How to Start Your Own Coffee Roaster Business
Where to Start?
This article will explain the basics of starting a small coffee roasting business. This is how I started. I don't own a company, and I'm more of a contractor, but I make enough to get by.
So let's get started:
The easiest way to start is to break the business down into two core areas: coffee supply and customers.
These two areas will be the focus of your initial planning. After you have decided what type of coffee roasting business you want, the steps you will need to take to fulfill your coffee supply and customer needs will be apparent.
When starting out, you may just be happy with earning a bit on the side, or perhaps enough to quit your day job. Either way, you want it to be an operation that is worth your time.
Things went well for me when I started. I had had enough of my 9 to 5 job. I quit, but not until after I had done the ground work to start a new business.
Be cautious when starting out and realistic about your business requirements. The idea may seem sound, but you can quickly find that there are many expenses you hadn't planned for. The more research you do, the more hurdles you will discover—but this is a good thing! As you discover what you will need, it will save you a lot of time and money in the long run.
Remember, keep your vision simple. Start with how you want to source your coffee supply (do you want a contract roaster at the start, or roast your own coffee?). Remember to factor in elements such as the green bean variables; you lose 20% of the initial coffee weight because of the moisture content in the green beans. Every 1.2 kgs of green beans you roast will result in 1kg of roasted coffee. Most green beans come in 60kg sacks. How many origins will you want in your blend? How many sacks of coffee will you need to buy?
After you decide what type of coffee supply you want to sell, then think about your customer base. There are many questions to ask here, so don't rush. Take your time. Go out to a cafe and watch how the operations work. Will you sell your coffee to a cafe, or online? To friends and family? Your target market should eventually be cafes.Remember exactly what you are selling and to who you are selling it to.
Contract Roaster vs. Roast your own
This decision depends upon your budget, but more importantly what you are actually selling.
My first (and lame) attempt to enter the coffee distribution market was half hearted, and I was sure I would fail. After working on the numbers it was clear to me that it would save a lot more time and energy if I uses a contract roaster. For those who aren't familiar with this term, a contract roaster will roast in a wholesale capacity for your business. They provide coffee for you to sell with your brand or logo. Using this method you can go around to cafes with a nice website and business cards to introduce your coffee. My first visit to a contract roaster was exciting. I got to see the roaster and the machinery and find out how it all works. The price was really good: 1kg of roasted coffee in my choice of packaging started at $8. The top quality stuff was around $15 per kg. I wasn't totally happy with the blends I tasted because I was looking for the cheapest price. My original plan was to undercut all of the big roasting companies and charge around $18 per kg, which is quite cheap where I live in Sydney. The price was good, but there was too much robusta in the blend which left an unpleasant aftertaste. Taste is a big factor in coffee so I decided I would try another contract roaster. I was happy with the second factory I visited and took a few samples to cafes.
Here are the pros and cons of using a contract roaster:
- Money. Money is the big pro here. You save big because you don't have to outlay capital/rent for the equipment. You have no overhead.
- Time. You save time roasting the coffee, which entails choosing the green beans, roasting and packaging the coffee. You have more time to speak to customers and pick up business.
- Space. You don't need a warehouse or commercial rent to operate. You can just have the coffee delivered to your house or pick it up from the factory and deliver it to your customers.
- There are a bunch of negatives, but the they all boil down to attraction marketing. The coffee industry is fiercely competitive, and you can lose a customer/cafe in a heartbeat. There is little security and if you are just selling coffee, that may not be enough. You need an edge. That edge could be inviting people to sample your coffee and show them the roasting equipment. You can explain how your equipment and technique affect the taste of the coffee. Gone are the days of just selling coffee. You need to offer more. The big roasting companies offer coffee machines and grinders, free machinery servicing, 24-hour service, umbrellas and wind barriers, and more support for their customer cafes.
- If you use a contract roaster then you are limited in your growth potential. Yes, you can supply tonnes of coffee if you find the customers, but who wants to use coffee in their cafe that doesn't have a story or isn't popular? The cafe owners want coffee that will attract people. You want people to love your brand. That's when you will get customers. Coffee is more than just a product. It's a story and it starts from the green bean origins.
