10 things to consider when choosing a coffee supplier
10 things to consider when selecting a wholesale coffee supplier
The Australian cafe industry has changed considerably over the last 17 years.
Today it's a competitive, saturated and mature market with high standards expected from both owners and customers.
Nowhere is this more evident than in Melbourne and many areas of Sydney, Perth and Brisbane.
Today, it's such a highly competitive environment that customers in the wholesale market should ask themselves a few important questions, whether they are seeking a new supplier or just reviewing their current performance levels:-
- Are you and your suppliers adapting over time ?
- Am I using the best product against my direct competition ?
- Will customers go elsewhere for any reasons ?
- Do I have clearly identifiable points of difference over my nearby competitors?
Unfortunately, many of the old ways for running hospitality outlets no longer work and the days of people traveling for a great cup of coffee are well and truly over. Good coffee is expected anywhere, even in fast food outlets.
Speed, consistency and convenience are important factors that weigh equally with quality, taste and value.
There is no point having the sweetest, most flavored coffee if the customer experience is poor.
Standing out from the crowd in today's market requires clear differentiation from the vast array of coffee outlets nearby.
Some outlets are fortunate enough to be located in busy areas with a lot of constant foot traffic (although they pay for that privilege in higher rents).
It's no secret the simple art of a great coffee beverage will be the shinning star in any cafe operation.
Widely acknowledged as a vital cash flow element that importantly makes up for risks or losses on food operations.
Coffee beverages, like alcohol, when done well can generate high gross margins.
If you look down many of Melbourne's strip shopping streets, there are dozens of cafes with most having an attractive appearance.
Unfortunately, only 20% of those cafes are executing their coffee properly and that 20% are regularly busy with beverage orders. The remaining 80% have coffee sales as a consequence of convenience or paired with food.
Don't believe everything you see or read about coffee.
In 2023, with 2,800 brands of coffee being sold in Australia everyone wants a plug, especially the free ones.
Any sort of leg up from a social media post, food blogger or a mention in the press can raise the profile and interest levels significantly.
So it's fair to say not much really separates the top 20 Coffee Roasters in Melbourne and Sydney.
It's also naive to believe such a list of a Top 20 exists - who could possible compile such a list objectively, scientifically......as performance would need to be measured over time - not a one-trick pony, god-shot espresso. The list would be changing weekly.
You may be surprised to learn the coffee companies supplying cafes are not the only companies that can source, roast and showcase exceptional coffee beans. In fact, cafe wholesale supply is a price/margin game full of compromise and trade-offs.
Many coffee brands decide to trade outside of the cafe wholesale supply segment.
But that does not mean these coffee brands are not capable of making the grade. In most cases those coffee brands will exceed quality grades by a considerable level.
Put proposed incentives aside to conduct proper coffee quality evaluations.
Remember, a sales pitch starts the moment a discussion on changing suppliers commences.
Ironically, you may not even realize this conversation has started !
Coffee company reps are hungry for new business (their incentives for taking new accounts from a competitor are outrageous).
Most cafes in good positions will have at least 3 or more coffee company reps into their premises every week.
Yep, it's irritating, annoying and a waste of time.
Mostly, coffee reps lead with a conversation along the lines of "you can do a lot better with a different coffee".
Or they sit quietly in your cafe drinking a coffee and then pass a feedback comment when walking out that the coffee was not so good.
This trick plays on the owner's paranoia - missing out on something or under-performing against competitors.
The most common trap cafe owners fall into when they start researching and reviewing potential suppliers is being seduced by shiny new equipment, or generous upfront financial benefits and incentives to switch brands.
Short-term thinking with "trinkets" has nothing to do with coffee quality.
Incentives distract or disrupt evaluation processes to develop strong emotional attachments, diverts thinking from product quality.
Trading off brands using incentives as the decision factor is not smart.
After all is said and done, you are buying roasted coffee and that's what your customers are consuming, not financially engineered incentives.
