They wonder why you buy offshore.

Dry_bean

Vinitasse wrote:

If my profit margin was anywhere near 4% I would have thrown in the towel a while ago. Of course creative accounting can help keep that profit margin low as this of course helps with the annual ATO reckoning. 😉 Having said that, in the case of the micro roaster with minimal overheads, net profits can easily hit 100% or more.

Took the words right out of my mouth, I would suggest that if your running any business on profit margin of 4% its time to close the doors and get a job. :stir

Brett_H

Dry bean. wrote:

Took the words right out of my mouth, I would suggest that if your running any business on profit margin of 4% its time to close the doors and get a job. :stir

I'm a consumer and I want good value! I don't want 'a steal,' a fire-sale a closing-down sale. I doubt that anywhere I spend money is ONLY making 4% and neither do I want them to! Otherwise who will support my retail needs/desires in the down-times. I have an Airwell ducted aircon system and not only did the install company fold during the GFC but so did the manufacturing company. Bastards!!! At the first sign of real maintenance I'm looking at a brand new system as parts are sort of available but really pricey. I bought from a local family company and I'd like to think I'll make the same decision next time... But I won't! I'll buy Daikin or something huge Multinational to give myself a better chance of after sales support. It's not a fool proof plan but I'm pissed. When they were cheaper than everyone else (by a small margin) I though you beaut... local family owned business and a great price. I had actually expected to pay a bit extra and what they should have banked on is that for really great local service most will! If they had rolled out fewer installations at better margins they may still be around. It's Queensland and air-conditioning for heavens sake! Stupid, stupid, stupid!

Cuppacoffee

Have a read of this: http://gsroasting.com/archives/241

Kelsey

We've discussed this here before in chat with BF and I've posted something similar on CS, but this Christmas I was struck by just how much we've given up in the name of cheap consumer goods. I was hunting for secret santa pressies for two of my sisters-in-law, both of whom like fine things. I was short on time and wanted to go to just one place - so I went to Myer in Maroochydore. It used to be the case that Myer and David Jones carried prestige brand-name goods. You could walk in there and find high-quality crockery or linen and walk out paying less than if you'd gone to a specialist. The power of sales volume at work. This year, things had changed. Their shelves were dominated by their crappy import brand 'Vue', in every damn department. In crockery, it was either Vue or Maxwell Williams - purveyor of bland white china for all of a decade. There were a couple of celebrity endorsement items, but that was it. What had happened to the choice? The prestige? Or indeed the prices, which weren't particularly cheap. Well, here's what's happened - they drove the local small specialty retailers out of business and once they had no more competition, their standards dropped and their prices rose. We've let these big retailers become the only game in town. This is a battle that's being fought in every sector - Brett's story is persuasive. He bought local and is the worse off for it. Not because he made a bad decision, but because everyone else did. Fewer choices means less competition and less innovation. Look at Coles and Woolies with their cut price milk and their fruit and vege price war. You can be sure they're not losing a cent on this deal - they're strong-arming farmers who have no choice but to accept whatever prices are offered, they're importing cheap permeate-laden milk, they're importing their own cheap products from overseas. And when we have no farmers left and they raise the price on us and foist crappy substandard produce on us, what will we do? We won't be able to go to the local grower's market, because they won't exist anymore. This year my resolution was to avoid big-name retailers as much as possible. Avoid Coles and Woolies. Buy local wherever possible. For example, our local Foodworks carries Eumundi Noosa Milk - the expiry dates on their milk is reliably two weeks greater than their brand-name competitors. Why? Their milk doesn't last longer, I'm sure - it's because the brand-name stuff is shipped all over the country and takes two weeks to hit our shelves. When it's only $0.03 per two litres more expensive, I can't understand why any local wouldn't support them. Now I know this has been a long-winded rant, but I'm sick of it. I'm sick of parasitic corporations sucking the life out of every nation on earth, it's gone too far. Mine is a small stand, but I think it's a choice more and more people will be making. Or at least I hope they do.

