Author Topic: Coffee Roasting Side Hustle  (Read 1996 times)

Beard N Bones

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Coffee Roasting Side Hustle
« on: March 13, 2018, 11:22:03 AM »
I love my coffee.  I love drinking coffee.  I love the smell of coffee.  I love the taste of coffee.  I enjoy roasting coffee and brewing coffee.  Thus far it has been just for personal/family consumption.
Recently, I've learned that a very good chef will be opening a restaurant up in the area by Nov 2018.  He has had some of my roasted coffee and really enjoys it - and in fact, he came by one day when he knew I was roasting coffee to see what it was all about.  Looks like he is seriously interested in getting high quality coffee for his restaurant.  Nobody within 275km (170miles) roasts their own beans commercially.  So in trying to figure out the business side of roasting coffee for this chef, I crunched some numbers to see how much this caffeine habit costs my wife and I.  This is what I found:

Cost of green beans:  $6.60/lb
Cost to roast (propane/NG/electricity): 10%  ($6.60 X 1.10 = $7.26)
Moisture/weight loss in roasting: 15%
Cost of roasted beans: ($7.26 / 0.85 = $8.54)  $8.54/lb
26 grams (0.0573 lb) per French Press (2 large cups of coffee). 
1 pound of coffee produces 17 French Presses (1lb/0.0573 = 17.4)
Each French Press gives 2 large cups of coffee. (17 French Press X 2cups = 34 cups of coffee).
34 cups of coffee made per pound of coffee.
$8.54 lb/34 cups = $0.2512
Each cup of (my favorite Guatemalan Antigua) coffee has a cost of $0.25/cup! 

A few additional notes on this:
- I am Canadian and the numbers I am using relate to the Canadian Dollar. 
- Currently I am using a home roaster, the Behmor 1600.  I have no idea how much electricity this sucker uses to roast the beans.
- I am most comfortable roasting 3/4 of a pound with this roaster.  To roast enough coffee beans to supply this chef's restaurant, I would have to spend way too much time in front of the roaster - which isn't worth it.
-  I am considering a proposal to this chef:  if he buys me a small (3lb max batch sizes - max 15lb roasted per hour), that would be sufficient payment for supplying him as many beans as he would like at cost for two (2) years.  The cost of the roaster, shipping included is approximately $5600USD ($7300CAD) + taxes + duty. 
-  I calculated that this would be the equivalent of him using $15/lb off-the-shelf coffee over a 3 year period.

Thoughts?  Feedback?
« Last Edit: March 14, 2018, 10:13:07 AM by Beard N Bones »

bwall

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Re: Coffee Roasting Side Hustle
« Reply #1 on: March 13, 2018, 11:52:30 AM »
Have you ever tried roasting coffee in a skillet on the stove? Cast-iron skillet costs $40 and you're done in 20 minutes. Batch size would be about 3 lbs.

After three years, you will be guaranteed to earn $5560 USD!

Beard N Bones

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Re: Coffee Roasting Side Hustle
« Reply #2 on: March 13, 2018, 12:03:21 PM »
Have you ever tried roasting coffee in a skillet on the stove? Cast-iron skillet costs $40 and you're done in 20 minutes. Batch size would be about 3 lbs.

After three years, you will be guaranteed to earn $5560 USD!

I've been roasting since 2008.  I've never used a skillet on the stove.  I have used a cookie sheet in the oven however.
I've also used a FreshRoast SR500, and am currently using a Behmor 1600.

My biggest problem in using the stove, oven, or a small home-roaster (which I highly recommend the Behmor 1600 for), are two-fold: 1.  the challenge it is to have consistent roasts and 2. the amount of time it would take to roast enough coffee for this restaurant.  (I could roast about 2 lbs of coffee in an hour with my Behmor.  A small commercial roaster can do 12-15lbs in an hour.)
« Last Edit: March 13, 2018, 12:05:22 PM by Beard N Bones »

SC93

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Re: Coffee Roasting Side Hustle
« Reply #3 on: March 13, 2018, 12:27:33 PM »
Don't get excited and jump ahead of yourself. I don't like this long term deal since you have never done anything like this before. Do this the RIGHT way. First, charge what you need to charge in order to make a good profit. If your price is too high, that means this business is not for you. Second, if you want/need the $5600 machine YOU need to figure out how to get it. Do NOT make this part of the deal.

