One doesn’t have to look far within the Australian coffee scene to see coffee shop roasting in house. It certainly is a growing trend as coffee shops look for ways to remain competitive in a market that is attracting a lot of new entrants. Like most things in business the pros and cons of such a venture needs to be thoroughly considered before jumping in.
The costs of running a cafe are increasing all the time. Increasing rents, labour, COGS and utility costs have led to many cafes looking at any way possible to squeeze more margins within their current offer let alone new offers. So for a cafe whose turnover is dependent on coffee sales the most obvious area that comes up for scrutiny is roasted coffee beans. This can involve assessing such areas as wastage, pricing, coffee supply contracts and also the prospect of doing it in house.
We get approached often from cafes that have done some research or sums and are looking at the prospect of in house coffee roasting. It is a natural progression of thought for cafes in today’s market as there are so many examples of cafes doing it. I would like to point out though that with many of these examples they do not get it right because they dived too quickly into it without the proper understanding and preparation required. It certainly is not for everyone and does not suit every business model. The romancing reflection of roasting fresh coffee daily in a busy cafe can quickly ware off when put in to practice.
The pros are very obvious if you get it right. Guaranteed freshly roasting coffee aged to your liking, flexibility around your coffee offering, in store theatre, a retail pack offering and of course the price saving advantage which is some case can be significant. That being said, in order to achieve this you need to have all you ducks in a row. This is not as easy as it looks and many fail to realise their potential. There is more to it than just doing the sums on how much you can save on your coffee pricing. Let’s take a look at what you need to consider when following this path.
Firstly most get their pricing analysis wrong. When looking for savings you need to conduct accurate analysis of pricing and costs. It is not a matter of just taking the green coffee cost and adding a bit extra for packaging. You need to calculate for such factors as real cost of green beans including freight, weight loss during roasting, power and gas costs, packaging and most importantly time and labour. You may not be able to do it as cheap as what you think in order to make it viable. I advise people to overestimate on costs rather than under estimate. You really need to work some fat into the numbers as something may come up such as servicing and breakdowns on the equipment. An accurate pricing analyses that takes into account as many factors as possible will provide you with greater understanding of the true net profit gain should you maintain or increase sales. This then becomes the base for the viability of a business plan. If you come out with a number that is does not look that attractive the capital investment and effort to transpose this into your business may not be worth pursuing any further.
If the numbers look good then you need to ask yourself are you willing to see it through with passion. Roasting coffee is not something you learn over night. You should pursue it with the same vigour as a chef pursues his craft. Operating roasting equipment is quite simple. You can teach someone the basics of profile roasting very quickly and they will be able to match profiles fairly consistently on the equipment. That is, however, not much different to most people being able to follow a recipe and operate an oven or BBQ. We use appliances in the kitchen that are based around similar principles. Roasting the coffee is only a small percentage of the process. Many people place too much emphasis on the equipment where as the bulk of the skill lies in the knowledge of the ingredient. Understanding green coffee as an ingredient is the most essential part to the process. I believe a lot of people are under the impression that coffee is simple as you only have to learn the one ingredient compared to say a professional chef who will have a knowledge and pallet for hundreds maybe thousands. What really perplexes people when they begin roasting is the complexity of the ingredient. There is so much variation in green coffee from varietals to origins that to really understand it requires study and experimentation. This requires time, which is something that a lot of busy cafe owners do not have.
Consider the transition stage you will need to undergo in store. If you are a very busy cafe then trying to manage roasting all your volume in store with the appropriate consistency and quality control can be difficult. In some instances it may be worth consulting your roasted coffee supplier on such a venture. Sure, some won’t be overly pleased, however, there are ways that both may be able to benefit rather than just cutting ties. You may want to continue your current main volume blend from your current supplier and utilise the in house roasting for variety of your menu board offering and retail packs. This can work well in many instances and can alleviate some of the risk. Some coffee suppliers can be quite supportive in this instance and the overall outcome can result in more sales for both parties.
When weighing up which equipment to use make sure you get a good idea on the overall floor space you will require. You need to consider allocating space for green bean storage, the roaster, packing equipment, deli grinder and roasted coffee storage. This may be difficult to achieve in store which is why some choose to roast at an alternate location. If you can, you do want to take advantage of the in store theatre so the appropriate planning for space and viewing for the public is important. Be mindful with this that you will need to conform to certain council regulations in regards to food handling and storage. You will also need to evaluate the exhausting of emissions from the roasting process. The volume of smoke and odour even on small roasters can be enough to upset surrounding residents. Careful planning in relation to this can help avoid EPA and Council issues down the track. Coffee Roasters also pose a high fire risk so an appropriate fire safety process needs to be put in place.
One of the key areas for the success of such a venture is the ability to source quality green beans at reasonable prices. Whilst there are a lot more green coffee brokers in the market these days it is still difficult for a small player to achieve the same level of service, quality, supply and pricing as the larger coffee roasters. Pricing and supply in most instances is linked to volume and the more you have the more negotiating power you will have with the brokers. Sometimes it can be better for a shop roaster to pay a bit more for the green coffee rather than buy bulk and have to store for a long time. Green coffee takes up a lot of space so consider the cost of storing the coffee verse the price you pay for it. Make sure when you do your green coffee costing for your business model you work on the pricing you can actually achieve which means contacting suppliers for quotes.
Having some foundation training is important even before you have made a definitive decision on whether to move forward. This will at least provide a clearer picture of what you will be in for. There are things that can be taught in a few hours or days however the practical element of hands on roasting experience takes time. The same applies to becoming a quality barista, just because you have completed the 3 hour course does not mean you are proficient and ready to take on the market. Practice is required and for many this has meant experimentation at home well before implementing into a retail environment. Remember that you will be potentially replacing many years of knowledge and experience developed by your coffee supplier so it is very important not to under estimate the challenge posed. For coffee suppliers in the market it is also important to consider that one day some of your customers may want to roast their own coffee. Having some king of plan to deal with the scenario may mean the difference between maintaining or losing that customer. I don’t believe that scare tactics are the answer and in many instances can make the customer even more determined. A more endearing approach may offer a more rewarding outcome for all involved.