Dry_bean

Cuppacoffee wrote:

Have a read of this: http://gsroasting.com/archives/241

Excellent article, well researched and very perceptive, makes fascinating reading and echo's my sentiments completely, however, much more lucidly than I could ever hope to express them. We've seen the same thing happen time and again in other industries, when digital photography was in its infancy the nay sayer's claimed digital could never replace film, now its not only replaced but surpassed it, witness the recent collapse of Kodak, a company who were in denial. Closer to home an industry I was involved in (mineral sample preparation) was labour intensive, each sample required numerous steps, all very precise and demanding, the industry said because of the complexity of the operation it would never be automated, you guessed it, a company in WA developed an automated processing line that not only did the job as well as human operators but surpassed them, don't think for a minute that the retail coffee industry will somehow be exempted from the process of automation, and the machines will do it better and more consistently than any barista could ever hope to. Then of course as the quote below says the market is saturated, I really would hate to be relying on the retail coffee industry to make a living nowadays, sure there are the stand outs who will survive but they are in the minority. 😢 "The retail coffee market in Australia and New Zealand is in decline. Currently, the average coffee retailer in Australia survives on a meagre 4% or less profit margin. There is approximately 1 espresso machine per 850 people in Australia & New Zealand. These espresso coffee markets are amongst the most mature in the world, and are now saturated

derrilex

x 2 Kelsey. I'd love it if my local stocked the milk that I want but instead they stock exactly the same stuff as coles ( except coles brand) but 20% dearer, like the rest of the products. The fruit and veg are rubbish and you have to look at the expiry date on every single item as a lot of it is old stock. Now this business used to be awesome, run by a very very good retailer that I got to know quite well. He sold it at top $$ and its inexperienced new owners have struggled from day 1. Rotten fresh food, frozen food that has been defrosted and refrozen, out of date stock on the shelves etc.... I havent been into that shop for nearly 2 years now and I still hear people whinging about it. Coles and woolies are 2 mins up the road and as much as I hate the big guys at least I can buy A2 or pure organic milk for a half decent price. Unfortunately, none of the smaller milk producers get a look in on the shelves of Brissy's big 2. The good owner of the local was / is a coffee nut, has a bezzera and we used to order beans from Byron together to cut the cost. I got milk cheap and a few freebies now and then. If he bought the place back I would return in a heartbeat but as it is now the only option for me is to use the big guys or get a cow.

Kelsey

Yep - that's right. The big guys have made it virtually untenable to operate as a little guy. The SuperIGA here bought the shop next to Caloundra's only remaining fruit and veg store and proceeded to try and start a price war to get rid of them - but the local prefer the fresher produce from that store over IGA and are willing to pay a minor premium. The local farmers markets are the only other choice - they run on Sundays here and Saturdays in Noosa. There are also farmers markets around Brisbane. They stock locally produced milk and produce. Fruit and veg costs about equivalent to that found in Coles (as my Strawberry farmer friend says "We need to make margin somewhere") but I've found has a much longer shelf-life.

derrilex

They keep moving the farmers markets in Bris. They used to be very close to me but now the nearest true framers market one is out at moggill. Not quite a packed lunch away bu hardly handy. Like driving from noosa to eumundi

Dry_bean

Last time I checked no one was buying milk offshore 😉 of course some of the Aust dairies may well be owned by overseas companies. ;D

Kelsey

Sorry DB, a segue without the appropriate frame of reference. The guy from the UK they've bought into run Coles apparently has just the one bag of tricks. He did the milk price war thing there too and I've read that the UK dairy industry is all but dead as a result - it's all imported from central Europe apparently. We're not there yet, but the cheap stuff *is* an inferior product, watered down with a milk by-product. If they drive all the independents out of business, then we'll only have the inferior product from dairies that are solely reliant on Coles and Woolies for their incomes. I know from hard experience the imbalance of power that comes from relying on one client for the entirety of your business. If they have absolute control of your income you have no leverage and they can make unreasonable demands with impunity. So it might be watered down milk now, but if they become the only game in town, the watered down stuff will be the premium product and who knows what junk will be shoved onto our shelves.