Smart cafe owners know that signage and bling equipment does not translate into a better cup of coffee. Although bling equipment remains almost 90% effective in seducing cafe owners to switch brands.
Generally, incentives are offered with strings attached. In most cases this is in the form of a signed contract for a term.
Coffee contracts are legally binding and may involve penalties if breached.
Over the last 20 years, we have seen many cafe owners trying to exit signed contracts, ending up in legal disputes costing thousands of dollars.
We don't use contracts and we don't sue our clients.
Generally, the more attractive incentives offered will invariably mean you can expect a lower level of quality for roasted coffee beans. It's how those brands roll - taking $$ from ingredients to spend on marketing.
Even more reason to properly evaluate the quality of the roasted product before signing anything. In fact, you don't need to sign any contracts with coffee brands - try that on the sales rep.
Always remember, those incentives and shiny equipment won't help you win coffee sales if the ingredients are poor quality.
Customers in this situation may resort to having compensate added value from another area of their operation such as discounting coffee beverages. All of a sudden those upfront incentives have long term damage to your operations.
We have seen so many cafes go full cycle in the space of less than 4 months. These cafes were bustling busy 60kg a week only to fall off a cliff down to 10kg a week when changing to another supplier. That's really painful to witness.
Another important point to keep in mind is that coffee brands are not banks or lenders, no businesses are. So they don't give out loans or free finance for bankrolling cafe operations.
Big Company or Small ?
We all know from our personal life experiences that most large companies can be difficult and frustrating to deal with ( think Banks, Telecommunications, Utilities, Government agencies, etc.).
It's due to the relative position you occupy in their list of customers - just 1 of many hundreds or thousands.
In those conditions, you can only expect to receive basic (or barely adequate) levels of ongoing service and support from these large companies.
Smaller coffee companies tend to be more focused.
These smaller businesses consider a customer's need more carefully and may be able to offer greater flexibility.
In some cases, the smaller brand may be able to customize solutions and give you a critical point of difference in a highly competitive market.
Another direct benefit of dealing with smaller brands is the likely chance of dealing with owners. If problems arise, these can be resolved faster and in most cases more amicably.
Large coffee companies tend to play the line they have scale economy and can offer you more for less by leveraging scale.
Mostly, that's a self-inflated ego they try to use as advantage over smaller coffee companies.
In roasting coffee, size is not always the key indicator of purchasing power or quality. Most input costs in roasted coffee beans are the raw materials and the related financing of marketing incentives or their DSO's (accounts receivables).
Coffee reps often brag about the size of their company and how they source better qualities for cheaper, giving you an edge when you partner with them.
All coffee companies pay a similar or relative price for coffees. We all buy from the same brokers.
These brokers have set prices for respective grades (called landed prices) regardless of whether you buy a bag, a pallet or a container.
The differences between a pallet and a container can be as small as $0.25 to $0.50c per kilo.
So these bragging rights claim of big scale are just more smoke and mirrors to "sell a story" to you.
It's no surprise that large coffee companies buy cheaper grades. Smaller coffee brands are more interested in building their reputation and will not take risks with cheaper coffees.
How to measure coffee quality
Measuring quality is not easy. It means different things to many people and even so-called experts can struggle to find common ground.
Whilst some imagine coffee quality as being a brew which is smooth, others believe it should have high flavor.
Then again, others think a quality coffee needs to have certain elements of complexity such as fruits, chocolate, acidity, caramel, etc.
To perform in the current market, cafes must have a coffee that appeals to a broad majority of coffee drinkers.
Whilst that may sound simple, in fact it's the most challenging target for a coffee roaster to prepare such a product.
So why is it hard to produce a universally appealing coffee ?.
Simple - coffee roasters are constantly being pulled in different directions by their customers that try to influence feedback loops - whether directly or indirectly.
Some coffees can be rather boring, or they quickly develop a boring reputation for being way too safe and mundane.