But here is another option..... bring this guy in as a SILENT <<<<< that means he needs to shut the hell up after he buys the machine.... partner. He buys the machine, you make the coffee, he tells others about you because now he owns part of the 'business' and he makes money from his own restaurant AND he makes a small % of any other place in town that sells the coffee. AND he makes a small % from his own restaurant every time the coffee company sells to his restaurant. DO NOT make his percentage over 7%. In the long run you can not make it if he gets over 7% PROFIT. If you choose you can make it so after he is paid back in full that either.... his % drops a little or you can buy his % from him.

This is your thing to play with.... make up your own rules and have fun with it. Write it all down how YOU want it to end up as and don't let it stress you one bit. If need be, work it backwards to make sure it all fits in to place.
« Last Edit: March 13, 2018, 10:31:54 PM by SC93 »

Smokystache

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Re: Coffee Roasting Side Hustle
« Reply #4 on: March 13, 2018, 08:11:02 PM »
IMHO, you are narrowing your options too quickly. Right now, it sounds like you've set it up as:
a) need to have a $5000 roaster, or
b) can't get into this business

What about some other options?
1) Sounds like you've got your current roasting technique down to a science. Why not buy 1,2,3 more of those models and have them running simultaneously until you've built up enough profit to invest in a larger commercial roaster? I found one of your current models on ebay (and it ships to Canada) for $528. Even if you buy two, that's about $4000 less than your current option, but you've tripled your capacity.
https://www.ebay.com/itm/Behmor-1600-Plus-Drum-Coffee-Roaster/152938119407?hash=item239bd280ef:g:ARoAAOSwDqlaonVJ

2) Take at least a month and look on your local versions of craigslist and ebay for other options. It looks like there are a wide range of prices/sizes of coffee roasters out there. What could you do with $1000? $2000?

3) If you're the only person roasting in that radius, then there are other customers waiting for fresh, local coffee. Other restaurants, non-chain coffee shops, up-scale stores that want prepackaged coffee on the shelves (higher-end gift shops, etc.), people who create local gift baskets/boxes, subscription services, local people who really value fresh coffee, etc.

I love the math and looking very specifically at costs, (and I understand this was just an example to see how much your own habit costs), but calculate the costs to create a lb of coffee that you'd package and sell to the restaurant. Determine what your time is worth (and then add some more profit in) and see if the restaurant will pay that price. Personally, I would avoid taking on any partners or funding and just consider bootstrapping this. It would be well worth an investment of $500 and then add machines as you get more regular, recurring customers. The worst case scenario is that you buy one or two extra machines, find that there is no demand or you don't like being in the commercial roasting business, but then you sell your extra machines for 80-90% of what you bought them and you're out $100-$200 and some time. Best case scenario is that you are the first to market for awesome coffee in your local area and you can turn your hobby into a sweet money-making gig.

Best of luck.

Toad

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Re: Coffee Roasting Side Hustle
« Reply #5 on: March 13, 2018, 11:21:11 PM »
One other item you might want to look into before going down this route is if there are any health regulations you need to abide by to sell food items.  I would suspect coffee beans would be covered under those regulations if they exist in your area.

I do something similar to you, I make my own chocolate from the beans, and I have kicked around the idea of turning it into a side business for a while.  The largest hoop for me is that I would need to rent out commercial kitchen space somewhere to do it since you can only sell a certain amount before you become subject to health inspections and regulations in my area.  This pretty much kills the idea of doing it as a side business for me since I would want to be able to dedicate a decent chunk of time to it if I were renting out space specifically for it.

The next largest hoop would be the start up costs related to equipment --> I don't have a proper roaster yet so I (somewhat successfully) control my roast profiles using my oven and an infrared thermometer...definitely not a scale-able way of doing it though.  I would also need a winnower (dedicated machine to remove shells and shell fragments from the nibs), and something to package the items produced.  So I feel your pain about equipment startup costs, but I would go the route as suggested and just buy minimal smaller units at the start and if/once things got going, resell those and buy larger more expensive ones.

mrmoolaman

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Re: Coffee Roasting Side Hustle
« Reply #6 on: March 14, 2018, 02:12:36 AM »
Interesting idea! Where in Canada are you?

Just a note about your math...if it loses 15% mass, then to calculate your new cost per pound you should really be dividing by 0.85 instead of multiplying by 1.15. I know it barely makes a difference at this level, but is way more obvious if you were losing 40% :)

Malkynn

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Re: Coffee Roasting Side Hustle
« Reply #7 on: March 14, 2018, 06:41:31 AM »
I also came in to comment about health regulations. They usually make it prohibitively expensive to run a food-based small business.

