Transparency Report 2022

TRANSPARENCY REPORT 2022 CREATED BY MATT BROWN, BECKY TACHIHARA, AND TRYSTAN FRENCH PHOTOGRAPHY BY JENNA SUDLOW

TABLE OF CONTENTS 1 Introduction 2 Roastery Stats 3 Vertical Reserve Releases 4-5 Coffee Contracts 6 Community Spotlight: Danilo Rodriguez 7 Community Spotlight: Emily McIntyre 8 Payments & Logistics Breakdown: Sucafina 9 Payments & Logistics Breakdown: DLG 10 Country Reports 11 Climate Change 12 World Coffee Research 13-14 Robusta: Shifting the Paradigm 15 Investing in Robusta 16-17 Conclusion

INTRODUCTION Oh hey, it’s been a while.

Last year was a challenging one for Coffeebar. We’d seen the worst of COVID itself, but the impacts of the pandemic were still wreaking havoc on our business. We struggled with exponentially rising costs, unpredictable supply chains, and severely understaffed cafes. Unfortunately, the 2021 Transparency Report was a victim of the chaos. But we’re back, and given everything that happened last year, or in some cases things that didn’t happen, we wanted to broaden the conversation beyond just reporting on our coffee purchases.

In all honesty, sustainability – at least in the way most people think of it, environmental sustainability – was not our top priority as we struggled just to stay afloat last year. But what it means to run a sustainable business in general was something we talked about constantly.

So in reflecting on 2022, we wanted to focus on how sustainability is defined differently throughout the coffee supply chain, and how Coffeebar interacts with the concept of sustainability in general. In this report, you’ll find not only information on our coffee buying practices, but also insights from our importer partners and Coffeebar executives, as we asked them each, “What does sustainability mean to you?”

As ever, our goal in producing this Transparency Report is to not only share some behind-the-scenes info with you, but also to hold ourselves accountable as we continue to grow and face different challenges.

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2022 ROASTERY STATS

119 1,542 80,380 1,532 CUPPINGS

POUNDS PER WEEK

POUNDS ROASTED IN 2022

TOTAL HOURS ROASTING

4,596 BATCHES OF COFFEE ROASTED

736 GIUSEPPE

1,973 ZEPHYR

316 PRIMA

256 TRAILHEAD

73 FELIZ

161 TODDY

1065 SINGLE ORIGIN

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2022 VERTICAL RESERVE RELEASES

1 2

5 3

6 8

7

9

4

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REGIONS 1. Guatemala

Manuel Gomez Washed Manuel Gomez Natural Ija'tz San Miguel Escobar Felix Porón Villa Sarchi

2. Costa Rica

Rio Grande de Orosi

3. Peru

Rutas del Inca Palmas del Paramo

4. Colombia Arlex Muñoz Edilma Loaiza

COUNTRIES

5. Ethiopia

Basha Bekele Hateso Qoke Keramo Bensa

6. Uganda

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Gorilla Summit Natural

7. Burundi

Controlled Yeast Masha Kibingo

8. Indonesia

Blue Sunda Estate

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VERTICAL RESERVE RELEASES 9. Papua New Guinea Baroida Estate Washed Baroida Estate Honey

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PER IMPORTER

COFFEE CONTRACTS SUSTAINABLE HARVEST $91,895.66

ATLANTIC SPECIALTY $106,011.98

TOTAL: $393,711.41

SUCAFINA SPECIALTY $45,012.90

CATALYST TRADE $37,927.52

LA REB $6,283.28 HOMAGE COFFEE SOURCE $9,396.58 GENUINE ORIGIN $6,463.60

DE LA GENTE $90,719.89

A NOTE ON CONTRACTS We buy all of our coffee through importers who help us physically move coffee from farms and mills to the United States, handle things like customs paperwork, communicate with the coffee farmers, and find coffee that suits our business. The above graph depicts the amount of money we spent with each importer, and the graph on pg. 5 depicts the amount of money we spent in each region. Due to the variable harvest periods of this global product, and thus contracts being signed at varying times throughout the year, it can be awfully difficult to determine which coffees to include on the report for a calendar year! In order to streamline this process, we are including all coffees that we began roasting during 2022, and then including the full contract value of that coffee.