- From my point of view, using a contract roaster means you will need to have perseverance. Without a story of how you became a coffee roaster, you will need to visit cafes and talk around the subject of who actually roasts your coffee. While using a contract roaster will save you money, but it will be harder to sell to cafes and selling to cafes,carts,bakeries, and restaurants is how you grow your brand and business.
Buying a coffee roaster
If I had no customers and was starting a coffee roasting business, what size roaster would I invest in?
Coffee Roaster Equipment: What Should I Buy?
The the biggest question for anyone starting out on their coffee roasting journey is "What coffee roaster should I buy?" The answer depends on a number of factors, but these are the big ones:
- How much coffee do I intend to roast? This sounds like a silly question, but it is very important. Everyone intends to roast as much as possible, but the reality is that the majority of people who purchase a coffee roaster won't use it in a commercial setting and won't need the capacity these machines offer. If you are currently working your 9 to 5 day job and want to start a roasting business on the side, think about this seriously: If it doesn't work, what size roaster would I be happy with at home? If you are looking to start your coffee roasting business because you enjoy coffee, then the question above is still important. Whether or not you sell any coffee, you will be happy with your coffee roaster. I always recommend that people start small. It's hard to pick up customers and accounts, so why invest $20,000 in a 10kg roaster when you may only need a 1kg roaster? Remember, you will need to invent your blend, so working with 10kgs and getting it wrong means you will be burning money. If you are still learning, then you will need to become familiar with a new roaster. This means going through green beans. If you purchase your beans at around $6 per kg, then you will go through coffee quite quickly. This all adds up. The roaster size is important. Don't try to get a 5kg because you want something in between, because you might grow. Start with what customers you have and work upwards. If you have no customers, then start with 1kg until you outgrow it. When it's time, sell the 1kg roaster and get a 5kg. If you outgrow the 5kg, then upgrade again. It will give you time to learn and develop on a smaller scale while also expanding your knowledge base while you grow with your business.
- Gas vs Electric? I always thought this was a no-brainer. It's always going to be gas, right? Well that depends on what size roaster you choose, how much it costs to install, whether you have a gas line available, and whether you need a gas fitter or can connect the gas yourself. Are there laws or restrictions in your state regarding gas connections? Does it need to be certified by a registered fitter? I am finding it more and more convenient to go with electric these days, for the smaller-sized roasters of course. Just plug in and play. There are many regulations around gas in Australia and it pays to do your homework. I went with an electric 1kg coffee roaster to begin with and it worked out perfectly. This was very important because the roaster was placed in a cafe and that's where I started roasting.
- Where will I operate? This question is hard to answer. You would think a garage at home would be the best place to base your operations, but you may want to consider other options. I don't have all the answers. I sold a brand new 1kg electric roaster to a barista who was given the task of overseeing the coffee supply for the cafe where he worked. He figured that he would buy a roaster and install it at the cafe. He planned to roast the coffee and prepare it as well. After speaking with me, he realized that this would not be feasible, so I offered to roast the coffee for him. Now I am getting paid per kg to roast, sharing his roaster, and also advertising my roasting ability to every customer who walks through the door. If you do buy a small electric roaster, could you approach a cafe and offer to roast their coffee for them? Of course you can. Negotiate a price that suits both of you and let him know that you want to roast coffee out of his shop. He will get the beautiful aroma of freshly roasted coffee in his cafe. Just the fact that he has a coffee roaster in his cafe is sure to increase his sales. Just make sure there is enough room in the cafe.
My first roast on the 1kg electric coffee roaster
My first customer (cafe)
Who Are my Customers?
Your best customer is a cafe owner. A cafe owner will need to buy your coffee every week and that will keep your business going. A cafe that needs 25kgs of coffee per week will pay roughly $20 per kg (underestimated). Over one year, that comes to just over $25,000. If you can manage to get four customer cafes then you will be making over $100,000 per year.
It all depends on your marketing, and the market is usually split up into four categories: top, middle, bottom, and boutique.
The top category are cafes that use the best coffee machines with Mazzer coffee grinders: La Marzocco, Synesso, Slayer, and Kees Van Der Westen-inspired machines like Spirit, Speedster and Mirage. These cafes will have atmosphere and a vibrant feel to them. They are filled with happy staff and have a large regular following that contribute to the overall spirit of the cafe. Coffee is a major focus in the cafe and they either serve a reputable brand or roast their own.
