7 ms·

Others have pointed this out, but no one has actually done the math yet, so... 6000 "units" for $250,000 is $41/unit. At wholesale. For a product that retail

by lisper 4y ago

Others have pointed this out, but no one has actually done the math yet, so... 6000 "units" for $250,000 is $41/unit. At wholesale. For a product that retails for $16/bag. It is just inconceivable that no one noticed this discrepancy. This is not a "grift" by the distributor, this is an elementary and obvious fuckup by the producer. In fact, it'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.

deleted 4y ago
[deleted]
Ancalagon 4y ago
Something something high quality, ethically-sourced coffee? (I don’t actually know the details of those descriptions. Playing devils advocate it sounded to me like they were trying to run a very ethical, environmentally friendly, health-focused business from the start, which is expensive as far as I can tell in the US, so maybe those prices made sense.)
- powera 4y ago
  The point is that a "unit" could not possibly have been a $16 bag of coffee, if they were getting paid $41 per unit. The story smells fake to me. The most charitable interpretation is that they were misled by their "food broker" more than they realize even now.
  - chasd00 4y ago
    maybe they gave the broker their AMEX to pay not realizing the broker makes their money on commission. heh although that would be an even more inconceivable mistake than the dollar discrepancy.
- marcinzm 4y ago
  They seem to sell the bags on their website for ~$15 so they should know that someone selling them for at least 3x the price is odd.
- lisper 4y ago
  The details of the product don't matter. What matters is that their "fire sale" 50% off price is $8/bag, so their full retail price is $16/bag. So they were looking at a wholesale price that was 3x their retail price and no one noticed that this was odd and bothered to investigate further. I find it hard to believe that anyone could be that stupid. I also think it's pretty dishonorable to publicly characterize the consequences of their mistake as a "grift" by their distributor. Modest Coffee is not the victim of anything but their own negligence.
- corgi609 4y ago
  Hello! If you read the whole story you will understand the numbers and the situation. It is all explained and you should read the whole story from beginning to end.
linuxftw 4y ago
This is what I'm thinking.
dtnewman 4y ago
From the article: > June 2022 comes, and the orders for this retailer start coming in from the distributor. This coffee was shipping to five distribution centers so we were receiving multiple orders. The orders were large but we thought we could handle it. Then the orders kept coming, spread apart by days. So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in piecemeal. There's no question that these business owners made some stupid mistakes and probably failed to read the fine-print. On the other hand, when you are a small business looking to grow, you learn as you go along. And oftentimes you have about zero leverage with a multi-billion dollar distributor or a supermarket. You can't really ask them to change their legal terms from their boilerplate language because fuck if they are going to get their lawyers involved to change boilerplate documents at the request of a new manufacturer fulfilling a tiny order [1]. So you sign anyway and hope for the best. [1] Reminds me of my friend who got a lucrative job offer from a large investment bank out of college, but wanted to adjust the terms in the non-compete section of their contract (something you hear suggested a lot by people here on HN). They literally laughed at him when he suggested it and said something sarcastic along the lines of "yeah, let's phone our legal team and tell them that the first year analyst wants a personalized job contract".
- lisper 4y ago
  > So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in piecemeal. What difference does that make? They thought they had a deal to sell 6000 "units" for $250,000. If they had just bothered to divide 250 by 6 they would have immediately realized that a unit could not possibly be a bag, and they would, by their own account, have passed on the deal, and none of this would have happened.
  - eternalban 4y ago
    Did they name the distributor? If not, your take on this is compelling. Unless these guys dropped out of middle school to do the startup thing, in which case we now have a good answer for kids in school who ask "But when will I ever need to use this math stuff?" To defend against "grifters", of course.
phphphphp 4y ago
the units weren’t purchased, though, it was an order. If we take them at their word that they worked with a broker, then there’s numerous ways this could have happened. For example, the broker could have said “they’ll pay you $x per bag and they need 6,000 units” which would explain the discrepancy. After all, the order was for “units” but what’s ultimately being sold is bags — so there is some translation happening somewhere. The businesses entire pitch is ethics, it would be batshit crazy to try and run such a gambit when ethics is core to their business.
- lisper 4y ago
  > the broker could have said “they’ll pay you $x per bag and they need 6,000 units” That's possible, but unlikely. The whole concept of "bags" just doesn't enter into it in a wholesale transaction. But even if this did happen, they could have avoided the problem by clarifying: "So that's a total of $X, right?" Also, at some point this deal should have been put in writing, at which point, again any ambiguity should have been resolved. They had a lawyer, surely they would have asked him to review the deal before signing? Sorry, but there is just absolutely no way to spin this so that this is not 100% their fault.
  - phphphphp 4y ago
    it’s absolutely their fault in many ways, I don’t dispute that, but I absolutely dispute the idea that this must be a grand conspiracy to trick people into buying coffee with an impossible story. They were dealing with a broker who is responsible for getting a deal done, the broker has no investment in the intricacies of the deal, so it’s totally plausible that the broker was saying whatever was necessary to get the deal done even if that meant providing ambiguous information that could have confused a naive supplier.
    - lisper 4y ago
      > this must be a grand conspiracy I didn't say it had to be a conspiracy, only that I find this hypothesis plausible in today's world. > the broker has no investment in the intricacies of the deal He certainly does. Brokers don't get paid unless their deals close. > it’s totally plausible that the broker was saying whatever was necessary to get the deal done Of course. It's still their responsibility to achieve clarity on what they are signing up for before agreeing. At the very least they should have done a sanity check on the terms and the bottom line.
deleted 4y ago
[deleted]
samwillis 4y ago
There is undeniable an F-up on the producers part here, however I think you are assuming too much in your calculation. They don't say at any point the $250k order value was the initial order as they understood it. They explicitly state that they kept getting further orders past what they understood as the initial 6k units. I think what's happed here is that as the order kept a growing they took on more debt to fulfil it. I don't think they believed the initial order was for $250k and that they were being payed more than wholesale per bag.
- lisper 4y ago
  Again, this is not possible unless they were complete morons. At some point they either had some idea of what they were going to be paid, at which point they should have realized that a unit could not possibly be a bag as they were assuming, or they did not, in which case they had no business being in business. There simply is no way to spin this so that this is not 100% their fault.
  - samwillis 4y ago
    No one can make that judgment without seeing the paperwork. We don't know how it was written down. Also they are a really small business. 6k bags a year, their old volume, is only 23 bags per day (5 days week, 52 weeks)! Of course they were out of their depth, and very naive to how this all works. It's not fair saying they are morons and don't deserve to be in business though.
    - lisper 4y ago
      The only circumstance in which "how it was written down" might matter is if what was written down is different from what they said in the blog post. Which doesn't really help. There are only three possibilities: 1. The deal was written down, and it was, as they report, for 6000 units and $250,000 (modulo phraseology) 2. The deal was written down and it was not for 6000 units and $250,000 3. The deal was not written down. In case 1 and 3 they are morons, and in case 2 they are liars. There are no other possibilities.
prawn 4y ago
I'm assuming they had a stated wholesale price sheet somewhere - maybe it specified per bag and per case prices. They received the indication that orders for 6,000 units would come in. If even 6,000 bags was a massive deal for them, the idea that it could be 6,000 cases might not have even entered their thinking. Not a grift. Their fault for not clarifying, and arguably a failure from the consultant to not step up and help them navigate uncertain waters. But I can absolutely see how it happened in a way that wasn't a stunt.

