Summer 2023 Issue

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MAILING INFO HNCT, LLC PO Box 4040 Renton, WA 98057

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PASSION VS PROFIT

Roasting coffee can be an alluring proposition. Many are drawn to the romance and craftsmanship behind it, while others are seduced by the idea of saving money or gaining greater control of their product. These are all valid reasons to consider roasting as part of your business. Over the years, many people have asked me when it is worth roasting or when I should become a roaster for the health of my businesses. Naturally, everyone wants a straightforward answer with a clear line that crossing indicates a threshold to begin roasting coffee. Unfortunately, it is not that easy, and it is never absolute.

In the following paragraphs, I will create the framework for making decisions based on your needs, setting and goals. There are various factors to consider, each of which holds a different weight depending on the business and your preferences as an owner.

Roasting coffee is a beautiful craft and tradition that has been ongoing for centuries. The act of alchemy when transforming an unusable hard seed into a brittle soluble bean with its maximum potential expressed and bound within is a very gratifying practice. I began my journey as a coffee roaster in 2009. I had already been a barista for years, had seen coffee being roasted a few times, and was fascinated by it. Working at La

Colombe Coffee Roasters and spending time with JP Iberti, Co-Founder and master roaster, gave me an even greater reverence for the skill and craft of roasting. JP was part of a traditional lineage, having learned from the Bizzarri family in Perugia, Italy, at Torrefazione Italia. The Bizzarri family continue their legacy to the fourth generation today with Caffé Umbria in Seattle. I had always wanted to be part of a lineage and tradition much more profound and older than a computer. When I roasted my first batch with JP, I was hooked. The romance of roasting on a vintage small-batch Vittoria from Bologna, combined with the new sensory sensations of sight, smell, sound and touch, made it profound. This is why I got into roasting coffee.

I ended up buying my 5-kilo roaster and setting it up in my in-law's basement and started roasting first to learn and shortly after to supply a local cafe down the street. It was such a wonderful time of exploration, trial and error and learning daily lessons. I was first taught how to roast by sight, smell and sound. Then I took some classes and learned a different analytical side to the processes: time and temp logging, bean probes, airflow, thermodynamics and organic chemistry. La Colombe was very protective of their recipes, so I had yet to learn what origins I was supposed to be using or the differences between them, so I had much work ahead of me. This discovery period was one of my favorite times in my coffee journey.

In any apprentice and journeyman phase, your first level of accomplishment is to imitate and reproduce what other masters have already done. Otherwise, it is hard to gauge your development.

Eventually, through trial and error and developing my pallet and roasting technique, I produced a La Colombe Nizza blend clone. I brought it to my local cafe customer, and we did blind taste tests between my blend and Nizza, which were indistinguishable. I felt accomplished. The next stage would be creating something of my own—a task I relished and could not wait to tackle.

The pursuit of roasting, cupping and mastering a craft was a true passion of mine, and it drove me beyond any limiting beliefs or obstacles that arose. At this time and era of retail, it requires passion to pursue roasting. It requires passion because arguments not to roast far exceed any rational dispute to roast. Therefore, the choice to roast must emerge using irrational thought, which can only be prompted and endorsed by passion.

Allow me to explain my reasoning. Imagine you are a retailer surviving off a coffee shop or multiple coffee shops, and you have already started your business off working with a wholesale roasting company. If you are doing well and considering roasting because you are growing, then you have already

JAKE LEONTI | CAFE GURU AT F+B THERAPY AND EDITOR-IN-CHIEF, COFFEETALK MAGAZINE

PASSION VS PROFIT

Continued from page 8

proven that your business can survive paying the current prices for coffee you have. If you are doing well and have multiple units, you may leverage the additional volume to reduce your cost without manufacturing. The more shops you open, the lower your expenses and higher your margins company-wide. This means you can increase your profitability without making a substantial investment in roasting and packaging equipment. You win!

