When it comes to businesses accepting bitcoin, there is nothing hi-tech about a farmer and his wife selling beef in rural Australia. However, David and Peta Moloney are doing for the beef industry what bitcoin is doing to the financial one: disrupting it.
High-profile companies such as WordPress and Foodler already take bitcoin, but the percentage of income generated in bitcoin is still very low. OKCupid, another big name to take bitcoin told us less than 5% of their revenue comes from the currency.
So how has a beef-seller in northern New South Wales achieved up to 20% of his business in bitcoin?
There is no denying that Honestbeef has found its niche in the market, providing ethical, additive-free beef to primarily metropolitan consumers.
David believes Australians are much more conscious these days of what they are eating and where it is coming from and says a large portion of his client-base are allergy sufferers.
The business started after the Australian drought of 2003 when the couple were living in Canberra, fed up with paying sky-high prices for poor-quality beef.
“Trying to get a nice piece of steak was terribly expensive,” David says. “We just thought 'this isn’t right, there’s got to be a better way'. We knew farmers who were selling it for AU$3 a kilo and thought 'why shouldn’t they get more money and people get better beef?'”
By joining these dots, Honestbeef began operating the following year, priding itself on the quality of its animal welfare as well as the actual beef.
The company only offers beef products because the abattoir closest to the business in Hogarth Range deals solely with cows.
“All our farms are around the abattoir so the animals don’t have to suffer a long journey,” explains David. “The trips are no longer than twenty minutes so that keeps them calm and there’s less stress.”
This ethos extends to the way the farmers manage the cattle as well. None of the cows are grain-fed. David said:
“It’s nice, relaxed farming, nothing intense, no hormones or anything like that. [The farmers] look after the land and look after the animals.”
Likewise, David ensures his customers know exactly what they are getting, explaining that it takes just nine days for the cow to get from the farmer to the consumer.
“It’s off the farm, into the abattoir, it hangs for six days and then it’s straight to the butcher. Two days later, they’re eating it, so they know exactly how old it is. It’s fresh beef, we don’t add anything to it.”
In fact, the animals are still alive in the fields when a customer places an order. About six to seven customer orders make up a whole animal and when these are in, David will liaise with his farmers to find a cow of a suitable weight and size to fit the orders.
This sustainable order-animal matching model means minimal waste.
It also sees David offering the farmers 10-20% above market price for a cow and then selling the meat packs directly to the consumer. Over 70% of the $10.75 a kilo that the customer pays goes to the farmer and butcher.
Honestbeef make an effort to keep their pricing transparent.
“We show everything about our pricing structure, what we’re doing, how much money we make, how much money the farmer is getting and how much the butcher is getting,” David says, adding that in terms of getting the cow from field to fork, it is “as peer-to-peer beef as you can get".
The similarities with bitcoin as an open-source, peer-to-peer currency are not lost on David and it seems starting to accept bitcoin was a natural progression.
“It fitted in with our business because we don’t accept credit cards or PayPal or anything like that,” he says.
He admits this was due to “the hassle and cost of setting up a payment gateway”.
Despite having had no issues with people wanting refunds, “if someone did decide they wanted their money back, we wouldn’t really get a say in it, we’d have to take them to small claims court, which for a small company like us, it’s just not on,” David says.
Before introducing bitcoin, Honestbeef dealt only with direct bank deposits, but the company soon saw that bitcoin offers the same advantages.
“It’s great to know that [charge backs] can’t happen without us trying to come to a resolution first. It just gives us more control,” David adds.
A self-confessed nerd, David discovered bitcoin when he was trawling the Internet one day in late 2010. He said:
“I thought about it for three to six months and looked at the forecasts and thought this seems like the real McCoy. I wasn’t investing in it at the time, I was just watching it and I thought this is going to bloody work!”
The company’s first bitcoin transaction was in 2011.
“Our first order was when bitcoin was at AU$5,” says David. “We were given 45 of them for a box of beef. More than half of those have gone now but the rest are still sitting there.”
Since that first transaction, around 10% of Honestbeef’s customers have been paying in bitcoin and in the last three months alone, that figure has doubled.
He acknowledges that it is quite rare to take such a relatively high volume of bitcoin transactions. He says he listed the company on the bitcoin wiki site and it took off from there, being posted and talked about on various bitcoin forums.
The company is cash-flow positive and takes payment before the cow has even left the farm.
For bitcoin customers, there is an API on the website showing real-time values in US dollars, but David checks bitcoinwatch.com before quoting a price.
“I take the last two weeks’ average price for the Australian market. There might even be a little back and forth, especially if the market is moving too quickly or it’s starting to fall away. We have a chat and come to an agreement,” he says.
One example he quotes is from during the March-April rally this year.
“Someone placed an order [when bitcoin was] at AU$145, they then hit AU$200 but he had already transferred them by that time. We sold about a quarter of the company’s bitcoin holdings when it went just above AU$200… The customer was happy in the end; by the time he got his beef, which was nine days later, the price was down at AU$80. We had sold our bitcoins so everyone was happy.”
He is looking to push forward with the bitcoin side of the business and his next step is to persuade suppliers to also accept bitcoin. He believes he is “very close” to achieving this.
One of the farmers he works with now takes 10% in bitcoin for every second animal. He added:
“It’s a lot to get your head around, if you’re not tech-savvy initially. But since 2011, they’ve watched the price climb and they’re slowly but surely coming to accept it.”
He admits he can start to evangelise about bitcoin when talking about it with friends and neighbours, but he is noticing people become increasingly interested.
“They’re fascinated and horrified at the same time,” he says. “They love the benefits that it yields, but because it’s computer code, they worry about hacking and so-forth so then I have to start a spiel on cryptography.”
There are three people he has managed to get excited about bitcoin and they are his children.
“We are considering giving away bitcoin to new clients”
“They have their own little stash that I control and they’re constantly asking the price,” David says. “That day it went up to AU$266 and then went back down to AU$100, I had to tell them they had lost $1,000, you should have seen their faces.”
He is not just talking about spreading the word on bitcoin either.
“We are considering giving away bitcoin to new clients, or having a month where we give away maybe a quarter of a bitcoin when people place an order so they can get started in bitcoin land,” says David. “We’re thinking of how we can get it to them and emailing them an information pack.”
David trusts bitcoin will continue to rise in value. “Either it will be spectacular or it will be a spectacular crash,” he says, but he is betting on the former. “It’ll be worth $200 by the end of the year,” he predicts, “and $1,000 by the end of 2014.”