eGreenCoffee makes $17.5bn e-marketplace debut

US-based start-up eGreenCoffee.com has launched an e-marketplace for raw coffee beans, and claims to have already cornered $17.5bn worth of trade.

eGreenCoffee.com will start trading at the end of this week, and according to company officials, the buyers on its service account for 35 per cent of world coffee purchases - a market worth $50bn annually.

The company believes cost savings through efficiency will reduce prices for buyers, and the savings could filter right through to the supermarket shelves. If the coffee exchange is successful, the firm hopes to expand into other commodities with the launch of similar ventures for cocoa, sugar, rice and tea.

Malcolm Wall Morris, business development manager for eGreenCoffee's European operations, said: "Transaction costs are lower, and you don't have to pick up the phone dozens of times to access bidders. And we only charge commission to the sellers, whereas in the traditional model, the buyers are charged as well."

eGreenCoffee.com says it is replicating the traditional trading process in a more efficient manner. The site does not omit the numerous exporters, importers, trading houses and brokers that sit between a coffee bean producer and a coffee processor.

Chris Prior-Willeard, head of exchange and trading markets at PricewaterhouseCoopers, said: "There will be a defensive period, in which intermediaries who will be cut out of deals will try to keep the traditional transactional process going. Suppliers and consumers will no longer be willing to pay commission for mere execution, but they will need value-added services like advice and time."

Italian coffee giant, Lavazza, has taken an equity stake in the exchange, which allows buyers and sellers to trade anonymously. Lavazza believes online exchanges will give small producers and buyers immediate access to a worldwide market that has been previously closed off.

But, according to Prior-Willeard, the producers and buyers will still be unknown to each other, and that's a problem the internet clearing houses still need to solve.

"Internet exchanges are notoriously lacking in clearing and settling services," he said. "On the internet, you don't know each other, and you need to create trust and the certainty of good performance."

Lavazza's director of coffee buying, Mario Cerutti, agreed. "A lot of people believe that internet trading will cut personal contact, but in my opinion it will actually enhance personal contact. The personal knowledge of your buyer or seller will become an even more important part of the business," he said.