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COFFEE CONTRACTS

CENTRAL AMERICA

TOTAL: $393,711.41

EAST AFRICA SOUTH AMERICA

12.5% 48%

ASIA PACIFIC

PER REGION

23.5%

16.1%

A NOTE ON FORWARD CONTRACTING By forward contracting coffees - agreeing to purchase a certain amount of coffee ahead of its export - Coffeebar and other roasters can provide farmers with more financial security and give them the ability to plan around guaranteed income.

Furthermore, roasters and importers bear more of the financial risk by agreeing to pricing and how much they'll purchase ahead of the harvest.

COMMUNITY SPOTLIGHT: DANILO RODRIGUEZ

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Danilo Rodriguez, Director of Operations for De la Gente (DLG), is deeply committed to addressing the injustices within the coffee supply chain and supporting Guatemalan coffee producers. As a non-profit organization, DLG is dedicated to promoting sustainability in the industry. Danilo recognizes sustainability as a multifaceted concept, encompassing environmental, economic, and social considerations. He acknowledges that striking a harmonious balance between these three elements is one of the biggest challenges faced by DLG. Having worked closely with coffee producers, Danilo and his partners have discovered the success of sustainability efforts is intricately linked to the economic stability of the producers themselves. To address this, DLG has implemented a unique trade model centered on building strong relationships with the producers.

Through this approach, DLG has been able to establish stable pricing structures that provide fair compensation to the producers. These stable prices enable the producers to reinvest in their communities and businesses, ultimately leading to greater financial independence from importers like DLG. This empowerment and self-reliance form the core objectives of DLG's sustainable trade model.

Danilo explains that DLG’s vision extends beyond mere financial stability for individual producers. He emphasizes their desire to see producers, such as Manuel Gómez, reach a point where they can operate successfully on their own. DLG aims to equip producers with the necessary skills, resources, and knowledge to build thriving coffee enterprises independently, thereby fostering long-term sustainability for the communities they are a part of in Guatemala.

By adopting this holistic and relationship-based approach, DLG endeavors to confront the systemic challenges within the coffee industry and create meaningful change. Danilo's vision for sustainability aligns with DLG's core values of transparency, respect, innovation, empowerment, and accountability. As they continue their work, DLG remains dedicated to building a more equitable and inclusive coffee industry that benefits all stakeholders and prioritizes the economic, social, and environmental needs of everyone involved.

COMMUNITY SPOTLIGHT: EMILY MCINTYRE "We define sustainability as a mindset focused on long-term success and responsibility. It goes beyond mere metrics, encompassing a series of intentional actions. It serves as a standard against which we measure our performance," stated Emily McIntyre, CEO and Founder of Catalyst Trade, the exclusive importer of Ethiopian coffee for Coffeebar.

Emily has been a driving force for positive change in the Ethiopian coffee supply chain. Her company, Catalyst Trade, has been instrumental in establishing independent washing stations in the villages of Bombe, Keramo, and Shantawene. Their efforts are aimed at acheiving economic sustainability for coffee producers they work with in Ethiopia, Kenya, and Peru, and include both educational programs and pricing structures that prioritzie the producers' well-being. For Emily, sustainability means enabling producers to lead prosperous and stable lives.

However, Emily faces ongoing challenges in altering consumer and roaster perceptions about the cost of coffee. Over time, coffee has become a common commodity in the Western world, despite its true nature as a luxury item originating from foreign countries, involving significant costs in cultivation, processing, exporting, and importing. While it may seem reasonable for those in the industry to pay $7 for a latte or $20 for 12 ounces of coffee, many consumers are hesitant to do so, failing to realize the consequences of their reluctance to pay higher prices. Emily strongly believes that within a decade, coffee production may cease, given that producers are earning only half of what their parents did. This has already contributed to a concerning trend in Kenya, where 60% of the farms currently lay fallow, meaning that over half of the coffee that was once imported from Kenya no longer exists.