Jonty

Dry bean. wrote:

Last time I checked no one was buying milk offshore 😉 of course some of the Aust dairies may well be owned by overseas companies. ;D

No but we fly it out to China at around $6 per litre...... http://www.weeklytimesnow.com.au/article/2011/10/06/390461_dairy.html

UNM

Why, oh why does it always come back to milk, and the poor dairy farmers... Sooner they ban dairy the better, then we can all move on. Full disclosure: 1. I have a couple of clients that are farmers and they are multi millionaires (not that that necessarily makes them rich). Yes, there ARE farmers out there that can work the system and some Australian farmers own properties larger than small European countries. 2. I have farmers in the family, not in dairy anymore. Might even contribute some more to this thread tomorrow, it is very interesting and thought provoking. Meantime, consider whether we should support retailers at all, or whether retail as a sector is a recent and temporary aberration.

Kelsey

Well sure, I virtually grew up on one of QLD's biggest strawberry farms and I'm still close with the family. If you've eaten strawberries bought in Australia, then you've had their strawberries at some point. And no, they're not hurting - although they've got some horror Wesfarmers stories. But do you think they'd be able to make it to the heights they've reached if they were starting out today with very little, as opposed to two generations ago? I suspect not. Not impossible, but much less likely. My family also owned and ran a farm when I was a young fella. Back when you used to muster cattle on horseback, something I don't really miss doing!

Brett_H

Excellent thread this! Great article Dennis and nice post Kelsey. My situation would possibly be better off if everybody had bought locally, but then again some businesses are destined to fail through poor management. I suspect my situation is more the latter!

derrilex

UNM wrote:

Why, oh why does it always come back to milk, and the poor dairy farmers... Sooner they ban dairy the better, then we can all move on. Full disclosure: 1. I have a couple of clients that are farmers and they are multi millionaires (not that that necessarily makes them rich). Yes, there ARE farmers out there that can work the system and some Australian farmers own properties larger than small European countries. 2. I have farmers in the family, not in dairy anymore. Might even contribute some more to this thread tomorrow, it is very interesting and thought provoking. Meantime, consider whether we should support retailers at all, or whether retail as a sector is a recent and temporary aberration.

I was going to say it earlier but didnt. Ive never met a poor farmer, ever. Serviced all sorts of exotic machinery and cars owned by farmers and in my experience in dealing with them I can honestly say they are a hard bunch. If the farmer next door falls on hard times they will get eaten alive by every surrounding farmer. Truely cut throat.

Vinitasse

Cuppacoffee wrote:

Have a read of this: http://gsroasting.com/archives/241

Personally I thought it came across as a rather poorly disguised infomercial for Super Auto sales... and.... I would have to wholeheartedly disagree with his base assumption that... "In the past five years super auto machines have certainly progressed. Science has surpassed human skill." Really? Where and when? I certainly have never had any coffee from a Super Auto worthy of any kind of kudos. We may get there some day but we ain't there yet. Somewhere down the road we may get all our food and bev from a Star Trek type replicator but I for one enjoy the human-human interface and am willing to cough up a bit extra for the privelege. Just can't get excited about ordering from what is essentially a vending machine.

askthecoffeeguy

Vinitasse wrote:

Personally I thought it came across as a rather poorly disguised infomercial for Super Auto sales... and.... I would have to wholeheartedly disagree with his base assumption that... "In the past five years super auto machines have certainly progressed. Science has surpassed human skill." Really? Where and when? I certainly have never had any coffee from a Super Auto worthy of any kind of kudos. We may get there some day but we ain't there yet. Somewhere down the road we may get all our food and bev from a Star Trek type replicator but I for one enjoy the human-human interface and am willing to cough up a bit extra for the privelege. Just can't get excited about ordering from what is essentially a vending machine.

