saturation or not

cosmic_couple22

Like most of us here I am passionate about the development of great coffee, supporting the the whole bean to cup approach.

I have visited nearly every good coffee (and a lot of bad) outlets from the Gold Coast to Gympie, plus a few of the big names down south. After doing much reading, barista courses, roasting my own beans and living nothing but coffee the last few years,  I am starting to wonder with so many cafe's, roasters and now more and more cafe roasteries are we moving close to peak coffee (sorry couldn't resist) is the market saturated?

And with so many players just joining the industry to make money is the industry going to experience quality issues untill a nice balance is found?

Are we going to see a hoard of businesses folding in the next few years and an influx of second hand roasters on the market?

I confess that I to am trying to get into the market but at this time I am looking at just developing my skills and then take myself and roaster to a ncie touristy place in South America and start a new life........

Regards

Chester

Kelsey

I think there will always be an ebb and flow - but it's not all about the coffee. Tim Adams new cafe opened up in Caloundra this past week, in competition with two very good Caf

mycuppa

Kelsey I think that CC was talking about too many roasters servicing what is a small market. In that regard, yes, Australia is well and truly saturated with quality espresso roasting capacity. But before you all start to howl me down with anecdotal evidence of crap coffee being served everywhere.....my point is, the standard of bean quality being produced by the majority of coffee roasteries around Australia is in fact very high and consistent. Yes, there are many "L-Plate" roasters out there who bought their cheap and cheerful equipment and giving it a good shot (I was also one of them in the past) and the number of new-entrants is becoming mind-boggling (another dozen in Melbourne alone this year already), where does it all end. I cup coffee from other roasters all the time - in fact it's the most important task I do during my weekly travels. If you get the bean at the right stage, it's great and I have nothing but admiration for the majority of the competition - sometimes I am delighted, other times dismayed - rarely would I blame the roaster. Unfortunately, all too often there are too many people critically judging bad execution (cafe/barista) or badly timed circumstances (the pack was 45 days old, but who's to say it was not superb 30 days earlier.......etc.). Quality coffee can be relatively easily to produce - it takes a mindset when procuring beans and a solid set of skills on the platform - beyond that it's a downhill run and as coffee lovers there is a tendency to be overly harsh critics of others handiwork. It has become ridiculous. Just this week yet another new starter was handing out beautiful glossy flyers into cafes in my area (including ones I supply) claiming they were multi-Golden Bean award winners - there is so much faking and false expectation setting being undertaken by greedy and desperate coffee reps that it's become ridiculous. One of my cafes has at least 6 reps call in every week - handing out cards and free samples. It really makes you sick. The market is unstructured - barriers to entry appear low and there are no real limitations or restrictions on distribution - so thus the urban myth was born that coffee roasting is a pot of gold. Despite the fact I need to re-invest another half a million into my business to enable the next level of capacity, if I had my time again I would pick another industry and another country - this one's heading for some tears. I do not believe quality will suffer - it will only improve at the roasting level as brokers are constantly lifting their own quality sourcing standards - however, different story at the extraction level - who knows. History tells us that saturated industries tend to consolidate - but this first requires that distribution (or demand) becomes controlled and/or restricted - which is certainly not going to be the case in the short-term.

FreshCoffee2

"...saturation or not..." Yes, and ditto to Jeff.

cosmic_couple22

Almost right Kelsey, currently working on a final deal for the roaster, just going with a 5kg machine to hone some new skills and will be large enough for the intended endeavour.  Selling the ccr to bump up the funds for an upcoming trip to South America. We have travelled throughout SA, and are going back for a look to check some spots in Peru and Argentina with the vision of relocating and starting a roastery. Should make buying beans simple  ;D I agree mycuppa, lots of good beans out there.  Queensland probably suffers the most on the barrista front though. Until QLD realises a great barrista is worth more to the business than the wage saving junior ever will be, not much will change. Yes there are some great barristas in QLD before you all lynch me, however their rate of pay and appreciation would be greater in the southern states. So if saturation exists is it up to the industry to drive for better controls? things like attend a 1 day course and you get a piece of paper to say your a trained barrista is surely a problem that needs addressing (isn't it)

derrilex

on 1364037422:

Yes, there are many "L-Plate" roasters out there

:rofl: Love it Jeff. Thats me to a Tee

derrilex

on 1364039032:

So if saturation exists is it up to the industry to drive for better controls? things like attend a 1 day course and you get a piece of paper to say your a trained barrista is surely a problem that needs addressing (isn't it)

Agree but until Aussies actually understand what they are drinking is vomit there is no recourse. I'm probably one of the harshest critics of bad coffee on here and I think that every bad coffee joint should be burnt to the ground, witch hunt style but, its a free market with zero standards that services a almost entirely ignorant customer base. No wonder people get into it and no wonder the crap ones survive. ( to clarify, when I say zero standards I mean to what is eventually served to the customer ) One more thing, being a "trained Barista" doesn't mean shit. I think of lot of them get caught up in the numbers  game and the "rules" of making good coffee. Willingness to experiment, getting touchy feely with the product and having some idea of the mechanics of what you are dealing with will win every time. I'm betting that every person I know on this forum can produce far superior results than 90 % of cafes with "trained Baristas".

galumay

on 1364044534:

I'm betting that every person I know on this forum can produce far superior results than 90 % of cafes with "trained Baristas".

I think you are very wrong, probably more like 98%.

derrilex

Sorry G, that was a typo  :rofl:

Ol Grumpy

Whether you like it or not, coffee is a 'commodity' item... I'm not in this industry (work wise) but I would hazard a guess that the very first question the *majority* of Cafe' owners will ask is, "How much a kilo is your stuff?" It's a price based commodity in the wider market... Not dissimilar to milk, pizza, bread, tradesman for that matter (me), fish & chips, fast- food, and on and on and on... Success in this market or any other commodity based market you care to name is so much more about your Marketing than your product. People who talk product need a slap across the face to wake them up... There is no debate here.... I've said it before but obviously I need to say it again... McDonalds do not make the best product do they? No!.... But they have extraordinary marketing and look at their success... It's not too shabby is it? Now Hungry Jacks will tell you "Our burgers are better..." I say, "Idiots"... But You could argue Hungry Jacks have enjoyed a reasonable level of success... And they have, but they remain in the Golden Arches shadow... It's been proven before that one restaurant in an isolated location will not have the success of the same restaurant in a group of restaurants... I haven't explained it well but I'm saying all the restaurants in a food court do better grouped together in one location than all being individually scattered through a shopping centre... Saturation is not necessarily a bad thing....

Ol Grumpy

I really know nothing about the business behind the Londinium coffee machine other than what we can all read on the website, forums, etc... Reading on and between the lines when clues are 'dropped' I see a business whose core is roasting and selling beans- worldwide... And worldwide is a big clue to the key- stone of their success... The Londinium has been developed as a complimentary 'side' or perhaps second main line, depending on your interpretation. I believe the business was successful before the L1... by promoting selected complimentary machines... But now the scope for future profit and growth has grown exponentially... Smart guy, I'm very interested to see if he recognises and builds to his potential.... My guess is that he doesn't fully appreciate the platform he is standing on- but I'll be happily proven wrong... You only have to follow the CS monthly sales or BG or peruse the threads like "What are you roasting this week' to glean there is an almost insatiable desire to find the next 'God-shot producing bean'... Anyway, there is a tremendous scope for (where the real profit is) ongoing sales to existing customers... How? Firstly a newsletter, competitions, Newly discovered 'bean' announcements and on and on it goes.... The key is engaging your audience and informing and entertaining them... That right there is where the 'money' is.... That's money spelt $$$$$$$$$$$$$$$! BTW- Do you recognise that Andy @ CS has followed this model exactly- the CS forum is his vehicle for capturing, engaging, entertaining and ultimately selling to his audience.... It's right under your noses and I bet you didn't recognise it... Did you? but I guess it's glaringly obvious now? And by the way if you've followed Andy's growth.... It works too! Edit: Just for the record- I have never met Andy, aside from occasional conversation on his forum and my comments are all my own opinion, based solely on observation. Edit 2: Note to Mods... I'm a teeny bit worried I have crossed a 'line' here by mentioning specific forums, names, etc. my comments are praise not criticism... But still, if I have crossed a line pls let me know and I'll modify posts accordingly :-)

Ol Grumpy

Oh C'mon- surely someone's got something to Add... Question... Refute.... .????

WotB

What once was a friendly community of sharing and caring is now a commercialised empire. True to its moniker...

Kelsey

No lines crossed OG - it's not like we don't know other forums exist or how they're supported financially! No-one is responding, in part I suspect because we've had enough drama of late that no-one feels like inciting a turf war. We don't have the same operation and that's both limiting and freeing in ways that I won't elaborate.