Emily emphasizes that the current market conditions do not accommodate coffee prices that would provide financial stability for producers, leading to a failing system that endangers the survival of coffee. She urges both roasters and consumers to recognize their influential role within the industry, emphasizing that every cup of coffee they purchase is essentially a vote for or against sustainability.

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PAYMENTS & LOGISTICS BREAKDOWN: SUCAFINA Sucafina is a specialty coffee importer and exporter with a global presence, providing a comprehensive approach to serving roasters and producers. Sucafina strives to build sustainable supply chains while driving innovation and efficiency in the coffee industry. Their dedication to sustainability extends beyond certifications to include projects that support farmer livelihood improvement, soil fertility, and yield enhancement.

IMPACT, Sucafina’s Responsible Sourcing Program, provides assurance that all levels of the company are complying to the same set of environmental, social, economic standards. In every region that Sucafina exports coffee from, there is a boots on the ground operation striving to connect with the community and enhance their livelihoods and crop. The IMPACT program allows these teams to provide farmers with support, periodic training, and access to farm services, such as inputs and tools, and they will work with each farmer group to develop a customized improvement action plan. Their most recent initiative, Farmer Hub, is investing $5 million dollars into the farming communities of Kenya, Rwanda, Burundi, and Uganda.

The teams’ goal is to create year-round relationships with farmers that will help them diversify their income and enable them to access banking services. With the Farmer Hub, Sucafina re-invents the role of the merchant to focus on serving the broader needs of farmers and capture business opportunities that go beyond coffee.

PNG WASHED LAMARI

TOTAL

USD$ / lb

FOT paid / green coffee

$2,347.90

$3.55

FOB paid / green coffee

$1,521.17

$2.30

PERU LAGUNA DE LOS CONDORES

TOTAL

USD$ / lb

FOT paid / green coffee

$13,804.65

$3.63

FOB paid / green coffee

$9,887.63

$2.60

TOTAL

USD$ / lb

FOT paid / green coffee

$3,968.28

$6.00

FOB paid / green coffee

$2,976.21

$4.50

TOTAL

USD$ / lb

FOT paid / green coffee

$7,936.56

$4.00

FOB paid / green coffee

$6,349.25

$3.20

BURUNDI YEAST KIBINGO

BURUNDI MASHA

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PAYMENTS & LOGISTICS BREAKDOWN: DE LA GENTE De La Gente (DLG) is one of our longest standing importer relationships. We’ve been purchasing coffee from DLG’s partner cooperatives since 2017, and have steadily increased our coffee contracts every year since as we’ve opened new cafes, grown our wholesale program, and found creative exporting solutions.

LA SUIZA COOPERATIVE

TOTAL

USD$ / lb

FOT paid / green coffee

$57,056.25

$3.75

FOB paid / green coffee

$46,405.75

$3.05

total costs

$7,607.50

$0.55

farmgate paid/ green coffee

$38,022.29

$2.50

IJA’TZ COOPERATIVE

TOTAL

USD$ / lb

DLG is unique among our sourcing partners in that they’re a non-profit organization whose primary focus is on building economic sustainability for rural communities through coffee. Being based in Guatemala means they have a year-round presence to support producers, and they also provide additional opportunities through job training, ecotourism, and even direct-to-consumer roasted coffee sales.

FOT paid / green coffee

$6,846.75

$4.50

FOB paid / green coffee

$5,781.70

$3.80

total costs

$684.67

$0.48

farmgate paid/ green coffee

$5,051.38

$3.32

FELIX PORON

TOTAL

USD$ / lb

FOT paid / green coffee

$3,765.71

$4.95

FOB paid / green coffee

$3,004.96

$3.95

total costs

$387.98

$0.53

We purchase primarily from three of DLG’s partner cooperatives: San Miguel Esocbar (including individual producers Manuel Gomez and Felix Poron), Ija’tz, and La Suiza. Most of the coffee we purchase from DLG is used as a blend component, but we also highlight several DLG coffees in our Vertical Reserve line up each year.

farmgate paid/ green coffee

$2,600.17

$3.42

TOTAL

USD$ / lb

FOT paid / green coffee

$21,852.54

$4.79

FOB paid / green coffee

$18,029.78

$3.95

total costs

$2,145.32

$0.49

farmgate paid/ green coffee

$15,783.62

$3.46

COFFEE GROWERS OF SAN MIGUEL ESCOBAR

total costs = FOB - farmgate In other words, total cost equals transportation and processing costs between the farm and the ship that brings the coffee to the United States.