Case in point - Ziggy's Coffee in Colorado. They have over a hundred units in their coffee-focused franchise journey and have yet to roast one bean of it themselves. In no way has this hindered their business or held them back. Dunkin Donuts does not roast its coffee, either. They are working with multiple third-party roasters across the country and around the world to roast, package and ship their branded product to all locations. Dunkin's still maintains a team of coffee experts overseeing their products' quality and consistency; however, they do not feel the need to own and operate their facility.

In contrast, Café Nero, a retailer based in London, has over a thousand outlets across ten countries, and they still roast all the coffee company-wide in one location in England. This decision

is based on passion and commitment to their brand values of creating a hand-crafted beverage and an authentic Italian-style espresso. The company was founded in 1997 when there were fewer roasters and less opportunity to create leverage for a small business.

If you are passionate about roasting and want to open a facility, it usually makes financial sense once you reach five to ten locations. This depends on the volume of your sites and how big you plan to grow.

Now imagine you started an online retail business and created a coffee brand. You were self-funded, so you needed more capital to invest in equipment, so you started with a thirdparty roaster to grow the brand online. It works, all your dreams come true, and the website is a hit! The product is excellent and consistent. People are buying it and are happy with their purchase. Why would you want to change a successful formula? It's the same basic argument as the coffee shops. You have already proven you can survive on the price you currently pay, and as you succeed, you can renegotiate the price.

Building out your roasting facility will cost between $150k - $250k for a small to medium-scale roasting operation. Between the roasting equipment, green

handling and storage gear, packaging equipment and space to house everything. This does not account for the cost of learning the trade and maintaining your desired quality and consistency. Nor does it account for the staff needed to operate and distribute your products. It is an entirely separate discipline and skill in itself. Suppose you are a skilled and focused retailer. In that case, avoid the distraction of learning a new business and taking on the responsibility of a manufacturer and the liability of additional staff and ageing inventory.

If you only have a handful of cafes, the roasting operation will not pay for itself for years. You may also discover all the ancillary benefits you were receiving from your coffee provider once they are gone, benefits like maintenance on your water filtration and technical service on brewing equipment. Perhaps you took for granted all the hours of barista training they provided or the ease of placing a last-minute order and having it appear at your doorstep. A vendor partnership allows you to pay on a net of 30 or 60 rather than having the roasting part of the business pay in advance for all your annual coffee commitments. It is a very different way of thinking about and financing your business.

Rationally, all these factors do not point to becoming a coffee roaster just for marketing or bragging rights. Nor is it rational to start roasting to shave a dollar off your price per pound. This is why it only truly makes sense to become a coffee roasting company if you are irrationally possessed to do so out of a passionate pursuit to discover something new within our beloved bean. This is why it is essential to know what your end goal is and why you are in this business in the first place. Coffee has driven me to a career of irrational pursuits, and I continue to search and discover every day. Roasting is a lineage of people more concerned with keeping the flame alive than any other monetary motivation.

Q&A WITH PHIL MCKNIGHT

GENERAL MANAGER–BEVERAGE AT BREVILLE GROUP

Can you tell us about the acquisition of Baratza and how it influenced Breville’s business?

PHIL MCKNIGHT: The primary driver behind our decision to acquire Baratza was the recognition of its status as a highly revered US-based coffee grinder business, which had been successfully operating for 25 years. We were fortunate enough to finalize the acquisition in 2020, amidst the challenges posed by the COVID-19 pandemic.

Initially, we kept Baratza's operations unchanged for about four to five months, allowing them to continue their existing transactions and market approaches. However, in February 2021, we began the process of integrating Baratza into the Breville systems. This integration was always part of our vision, where incoming businesses could leverage all the infrastructure and resources of Breville, including access to warehouses, finance, HR, and technology services – things that typically require significant capital investment if built from scratch.

During this integration process, I took on the responsibility of ensuring a smooth transition. Kyra Kennedy, who was mainly in charge of operations and marketing, played a crucial role in overseeing this aspect of the integration.

KERRI GOODMAN: How do you envision the impact of the Baratza

and Lelit purchases on the product lines carried by Breville?