Beard N Bones

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Re: Coffee Roasting Side Hustle
« Reply #8 on: March 14, 2018, 08:57:27 AM »
Interesting idea! Where in Canada are you?

Just a note about your math...if it loses 15% mass, then to calculate your new cost per pound you should really be dividing by 0.85 instead of multiplying by 1.15. I know it barely makes a difference at this level, but is way more obvious if you were losing 40% :)

Saskatchewan.

Thank you for catching my error in my calculations.  I will certainly go back and fix the numbers...

GrumpyGoat

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Re: Coffee Roasting Side Hustle
« Reply #9 on: March 14, 2018, 09:11:19 AM »
Some quick thoughts:

Not sure where you are sourcing them, but you are paying too much for green beans.

Electricity and Propane are not 10%, I was once calculating this value but have since stopped as it is not meaningful on a per lb basis (at least in the U.S.)

You need to include packaging and labels. I assume about $1 per 1lb bag.

Loss of 15% in weight might be accurate for a medium roast, but not a dark roast...that should be about 18%. I simply assume 20% across the board for simple numbers. Another way of looking at it, when I roast 1200 grams of green beans, I end up with just over 2lbs of roasted beans that I can sell.

I personally doubt the chef/restaurant owner is willing to pay an equivalent to a retail price of $15 per lb. Their food vendors will be offering coffee for much less than that.

I posted on the other thread that you have under Ask a Mustachian and anyone that wants to talk details can find me at grumpygoatcoffee.com.


nottheturkey

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Re: Coffee Roasting Side Hustle
« Reply #10 on: April 08, 2018, 10:42:27 PM »
I've been home roasting for somewhere around 12 years. I've always had an urge to start a business around coffee, but haven't found something that wasn't completely saturated. Lots of competition, so I think you'd have to be very careful about basing it on one customer. Locking him into multiple years to at least break even sounds like a good start.

Are there others in the area that might want to "rent" time on your roaster if you purchased a larger one?

Toad

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Re: Coffee Roasting Side Hustle
« Reply #11 on: April 09, 2018, 11:49:45 AM »
Right now might actually be an ideal time to start a roasting business.  Advertise your coffee as low acrylamide coffee (obviously make sure you end up with that after roasting).

Beard N Bones

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Re: Coffee Roasting Side Hustle
« Reply #12 on: April 09, 2018, 01:49:25 PM »
I've been home roasting for somewhere around 12 years. I've always had an urge to start a business around coffee, but haven't found something that wasn't completely saturated. Lots of competition, so I think you'd have to be very careful about basing it on one customer. Locking him into multiple years to at least break even sounds like a good start.

Are there others in the area that might want to "rent" time on your roaster if you purchased a larger one?

@nottheturkey  There is nothing like roasting your own beans eh?!  It elevates what coffee can/should taste like.  I have found that it is an inexpensive luxury - one that I'm willing to pay for.  The real issue though, is whether or not I am willing to put out $5000-$10,000 to get a roaster that I am comfortable using commercially.  Where I live, the issue isn't market saturation.  There isn't freshly roasted coffee made within 275km (170mi).  My issues right now are:
1.  Opportunity cost.
2.  How much time I'm willing to put into this side hustle at the moment.  (Planning on building my own home within the next 3 years.   And, I have a young family.)

Right now might actually be an ideal time to start a roasting business.  Advertise your coffee as low acrylamide coffee (obviously make sure you end up with that after roasting).

...low acrylamide coffee advertising.  @Toad that is very funny.  You made me laugh at a time where there is lots of grief and mourning around me.  Thank you.

And a public thank you to GrumpyGoat.  The information he has provided has been super helpful. 

Lis

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Re: Coffee Roasting Side Hustle
« Reply #13 on: April 16, 2018, 01:49:04 PM »
When I was listening to Side Hustle School regularly, he featured a guy who did this. Apparently there was another guy - didn't listen to the second one.

Kroaler

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Re: Coffee Roasting Side Hustle
« Reply #14 on: June 05, 2018, 11:31:51 AM »
Odd that I find this. 

There is a coffee shop / friend in town who has discussed with me the idea of beginning a roasting operation.    His current store does 200K sales  (Coffee profits are insane BTW....) and is currently in process of opening a second location.

Even with capital investment, the roasting operation looks profitable in less than 1 year if just used to supply the 2 stores.


If you sell excess at retail pricing and also wholesale to local businesses or whatever it gets better....




Following for information.... This friend has approached me about being a partner in this new operation due to my working background, havent given an answer yet.