by lisper 4y ago

deleted 4y ago

[deleted]

Ancalagon 4y ago

Something something high quality, ethically-sourced coffee? (I don’t actually know the details of those descriptions. Playing devils advocate it sounded to me like they were trying to run a very ethical, environmentally friendly, health-focused business from the start, which is expensive as far as I can tell in the US, so maybe those prices made sense.)

powera 4y ago
The point is that a "unit" could not possibly have been a $16 bag of coffee, if they were getting paid $41 per unit. The story smells fake to me. The most charitable interpretation is that they were misled by their "food broker" more than they realize even now.
- chasd00 4y ago
  maybe they gave the broker their AMEX to pay not realizing the broker makes their money on commission. heh although that would be an even more inconceivable mistake than the dollar discrepancy.
marcinzm 4y ago
They seem to sell the bags on their website for ~$15 so they should know that someone selling them for at least 3x the price is odd.
lisper 4y ago
The details of the product don't matter. What matters is that their "fire sale" 50% off price is $8/bag, so their full retail price is $16/bag. So they were looking at a wholesale price that was 3x their retail price and no one noticed that this was odd and bothered to investigate further. I find it hard to believe that anyone could be that stupid. I also think it's pretty dishonorable to publicly characterize the consequences of their mistake as a "grift" by their distributor. Modest Coffee is not the victim of anything but their own negligence.
corgi609 4y ago
Hello! If you read the whole story you will understand the numbers and the situation. It is all explained and you should read the whole story from beginning to end.

linuxftw 4y ago

This is what I'm thinking.

dtnewman 4y ago

From the article: > June 2022 comes, and the orders for this retailer start coming in from the distributor. This coffee was shipping to five distribution centers so we were receiving multiple orders. The orders were large but we thought we could handle it. Then the orders kept coming, spread apart by days. So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in piecemeal. There's no question that these business owners made some stupid mistakes and probably failed to read the fine-print. On the other hand, when you are a small business looking to grow, you learn as you go along. And oftentimes you have about zero leverage with a multi-billion dollar distributor or a supermarket. You can't really ask them to change their legal terms from their boilerplate language because fuck if they are going to get their lawyers involved to change boilerplate documents at the request of a new manufacturer fulfilling a tiny order [1]. So you sign anyway and hope for the best. [1] Reminds me of my friend who got a lucrative job offer from a large investment bank out of college, but wanted to adjust the terms in the non-compete section of their contract (something you hear suggested a lot by people here on HN). They literally laughed at him when he suggested it and said something sarcastic along the lines of "yeah, let's phone our legal team and tell them that the first year analyst wants a personalized job contract".

