;ve netted $60k. But to make that $60k you need to spend $50k up front to buy the inventory, and maybe $2k more to ship the inventory to you. Then you need a place to put it, so maybe $1k&#x2F;month.<p>So when you need to order your next batch of inventory you need, say, $52k. You haven&#x27;t made that much yet, because your inventory has a 2 month lead time. So you use money from the 60k in &quot;profit&quot; to buy inventory, leaving you no profit.<p>At that point you haven&#x27;t made anything. It looks like you&#x27;re making money, but you aren&#x27;t. Maybe you dip into your tax reserve fund to buy that inventory, but the fact is that you probably haven&#x27;t paid yourself much, if anything.<p>This is the brutal reality of small business math.

One thing that irks me about dealing with big businesses, that the post touches on, is payment terms. If I buy an item, I pay for it immediately (or if it’s large enough, a creditor pays for me). Big companies pay with IOUs that say they’ll give you cash later, say 30-90 days from now or after criterion X is fulfilled. They do not care if you’re a small company with poor liquidity. I think it’s absolutely abusive behavior

The coffee producer was expecting a retail chain to pay $41&#x2F;bag ($250k&#x2F;6000)<p>I&#x27;m glad that they were able to move the bags and save their business and themselves from all this debt, but this red flag needs to be addressed and owned up.

&gt;&gt;To make this order happen, we had to take $45,000 in personal loans from friends and family, $65,000 in business credit card debt, $35,000 from a business loan, $60,000 in personal credit card debt, $20,000 in outstanding invoice debt, and $11,000 in loans from us personally to the business, for a total of $216,000 in debt.<p>I don&#x27;t find myself very sympathetic. Feels like there is plenty of evidence that the business owners here aren&#x27;t the most diligent or detailed oriented.<p>$45k+$65k+$35k+$60k+$20k+$11k adds up to $236k<p>Best case this is the result of their own naivety&#x2F;incompetence, worse case this is just a distasteful marketing ploy.<p>&gt;&gt;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 and boxing.<p>Despite this work schedule, had no problem releasing their weekly hour-long podcasts every week in June&#x2F;July.

People are getting hung up on the &quot;cases vs bags&quot; error, but it sounds like the small-coffee people overcame that.<p>Selfish observation: this coffee has to be close to its shelf life, despite being roasted in Jun&#x2F;Jul and despite being sealed. A &quot;one year best buy date&quot; is unreasonably generous.

When we worked with Mega-Mart, you were required to acknowledge all orders within a certain time period, and you also had to enter all your shipments into their system as well.<p>All suppliers were graded by these scores etc. Errors or failure to report would end up in your company getting removed.<p>The problem was, the people assigned to hound us for this information were using old data. They would get a report emailed to them the night before, and by the time they emailed us about it the next day, we&#x27;d have already submitted the requested information.<p>It didn&#x27;t mean anything, though. The ball was already in motion where someone at Megamart would leave a nasty voicemail to our salespeople who then reported it to the CEO who would then come down to give sales&#x2F;IT&#x2F;logistics a mouthful.

Title ought to be “how we messed up our first large order”, but that wouldn’t help sell their inventory.

Big companies are mostly made up of small people. Small companies tend to have bigger people. If you want to become well known, stand up to the shitty ones, their complaints will do the rest for you. I think the OPs story is going to have a good ending, and I hope that broker tries to slander them because it&#x27;s free marketing from someone who people in that business probably know all about already. Good luck, and nice save.

&gt; Then, 3 weeks into the process, with the orders still coming, Marcus pointedly asked him about why they were ordering so much more than the 6,000 bags they had originally predicted. The food broker laughed and said “I wondered why you’ve been so upset and concerned. When they said ‘units’, that was cases. They’re right on target so far.” You can imagine how we felt in that moment, realizing that the person we hired to make this a smooth transition and to guide us and to tell us the things we don’t know failed to ever ask us if we were ready for a 36,000 bag order. This is equivalent to a year and a half’s worth of coffee for us. We would NEVER have agreed to this had we known. It was more than we could physically or financially handle. We immediately severed our relationship with this food broker figuring at this point we were better off figuring this out without him.<p>&gt; “I wondered why you’ve been so upset and concerned. When they said ‘units’, that was cases.<p>Ouch.<p>I get a lot of flak at work and at home when I get irritated that people don&#x27;t use the right words and terms and this story won&#x27;t change my attitude.<p>Eg:<p>- &quot;we want a new tab on the website&quot; -&gt; they want a new subdomain with a whole new CMS and a link in menus of every site<p>- &quot;we want a new site to highlight this thing&quot; -&gt; they want a single page with a photo and a paragraph but want to be able to change it themselves at will

