In recent months, we have seen costs increase significantly for hospitality businesses, including in the coffee sector. There are a number of reasons for this, such as rising food and energy costs, as well as higher levels of inflation.
On top of this, shipping costs for roasters have also increased – squeezing already-slim profit margins more than ever.
Ultimately, it’s important that roasters are able to keep their business costs down to remain profitable. So what are some of the ways they can do this?
To find out, I spoke to three roasting professionals. Read on for more of their insight.
Why are costs rising?
Over the past two years, hospitality businesses have been facing a number of significant challenges. As a result of Covid-19 lockdown measures in early 2020, many coffee shops and roasters were forced to temporarily close.
At the time, many business owners were concerned about remaining profitable. According to a UK survey conducted in 2020, nearly 50% of coffee shop owners in the country believed that Covid-19 would significantly affect their revenue until the end of that year.
While there has been some financial recovery following the pandemic, we have seen costs (particularly for food and energy) continue to increase for coffee businesses for several reasons.
The pandemic has undoubtedly contributed to the ongoing energy crisis as more people than ever before worked and remained at home, meaning demand for energy skyrocketed.
On top of this, the Russian government’s invasion of Ukraine has worsened the situation – leading to record gas prices and potentially resulting in high energy and food prices for the next three years.
Perpinias Kostas is the owner of Mr. Bean Coffee Company, a roastery in Athens, Greece.
“In the last few months, roastery operation costs have increased significantly,” he says. “Following the pandemic, the price of shipping containers increased drastically, the price of coffee increased, and the US dollar strengthened against the euro.
“The energy crisis also increased the cost of packaging materials and fuel for transportation and shipping,” he adds. “This means costs for roasters have skyrocketed, and it’s difficult to not pass these costs onto the consumer, so profits have also been decreasing.”
Furthermore, rising energy and food costs are also impacting consumers. According to research from Deloitte published in October, some 30% of UK consumers are spending less money – up from 21% at the start of 2022.
Ultimately, this challenging economic climate makes it more important than ever for roasters to keep their costs down.
Breaking down the costs of roasting
Before we can discuss how roasters are able to minimise their costs, we first need to break them down. There are many business costs which roasters need to consider – including equipment, rent, energy bills, shipping and transportation, and more.
Ioannis Papadopoulos is the owner and 3D Mechanical Designer at IP-CC, a roaster manufacturer in Thessaloniki, Greece.
“Purchasing equipment and machinery is often the first – and biggest – upfront cost,” he says. “Roasters, afterburners, and storage silos for both green and roasted beans are essential pieces of equipment in any roastery.”
In order to keep green coffee fresh and free from contamination, it must be stored in cool and dry conditions with as little exposure to oxygen and light as possible. Storage silos help to maintain these conditions, making them essential pieces of equipment for any roaster.
“Moreover, the majority of roasters also need to buy equipment which best suits their needs, so purchasing customised or specialist equipment can significantly increase these costs,” he adds.
Specialist equipment can include custom-branded roasters, machines which have integrated software or smart technology, or more energy-efficient roasters.
Ioannis explains other major business costs which roasters need to account for.
“There are staff wages and the costs of packaging roasted coffee, too,” he says. “You also need to factor in buying green coffee and having a large enough space for roasting and storing coffee.
“It takes around seven to ten days for freshly roasted coffee to degas, which means adequate storage space for roasted coffee is essential,” he adds.
For smaller roasters looking to expand their operations, there are also other business costs which need to be considered.
“When a smaller roaster expands to become a medium or large-sized coffee business, the costs of training and paying more experienced and skilled staff will increase,” Ioannis explains.
As a roaster scales its business, the volumes of roasted coffee it sells will also naturally increase – meaning the costs associated with operating machines will as well.
Cost management tips
Considering the numerous costs which roasters need to pay attention to, it can be a daunting task to know where to start reducing spending.
One of the most significant ways in which roasters can minimise long-term costs is investing in a more efficient and sustainable roaster.
While older gas-powered machines can roast coffee to a high standard, they can be much less efficient than modern roasters. And with natural gas prices continuing to increase around the world, making the shift towards machines which are less dependent on gas can help roasters minimise their running costs.
“IP-CC understands that investing in new roasting technology and more efficient machines can help roasters to reduce their costs,” Ioannis tells me. “It’s important for roastery owners to understand that adopting new technologies will help them to upgrade and develop their businesses in the long run.”
Having more control over heat dispersion has been an area of focus for specialty roasters for some time now, as it can help them get the best results from their coffee.
One example of an efficient automated roaster is IP-CC’s iRm series machines, which use hot air technology to roast coffee.
Ioannis tells me the roasters create up to five times the volume of hot air than other commercial machines – as well as up to five times quicker air speed – which he says can help to cut down on a roastery’s costs by up to 50%.
Michalis Katsiavos is the 2018 Hellenic Barista Champion. He also works at Seven Steps Coffee Roasters in Ilion, Greece, where he uses a 5kg-capacity iRm roaster.
“Investing in a more efficient machine is key to helping roasters manage their costs more effectively,” he says. “Roasters that use hot air technology can save between 30% to 40% propane consumption, [which ultimately reduces your costs, too].”
Furthermore, more efficient roasters also tend to be better insulated, which means energy conservation can improve. For instance, IP-CC’s iRm machines are thermally insulated, and also include a smokeless air supply, which can help to reduce costs further.
“In addition to this, this smokeless roasting style can result in more uniform roast profiles, as well as cleaner-tasting coffee,” Michalis explains.
What are the other areas where roasters can reduce spending?
Alongside investing in a more modern and efficient machine, there are other ways in which roasters can minimise costs – such as staffing.
Traditionally, medium and large-sized roasters require a team of staff, which will include a head roaster. This is because production roasting on a large-capacity gas-powered roaster requires a professional overseeing the entire process to make sure consistency is kept high.
However, with the rise of automation and AI-technology in roasting, roasters’ job roles are changing, and they are now winning back more time to focus on other areas of the business. These can include marketing and branding, product development, and improving sustainability practices.
Many newer machines, such as the iRm series, allow roasters to connect specialist software programmes like Cropster and Artisan. In turn, this grants roasters more control over their roast profiles, helping them improve precision and giving them the ability to experiment with more parameters.
Moreover, this grants roasters more time to experiment with their roast profiles, as opposed to repeating them to get the best results.
“Roasting on an iRm allows me to control the temperature in the drum, so that I can enhance the best qualities of the coffee, such as sweetness and juiciness,” Michalis explains.
It’s more important than ever for roasters to keep a close eye on their costs, and profitability is a key question as we enter an environment of economic uncertainty.
While there are many ways for roasters to cut down on costs, investing in a more energy-efficient machine can be a great place to start. Similarly, automating production roasting can give roasters more time to focus on other aspects of the business – such as sales and marketing.
Enjoyed this? Then read our article on why blends are becoming more popular in specialty coffee.
Photo credits: IP-CC
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