PM: That's a great question. When we made the decision to acquire Baratza and Lelit, we saw a fantastic opportunity to share technology and leverage intellectual properties between these companies. Breville possesses an extensive portfolio of intellectual property, with over 200 patents worldwide, many of which are related to coffee technology. The synergy lies in the fact that Breville's intellectual property can be integrated into Baratza and Lelit's products and vice versa. This cross-utilization of technology and intellectual property will create intersections in our product lines. For instance, you'll see instances where Baratza's grinders are used in some of Breville's espresso machines, indicated by "Powered by Baratza European Precision." This cross-branding approach allows us to combine the strengths of each brand, delivering innovative and enhanced products to our customers.

KG: Can you elaborate on how the COVID-19 pandemic affected your company and how you navigated through the challenges it brought?

PM: The impact of the COVID-19 pandemic was significant, and, like many other companies, our primary concern was ensuring the safety of our employees. We had a global approach to managing the situation, with one person in Sydney overseeing the COVID safety

initiative across all our offices. We implemented measures to protect our workforce, including guidelines for responding to symptoms and contact tracing in case of positive cases.

As the pandemic progressed, we witnessed an unexpected surge in demand for our products, driven by people spending more time at home and exploring new activities. However, this surge was accompanied by severe disruptions in the supply chain. Electronics and semiconductors faced enormous demand, and shipping was severely affected by container shortages and space constraints on ships.

Shipping delays became a major hurdle, with container ships queuing up for weeks at the Port of Los Angeles, Long Beach. This resulted in significant delays, stretching from offloading at the port to reaching our warehouses. The situation led to an unprecedented increase in shipping costs, making it challenging for us to import certain products without the risk of a substantial price hike.

Fortunately, over time, the shipping situation has improved, but the stress on the supply chain continues. Shipping costs have remained high, impacting businesses that rely on volume products, as the freight component became prohibitively expensive.

Overall, the pandemic brought about a unique set of challenges, and >>

Q&A WITH PHIL MCKNIGHT

Continued from page 12

while some aspects have improved, we continue to adapt to ensure the smooth operation of our business and meet the needs of our customers in these uncertain times.

KG: What was the percentage of remote workers in your workforce before the COVID-19 pandemic, and how do you see it evolving post-pandemic?

PM: Before COVID-19, our remote workforce was quite minimal, accounting for only about one percent. Almost everyone was based in the office, working five days a week. Working from home was a rare occurrence, typically only happening when an employee had a specific reason, like illness or a medical appointment.

However, the pandemic brought about a significant shift in our work culture. We quickly adapted to remote work arrangements, and now we have flexible working options across

all our offices and locations. Most of our staff have the freedom to work remotely, and we can observe this change in our office capacity, with fewer employees present on certain days to maintain social distancing.

The benefits of remote work have become apparent to both our employees and the company. People appreciate the extra time gained by eliminating commuting, which could sometimes be 45 minutes to an hour each way. However, we do acknowledge that certain functions, such as product service, require physical presence and access to tools and equipment. These teams continue to work on-site.

Overall, the pandemic has allowed us to embrace a more flexible approach, and many employees now work from home at least part of the week. As we move forward, we expect remote work to remain a common practice in our company, facilitating work-life balance and increased productivity for our teams.

KG: How do you ensure that your products align with the core values of your business?

PM: Our products are driven by several key principles that we hold dear: they must be better, faster, simpler, and offer increased engagement. These attributes are crucial for any product to be considered a true Breville product. We strive to provide a richer experience with every offering we bring to the market. To achieve this, we have a concept call "SMOB," which stands for a single moment of brilliance. Each of our products, whether it's an espresso machine, coffee grinder, drip filter coffee maker, countertop compact oven, or electric stand mixer, contains a unique feature that is exclusive to Breville. These SMOBs embody the essence of our brand and differentiate our products from others in the market.

By delivering on our promise of being better, faster, simpler, and more engaging, we ensure that our products align with the expectations of our consumer base and fit seamlessly within the Breville product family. These core values guide our product development process, enabling us to consistently deliver exceptional experiences to our customers.

