Chapter 1: First 2 Steps When Starting Your Coffee Business
There are 2 steps I would consider to be a must before any venture into a coffee business. #1 Industry research, specifically, figuring out the GROWTH of the coffee market as a whole, in your country or region. #2 Figuring out which coffee business model you should pursue.
But before we get in to that...
What I Am Looking To Accomplish With This Blog
You found this blog because you have questions about starting a coffee business, right? As you can tell, this website www.louverture.coffee would seem to have some answers! You are right. But before we get into the very first steps, it is only cordial that I first introduce myself and tell you a little about why I feel I have the information that you need.
My name is Junior Racine. I am a 34-year-old Canadian-Haitian living in Calgary, Alberta, Canada. In July of 2017, I decided I no longer wanted to work a 40+ hour work week helping someone else achieve their financial goals while living paycheck to paycheck myself. You might be exactly where I was, and you are looking for a better income and a better standard of living.
I have spent many years before leaving the everyday rat race studying and practicing business principles and theories. My dream was to one day own my own destiny and run a successful business. We all have barriers that we face in life, and sometimes they seem impossible. I know you might be feeling this way right now, as you did yesterday and you will tomorrow. I'm here to tell you that you will succeed.
I am not an expert. Not by a long shot! But, I'm good at gathering, dissecting and compartmentalizing information. So, when I was figuring out what knowledge I needed to start my own coffee business, I went deep. My goal is to pass this information on to you with the hope that it will help you move forward.
Why did I get into the coffee business?
To make a long story short, my paternal great-grandfather was a coffee farmer in Haiti. When I found out about this in 2017, I found my calling.
Now enough about me! Let's talk about the coffee industry.
#1 Learn Your Industry
The very first step in any business venture is familiarizing yourself with your target industry. In our case, it is the coffee industry.
Depending on what country or region you are thinking of operating from, the statistics will be different. Some information I can give you, some I can't.
When learning about the coffee industry in your country or area, one of the most important things you will need to figure out is its viability. Can your current market sustain another coffee shop, roaster or supplier. A critical factor in making that decision will ultimately be "growth".
Most countries will have government or coffee association that will supply inquirers with growth statistics. This information will also come in handy when or if you are planning to write out a business plan to get a bank loan or investor capital. But always remember, coffee is a dinosaur. So don't expect to see levels of growth experienced by newer and sexier industries like tech.
When I was first writing my business plan for L'Ouverture Coffee, I found out that in Canada, the coffee industry as a whole was growing at a little over 2% per year since 2015 and growth are expected to rise to 5% in 2020. The slow growth was due to the massive leaf rust epidemic in Brazil. (Pro knowledge tip: the global price of coffee is based on the Brazil coffee market.)
To figure out how much coffee is growing in your market there are a few reputable sources I would suggest. Coffee associations and well established national statistic research organizations.
Reliable sources I recommend. (Sorry this will be focused on North America, but the principles will be the same for most of you).
Statista has a limited free version and a paid version, depending on how much information you want.
Also, know that these resources will supply you a treasure trove of valuable information you can use to deepen your own knowledge of the industry or to use for your business plan if you choose to write one.
Some other things you will want to pay attention to in these reports.
- Pay close attention to your largest competitors. This will give you a benchmark to judge your possible outcomes. In Canada, I look to Tim Hortons, Keurig Green Mountain, and Kicking Horse. Because the coffee industry is an old dinosaur, remember that your most significant competitors will have been in business for a long time. Don't be afraid of them. As the newcomer, you are more versatile. Big companies turn slowly.
- Depending on what your business model will be (we will get into that in next), finding out how much coffee is consumed at home, offices, restaurants or coffee shops will give you a good idea of what market share you could capture.
- Keep an open mind about the different trends that are popping up. Evaluate these trends, their consistency, and popularity by using Google Trends. This will help you identify what types of "ebb and flows" your coffee business will face.
#2 Choose Your Business Model
"A business model is a company's plan for making a profit. It identifies the products or services the business will sell, the target market is has identified, and the expenses it anticipates." - Investopedia
Defining your business model will be the next step in your journey of starting a coffee business. The first part of defining your business model is to decide what type of coffee business you want to get in to.
Here are the more common options:
- Coffee Shop
- Retail (e-commerce)
As you can imagine, each of these requires different strategies to be actively efficient, and they each present their own levels of difficulty. I will go through a few of the benefits from the two most popular coffee models. In another post, I'll go into more depth about each of the coffee business models mentioned-above.
Most often, the coffee shop is the first thing people think about when wanting to get into the industry. Trust me, every time people asked me what I do, and I told them I own a coffee business, they would immediately ask me where is my coffee shop. Why? Because everyone assumes that all the money is in coffee shops and they are EVERYWHERE. Now regardless if that's true or not, coffee shops are no easy tasks to run. FYI, a coffee shop is one I would not recommend anyone getting in to.
Type: Retail, B2C (Business to Consumer)
- High margins
- Brand visibility
- Community/social involvement
- Artistic type creativity
- Longevity (this goes for all business models if appropriately run)
- Highly competitive
- Market saturation
- Difficult brand management
- High start-up cost
- Busy lifestyle
Roasting, surprisingly, is a business model very few budding coffeepreneurs think about. Personally, I believe this is due to how old the industry is. But roasting is by far one of the most critical processes in the coffee industry. Think about it, without roasters all you would have is green bitter coffee beans. Some kind of freak experiment to counter tea... and it would fail miserably! Just my opinion though.
Type: Manufacturing, B2B (Business to Business)
- High output
- Supply control/relationship
- In-depth knowledge of the chemical process (Maillard reaction, etc)
- Lower start-up cost
- Large space requirements (Roaster & inventory)
- Qualifying good sources (because everyone basically gets coffee from the same brokers)
- Technicalities of roasting process
- Locking down customers
- Low margins
Of course, there are many more benefits to both of these options, but I really don't want to make this post longer then it needs to be. In later blogs, I'll cover the pros and cons more closely so be sure to sign up below to get notifications when I post new content.
The coffee industry is a ridiculously large system, and we will have many things to cover. Like I said earlier, I don't know everything, but I hope this was helpful!