By Nora Johnson, Commodities Manager, Massimo Zanetti Beverage USA
“Where is that container of coffee?”
Chances are, if you work for a green coffee importer, exporter, roaster, or warehouse, you have either been the one asking this question or the one being asked this question. This answer to this question lies in a fundamental aspect of the coffee trade and supply chains everywhere – logistics.
Given the events of the past fifteen months – a global pandemic, a container shortage, record-breaking container demand, port congestion, blank sailings, a blockage of the Suez Canal, a rare freeze in Texas, the hack of the Colonial Pipeline, and a strike in Colombia, just to name a few – supply chains have been faced with numerous challenges.
For the inaugural piece of the ‘Logistically Speaking’ interview series, Nora Johnson, Commodities Manager at Massimo Zanetti Beverage USA (MZB-USA) and NCA Next Gen Council Member, sat down with Don Pisano, President of American Coffee Corporation and renowned leader in logistics.
The interview below has been condensed and edited for clarity with approval from the interviewee.
Tell me about your background and career. How long have you worked in coffee, and how did you find yourself in logistics?
Don: I got into the commodities business back in 1976, working for a British firm handling insurance and claims. They were trading cocoa, coffee, and tea, but they were bigger in cocoa than coffee. I worked for them for about three years, then moved over to the logistics field. I then spent the rest of my career in coffee, apart from a four-year stint with the Sugar Division of ED&F Man. That was right before I joined American Coffee and the Hacofco Group. For 38 out of 45 years I was strictly in coffee. I was glad to get back to coffee, that’s for sure – coffee is an engaging industry, everyone likes to talk about coffee – it gets in your blood and you build a lot of relationships.
As the President of American Coffee Corporation, do you still find that logistics has a role in your everyday job?
D: I am an admitted “logistics geek,” but you can’t really separate logistics from running a company. The commodities business is supply chain and it just so happens that the product that we are dealing with is coffee. Coffee is unlike any other industry, but at the end of the day, it is supply chain – logistics is supply chain and it is a key part of the overall business.
There are constantly decisions that need to be made and dealt with whether it is on the origin side or on the US/Canada side. I am very fortunate to have the logistics background and I think the company is served well by it. Any senior level person should have at least a knowledge of the processes and an understanding of what it takes to get your product delivered whether it be an agricultural product or a finished good.
From the NCA to the GCA to the National Industrial Transpiration League, you have dedicated yourself and served in so many capacities throughout both the coffee and logistics industries overall. What kind of topics would these different committees address for the industry?
D: Each role is quite different, but they are all related.
For the Green Coffee Association [GCA Logistics Committee (Chairman) and GCA Board of Directors (Board Member)], we have dealt with all things related to coffee movements, from U.S. Customs and FDA issues to ocean, truck, and rail transportation, to warehousing issues, cargo insurance, and more. The GCA Logistics Committee currently has around 29 members representing companies across the coffee supply chain – we span the full gamut, and it represents a significant portion of the GCA membership.
We have published a number of industry best practices over the years. These have been widely distributed to the membership and outside the membership. You can still find these on the GCA website.
The National Industrial Transportation League [NIT League Board of Directors (Board Member) and NIT League Ocean Transportation Committee (Former Chairman)] deals with everything transportation. We work with regulatory agencies, Senate and House Committees, the Federal Maritime Commission, the Surface Transportation Board, and the Department of Highways. The League acts as the voice of the shipper. Members range from small shippers to the likes of Cargill, Nestlé Purina, and Exxon Mobil.
I had the privilege to serve 2 terms, 6 years, as Chairman of the NIT League’s Ocean Transportation Committee. Internationally, NIT League is a member of the Global Shippers Forum. Based in London, the Global Shippers Forum represents various national trade associations from around the world. It is a recognized NGO and deals with issues in front of the United Nations, International Maritime Organization, and World Customs Organization. It is a privilege to serve them. Recently, the NIT League has been dealing with demurrage and detention issues, working with the National Retail Federation, and right now, we are drafting proposed legislation to revise the U.S. Shipping Act of 1984.
The Warehouse and License Committee of the NY Board of Trade [Warehouse and License Committee of the NY Board of Trade (Former Chairman)] provided oversight of the companies and individuals that were licensed to store or perform services on behalf of the Exchange for both coffee and cocoa (and wood pulp products at the end). Over the years, the Warehouse and License Committee enhanced the warehousing, storage, and insurance requirements to ensure that the performance of the licensed warehouses and companies kept the contract [futures contract] liquid. This committee has since been brought in-house within the ICE.
While with the National Coffee Association Logistics Committee [NCA Logistics Committee (Former Chairman)], we were working more directly on coffee regulatory issues, whether with Customs, the FDA, all the FSMA regulations, and various other issues.
Can you elaborate on your experience with the NCA Logistics Committee and the work you did with FSMA (Food Safety Modernization Act)?
We addressed each of the 7 regulations that resulted from FSMA. The FDA created 7 different regulations over a period of years addressing the different segments that would require a regulatory authority over them. The NCA weighed in on all relevant regulations that applied to coffee to make sure that coffee was being treated as a raw, agricultural product as opposed to a finished product. Green coffee is processed prior to consumption, so it must be treated differently than other finished products. We also worked with the Scientific Advisory Committee and other NCA members to come up with the Hazard Analysis Template that the industry could use as a guideline.
Would you recommend that up-and-coming coffee professional get involved early on? How would one go about that?
I definitely would – the coffee industry is going to face many challenges and opportunities, so I would encourage each of you to get active and get engaged in efforts that would provide benefits to your careers and your companies and the coffee industry at large.