My friends company (software consulting) got a contract with Amex, super excited<p>Took months for them to even respond to emails about their invoices, they never ever paid on time or even a month a late<p>Dealing with giant firms is the worst and there’s nothing you can do as a small vendor besides having your game tight upfront<p>and if you do have your game tight upfront they won’t hire you in most cases

Is this grifting? How did the distributor benefit?

i neither trust nor have sympathy for anyone in the situation. i guess its because any inter-business negotiation &#x2F; transaction should be assumed to be hostile since its generally close to a zero sum game, or partially one. you are trying to buy some goods &#x2F; services to then sell for a profit, or you are trying to sell some goods or services for a profit that you already made. its the same as flipping something at a yard sale- sometimes you get screwed, and its basically always your fault. i guess your post reads like you think you are a well behaved consumer buying stuff at a retailer with good customer service. which is an impossibly naive or deliberately false point of view. and of course, the fact that your whole goal of writing these posts was to sell the coffee, and it worked, makes your aw shucks routine all the more suspicious. i have been screwed many times in the world of manufacturing, no one ever complains like this, you either have recourse or you eat it and dont feel bad for yourself.<p>edit: on top of that you are selling coffee, something that is already well provided everywhere. it would be different if there was some element of charity or necessity, but your endeavor is purely a profit seeking one (with no negative externalities, id consider it neutral to everyone else) which furthers the mismatch between your tone and reality<p>edit 2: of course i think its a dick move by someone to order a bunch, then reneg. but if you werent aware of that risk, you are just stupid, especially if your going to spend 250k

&gt; This coffee is still good. It was roasted in June and July 2022 with a one year best buy date.<p>Still good but hardly fresh for a specialty.<p>Anyway. There’s a 6x number in here that somebody (or somebodies) completely missed…<p>Seems like what they thought was a fair-to-good deal was actually a such a terrible deal that, given their incorrect definition of a unit, the numbers in their model lined up.<p>That might be something the consultant could have spotted, since they’d seen the numbers around previous deals. I’m not sure it’s their duty&#x2F;obligation to.

who even thinks that 6000 units will be bags. I mean considering that we are talking about food distribution it can&#x27;t be bags. now consider aldi in the us or in germany, it has over 2k stores, consider it will send 50 bags per store (which is not a lot, but that would probably be around 2 cartons, which is fine for a start or special) it would only be possible to send it to around 120 stores, so why should they even bother? now the other way round a simple person who operates like 2 aldi stores wants to order the coffee, he would probably only need around 200 bags, so why did they even think that 6000 units are bags.<p>its so stupid. (especially since they bothered in writing how much hours of coffee that would be...)

Unit of Measure confusion across varied supply chains is a real problem.<p>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.,<p>At the point of ordering (eg: the nurses&#x27; 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&#x27;s material management system takes care of the local inventory management and reordering.<p>While most of the ordering happens through electronic systems, there are still orders originating through &lt;gasp&gt;faxes&lt;&#x2F;gasp&gt;! 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&#x27;s preferred&#x2F;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&#x2F;23).<p>In the backend, the faxed order has to be entered (ie., entered into the supplier&#x27;s ERP system). Our company was doing the order entry for these faxed orders.<p>Once we received an order from a hospital in a small European country. The order was for &quot;baby blankets&quot; 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 &quot;EA&quot; (i.e., Each = single unit) the hospital&#x27;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.<p>True story.

I got tired of reading &quot;expert&quot; opinions in this thread... All throwing numbers that &quot;don&#x27;t add up&quot;, but at the same time confusing some elements of the story to make it sound as &quot;fake&quot;. Sometimes, there are just hard workers seeing an opportunity to grow after years of waiting and fighting. You see the deal, it sounds risky but you think you can do it and maybe it can change your life... You trust the wrong person, don&#x27;t do your double checking, and boom, it just explodes in your face. Maybe that would never happen to this &quot;experts&quot;, but it could definitely happen to me.