Ronin

on 1364107542:

McDonalds do not make the best product do they? No!.... But they have extraordinary marketing and look at their success... It's not too shabby is it?

True, McDonalds make an average burger, but they do it well and consistantly. Its been said to me by a cafe owner that while he won't drink it, he has Merlo in his cafe because its a consistent product that people know. Remember that bad is still a form of consistent  :stir Curiously McDonalds main business when it started was not burgers, but real estate. The burgers were a way to pay for the premium land for capital gain. Every store use to be positioned on a major road on the side of the road that exits the city. Most still are but not always now.

Ol Grumpy

Yes, we'll it's good to see some differing opinions... My comments were all relating to and in the context of expanding on the thread topic... Saturation or Not? I can't see a turf-war in my comments- but I suppose that's a matter of interpretation. I understand I have strong opinions, which can polarise people, or not... However at no time do I set out to offend or criticise... I certainly will challenge conventions if I believe it appropriate... Which I am want to do.... Remember, in the Jungle, the Tiger starves last.... I'd like to hear from Chester?

FreshCoffee2

on 1364799130:

....Its been said to me by a cafe owner that while he won't drink it, he has..........in his cafe because its a consistent product that people know.......

I read this to mean, that the brand is apparently beneath *the cafe owners personal standard* (whatever the hell that is) but that he recognizes it has been well roasted and blended and has good market recognition. What an entirely inappropriate, unprofessional, unintelligent, naive, indiscreet,  dumb, stoopid thing for he/she to say. The word SNOB comes to mind, in its most derogatory form. The term A hole also comes to mind. I'll even bet they look after him really really well in his business and therefore in his hip pocket nerve, for him to turn around and open his derogatory trap and say that kind of scheit.

Ronin

Not quite my understanding FC While not to his taste he is selling a lot of coffee because of brand awareness. Money in the bank for him. Purely a business decision. Perhaps FC you should keep opinions like that to yourself.. Completely unnecessary. It comes across like you are jaded by people making money in a way they choose to, but not how you would. In case you didn't know, coffee is a subjective product and we are all entitled to our own decision on flavour of personal choice. There is a place for all coffee, not in mine or yours, but someone's

FreshCoffee2

on 1364792114:

Oh C'mon- surely someone's got something to Add... Question... Refute.... .????

These discussions are nothing more than academic musings even if interesting. They take up a lot of time, and sometimes they can get very close to being publicly inappropriate. What could be an interesting discussion over a beer, may not be quiote so appropriate when written up in a public forum for all to see. Individuals have to decide when its time to stop participating in any particular topic. Hope that helps.

FreshCoffee2

on 1364808754:

Not quite my understanding FC While not to his taste he is selling a lot of coffee because of brand awareness. Money in the bank for him. Purely a business decision. Perhaps FC you should keep opinions like that to yourself.. Completely unnecessary. It comes across like you are jaded by people making money in a way they choose to, but not how you would. In case you didn't know, coffee is a subjective product and we are all untitled to our own decision on flavour of personal choice.

I disagree entirely (and you apparently didnt understand my motivation in response). Someone apparently said something they probably shouldnt have said (to you), exemplified by the fact that it ended up in a forum where it makes it look like there is something wrong with someone's brand or that someone percecives that the brand is not "up there".... If I was merlo, I would be in here talking to the site admins about striking your post. EDIT and addition. I sincerely hope that what the cafe owner really meant, was that he wouldnt normally drink the blend he uses for work, rather than that he wouldnt drink the *brand* in toto.....

UNM

OG - I don't agree with all of your earlier post, but yes, it is food for thought. I (and many others) have long been aware of the CS business model and approach, that was no surprise. I don't believe Andy's historical model is, ultimately, the best way to grow his business. It is one way and does have some good aspects, but is not the only way and I think there are areas he could do better. All businesses change over time and  I am sure his will as circumstances change. I know other roasters that started from nowhere and churn through 5 tonne+ in a week and do not run their business in that way - they have found other ways to be successful (and want that kind of volume).  There are many ways to skin a cat. Business success is not necessarily about growth, higher profits or market share - it is having the business that you chose and meeting the targets you aspire to. Some realise this early, others never do and get caught up in other peoples definitions of success rather than their own.  Clearly a business that loses money consistently is less likely to be deemed a success. As to Ronin's comment about McDonalds making an average burger, they must have improved in the last decade since I last visited.  Sorry, but 'the burgers are better' at Grill'd.

