Small Roaster Startup

[sshafran]

Hello All,

Background...
I've been on the forum several times and finally registered tonight. I've read a lot about Roasters, different kinds, different business models, etc.
I'm currently a self-employed insurance agent - I've been selling insurance since 2009. I love what I do, which I think has helped me continue on in the industry.
More importantly, I'm a coffee lover. One great thing about my job is the travel - which leads to trying new coffee shops. I'm drawn to the shops that roast the coffee on site. I'm in Ohio, and I've been to a number of them.


Like many other coffee enthusiasts, I'd love to buy a roaster and roast my own. I'd probably start off just selling the beans, and organically grow the business until it could support a cafe/retail location. Having been in business for myself since '09, I know it takes hard work, enthusiasm, creativity, etc. to make a business successful. I also know it would take a fair amount of capital to get the equipment to start it off right. I'm not too concerned about that at this point.

My initial question is on margins and profitability. i.e., for a small roaster just starting out, is it just an expensive hobby :grin:? i.e., sell a 1lb bag of fresh-roasted coffee for $14 (or whatever) - what is a reasonable expectation on profit? $7 per bag? More? Less? After the raw bean cost, machine operation cost, bag w/ valve cost, etc...

I think I can sell a lot of coffee as long as I do the work to learn the trade. The fresh-roasted that I've tried kills any other coffee out there. Looking for reasonable expectations...

 

[CoffeeJunky]

It really depends on how much you want to invest in coffee business.
Its not cheap to purchase green in small quantity.
Also, roaster are not cheap as you already know.
talk to Eldub and see if he can give you some basic idea. He would be the great person to talk to

 

[peterjschmidt]

It sounds like you may not need the income from coffee, right? IOW, your insurance job can sustain you, so you can sink $10K+ into coffee and not care how fast your return is? While roasting coffee is not rocket science, there is a learning curve to deal with. You shouldn't assume that because you've had killer coffee from some roasters that your results will equal theirs right off the bat.

Who would you sell the coffee to? I'll say you can make $7/lb. profit. But you have to sell the coffee to make a profit, and that's what I'm curious about.

 

[sshafran]

It sounds like you may not need the income from coffee, right? IOW, your insurance job can sustain you, so you can sink $10K+ into coffee and not care how fast your return is? While roasting coffee is not rocket science, there is a learning curve to deal with. You shouldn't assume that because you've had killer coffee from some roasters that your results will equal theirs right off the bat.

Who would you sell the coffee to? I'll say you can make $7/lb. profit. But you have to sell the coffee to make a profit, and that's what I'm curious about.

No, I don't need the income, but I also don't want to lose money on it. I would not rely on it for income in the beginning...but someday, who knows?

At this point, I'm trying to figure out what I'd need to sell if I had a goal of $1,000 profit monthly. Assuming start-up costs of 15K (realistic?), I could pull some profit after a year or so.

Who would I sell the coffee to? I'd start by marketing locally/individually. I'd love to get restaurants, but that seems like it would be a harder sale. Wholesale to local specialty stores...etc.

Regarding the learning curve - what's the best way to get the training? I don't want mediocre results from my roaster, I'd rather put the time in to learning to do it right.

 

[peterjschmidt]

Start-up costs can vary so much, it would be hard to say. Your overhead - space rental might be the biggest cost - there's no way for us to know.

Figure around $4/lb. green, translating into $5/lb roasted due to moisture loss, at least a half a buck for packaging. If you're selling at $14/lb. you can figure how many lbs. you'll need to sell, minus business costs, to make your $1000/mo. profit. You might want to snoop around the local specialty stores and see if you can get someone to open up about what they're paying, but my guess is it's around $7-8/lb., which will drive up the amount you need to sell. I haven't tried building any commercial accounts, but my suspicion is that they'll want to buy from a licensed/health-dept.-approved vendor, so you might investigate what your municipality requires along those lines.

I still say (apart from knowing you can provide a quality product) the most important thing will be having an accurate idea to whom your coffee will be sold. When I see used roasters being sold by shops/cafes going out of business, I suspect it was usually due to low sales.

There aren't many outlets to receive training. Others might chime in. I spent several years as a home-roaster, learning through trial and error how the beans like to be treated to coax out their best, and then carried that over to a commercial roaster. If you come to Milwaukee, I'll gladly show you the ropes.

 

[Redswing]

ahhh, the slippery slope of optimism and creative accounting...i hear a kindred spirit. i'm too green to offer much usable insight, but i can say this: however hard you think it might be, it's harder. be ready for it.
i also say this: best of luck!
-greg

 

[sshafran]

haha, yes, optimism and creative accounting. It's funny because I see it in new insurance agents all the time, they all think they'll do great, and 92% quit within the first two years. We help them all we can but, like you all are doing, we give them a dose of reality.

I'm getting the vibe that it's an expensive hobby unless you dedicate a good chunk of time to it. Not sure I have that time - yet. Maybe I should go really, really small, and do it more for myself. If people want to buy, great, and if it grows organically, great - but I won't count on it. I'll look for a small roaster that can still produce great coffee. I've seen a lot of people recommend the Ambex. Any other comparable, around the same quality? Or maybe even something smaller?

Some guys buy cars for fun...others roast their own coffee...

 

[cafdud]

I started roasting with a SC/TO roaster, only roasted for family and friends, when the demand got over 100# a month I moved up to a used 2 kilo Osturk, only need to fire it up a couple times a month. took me a year and a half to gather up enough money to pay cash for the roaster, didn't need to pull from my personal income, worked fantastic. This was a great way for me to gain experience on the cheap. I am now up to short of 200# a month. I sell roasted coffee for$12.50 a pound + shipping. That pays for bags, labels greens + a nice profit to support my coffee obsession. Been thinking of maybe moving up to a 15 Kilo Ambex, waiting for a good price to come long, patience is the hardest thing to deal with. Anyhow this how I did it.