If you’re looking for a complete guide on how to start a coffee roasting business you’ve come to the right place. We’re going to tell you exactly what you need to do to establish and run a profitable coffee shop.
Before we go into detail about each step for starting a business in this market, we’re going to give you a brief overview of how to start a coffee roasting business.
- Research the various types of coffee and find out what customers in your area want
- Identify a gap in the market and create a roast that fits this need
- Alternatively, find a manufacturer that is already producing a high-quality product and rebrand it under your company name
- Estimate set up and running costs based on your business model
- Establish a brand identity including a business motto, logo, images, and tagline to use on your roast packaging
- Market your brand online using a variety of approaches geared towards your target audience. Approach wholesale vendors as potential buyers for your products and offer them discounts to incentivize them.
- Tweak your supply chain, business model, and products as your business grows
However, before you can start setting up a business you need to answer a few key questions.
Who is your target market?
As a coffee roasting enterprise, your primary goal is to attract businesses that deal in specialty brews. This can include high-end coffee shops, luxury boutiques, and even a few choice grocery stores.
Having an established wholesale customer base will allow you to pull in stable profits and grow your business. Later, as your brand grows you can target individual retailers.
How does a coffee roasting business make money?
If you’re running a coffee roasting business there are two ways for you to make money.
- Target established businesses that will buy your product in bulk, at wholesale rates
- Individual coffee lovers who will pay higher retail rates
A combination of these two customer bases will let you target high-paying customers while still generating a base level of income. Unless you’re setting up in a commercial space with high foot traffic, you’ll need wholesale accounts to cover costs so you can roast at greater volumes.
The biggest way to succeed as a wholesale provider is to be available, on-call, and efficient. So if businesses need immediate delivery you need to have products ready to deliver. Reliability is key in this business.
How To Start A Coffee Roasting Business
There are a few key ingredients.
The first is something worth selling. In this case, roasted coffee will draw in customers and make them sing your praises. The second is a solid chain of distribution, from growers to roasters and retailers. Third, is an estimation of the costs involved in setting up and running a coffee roasting business.
And finally, a good marketing strategy that will turn your company into a reputable brand.
Step 1 – Market Research
The coffee market is heavily saturated so finding your audience is the key to your business success. Research competing roasters in your area.
I’ve written about the best coffee roasters in major US cities:
Are they selling expensive custom blends or mid-range mass-produced beans? Do most of them sell light or dark roasts? Also, look into the businesses in your area and find out what type of coffee their customers prefer. Find the gap in the market and fill it.
Once you have a regular clientele you can broaden your product range by trying new and exciting roasts. Consider the type of customer you want to attract will guide your hand as you make business decisions such as pricing, branding, and startup machinery.
Step 2 – Creating Coffee Flavors
No matter what else you may do you can’t establish a profitable business without first working on your product, in this case, your brew.
The coffee roasting process follows several key steps. First, you need to choose a specific type of green bean, then it has to be processed and you need to decide on a roast level. Finally, the roasted beans and ground and brewed. Coffee making is an art form, and if you want to properly practice and sell it, you’ll need to do a lot more than buy a coffee roaster.
That means you need to decide:
Which beans to source
Coffee beans come in varying flavors depending on the regions where they were grown, altitude and weather, the category of the plant they were obtained from, and the care they received. Another important factor is density since lighter beans respond to heat differently than heavier beans.
I’ve written about coffee production in these countries:
There are two main commercially sourced coffee beans, Arabica and Robusta. The subcategories within each give us a diverse flavor profile, with factors like acidity, robustness, and sweetness of the beans playing a major role. You can create up to 1000 varying aroma profiles by roasting coffee beans.
The flavor of your coffee will depend greatly on your chosen roast degree. Expert roasters can make this decision by taste while the more technical roasters may choose to use a color meter for precise measurements.
Ordinarily, light roasts tend to be acidic in nature, while dark roasts carry a bitter edge. If you want a fruity undertone to choose a light roast, but if you prefer a slightly burnt undercurrent pick a dark roast.
Another factor that determines the flavor profile of your product is the total roast time. With faster roasting, you’ll get stronger aromas, and draw out fruity, chocolatey, or nutty flavor tones.
On the other hand, slower roasting means softer, blended flavors with lower acidity, which may be preferable with espresso blends. However, the speed of roasting available to you depends on your roaster design.
The type of roaster you’re using should depend on the type of result you want to achieve. For slow-roasted stable batches use a small, drum roaster. For faster roasts with stronger flavors, you’ll need a fluidized bed roaster. There are also hybrid models that you can look into.
The price range for each will depend on the quality of roasting it offers. You can get small commercial roasters for as little as $3k to $5k, whereas the more high-end devices will cost you up to $60k. The higher price point will get you flavor consistency since these roasters minimize contact between the drum and beans.
Step 3 – Establish a supply chain
When it comes to setting up a chain of distribution you have a lot of options, and you’ll want to start by deciding on the type of supplier that best fits your business goals. As yourself:
- Do you want a domestic or overseas supplier?
- Are you looking to roast your beans and manufacture them in-house or purchase inventory from a third party?
- If you’ve decided to buy roasted beans, what type of product best fits your customer’s needs?
- Are you a drop-shipping business or will you set up a storefront?
- How much money will you put into each stage of the process?
Manufacturing in-house gives you complete control over your product, from quality to the flavor. If you want to set yourself apart from the competition by creating your custom blend this is the choice for you.
Of course, this only works if you have a passion for coffee and an understanding of its various components. You’ll need time to perfect your recipe, but you can use it productively by simultaneously planning the logistics for production.
Generally, you can take one of two routes, you either start with a small-scale home-based model or find a manufacturer to partner with. If you choose the latter, you’ll have to spend months working with a chemist, choosing ingredients, checking samples, and tweaking your roast.
