Monday, May 2, 2016

How do you defined sustainability and profits in a speciality coffee business?

Sustainability     Traceability                 Direct Relationship
Fair Trade                                                            Conservation
Transparency           Exclusivity
Crop to Cup                           Commitment

What was the first thing that came out of your mind, as soon as these words jumped right at you?

SPECIALITY COFFEE

That is if you are a Barista, Roaster , Green Bean Buyer or even a Coffee Farmer in this speciality
 industry but in layman's term, others outside of this industry (but one who love his or her coffee still) would think of it as some social activity, an NGO related cause or even a 'Save the Planet' campaign. Not too far off from coffee you may agree but definitely far enough when you ask a coffee professional. Then again to a coffee regular who visits a speciality cafe at least three times a week or that wholesale account who buys your coffee in kilograms, these words above means         EXPENSIVE COFFEE

In writing this article, I definitely question my own credentials  in doing so. I am no subject expert in this matter and certainly, I have not done enough in talking to coffee farmers to understand their worries. Rather, I am looking at it in a very different perspective, defining it from a cafe and coffee business owner altogether and hence my question, 'How do you defined sustainability and profits in a speciality coffee business?' It is my prerogative as a coffee professional, to understand that profitability is essential in driving the coffee business and to keep it sustainable,  THE PRICE MUST  BE RIGHT.

BUT AT WHAT PRICE? Well, it is like two girls spending six hours to bake one cake. How much would they sell it for? $200 for that cake will certainly be very profitable but who pays for a $200 cake? They will claim they have given six hours of their artisan time and will be able to only baked one cake per day and so the price is justifiable.  If that cake was bought by a cafe owner to be sold in the shop, that same cake will be sliced up to ten servings, each serving carries a nett cost price of $20. After taking account of cost of labour, garnishing, electricity and profit, that same slice of cake now sells for the very minimum - $28. Perhaps Sustainable but not very Profitable. Then again, it could also be vice versa - Profitable but not sustainable in the long run! 

Barista to advocate the speciality mannerism to a customer in the hope of changing the overall appreciation of that coffee, one cup at a time, may help to sell that same cup of coffee at an additional $1 above the national average selling price. But is it FAIR to pass this cost to the consumer in the name of coffee education? Also, how many customers will ever return for a $6 five ounce white (even though he received $60 worth of education while waiting for that cup) when a few streets away, a similar beverage is being sold for $5.

In all honesty, it is hard to defined sustainability and profitability in a specialty coffee business. Often then not, new cafe owners entered the business under the assumption that revenue and margins will add up in day to day operations. Running a coffee business is never as simple as forecasting the sale of  200 cups of coffee per day to generate $365,000 revenue per year. Also in Singapore context, 30% of that sales revenue or to be precise, $109,500 going to the shark of a landlord will never allow the coffee business to be profitable, let alone sustainable unless you plan to do it all by yourself. (if you plan to hire the very least 3 salaried Barista full-time with a total 20% of the same revenue going to wages entering a 365 days operation, that is another $73,000 entering your P&L spreadsheet) 

The only way to have it both sustainable yet profitable is to reduce cost and selling more cups of coffees, and by that meaning to open up the business in more than just one location. In the simple logic of supply and demand in the supply chain, the more you buy, the cheaper it gets. Products and the brand began to have a mass market appeal but at the risk of losing its EXCLUSIVITY CHARM but that is a topic for another day article. 
There is also the possibility of being good at what you do and with enough skills and knowledge, set up a roastery to create your own supply chain and selling more coffee by the kilos without losing that exclusivity that you started off with in the beginning of your coffee business dreams. That too, is a topic for another day.

Have i concluded anything yet up until this point? 
No i have not but that is why the title to my article is a Question. There are just too many mitigating factors and theories involved to get that question answered and now these WORDS below may just take a life of its own, each deserving an article to be blog upon, in defining sustainability and profits in a coffee business.

Employment Practices      long term supplier relationship

      unique selling point    QUALITY WORK 

            creativity      INNOVATION        Passionate   

  brand identity               CUSTOMER SERVICE








No comments:

Post a Comment