Cost management tips for smaller coffee roasters
With the exponential growth of specialty coffee in recent years, we’ve seen a corresponding rise in the emergence of nano roasters, home roasters, and coffee shops starting to roast their own beans.
With more and more small businesses looking to enjoy the many benefits of freshly roasted coffee, there are arguably a number of questions about the economic viability of running a small roasting operation. In the early stages, coffee roasting can be a business which operates on fine margins and requires significant overhead investment.
To learn more about how smaller roasters and cafés roasting their own beans can manage their costs, I spoke to Jonas Lillie, the CEO and founder of Aillio. He told me more about how small roasting operations can stay competitive. Read on to find out what he said.
You might also like our article on how home coffee roasters have evolved.
Why is cost management so important for smaller coffee roasting operations?
To put it simply, without the buying power, infrastructure, and sheer scale that large commercial roasters have, profitability can become an issue. Keeping your costs down can be the difference between survival and being able to reinvest your profits and move forward.
Jonas explains: “There’s a range of reasons. To start with, at the minute, the price of green coffee is very high, and that doesn’t seem to be changing any time soon.
“Beyond that, shipping and logistics prices are through the roof, energy prices are soaring, and so are the costs of everything else related to coffee, such as cupping bowls and spoons, and so on.”
Jonas points out that roasting itself is one of the key areas where smaller operations can lower their costs, and says that it’s “one of the few things actually within your control”.
He starts by noting that the simple decision to roast your own coffee will require an initial investment, but explains that it provides a lot of independence for coffee shops or other coffee businesses. The process is by no means easy, but it can be highly rewarding.
“Let’s say you have a coffee shop, and you get your roasted coffee from a wholesale roaster,” he says. “You depend on that roaster, [and effectively defer to them on] quality, availability, and price.
“If any of these three factors change, it could negatively affect your business, but you have no control over it. So taking control of the roasting process will increase your independence.”
Jonas points out that many prominent third wave roasters around the world today started as small operations or coffee shops, which then scaled up their roasting operations once they had an established presence.
How can you minimise expenses when roasting coffee?
While green coffee itself might be significantly cheaper than roasted coffee sourced from a commercial roaster, the process of roasting obviously requires some expense from a business perspective.
Figuring out how to keep these expenses under control, however, is where you can manage your costs.
Gas vs electric
“Let’s break down the costs for roasting,” Jonas says. “Initially, you have the energy costs, regardless of whether you are using gas or electricity. Energy, in general, is expensive, so you want to begin by making sure you have an energy-efficient roaster. Switching from gas to low-energy electric roasting is a good place to start.
“Even with electricity, however, in many places utilities prices can actually fluctuate during the course of a day. This means that roasting in ‘off-peak’ hours can be another way to save costs.”
In the last few years alone, there has been a notable shift away from gas roasters, with a number of newer manufacturers emerging in the market and offering electric roasters. With the advent of discussions in many US states about banning the installation of new natural gas lines for business premises, this may even be mandatory for some roasting businesses in the years ahead.
Jonas adds: “After that, you have the efficiency of the roaster itself. Many coffee roasters are poorly insulated, so you end up heating your café instead of channelling all the energy to the actual process of roasting.”
Switching to a more sustainable energy source is a good first step, but a lot of modern roasters also focus on increasing efficiency and precision to minimise the number of batches you have to roast when dialling in a new roast profile.
This minimises waste, while also lowering energy usage (and cutting costs) in the long run.
The final area Jonas identifies is staffing. Historically, medium and large coffee roasting operations have employed roasting teams made up of a number of people, which is then led by a head roaster.
“For classic gas-powered coffee roasters, you generally need a professional roastmaster to make sure consistency is spot on from batch to batch,” Jonas explains. “Some sort of automation here, along with good data use, can help.”
In recent years, automation has become a growing trend in the coffee roasting market, as this allows professionals to focus more on other business areas.
He adds: “After that, there is the time spent on cleaning and maintenance. There’s no such thing as a self-cleaning roaster, but the easier you can make this part, the better.”
Maintaining large commercial roasters is obviously another cost, and it can contribute significantly over time.
However, while new or replacement parts clearly require expenditure, there’s also staff time to consider. When a certain amount of time has to be spent every month on cleaning and maintaining the roaster, this obviously affects a company’s efficiency.
Ultimately, it restricts the time that a member of the team could spend on product development, marketing, or sales instead.
Other cost management tips
As well as managing your energy source and introducing automation into your roasting operations, one of the most important things to consider when cutting costs is your roaster.
Jonas explains that cost management for smaller roasting operations was one of the key drivers behind Aillio’s new model, the AiO. He says it aims to break down barriers for smaller roasting operations, and improve profit margins at the same time.
“The AiO uses the same heating principle as the Bullet R1 roaster, which is induction heating,” he says. “This translates to an energy saving of around 75%. In other words, the AiO uses one-quarter of the energy of traditional roasters.”
Jonas adds that with the automation provided by the AiO, smaller operations (such as independent coffee shops) can quickly free up staff hours to focus on other business areas.
“You only need a professional to develop your roast profile,” he explains. “You don’t need someone there all the time to monitor the process and determine when the roast is complete.
“Your barista can take over these tasks. All that’s needed is for someone to weigh out the coffee and load the roaster.”
Jonas adds that after choosing the right roaster, general organisation, standardising processes, and leveraging the expertise of the wider roasting community can all help you get up to speed more quickly.
“You need to start by being organised and setting out standard operating procedures,” he says. “Roasting doesn’t have to be as hard as some people want you to think, and there’s lots of information that can help you get started.
“This is why we established Roast World, an online platform for sharing profiles and finding coffees.”
Ultimately, Jonas says that for him, the future is technology, whether it’s automation, online resources, or improved energy efficiency.
“Going forward, I think there will be an increased focus on savings through technology. Savings will automatically appear as people start using improved machines which are more energy-efficient and have more automated features.
“Technology will lift us into the future and help us improve productivity and minimise waste,” he concludes. “Having said that, I don’t just believe that everything is merely about cutting costs. Standing out as a coffee shop or roaster is equally important.”
There’s no doubt that roasting your own coffee gives you more control over the identity of your business, but starting on this journey as a home roaster or a coffee shop can be fraught with challenges and costs.
Finding ways to manage these as you move forward is important. Leveraging the capacity of emerging technology and online platforms is a great place to start, and it can help put control back in your hands as a business owner.
Enjoyed this? Then try our article on how to add a roaster to your specialty coffee shop.
Perfect Daily Grind
Image credits: Aillio
Please note: Aillio is a sponsor of Perfect Daily Grind.
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