How much coffee must I roast to recoup my investment or pay the premium over a cheaper roaster?

In this article we're going to first discuss the savings associated with roasting your own coffee vs. purchasing roasted coffee; we'll go over how much coffee you need to roast through in order to recoup your investment (and the associated timeline for doing so); and lastly, how long it would take to pay the premium over a cheaper roaster. To that end, First Crack only sells premium products. We believe a roaster is an integral tool for any business and we simply aren't willing to sell inferior products that may have a lower sticker price but will cost their purchasers more in the long run. We only work with world-class manufacturers whose products are reliable, feature cutting-edge technology and efficiency, are well-supported, and offer the best possible value without having to compromise on quality, ethics or anything else. 

I. Savings

The SCA just released a chart based on the coffee value chain

According to the SCA, an "illustrative" price per pound for wholesale specialty coffee is $9.40. I'm not in love with that number but let's go with it. 

In that same chart, the SCA said roasters are making $0.44/lb. profit. Simply put, I cannot fathom how they arrived at that number - it's WAY off. Anecdotally and experientially, achieving a 50% profit margin is super doable for coffee roasters. Many are making three times their cost. Some common pricing strategies (just to name a few): multiply your cost by 3.7 (this one is from "Dear Coffee Buyer" by Ryan Brown); add $10/lb; add a 30% margin; double your cost; triple your cost; or, as Matt Perger advocates for, basically charge as much as you can before you start losing profit due to lost sales. These are all real-world examples of wholesale coffee pricing strategies, in use today. 

So we'll do this two ways: based on the SCA $0.44/lb. profit, and based on a $4.70/lb. profit (half of the $9.40/lb. wholesale price the SCA uses... and $4.70 is STILL super low). 

Before we do the deep dive into roaster cost and related investment recoupment, I want to mention that the aforementioned SCA chart breaks down the costs pretty well, at least in terms of relavant line items. I could write another article someday about the reservations I have with the value chain illustrated there, but that's a fight for another day. I also wanted to address education specifically. This historically has been an incredible barrier to entry, firstly because many wholesalers have protected their business by making the craft of roasting seem impossible, but secondly because the cost of education has been incredibly high. Roasting education is no longer expensive. First Crack offers a comprehensive course for $1,050, as well as brand-specific courses (with certifications) for each manufacturer's products we represent. I'd thus like to peg education costs at $1,050, knowing they could be lower (free, even) for some and much higher for others. I'm not going to take this into factor below, but it should be easy to calculate the addition of another $1,050 to any roaster purchase scenario. 

Now here's the thing. Roasting is worth it. If the only thing it ever did for you was get you on a level playing field with your current roasted coffee suppliers ("partners" in the parlance of our times), it would be worth it. Benefits ancillary to that are cascading, important, and incredible too - seriously, not hyperbolically - but we'll focus on the savings. The larger picture is discussed in another article. This is not to condemn wholesale roasted coffee; far from it, in fact! There are plenty of customers who need to simply purchase roasted coffee. Every coffee business should be able to provide such customers with roasted coffee products.

II. Investment recoupment in terms of time and beans

Let's look at a few scenarios. a 75lb/week cafe, a 200lb/week cafe, and a 1000 lb/week multi-location cafe. 

If you're buying roasted coffee wholesale at $9.40/lb and you're able to get a roaster and essentially save $0.44/lb, the savings alone will pay for a 1.5kg roaster after 22,500 lbs (I'm simplifying here, but the underlying premise holds). If you're doing 75 lbs/week, that's six years. If you're doing 200 lbs/week, that's just over two years. But if you're doing 1000 lbs/week, you have your roaster paid for in half a year. Six years might not sound great, but stick with me here! There's more context to that number.

If on the other hand we go with the $4.70/lb. profit margin (again, a number I contest remains criminally low), you only have to go through 2,106 lbs to have the savings be worth it. At that point, even the 75 lb/week cafe is paying off their roaster in roughly half a year... and that's only considering savings on roasted coffee, not any beverage profit, business growth, increased margin via price hike or anything else.

Truth is, there's a lot more detail as to how long it'll take to pay off your roaster. For instance, a 1000 lb/week cafe would likely be best-served by getting a 5kg roaster. In that case, even going with the SCA's margin number, the roaster will pay for itself in about a year. Another article of ours gets into that a bit more - you have to know your business type, current and/or projected roasted needs, how many hours you can roast each week, your roasting approach, etc. but the bottom line is that if you're weighing whether to begin roasting and you purchase an appropriate-sized roaster for your needs, you should be able to recoup your investment in savings alone in half a year, perhaps way less, perhaps slightly longer. 

... as an aside, in the 1000 lb/week scenario, after the roaster is paid off you're making $22,880 more, annually, for moving the same amount of roasted coffee simply by roasting your own (at the SCA's figure; at $4.70 you've made $244,400 more, annually). 

III. Why get a premium roaster?

Look, I'm not going to spend a lot of time trying to sell you on paying more for a roaster. There absolutely are customers for whom initial price point is the most important variable, and we respect and support that. There is a place in the market for such customers and such roasters. Further, you can read here about how the roasting system itself isn't responsible for the cup profile or quality (briefly, if you roast the same way across different systems, the coffee will indeed taste the same; however, you might utilize different roasting systems differently to play to their strengths). Here's the deal though: Bühler and Proaster each make roasters whose materials are first-class and won't introduce roast defects or uneven roasts; build quality that will hold up to intense usage so long as the equipment is cleaned and properly maintained; unbeatable value, and uncompromising ethics. 

The premium one might pay for each of those brands' products over a cheap roaster of comparable size varies; however, I ran the numbers across First Crack's entire offerings compared to many cheap roaster makes of comparable size, averaged the premium and got 35%. So we're going with that. 

Let's figure out how long it would take to overcome that 35% premium. We'll choose a size from each roaster capacity category:

1) Profiling - 1.5kg

2) Small Production - 5kg

3) Standard Production - 20kg

IV. Industrial Production - 60kg

Let's presume you've purchased a roaster that's the optimal size for your business and are thus achieving 40-hour roasting weeks. Let's also presume you offer full-spectrum roasted products (light, medium and dark). We'll go with averages and we'll round to make the numbers easy. If you’d like to go over a specific scenario with us on a specific piece of equipment we sell and the premium over another piece of equipment in consideration, reach out and we can work through it with you. 

1.5kg will output 13,000 lbs annually.

5kg will output 56,000 lbs annually.

20kg will output 225,000 lbs annually.

60kg will output 500,000 lbs annually.

Say you need to spend an extra $2,500 on the 1.5kg; $7,500 on the 5kg; $17,500 on the 20kg; and $45,000 on a 60kg.

If your profit margin is $0.44/lb, you’d overcome the gap in:

1.5kg - less than half a year

5kg - about a third of a year

20kg - about two months

60kg - about a quarter

If your profit margin is $4.70, you’d overcome the gap in:

1.5kg - about a third of a year

5kg - 8 roasting days

20kg - 6 roasting days

60kg - 7 roasting days

A roaster is a tool you’ll use for decades. Why make a shortsighted decision to compromise long-term reliability for savings that would be irrelevant in days, weeks, or months at most? It doesn’t make business sense. Getting a quality, reliable roaster with the flexibility and control you want will pay for itself rapidly and will better serve you long-term. That's to say nothing of additional cost incurred with a less reliable, less efficient roaster.