KG: So what was that Single Moment of Brilliance for your new award-winning Barista Touch Impress?

PM: The moment of brilliance in the Barista Touch Impress was centered around the Tamper, which helped address issues related to tamping and its impact on extraction rates. Additionally, it provided control over the coffee dose in the filter basket. The machine incorporated self-learning capabilities to optimize the process.

Here's how it worked: The tamper would descend and tamp the coffee to a specific depth, which was a reliable indicator of the coffee dose in the

basket. If the dose was insufficient, the machine would prompt the user to grind a bit more coffee. Then, it would precisely measure the height of the tamper and calculate the grams per second needed to reach the desired height. Consequently, it would determine the exact grinding time required to achieve the correct height and dose.

Through this innovative process, the machine ensured precise grinding and tamping to deliver the right amount of coffee every time. It learned from previous grind settings, remembering the time it took to achieve the desired height, such as 19.2 seconds. This information remained intact unless there was a change in grind size or coffee beans, which would necessitate a recalculation. The result was consistent and high-quality coffee extraction, providing users with a seamless and efficient brewing experience.

KG: With everything changing so quickly in the marketplace, how do you stay on top of the trends and how do you keep coming out with innovative new products?

PM: In a rapidly changing marketplace, staying ahead of trends and continuously innovating is crucial for our business. We have dedicated insight managers, product teams, and designers whose primary focus is to gather and harvest new trends. Within the company, we have various communication channels that facilitate discussions about emerging trends, particularly in the coffee industry, and potential future developments.

Research plays a central role in our approach to innovation. Unlike in the past when we relied solely on intuition, we now conduct thorough research before proceeding with any project. This approach brings a higher level of certainty to our initiatives, especially when substantial investments are involved. For instance, if we identify an opportunity within the coffee segment, we engage our research department to design a comprehensive program. This program helps us understand consumer behavior in that specific area, pinpointing pain points and friction in the coffee preparation process.

Based on the insights gained from the research, we strategize to create products that address these pain points. Our ultimate goal is to deliver products that embody our core values: being better, faster, simpler, and more engaging. We achieve this through the application of innovative technologies or novel methods, ensuring that each product carries our unique "single moment of brilliance" (SMOB) that sets it apart from the competition. By embracing insights, research, and innovation, we can confidently navigate the evolving market and continue to offer cutting-edge solutions to our customers.

GROUNDS FOR HEALTH

{ Building the Bridge to Globally Inclusive Healthcare }

In a noble effort to prevent cervical cancer in coffeegrowing communities, Grounds for Health (GfH), a dedicated nonprofit, has launched an ambitious summer-long fundraising campaign. The goal? To raise $100K and extend vital healthcare services to women #wheresheis.

GfH has revolutionized cervical cancer screening through easy-to-use and portable HPV test kits. Women can

now collect their own samples, which are then sent to labs for analysis. This innovative approach allows for quick detection of the HPV virus, the leading cause of cervical cancer, enabling timely and effective treatment.

Throughout the summer, GfH is showcasing different locations to expand access to these life-saving test kits. This July, the spotlight is on openair markets, where women frequently shop. Earlier this year, GfH's team had a successful trial run in Nyeri, Kenya,

where vendors and shoppers readily participated in the screenings due to the convenience and privacy offered by on-site HPV self-sampling. The response was overwhelming, with women queuing up to undergo the test.

Susan Hollinger, GfH Clinical Consultant, expressed her astonishment at the enthusiasm of the women participating, saying, "I have never seen anything like it! Quick, on-site HPV self-sampling was so simple and non-intrusive for

women, they were easily recruited to visit the pop-up screening site."

Support for GfH's cause comes from influential players in the coffee industry. Royal New York, BNT Industry & Trading, and Royal Coffee have each generously donated $10K to help propel GfH closer to their fundraising target. Royal New York is going a step further by contributing proceeds from the sale of an exclusive women-produced coffee lot from their Royal New York Line Up.