lisper 4y ago
> So it sounds like they had an initial agreement for 6000 units, but the actual purchase orders were coming in piecemeal. What difference does that make? They thought they had a deal to sell 6000 "units" for $250,000. If they had just bothered to divide 250 by 6 they would have immediately realized that a unit could not possibly be a bag, and they would, by their own account, have passed on the deal, and none of this would have happened.
- eternalban 4y ago
  Did they name the distributor? If not, your take on this is compelling. Unless these guys dropped out of middle school to do the startup thing, in which case we now have a good answer for kids in school who ask "But when will I ever need to use this math stuff?" To defend against "grifters", of course.

phphphphp 4y ago

the units weren’t purchased, though, it was an order. If we take them at their word that they worked with a broker, then there’s numerous ways this could have happened. For example, the broker could have said “they’ll pay you $x per bag and they need 6,000 units” which would explain the discrepancy. After all, the order was for “units” but what’s ultimately being sold is bags — so there is some translation happening somewhere. The businesses entire pitch is ethics, it would be batshit crazy to try and run such a gambit when ethics is core to their business.

lisper 4y ago
> the broker could have said “they’ll pay you $x per bag and they need 6,000 units” That's possible, but unlikely. The whole concept of "bags" just doesn't enter into it in a wholesale transaction. But even if this did happen, they could have avoided the problem by clarifying: "So that's a total of $X, right?" Also, at some point this deal should have been put in writing, at which point, again any ambiguity should have been resolved. They had a lawyer, surely they would have asked him to review the deal before signing? Sorry, but there is just absolutely no way to spin this so that this is not 100% their fault.
- phphphphp 4y ago
  it’s absolutely their fault in many ways, I don’t dispute that, but I absolutely dispute the idea that this must be a grand conspiracy to trick people into buying coffee with an impossible story. They were dealing with a broker who is responsible for getting a deal done, the broker has no investment in the intricacies of the deal, so it’s totally plausible that the broker was saying whatever was necessary to get the deal done even if that meant providing ambiguous information that could have confused a naive supplier.
  - lisper 4y ago
    > this must be a grand conspiracy I didn't say it had to be a conspiracy, only that I find this hypothesis plausible in today's world. > the broker has no investment in the intricacies of the deal He certainly does. Brokers don't get paid unless their deals close. > it’s totally plausible that the broker was saying whatever was necessary to get the deal done Of course. It's still their responsibility to achieve clarity on what they are signing up for before agreeing. At the very least they should have done a sanity check on the terms and the bottom line.

deleted 4y ago

[deleted]

samwillis 4y ago

There is undeniable an F-up on the producers part here, however I think you are assuming too much in your calculation. They don't say at any point the $250k order value was the initial order as they understood it. They explicitly state that they kept getting further orders past what they understood as the initial 6k units. I think what's happed here is that as the order kept a growing they took on more debt to fulfil it. I don't think they believed the initial order was for $250k and that they were being payed more than wholesale per bag.

lisper 4y ago
Again, this is not possible unless they were complete morons. At some point they either had some idea of what they were going to be paid, at which point they should have realized that a unit could not possibly be a bag as they were assuming, or they did not, in which case they had no business being in business. There simply is no way to spin this so that this is not 100% their fault.
- samwillis 4y ago
  No one can make that judgment without seeing the paperwork. We don't know how it was written down. Also they are a really small business. 6k bags a year, their old volume, is only 23 bags per day (5 days week, 52 weeks)! Of course they were out of their depth, and very naive to how this all works. It's not fair saying they are morons and don't deserve to be in business though.
  - lisper 4y ago
    The only circumstance in which "how it was written down" might matter is if what was written down is different from what they said in the blog post. Which doesn't really help. There are only three possibilities: 1. The deal was written down, and it was, as they report, for 6000 units and $250,000 (modulo phraseology) 2. The deal was written down and it was not for 6000 units and $250,000 3. The deal was not written down. In case 1 and 3 they are morons, and in case 2 they are liars. There are no other possibilities.

prawn 4y ago

I'm assuming they had a stated wholesale price sheet somewhere - maybe it specified per bag and per case prices. They received the indication that orders for 6,000 units would come in. If even 6,000 bags was a massive deal for them, the idea that it could be 6,000 cases might not have even entered their thinking. Not a grift. Their fault for not clarifying, and arguably a failure from the consultant to not step up and help them navigate uncertain waters. But I can absolutely see how it happened in a way that wasn't a stunt.