Direct to Consumer is the way to go. The silver lining here is that you guys got massive exposure with this fiasco and hopefully won&#x27;t have to partner with (multi)national corps to sell coffee in the future.

This isn&#x27;t grifting, and if they had specified the distributor it would be libel. This is a story about a small business that made a lot of bad decisions and got in way over theirs heads.<p>That&#x27;s all well and good, but the spin to try to make themselves look like victims is pretty disingenuous. This sounds like the story you get from a teenager about how it&#x27;s everyone else&#x27;s fault after they&#x27;re caught red handed doing something wrong.

Anyone know a good resource (book, video, whatever) about starting a small business, including approximate customer or revenue growth rates and mechanisms to get customers? So much I’ve been reading is for high growth startups and I wonder what the other end of the growth distribution is supposed to look like. How to know a slightly profitable hobby from a growing small business, for example?

Hmm. Between Finagle and Hanson, I chose Hanlon. It would have been a shame for this coffee to go stale. Oh, “roasted in July”, so Finagle then.

No one has pointed this out. These guys are selling high end coffee. They also admitted this was their largest order by far. Where are they getting this high end coffee from? Is there an unlimited supply of this coffee somewhere? The cynic in me suspects some of that coffee might not even be what&#x27;s advertised.

Classic copywriting. No wonder they sold it all out.<p>People love a good story, and a &quot;reason why&quot; they can get a good deal.<p>Amazing to see so many people engaging deeply with the story, and not even notice how incredibly effective the sales pitch is.

Reminds me of the “Level of Effort” field in DevOps. If you have a group of tickets with a value of LOE total of X, it could be in hours, days, or some other contrived measure.

This is why you abolish the word “unit” in your factory. “Unit” has no actual meaning. It’s just a filler word for an object that you should be mentioning explicitly.

That font on the website. It’s almost unreadable on my phone.

I&#x27;m wondering if firing the broker is what nuked the deal. The broker told his contact to walk away and offered something else, no doubt.

It is super important to name the actual parties here. Who is the food broker? Who is the distributor?<p>Otherwise, bad behaviors continue.

It seems like a lot people here aren&#x27;t reading the full post. All the numbers and the situation are laid out.

Lmao you guys just got grifted into buying 30k bags of coffee from these guys

Uff, was able to get decaf and hopefully make a new year a bit more tolerable!<p>Happy New Years!

Coffee must be fresh to taste good, months old coffee is rubbish.

They still have incredibly priced decaf if you want it.

TLDR they had a miscommunication about the units. They thought they were getting 6,000 bags of coffee, but it was 6,000 cases with 6 bags each.<p>In school, every class that involves numbers always stresses the importance of units. This is a good real-life example of how important units are, but easy to stumble on.

This doesn&#x27;t really make a lot of sense.<p>How can bags be mistaken for cases when negotiating a deal? The price would be different by an order of magnitude.<p>Why would orders trickle in like this if the product isn&#x27;t getting shipped from the distributor and sold?<p>Maybe I&#x27;m overly cynical and wary of things on the internet but somethings not adding up here.

When I was homeless, I found a job with a &quot;call center&quot;. Our training consisted of teaching us the cover story and how to handle reactions to it. We began with a joke involving alcohol. Then if they didn&#x27;t hang up we launched into the pitch: &quot;We just lost our lease on our warehouse, and we&#x27;ve got to move all these pens. You can get them imprinted with your name and phone number for a bargain. What do you say?&quot;<p>I quit within 3 days because I&#x27;m not a liar.

I see young kids working in pictures, is this legal or gray area for family run small businesses i.e. all hands on deck to help family

The coffee supply chain seems to have a lot of people claiming to add value who don’t really.<p>Does this business need to be saved because the customer really cares they specifically roasted and bagged some beans they got?<p>No, the coffee bush did all the work. And yet we never meet or thank it. (The farm workers go second. The James Harrison video you learned your coffee making technique from is third.)