Coffee roasting for profit

By Nick Giles

Head of Hospitality, Link Business Broking

Let’s face it, most of us enjoy a cup or six of this wonderful, dark, mysterious elixir each day! Coffee has worked its way into our lives in such a way that it has become very much part of our culture. It is the morning ritual, the break time necessity, the fuel that keeps us going through the day, the after-dinner finishing touch.

New Zealand is renowned for the quality of the coffee we serve and it’s actually pretty hard to find a bad cup in even the most remote café across the land. It’s a national sin not to be able to serve a great flat white and, for the most part, we even get beautiful latte art weaved and carved into that silky smooth heavenly top.

OK, so we can agree that we all like the dark stuff, but does owning a coffee company make any financial and business sense?

It is said that there are more coffee roasters per capita in NZ than anywhere in the world. Maybe they know something?

I’ve been fortunate enough to be involved in the sale of several coffee companies over the years and have dissected and researched many more.

Coffee roasting companies tend to either supply a range of different customers or will focus on one segment of the market.

Selling coffee to wholesale customers (cafes and restaurants) is a very different game to selling coffee to supermarkets.

It’s also very different from producing product for offices rather than selling directly to the home consumer online.

You also have contract roasters who produce product for other coffee companies or hospitality organisations using the client’s branding.

You also have cafes that start roasting their own coffee out of passion and then morph into a being wholesale suppliers to other cafes.

Margins can vary significantly on each kg bag of coffee that goes out of the door.

Margins can be as low as $2 on a bag or as high as $25! It all rather depends on what the costs are below that Gross Profit line as to whether you make any money or not, and it’s this wonderful mix of business plans and sector specialisation that I love!

Each is unique and each has its pros and cons just like any other business sector.

There are many deeply passionate coffee people in New Zealand who own coffee companies. There are also many people who own coffee companies who, while they love coffee, are more deeply passionate about the business side of things and recognise the demand for coffee and the financial rewards it can bring.

Whichever you are – there are some great opportunities out there and this is a fun sector!

Learning coffee is not that hard. I know coffee connoisseurs are literally spitting their beautifully extracted short blacks at this but it’s true. Besides, you can always hire talent! Being an owner is different. Just because you haven’t been a barista for 20 years doesn’t mean you can’t run a coffee company.

Right now, I have 2 roastery cafes for sale and they are both excellent businesses. One is coffee geek heaven - super high-quality equipment and product produced by a deeply passionate coffee connoisseur. He produces around 375kg a week and makes a profit of over $375,000 a year. This can be yours for $1.15m plus stock.

The other is a beautifully formed brand. It roasts around 120kg of beans per week, has a strong café operation and some good wholesale customers with a strong contract in place. This one has been designed to be super easy to operate and largely hands-off from the owner in terms of operation. This one enjoys profit of over $225,000 and could be yours for $880,000 plus stock.

I am also working on bringing a contract roaster to market that roasts around 900kg per week. Another wholesale roaster may come to market over the next couple of months. That one is good for over 450kg per week.

Next year I will bring a company to market roasting around 1 tonne per week with expected profits over $650,000 per annum.

Contact: Nick Giles, Link Business Broking. 021676832 [email protected]

- Article supplied by Link