Smooth and creamy is largely unexciting these days, except to the traditional coffee drinker who may be used to instant at home and looks forward to a rich and creamy brew as a special treat at the local cafe.
A distinctive coffee that is universally accepted is not easy to create or maintain.
Top 10 factors to consider when selecting coffee suppliers
- Bench marking - a track record of quality and consistency. Is the coffee the same every week or do you have good and bad batches.
- What infrastructure do they have for ensuring they preserve coffee quality. If you are really serious about selecting a quality coffee supplier, don't rely upon them visiting your premises to have polite discussion. Instead, go and visit their coffee roastery and warehouse. Serious coffee companies have extensive cooling in the areas where raw and roasted coffees are stored.
- Don't be fooled by sharp reps/salespeople who make promises about unlimited training, shiny new equipment, investments in signage, cups, uniforms, marketing and HR assistance, etc. All these trinkets are clever tactics to get your signature on a contract and lock you in. Once under contract, they may gradually substitute lower grade coffees over time. Here's the first of your big problems, you are fighting against your competition with hands tied behind your back and locked into a fixed contract.
- Nothing comes for free - you will pay for it, it's just that you can't see it as a direct cost line item because it's built into the price of the coffee per kilo rate, e.g. they use much cheaper, inferior grade coffees to maintain their margins in order to fund incentives. Coffee companies are not banks or cash rich !
- Think twice before erecting coffee company logos and signs in your cafe - straight away this may reduce a number of prospective customers. Someone may have had a bad coffee elsewhere with the same coffee company logo. Unfortunately many cafe customers mistakenly think it's the coffee bean brand instead of the barista. Your Cafe is your business, your money, your hard earned reputation and your built-up goodwill. Be proud of your own cafe brand because when it comes time to finally sell your business - coffee company signs add no value. Smart cafe operators train their customers to think about their brand, not the coffee company brand.
- Support of espresso machines and grinders is not a core or essential service to coffee roasters in Australia, despite all the marketing. Remember, coffee companies roast coffee beans first and foremost - they don't sell coffee making equipment or make profits from this segment. Reality is that the equipment side is an annoying and risky means to an end for many coffee companies. Supplying equipment is a cost item, not a profit generator for coffee brands. Essentially, equipment is just a means to enable flow of beans from their warehouse into your cafe.
- Using a strategy that hopes a brand of coffee will attract customers is really an outdated and risky thinking. In fact it's stupid. Even in 2023, we regularly encounter cafe owners believing if they are using high profile Brand X, then the coffee drinking public will beat a path to their door - simply not the case anymore. Go with the company that tastes the best according to both your own palate and your most trusted customers.
- Don't commit to fixed weekly volumes. Everyone knows that cafes have low and high trading periods so you should have flexibility to order less or more as it suits your business volumes. New outlets opening nearby your premises will have an instant impact upon your daily volumes. Fixed volumes are the ways coffee brands fund the incentives they offered you. Watch carefully when you reduce the ordering quantities - attitudes change and they may panic or remove incentives.
- Ensure your supplier is clear and honest with roast dates and freshness. This is perhaps one of the most important contributors to quality and consistency. Don't take coffee that is more than 12 days old and expect to make stunning coffee over the coming week. Demand your supplier gives you coffee that is just 3 - 7 days old. Of course, some coffees develop over a slightly longer period than others, but for quality specialty grade coffees the peak window is 5 - 18 days from roasting.
- Flexibility is fundamental - if you don't like a coffee, or your customers are complaining, then a great supplier who truly values your business will investigate and act accordingly. This is what real quality systems are about, not promises that the coffee is fine or blaming your baristas or the equipment is playing up !. Sometimes, coffees can change because new lots from new seasons arrive and they taste different which is a directly caused by the growing conditions - a great supplier will evaluate and offer an alternative if the coffee is not working or performing to expectations.