Small business owners are no strangers to the challenges that come with starting and growing a successful brand.
Rising inflation has increased costs across the board, while supply chain issues remain thanks to climate change. Additionally, Covid-19 continues to affect how consumers purchase and consume coffee.
That said, roasting and selling coffee still has the potential to be highly profitable – provided roasters can consistently generate high sales and develop long-term relationships with customers.
It is important to note that the initial training, equipment, and property-related startup costs of a coffee roasting business can be high. This is why becoming profitable as soon as possible is essential to the long-term success of any business.
That said, the profitability timeline of a roasting business will depend on many unique factors.
What challenges do coffee roasters face today?
As of 2021, there were an estimated 5.5 million small businesses employing up to 49 employees – a decrease of 6.5% compared to the previous year.
A 2022 survey of small to medium business owners in the UK shows six out of ten predict a 10% higher sales volume on average in 2022s April to June period, compared to the same time last year.
However, three-quarters are concerned about the long-term impact of rising inflation, energy, and living costs will have on their business and customer spending.
Factors such as these are important, as the Specialty Coffee Association (SCA) estimates the average roaster will have to invest $120,000 to get started.
Sustainability is another challenge roasters will have to face while working towards profitability.
For instance, the UK government has set a target of net-zero emission by 2050, which means local roasters will have to reduce their carbon footprint in every aspect of their business: from how coffee is roasted to how it is packaged.
A 2020 survey by McKinsey & Co. revealed 66% of respondents say they consider sustainability before buying a product.
How to improve your roasting business’s profit margins
Roasters can make their business more profitable by reducing costs and increasing sales, and there are a number of ways to do this.
Invest in social media
For many roasters, social media advertising is more affordable than traditional print media advertising – and the benefits are countless.
Through various social media platforms, roasters can target a specific market and introduce their brand to a wider audience. Furthermore, they can account for spending and return on investment in any adverts or campaigns they run.
Sean Fox, founder of CC Coffee Roasters in East Dulwich in the UK, found that investing in Instagram ads directly impacted his sales. In one post, he mentioned that he offered drop-off deliveries, which led to a permanent increase in daily orders.
Furthermore, he found that messaging customers about their gifting plans during the festive season encouraged them to place orders for customer hampers and stocking fillers.
Regularly audit the menu
Every item a roastery offers needs to be high performing and have a high profit margin.
According to Ben Graham from Seven Miles Coffee Roasters in Sydney, Australia, the mix of products a roaster sells is not equal. Some menu items may have high sales and profit margins, while others may not.
Therefore, if some products are not performing, it may be time to replace them. Ben believes it is the low selling, low margin products that often reduce overall profits.
He adds that sticking to a simple set of popular offerings can help roasters reduce product waste to become more efficient. Additionally, if the menu offerings are consistent, the roastery requires fewer staff members, which saves on labour costs.
Offer all year subscriptions
Coffee subscriptions are often a common part of a roaster’s sales strategy.
They are an effective way to determine the demand for coffee in advance and secure payment upfront. Roasters can use coffee subscriptions to encourage customers to try new, more exotic coffees.
This offering can help forecast the demand for new coffees while helping customers broaden their knowledge of, and interest in, specialty coffee origins.
Reduce packaging costs
At first glance, packaging may not seem like a large expense, however, the costs can build up over time.
Revisiting packaging choices allows roasters to improve their sustainability efforts in a way that customers can benefit from and understand.
By investing in digital printing for their packaging, roasters may save on costs. This is because they will be able to purchase a low minimum order quantity (MOQ) without paying for it, as they would with other forms of packaging.
This also gives roasters more flexibility with their coffee bags and design, as they will not have to invest in large quantities of a certain type of packaging.
Depending on the type of packaging material, roasters can also educate customers on responsible disposal while encouraging repeat sales.
For instance, US-based Bequest Coffee Roasters implemented a Close the Loop system. This encourages customers to return empty packaging in exchange for a small discount on their next purchase.
Implementing a system like this can help ensure packaging does not end up in landfills. Furthermore, it provides customers with a first-hand view of a roaster’s dedication to the environment.
Making changes to a roasting business can seem complicated, but it all depends on who roasters partner with.
The team at MTPak Coffee have invested in the HP Indigo 25K, allowing us to custom design and digitally print coffee packaging with just a 40-hour turnaround and 24-hour shipping time.
We can offer low minimum order quantities (MOQs) of packaging, no matter what size or material.. We can also ensure that packaging is completely recyclable or biodegradable, as we offer bags made from sustainable materials such as kraft and rice paper, as well as LDPE and PLA-lined bags.