By Samantha Magick
Banz Kofi’s online business was transformed when owner Patrick Killoran negotiated a significant reduction in freight rates. Last year during COVID, while regular sales out of the company’s Mount Hagen coffee shop and traditional channels were down 50%, online sales “went through the roof.”
A decade ago, Killoran decided he wanted to get into downstream processing of coffee. He said he learnt quickly that that it didn’t matter how good the product was, if he couldn’t get it to its destination for a competitive price, he wasn’t going to succeed, and at the start, his landed price was too expensive.
Killoran managed to negotiate what he calls “Amazon rates” with DHL in Papua New Guinea as a pilot project. He said DHL (he is the company’s Mount Hagen agent), and in particular the PNG-based manager he worked with, understood the value of working with Small and Medium Enterprises (SMEs), particularly in a market that tended to boom when mines were in building and opening stages, and then quieten considerably in other periods.
After securing the improved freight rate, Killoran deliberately refrained from doing any extra marketing, so as to be able to gauge the impact without any other factors influencing sales. “Last year we did A$25,000 from the website. So we went from A$200 to A$25,000 in one year.”
“In fact, I’m now getting my coffee, anywhere in the world, in three to four or five days,” he says. “We actually roast it fresh for you. So when I say it takes three, four, five days, that includes roasting of the coffee and sending it from Mount Hagen, which is up in the highlands of New Guinea, which in itself to get it to Moresby in three days is quite a feat sometimes you know.
“The fact is we can prove that e-commerce can work in the Pacific. You’re not going to get it much more remote than Mount Hagen. And we’re getting it to these people.”
His customers include a long-standing client in Estonia, who worked on a gas project in PNG some years ago, developed a love for Banz coffee then, and has been consistently buying it since, most recently 100 kilos in February. “We roasted that coffee and airfreighted it, and that whole process took three days. And that coffee got to them in three days, and cheaper than buying it locally,” Killoran says.
He would like to see the competitive shipping rates he enjoys made available to all Pacific SMEs, saying it can still be commercially viable for big shipping and freight companies, but it would also mean they are supporting smaller businesses and Pacific communities. Killoran believes this is a conversation that needs to be had collectively at the headquarters or large regional offices of freight companies.
“I’m really passionate about the Pacific coming together to solve this problem” he says. “We need to come together as a group…it gives us power.”
Killoran says while he is keeping his margins low, he intends to slowly put his prices up. “I’m not going to take the mickey out of the customers that I’ve established by just putting the price up overnight” he says, but he does want to increase them slowly in order to be able to invest in more equipment “and make it a profitable business rather than a breakeven business.”
If “nothing else comes out of COVD” he says, it is the knowledge that “we can’t just sit back and wait for the tourists to come. SMEs are the future. We’ve got some amazing products, we know we can do it, it’s just we’ve got to be committed, we’ve got to work as a team.