Ol Grumpy

on 1364808792:

These discussions are nothing more than academic musings even if interesting. They take up a lot of time, and sometimes they can get very close to being publicly inappropriate. What could be an interesting discussion over a beer, may not be quiote so appropriate when written up in a public forum for all to see.

Hmmmm, having now seen and experienced the result of my previous 'challenge'... Well let's just say, "I better understand".... Your comments above.... Thanks!

Brett H

Merlos have one out of their way to accommodate me on a number of occasions with embarrassingly small orders and one comparatively low cost grinder purchase issue.  In every instance I was made to feel like my satisfaction mattered and they appreciated my custom!  They represent everything that is right about the roasting/cafe scene in my opinion and they are now, after many years of consistently excellent product, they are now big enough to polarise opinion so it seems.  Bully for them!  I hope that the cafe owner's comments were taken out of context! OG, you posts are interesting, relatively un-scandalous and not requiring comment on the whole.  Kind of like a nice bottle of red!

Kelsey

I can also attest that I've enjoyed Merlo most of the occasions I've had to try it and have enjoyed their roasts also. That said BH, I think you were present at the west end cafe when I ordered what turned out to be a fairly dubious espresso.....

Brett H

Absolutely, but that is a very infrequent experience and in fairness  it was an Aussie bean that we were sampling.  I bought 500g of it and no extraction method made it suit my tastes.  One of the guys in the Opera Chorus however loved it and despaired when their bean of the month ended.  Each to their own I suppose: Which leads me back on topic. Yes the market is over-saturated but with such eclectic tastes out there there will always be room for one more gold-rush miner and there'll always be one to wax lyrical and many to collect the permit fees!

Kelsey

on 1364814827:

Absolutely, but that is a very infrequent experience and in fairness  it was an Aussie bean that we were sampling.

True, I had forgotten that part - 100% correct. And I've had bad brews pulled on better beans from cafes that should know better - and I've pulled more than my fair share of sinkers too.

cosmic_couple22

Thought I should jump back in, I always find open discussion an amazing process what starts as one line of thinking always morphs into something else before finally returning to its origon. My origional post came about after my desire to learn to roast on a full sized gas powered roaster led me to look at the financial viability of operating a small roasting opereation.  Some of the numbers i discovered were quite intresting. With some basic looking I discovered 65 roasting/coffee companys registered as pty ltd. Over 1000 small roasters/beans, be it - web based sales roastery, roastery/coffee shop, or contract roasters and a few others. Straight away I thought that was a few for a popoulation of just under 23million and of that how many had coffee machines and needed beans? Not totaly preterbed I looked at the cost and profit of roasting on a 5kg gas roaster selling 250gram bags, keeping with a fresh coffee is better approach. After which I worked it back to around $3.85 profit on a $12.50 retail price for that bag. (green beans, craft bag, gas/elec,dry back, tax allowed for) sure there is other costs web site etc, but this paints a picture. 9kg beans = 36 bags = $138.60 profit 18kg beans = 72 bags = $277.20 profit 27kg beans = 108 bags = $415.80 profit 36kg beans = 144 bags = $554.40 profit 45kg beans = 180 bags = $693.00 profit Thats a lot of bags to sell to make a basic wage, so if you don't have a couple of cafes to supply things would be pretty tough I would imagine.  144 bags a week, every week for the entire year just to make a bit over $500 bucks a week, thats hard to sustain. Then consider thats a retail price not a wholesale price to a cafe. Then if you do have a cafe or two, as mycuppa points out there are reps constantly trying to via for your customer base and offering bigger and better machines to gain that trade. Ruthless industry it would seem, yet every week I see a new add for beans or a new esspresso bar opening. So that is what brought me to my question, businesses will come and go and those wtih great product, strong product support and marketing hopefully will survive.  Will the market experience some hard times, without doubt. I believe the industry needs better support from its councils and their town plans to avoid every 2nd shop being a coffee related service. Maybe more stringent requirments for establishing this type of business, not sure. But for now for every place that closes there are 2 more ready to open, many with roasters and a L plate on the door. For me I am of to South America next month to see if it's viable to spread the plague offshore.  ;D Chester