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COUNTRY REPORTS Our stated goal of the Vertical Sourcing program is to build connections throughout the supply chain and work with partners who share our commitment to building a more sustainable future for coffee producers and the industry as a whole. And understanding how money moves from consumers, to roasters, to importers, exporters, and producers is a critical part of that picture.

In the course of collecting data for our Country Reports this year, we became aware of the difficulties involved in compiling price transparency data. We faced significant obstacles when in pursuit of certain pricing information, specifically the Free on Board price which is the price paid by the importer to whoever they’re buying the coffee from and the Farmgate price which is the amount actually paid to the producer.

TRACKED PRICING 33.8% UNTRACKED PRICING 66.2%

Some of these challenges we caused ourselves due to poor record keeping during a period of high turnover in the coffee department. In other cases, the importers were unable to track down contracts or stated it was not their policy to share the specific pricing information we were after.

Moving forward we are determined to address this issue and make substantial improvements during 2023 and 2024, with the goal of presenting comprehensive Country Reports that are on par with our 2020 edition.

This represents the portion of our contracts that we were able to track down detailed pricing information for. After consulting with some of our partners, we are confident that we can increase the percentage of contracts with full price transparency.

CLIMATE CHANGE When Coffeebar started our Vertical Sourcing and roasting program in 2018, it was built on direct, meaningful relationships with small importers who had boots on the ground in the producing regions where they purchased coffee. In some cases, like our longstanding relationship with De La Gente, that partnership extended to communities and individual producers whose coffee we purchase year after year.

These relationships have allowed us to facilitate investments into needed equipment and infrastructure for communities in Guatemala, and to feel confident that we’re supporting importer driven programs in other regions that are rooted in the actual needs of the farmers.

And while we believe these small, direct investments that address immediate needs are a key component to building a more sustainable supply chain, we also know that there are challenges facing our industry that can’t be addressed just one farmer or one community at a time.

Climate change poses one of the greatest threats to the survival of the specialty coffee industry, as the smallholder farmers who produce the majority of specialty coffee in the world are ill-equipped to deal with increased presence of pests, fungi, and diseases that come along with warmer temperatures, or with the fallout from increasingly common severe weather events.

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WORLD COFFEE RESEARCH So, in order to do our small part to contribute to the long-term sustainability of our industry, Coffeebar purchased a membership with World Coffee Research (WCR). WCR is a global non-profit that is driving agricultural science innovations in the coffee industry, largely focused on addressing threats to coffee production and quality caused by climate change.

One aspect of WCR’s work that we’re particularly excited about is their program for developing hybrid coffee varieties that are more resilient but also maintain the yield and cup quality of traditional varieties. The hope is that making these hybrid plants widely accessible to producers will reduce the risk of continuing to grow coffee in the face of climate-related challenges, thus creating more security for those producers’ livelihoods and the industry as a whole. The WCR varieties also help ensure the genetic diversity of Arabica coffee, which provides some insulation against a single catastrophic disease or pest wiping out the specialty coffee industry as we know it.

And as members of WCR, Coffeebar gets access to not only general research findings but information and services for producers, which allows us to open a dialogue with our partners around how to bolster long-term sustainability for the communities we work with directly.

It all comes back around.

To learn more about WCR and their work, visit https://worldcoffeeresearch.org

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ROBUSTA: SHIFTING THE PARADIGM Global coffee production today consists primarily of two species of coffee: Coffea arabica and Coffea canephora (commonly known as “robusta”). With the rise of the specialty coffee industry, consumers and coffee professionals alike have been taught to equate statements of “100% Arabica” with high quality, and conversely, to read robusta as cheap and not tasty.

“The first café job I had was with a specialty coffee roaster where everything we did was marked as hand roasted, small batch, roasted to order, 100% arabica, single origin, microlot,” said Matt Brown, Coffeebar’s Senior Manager of Coffee Operations. “The word ‘robusta’ to our team induced looks of disdain and turned up noses. It was used to show what bad coffee tastes like.”