Have to agree with you there and as to pour-overs and the like being obsolete - has anyone been to Proud Mary, Auction Rooms, Seven Seeds, or St Ali any day of the week - all do a roaring trade and all are innovating in these areas I would also argue that if you want to differentiate yourself in a crowded marketplace, it is necessary to innovate in terms of what you do, in order to provide the consumer not only with choice, but also with the quality and consistency of product that other operators in the area are not operating And as for world champion baristas not influencing innovation in espresso machine design - I would argue that the opposite is true - I would say that leading manufactures are partnering with leading baristi to innovate and introduce new technology to the marketplace which is even trickling down to the domestic market and that innovations such as the plethora of dual boiler machines, and pressure profiling, are having a massive impact upon how we view and craft our product If anything I would suggest here in Melbourne every man and his dog seem to be offering pourover, syphhon, and cold filter and the like - but given the number of variables involved and the margin for human error - very few (as many as I can count on one hand) are making a decent fist of it in terms of roasting specifically for these profiles, and then experimenting with all the different variables to produce a superior product And palate development is a vital and important aspect of the market place for roasters, baristi, and consumers alike which is often over-looked (if it gets a look in at all) - and is probably IMHO the single most important aspect of product development which either, a) remains secondary to driving profit margins, and or b) many operators in the industry don't have much of a clue about it I'm not trying to set myself up as some sort of expert in the area here - but I did have ten years in the wine industry (as a sommelier / beverage manager and hands-on during vintage) before I got into coffee, and I am constantly refining and developing my palate - but I don't see many operators driven by the type and quality of product that they wish to develop as a desired end result - so much as byproduct of what they produce p

UNM

I do buy offshore myself and see nothing wrong in it under the right circumstances. I'm hardly going to order fresh produce from other countries, but for products made offshore and where local support is not a strong requirement, I am not guided by Adam Smiths 'invisible hand' to support domestic industry over foreign. We live in interesting and rapidly changing times and retail as we know it may well not survive. Bearing in mind the quotes from Adam smith earlier, I am struck by the fact that when he was alive, retail as we know it did not exist. It is a pretty recent phenomenon in the form of a business purchasing finished goods, displaying them and selling them to the public from a fixed address. In Adam Smiths day, and for quite some time afterwards, most trade consisted of purchasing items, adding value in some way, and then selling a different product - farriers, butchers, bakers, milliners, tailors, coffee houses... Our desire to own vast numbers of complex products we don't really need has fed the retail sector for quite some time and it is no surprise that people moved into it to make money - some very successfully. In the last few years, we have seen the birth of the internet - a truly disruptive change to our society that I believe will be even more far reaching than the invention of steam power and the industrial revolution. One outcome is disintermediation - like many, I use the internet to research potential purchases and am happy to cut out middle men that I do not see as adding value (maybe they do, but if I can't see that value, I act accordingly). It is ridiculously easy to practice direct trade compared to just a few years ago. In some cases it is lauded as a good thing (e.g. purchasing from coffee farmers), then in others we are led to believe we should 'support our local retailers' (e.g. don't import espresso machines from Italy direct). Regardless of what you may feel about the good and bad of it, the trend is obvious and will continue. On the flip side, there is hyper-intermediation - many times you will be initiating a myriad of micro transactions while researching what products to buy from whom. Tiny 'pay per click' charges happen as you click through various sites. You might not be paying anything directly, but plenty of businesses are happy to pay small amounts for an increased chance of winning your business, or keeping their website high enough up rankings to attract advertisers of their own. This is where the new intermediaries are setting themselves up as the major traders of the future. It might be nice to think that some specialists will remain in business - those who provide value by identifying clients needs and selling the right product and also offer post sales services. I really doubt this will be the case as human nature is such that many will take that pre-sales advice and then purchase elsewhere, potentially along with an 'extended warranty' (which is actually just an insurance policy) to ensure after sales service. Anyway, thats just a few random thoughts of the day.

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