mycuppa

Thank you Chester for outlining a similar theme to what I've also been trying to say for a while now - the gold rush is well and truly over ! Unfortunately, when it comes from the mouth of an industry operator like myself, mostly it's treated with suspicion on the grounds that I'm trying to protect or preserve my interests, rather than my honest objective of telling people there is better (and easier) money to be made elsewhere. Reality is - the margins are not as healthy as most people think, because they simply perform basic arithmetic on the raw materials costs less the finished goods sale price and they throw in a few simplistic assumptions and variables - almost nobody knows the real costs as you only discover all these additions once you are up and running. I have a similar case with one of my cafe clients at the moment - he is not doing so well with his cafe and wants to buy a roaster because he thinks 95% of the cafes out there just begging for good coffee and he is going to give it to them. Despite me warning him over and over (because I actually care about his long-term welfare - I really like the guy) it's almost impossible to get the message through. Here are the key points in case people miss it..... 1. There is already really good coffee out there - almost everywhere. 2. Coffee is a volume game - not a "high priest of the temple" play. 3. Deep pockets are needed right from the very start. 4. It's really very hard work - physically and emotionally. If you don't like lifting stuff, working late nights and weekends, cold weather, hot weather, getting dirty - don't even think about it. 5. Customers will do anything to avoid paying their Invoices - this practice is endemic in just about any industry (see point #3 above) - situations like these can kill a business. 6. You can't please everyone - euphoric highs are balanced with the random unexplainable and unreasonable unhappy customer (like every other service business). 7. It is different to other industries - being that it's unlikely to ever undergo structural reforms such as market consolidation - a buyout is literally impossible (but it does happen in very rare cases - just don't build your strategy on the chance of a buyout).

UNM

Chester - I think your number of roasters is on the low side. Not sure how you got those figures, but a lot of roasters are not necessarily listed as such. Sometimes, a cafe whacking in a small roaster is a good thing - it can be a feature and part of the fit out so draws people in just on that basis, rather than as 'a roasting business'. Additional sales of beans as they come straight out the roaster at retails prices can make it  worthwhile. Anyway, to address mycuppas points in order 1. yep. 100% agree. 2.coffee doesn't HAVE to be about volume  and 3. you don't necessarily need deep pockets. There are plenty failing/failed coffee businesses dumping their equipment cheap, caveat emptor  though. 4. Not always hard work, certainly emotional at times. depends how much you want to make - again, it comes back to how you define success and what you want from your business. If you want to use it to provide a real income and service a mortgage, yep. If it is a retirement or part time hobby-business, maybe not so much. 5. it is getting more common for businesses to collect money in advance. I have a couple suppliers that only ship after money in their accounts and it is now quite common for net based companies to run regular shipments of consumables that have recurring payments and have to be cancelled if you want out. 6. Selling roasted coffee seems more product than service, but yes any customer interaction is prone to uncertainty. 7. A buyout is impossible but it does happen??? Nope, you confused me with that one. Every business is different and understanding differences, similarities and current market conditions helps each business get an edge on others that miss something. Accepting that your competitors are also looking for the same edge and there is a natural ebb/flow helps cope somewhat with 4 above. my $2 worth  for the night.

cosmic_couple22

I am sure there is many more UNM I only searched the companies registery, yellow pages, google keywords search results, Golden bean competition entrants last 3 years, ebay/gumtree bean sellers, bean scene advertisers, Seek and a couple of others. That was 16 hours of life i'm never going to get back, but did pull some really nice shots to keep me motivated. :coffee2: UNM seeing a deficency in my count just supports the idea that maby it's time the industry looked at developing some standards to support and stabalise the industry. Over regulation never works but seeking/ developing a set of minimum training standards above and beyond the current requirement will lead to better trained people servicing the customer base, which has a flow on effect teaching customers to expexct more from the cup they choose to indulge in.  An educated customer base is the real key to improving any industry. :thumb: Chester

Ol Grumpy

Ahem...  If I may... Before you even think about 'Product'... You need to consider your potential market... You will get so much more meaningful 'market information' and 'feedback' if you actually survey your prospective market rather than try and size up your opposition... As for trying to 'educate' the market... Well that is THE single most expensive and difficult possible option you could possibly take... Good Luck with that one.... Business success is not difficult- it is formulaic- plain and simple. You can try and re-invent the wheel if you want to, but I find plenty of other ventures to focus my energy on... Good Luck with whatever you decide to do Chester....