Jaime Schoenhut, President & CEO of Royal New York, expressed pride in participating in the #wheresheis campaign, highlighting the remarkable work GfH is doing to provide accessible healthcare to women in coffee communities. Royal New York's donation and support emphasize the company's dedication to the cause.

Meanwhile, an exciting and unprecedented collaboration between a local exporter, BNT, and an international importer, Royal Coffee, has emerged to support women's healthcare at origin. As an exporting company, BNT Industry & Trading deeply values the contributions of women to their families, communities, and the global coffee market. Inspired by BNT's commitment, Royal Coffee joined forces to make a difference and demonstrate the power of partnership along the coffee supply chain.

After a successful July campaign, GfH's #wheresheis initiative will continue in August. Their focus will shift towards providing test kits to rural health posts and villages where women reside, ensuring that no one is left behind in the pursuit of accessible healthcare.

For those interested in supporting this crucial cause, more information

can be found on GfH's website https:// groundsforhealth.org and the option to subscribe to their e-newsletter or follow their social media channels. Together, the coffee community can make a meaningful impact on the lives of women and farmers worldwide.

SUSTAINABILITY – ARE YOU READY?

Most companies talk about sustainability without changing what they are currently doing. At Scolari Engineering, we recommend preheating your coffee beans with your waste heat to make a significant difference in the energy you use for roasting coffee.

{ david.kramer@scolarieng.com }

NEXTPAK RECYCLE-READY COFFEE PACKAGING

With the NexTrex® Certification and Fres-co’s extensive coffee packaging expertise, Nextpak™ is primed to help coffee brands, roasters, and manufacturers make an immediate positive impact on the environment and accelerate time to market.

BENEFITS OF NEXTPAK:

• First NexTrex-Certified High-Barrier Coffee Package

• Recycle-Ready, All Polyethylene Material with Degassing Valve

• No Compromise on Shelf Life or Venting Performance

• Complete Packaging System Capability to Assist with Machine Integration

• Ability to Upcycle Single-Use Packaging into High Performance, Durable Trex® Decking

• Available as Rollstock or Premade Bags { fresco.org }

SEE US AT COFFEE FEST!

Visit General Packaging at Coffee Fest Booth #2666B in Anaheim to explore our variety of vertical bag form-fill seal models, tailored to meet the unique packaging requirements of coffee roasters. With 64 years of experience, we specialize in crafting efficient, durable, and dependable machines suitable for various products, packaging styles, and delivery methods. Our goal is to save you time and money by offering simple, rugged, and high-efficiency vertical form fill seal machines that demand minimal maintenance.

{ generalpackaging.com }

Scolari Engineering 45.5586,9.2141

DAIRY FREE MADE EASY

Coconut Cloud presents a collection of dairy free, vegan-friendly products to create a better-for-you beverage experience. All of our items are made with a premium coconut milk powder to deliver rich and creamy taste, without the dairy! They are allergen friendly, gluten free, and shelf stable. These will be your pantry's new best friend. We created a collection for every season and mood; dreamy creamers for your morning cup of coffee, frosty frappes for hot summer nights, and warm, rich cocoas for chilly evenings. If you can dream it, we've made it dairy free!

{ coconutcloud.net }

ANNOUNCEMENTS

THE LATEST FROM EASTSIGN

Table Top Espresso Coffee Machine, one stop coffee brewing using coffee bean including grinding function, large touch screen user interface, 8 flavor choice, compact ideal for office, small cafe and club.

{ sales@eastsign.com }

Grounds for Health 44.4374044,-73.0689621

BRINGING HEALTHCARE #WHERESHEIS

Grounds for Health has helped prevent cervical cancer in coffee communities for 26 years. This summer we are raising $100,000 to bring HPV test kits to coffee farms, open air markets and villages —bringing healthcare directly to women. Our supporting partners so far include: Peet’s Coffee, Royal, Royal New York, BNT and Swiss Water and they are each donating $10,000 to this campaign. Want to get involved and support women at origin?

{ groundsforhealth.org }