If there is a cafe in the middle of the worst part of town with a big sign that says they are now using your coffee, your brand is now associated with that type of cafe/shop. This is the bottom of the market. When enough people get used to seeing your brand name outside of that shop, you will attract other shops of the same calibre. Coffee isn't the main focus in this type of shop, it's just another way to make a buck. The equipment is usually poor and not maintained well.
The middle category is somewhere in between these two—not the greatest but not the worst. This is where the majority of most cafes sit.
The boutique section can include someone roasting beautiful coffee at home, or in a tiny space, serving brilliant cups of excellence. The boutique/speciality/micro-roasting type can hold up quite well in the industry, but as you grow you may out-grow this area and move into one of the three general categories. If you carry on roasting immensely good coffee, and choose your cafes well, you can end up in the top category. If you get lazy and accept a few middle-level cafes, then you can easily slide down and disappear.
This is where you decide at what level you want to play. Here in Australia, examples of top-quality roasters are Allpress Espresso, Coffee Alchemy, Campos Coffee, Single Origin Roasters, and Toby's Estate. This doesn't mean that their coffee is the best, it just means that they have excellent marketing strategies. They will only put their coffee in great cafes with the best machinery.
Think about the type of cafe that you would like to represent your product. Once you know, then think about all of the things that this type of cafe would want. Are they currently using La Marzocco level coffee machines or standard coffee machines? What coffee are they currently using? Look at your branding and ask yourself if the branding matches the category of the market where you are trying to position your coffee.
There is always room in the top category for more coffee roasters because the top usually has all of the best cafe owners. These cafe owners are the type that always pay their bills on time and are happy people who like to chat. The top category maybe hard to enter but once there it will make the rest of your marketing a lot easier.
The middle category is just so hard to enter. This is where most coffee roasters position themselves and they struggle while battling to hold their accounts (cafes). The problem with the customers in this category is that these cafe owners want free stuff. They will leave you in a second if they can get extra freebies from someone else. The freebies I talk about are umbrellas, wind barriers, "buy 5kgs of coffee and get 1kg free" offers, and new coffee machines and grinders that includes free servicing. This is why it's so hard to survive in the middle bracket; it comes down to how much money and perseverance you have.
The bottom category is easy to enter but isn't good for your brand unless you want to be there. The chicken shops, kebab shops, small rough bakeries, convenience stores, and old train station stores will not have much competition, but once entering these shops, your brand will be seen as average or below average.
On a personal note, I have worked for three coffee roaster companies and by far the best was the company in the top bracket. Not only were the people friendlier and happier but the wages were better.
To sum up the question, I believe it has a lot to do with where you want to establish your business as a coffee roaster in the overall market.
Final Note on Coffee Roasting
Starting a business as a coffee roaster is not easy. Each step takes time. It can take three to six months to get your first customer. Along the way there are times where you just need to be patient and hang in there. Getting your first customer is hard, but then you get some momentum going and you will begin to see some results. You can save a lot of money if you take your time and plan things carefully. My advice is to be patient and persevere.
Step 1: Get professional advice. You want to start off on the right track, you don't want to get so far along and realise you've made some basic errors that can cost you a lot. Ask those with experience for help, work smarter not harder.
Step 2: Save up and buy a small roaster. Don't get a loan because you will need the cash-flow. Also if you buy a large roaster, what will you use when you need to roast samples to decide on your blend?
Step 3: Hone your skills. Become a master on your roaster and learn about green bean origins and the roasting process.
Optional: Find a customer or partner. My advice is find a cafe that will be happy to show off your roaster or you could look at partnering with someone who needs/benefits from you being around - perhaps contribute to a lease or help look after the shop in exchange for retail space.
Step 3: Decide on your position in the market. Create your brand and focus on growing your network of cafes that you roast for. This can take time.
You can do all of this while working at a full time job until you are getting enough to support yourself. When you are ready, cut your ties with your job and start enjoying your lifestyle. Just remember to choose your customers/cafes/accounts wisely. Make sure they are in it for the long term...
If you are looking to avoid some of the pitfalls when starting a coffee roasting business, you should consider researching the common problems that new business owners face. A good place to start is here: Top 3 Problems Starting & Growing a Coffee Roasting Business