The coffee trade associations are always looking for volunteers – reach out to any of the associations and look out for requests for volunteers for the various committees (note: your company must be a member in good standing to participate). Check out the associations’ websites, look at the various committees, and see what best aligns with your discipline, role, and interests. As long as your company and your immediate superior supports you, reach out and volunteer your time to serve.
You will benefit, your company will benefit, and you will get knowledge of the issues that are being faced throughout the trade. You are then better equipped to deal with those issues. At the end of the day, the industry is still very much based on relationships. It is well worth the investment of your time.
This might be the toughest question of them all…! Can you walk us through and characterize the logistics crises of the last 15 months? What has the past year in logistics looked like from your perspective?
D: The crisis was the COVID pandemic. We’ve been treating the logistics dilemma as a crisis, but really, it’s more the consequence of that crisis and lock downs, and a tough challenge for our supply chain. In my career, this has probably been the most difficult challenge and certainly the most costly one. The sheer volume of trade has overwhelmed the existing network capacity. There is currently insufficient equipment – insufficient containers, trailers, vessel space, rail and truck capacity, and even drivers – it has been extremely difficult.
Going back to the early stages at the beginning of 2020, there was excess capacity in the market – mostly on the ocean side – but there was more than enough capacity. Then COVID hit and everything plummeted, but once people repositioned themselves at home, there was a surge in demand. Then you had an influx in spending with stimulus money and a surge in spending on PPE and medical equipment. Between electronics, consumer purchases, and medical equipment, the demand was tremendous. The carriers were fairly slow in getting their capacity back online. Ships were at anchor, idle, because the carriers didn’t want them to be sailing at 50% capacity. When things started to move, they were slow to get capacity back into the market. Then, the demand just outstripped any increase in capacity. It got bad in the fall, then it got worse, and it has remained extremely tight. Many of your traditionally containerized commodities are now even being shipped in break bulk as in years prior.
Right now, it’s a struggle to find capacity. The last round of stimulus enacted in March has prolonged the challenge of getting enough capacity back online. Personal savings has been at an all-time high, consumer debt was at a very low level, and governments were still rather restrictive on the services sector at this time, so people continued to spend money on electronics and durable goods.
Coffee competes for capacity against other products of higher value. The value of the freight versus the value of the goods within the container is more bearable for these higher valued goods (electronics, furniture) than what you could bear for coffee or another agricultural product.
Now, with the lifting of the restrictions on the hospitality sector, you are starting to see a narrowing in the gap between consumer purchases of goods and spending on services. As this gap narrows, there should be less money to be spent on the purchasing of goods and supplies. I am remaining optimistic and hoping to see capacity start to improve towards the latter end of the fall though this may not lead to any immediate reduction in freight rates. As they say, live in hope, die in despair!
Do you think that the happenings of the past 15 months have transformed the logistics landscape forever? In other words, do we have a “new normal” for logistics practices moving forward?
D: It has definitely highlighted the importance of logistics departments and personnel at just about any company that has to deliver a product – this is a good thing. I think that companies will reevaluate their supply chain partners, how they contract with their carriers, and whether they have enough options to choose from when times get tough in addition to considering upgrades to their systems to manage their supply chains. I also think that manufacturers, warehouses, and distribution centers will look at what they need to do in-house to become “shippers of choice.” This would make life better for our truckers – oftentimes, the trucker gets little consideration at some facilities. Becoming a shipper of choice where they [the trucker] know they will be treated with respect will count.
I’m not sure the term “new normal” would be appliable to the logistics industry since it is perpetually changing. You get a “new normal” every other day.
Of your entire career, what was the most memorable logistics crisis, event, or time that you experienced?
D: Honestly, there are many difficult periods that I’ve had over a long career – many that I would prefer to forget! – but for the coffee industry in the U.S. and myself personally, Hurricane Katrina in 2005. It devastated New Orleans and caused significant damage to warehouses, the port, businesses serving the coffee industry, and of course, it was a huge loss to coffee stocks that were stored within the port warehouses.
At the time, I was Chairman of the Warehouse and License Committee, and together with their VP of Operations, we went down to New Orleans to report on the conditions, expected losses, and the recovery efforts. We stayed on a Naval vessel as no hotels were available. I was equally as awestruck by the scope of the devastation that was inflicted on New Orleans as I was by the dedication and perseverance of our many friends in the industry. After ensuring that their families were safe, had survived, and were cared for, these people looked first at protecting the hundreds of thousands of bags of coffee that were stored in their facilities. The facilities were severely damaged – half a roof and side walls missing – it was incredible. They then had to work to repair the facilities and deal with the damaged product in an effort to recover and preserve as much of it as possible and as quickly as possible. By reporting on these efforts to the Exchange we helped to stabilize the market volatility that was caused by the storm and allowed for a rational and deliberate path forward which benefited the coffee industry and the great people and businesses of New Orleans.
I saw this first-hand – it was remarkable how they persevered and recovered.
What would be your best piece of logistics-related advice for a “Next Gen-er” working in the coffee industry?
D: In general, reach out beyond your desk and your office perimeter. Challenge yourself and expand your sphere of influence. You always want to be part of the solution, not the problem. Volunteer your time (whether it is within your company or within trade organizations) and build your network with professionals inside and outside of the coffee industry. Broaden your knowledge, elevate your career potential, give yourself different dimensions, get involved in your community, and make your life more interesting. Find a mentor, someone who you trust that will have your best interest at heart. Importantly, remember that it is always best to build your network before you need it!