This is a common refrain in specialty coffee circles, and it’s rooted in simple economics. Marketing arabica coffee as being higher quality and more delicious than robusta creates value because customers will pay more for something they believe is somehow better than the alternative. Theoretically, this means that both roasters and producers receive more money for their hard work, and it should make for a more economically sustainable industry.

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ROBUSTA: SHIFTING THE PARADIGM Despite robusta’s less than stellar reputation, if it is tended with the same level of care given to specialty arabica, it can produce coffees that can compete in quality and flavor.

Robusta plants are also generally more tolerant of higher temperatures and more resistant to disease and pests than arabica varieties, making them less risky to cultivate.

The problem then is that the industry has spent so long demonizing robusta, that there’s an uphill battle ahead if we want to use robusta as a way to address the challenges we currently face.

Having seen the potential in robusta coffee, in 2019 the Ugandan government funded research to produce a Robusta Handbook with the Uganda Coffee Development Authority, then commissioned the Coffee Quality Institute to create a robusta grading system to accompany their industry standard Q Grade system for Arabica coffees. That new R-grader certification has sparked new conversations in the specialty coffee industry around what role robusta has to play in the future of coffee.

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INVESTING IN ROBUSTA Because of our close relationship with Ugandan coffee exporter Gerald Mbabzi of Gorilla Summit Coffee, Coffeebar learned of those efforts and began purchasing robusta from Ugandan producers through him in 2021. Our goal was to create a better diner blend, something that would hit that nostalgic flavor, but where the robusta component wasn’t there to make the blend cheaper. Thus, “Davey’s Diner” was born, a blend catering to the needs of wholesale clients and expanding our usage of robusta on the whole.

While Robusta is a tiny part of our program, our goal is to source more high-quality robusta and show how it can create value. We’d love to find a robusta that can be sold as part of our Vertical Reserve line up of singleorigin coffees, one both we as roasters and our customers will pay specialty coffee prices for. This is how we can shift the paradigm and remove the stigma around robusta so that it can be a viable option for specialty producers as we seek a more sustainable future.

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CONCLUSION So, what did 2022 teach us about sustainability, and where do we go from here?

Last year put a harsh spotlight on how difficult it is to balance the economic sustainability of our business our ability to keep the doors open and pay our teams fairly - with our aspirations for environmental sustainability.

The costs of getting the right products, getting things that are recyclable and compostable, those costs have gone up so much,” said Jenn Ernst, our Sr. Director of Retail Operations. “Coffeebar has always been a company that’s wanted to get the best product, to go to vendors who are organic. But our ability to afford that clashes with our desire to do it.”

Despite the challenges with increasing costs, both Ernst and Coffeebar’s Owner/Founder Greg Buchheister believe there are opportunities to make a positive impact without compromising the business, and in 2023 we’re targeting things like reducing single-use packaging in our cafes as a small step toward the kind of environmental sustainability we hope to achieve.

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CONCLUSION “If I had enough guts, I would say no to-go,” Buchheister said. “But I don’t think America is ready to make that jump just yet. But when people come in, when they use their own cups, that’s a great start.”

But Coffeebar has to be around to make those changes, and Buchhiester emphasized that’s part of sustainability too.

Perhaps the most important lesson of 2022 was that sustainability doesn’t exist in a vacuum. It means different things to different communities, and when we look at sustainability holistically it often begins with sustaining people - whether that’s ensuring fair prices for producers, working to prevent burnout in cafe teams, or simply doing our best to keep our cafe doors open and serving our communities.

We hope you’ve enjoyed this behind-the-scenes look at Coffeebar’s sourcing and sustainability. If you’d like to ask a question about anything in this report or about our sourcing and roasting program in general, please send us an email with the subject line “Transparency Report” to info@coffeebar.com.

COFFEEBAR TRANSPARENCY REPORT PRODUCED BY COFFEEBAR ROASTERY 1030 HASKELL STREET RENO, NV, 89509 www.coffeebar.com