Your other option is to purchase from a business that makes good-quality roast, repackage, rebrand, and sell it under your company name. This can greatly help reduce both time and money spent in the initial stages.
Once your brand is well established and drawing in customers you can always add some custom products to expand your range.
Purchasing inventory must link directly to the first step of market research. You need to gear your product to your consumer base so there is some level of certainty that it will sell out.
Sourcing and Supply
If you’re manufacturing in-house you’ll need to worry about sourcing and supply. Your biggest concern will be making sure you have enough green beans.
When you roast coffee beans the moisture is sucked out and you end up losing around 20 to 25 percent of the overall coffee weight. That means 1 pound of green beans turns into 12 ounces of roasted coffee.
And if you want 1 kg of the final product you need 1.2 kgs worth of beans to stay on the safe side. Of course, most retailers will only sell you 60kg sacks. So make sure you know how much product you need to start off with.
Packaging and Shipping
Depending on how much money you put into developing your product you may have more or fewer resources when it comes to packaging.
Ideally, your goal as a new business should be to market your product well. That means investing in logos and artwork, and even hiring a designer to help you cater your packaging to your brand.
Make sure you have several size options geared to your target market. That can mean 12 and 15-ounce bags for wholesale shoppers, or smaller packets for independent retailers.
Once your products are sealed and ready you get to ship them. At this stage, you’ll need to devise a system to manage inventory and ensure timely deliveries.
Cater your supply chain to your business model and don’t be afraid to tweak it as your business starts running. Identifying and fixing delays in your distribution process is the key to success for a new business.
Step 4 – Estimate set-up and running costs
Setting up a coffee roasting business is no easy task, and it comes with significant start-up costs. I’ve compiled a list of essentials to give you an idea of what you’ll need though this is by no means an exact amount.
- Commercial space, including furniture and basic utilities. Costs may vary depending on location but you can expect an average monthly rent of $10 to $50 per square foot. Setting up a space with a 20 to 50 person capacity may add up to $200k to $400k.
- Coffee beans will be priced differently based on quality but an average cost so a Brazilian variety may cost you $3 per pound, while a specialty Kenyan variety can be $6 per pound. Commercially beans are sold in 110-pound sacks.
- Packaging and labels will cost a few cents per cup
- POS or Point of Sale system to ensure a speedy and efficient payment process (costs $60 to $80 per month for the basic package, with addons costing additional money)
- A quality coffee roaster can cost anywhere between $2000 and $20000
Then there are the expenses that come with running a modern-day business like online ordering and home deliveries. You’ll need internet access, computer personnel, a vehicle, and a driver. So, what can small businesses or startups do to reduce costs? You have two options.
1. Contract roast
This is when you set up your own coffee house but cut down costs by using another roaster’s backend facilities.
You have to pay them a fee but you can sell the coffee under your brand to generate income. That means you don’t need to get a roaster, heat sealer, or coffee grinder. You may not even need to rent a warehouse for production. It also severely cuts down the time and energy you’d spend researching and coming up with your own brew.
This also means you can’t start off with an original product, which some may find a serious drawback. It also limits the growth potential for your business and cuts down the originality factor that could potentially draw in customers.
However, beginner coffee makers may use this initial grace period to set up their business, gather a clientele, and start generating profit while they simultaneously work to perfect their own recipe. In that regard, contract roasting is a smart business decision.
2. Low-cost equipment
Your other option is to do everything you can to keep startup costs low and spend the least possible amount of money on equipment. You can get a beginner roaster for as low as $500 and invest in higher quality products later on. Of course, this will impact the taste and flavor you get, as well as, the type of clientele you draw in.
For people looking to pull in customers with a high appreciation for coffee tasting, this strategy may not work. However, if you’re looking for a way to get your business off the ground this is a good way to do it.
What can you charge your customers?
Charges for your coffee will be based on the quality of your product, your business expenses, and your target customer base. Generally, retail prices range from $12 to $20 if you’re selling 12-ounce bags. On the other hand, wholesale prices are between $6 and $12.
However, these are just basic guidelines and you can price your product higher or lower based on your business model. With 12-ounce bags being the standard, you may choose to sell 15 or 18-ounce bags on demand. That’s because the weight of coffee beans decreases by 25 percent post roasting, so 1 pound of green beans turns into 12 ounces of roasted coffee.
Step 5 – Market your company as a brand
As a roasting entrepreneur, marketing will dictate everything from how much profit you make to the type of customer you pull in. This umbrella term covers packaging, pricing, content, social media presence, and above all brand identity.
If you are targeting retailers you’ll need a social media presence and the ability to develop a personal connection with your customers. One-on-one interaction can help you step into the lives of the people who love your roasts and turn them into repeat customers with incentives like deals, promotions, and events.
If you are targeting wholesalers set up a website that explains your roasting process. Talking about where you source your beans, what roasters you use, and the techniques that set your brews apart from all the rest.
Often, walk-in customers balk at the high prices for specialty roasts because they don’t know the work that goes into creating them. Teach your customers how to truly appreciate the art of coffee roasting by hosting “cupping” sessions. A basic class can walk them through the process of grinding the beans, smelling and steeping them in warm water, and tasting the roast.
Teach your clientele how to have a proper appreciation for coffee and identity aspects like sweetness, acidity, and undertones. Before you know it you’ll have a devoted following.
Overall, starting a coffee roasting business is no different from any other entrepreneurial venture. You need something worth selling, someone to sell it to, and a way to get the word out.
Follow a business model that works and you’ll start seeing results in no time. Of course, like with all startups, you’ll need to do the legwork to get those first few customers and get the ball rolling.