Roasters scaling beyond their usual market isn’t always a recipe for success

cafe on a moving truck
  • Many coffee roasters enjoying local success seek to scale up their operations nationwide or internationally
  • Mass retail means broader outreach – 40% of US coffee drinkers purchase their home coffee from grocery stores
  • However, scaling up a roastery is easier said than done

SUCCESS for many specialty coffee roasters builds on community – capturing the attention and loyalty of their local markets. 

As they grow, some may seek to expand beyond their local regions and become national competitors. However, this is often easier said than done. 

Inspired by success achieved within their local markets, many coffee roasters’ ambitions naturally scale to national, or even international, expansion. However, this requires a markedly  different approach and a finessed enlargement plan that aren’t always accounted for.

Some roasters target specific national markets for expansion. For example, Stumptown Coffee Roasters’ roastery and first four venues were opened in their home city of Portland, USA, within their first eight years of operation. In 2007, they expanded to open two locations in Seattle – a well-known hub for coffee culture and consumption – and have since opened several additional locations in New York City, Chicago and New Orleans. 

Other roasters, however, set their sights on international expansion. Since 2015, German coffee roaster The Barn has opened 10 locations in its home city of Berlin. They then also established new international locations, including South Korea, the UAE, and Spain.

While scaling across multiple cities or countries is an ambitious and costly enterprise, it can be worth it. Selling via wholesale models to other coffee shops provides scant guarantee of consistent sales, as these prefer to feature roasted coffee from multiple “guest roasters.” There is also often limited control over how roasters’ products are sold or represented.

Establishing physical locations in target markets may help to improve a coffee roasters’ brand visibility and presence, and can provide the additional guarantee of brand representation. Having multiple venues can also help increase turnover, and strengthen the presence of a roasting brand across one or multiple countries. 

“National and international ambitions are fueled by confidence in your products and your business, professional ambition, and one’s feeling of self-worth and importance,” says Spencer Turer, Vice President of Coffee Enterprises. “Businesses see the growth of competitors or of their professional heroes and want to emulate that success.” 

What does it take to scale up?

For roasters seeking to expand their operations across state or country borders, the main concern is the ability to scale. If they lack the sufficient infrastructure and products to meet demand and satisfy new markets, roasters’ expansion may falter, or even backfire.
“An economy of scale often includes a much more complicated supply chain, logistics, and operational structure, requiring greater financial elasticity and risk controls, and greater complexity for human resources, recruiting and training,” says Spencer.

Challenges aside, he believes the main advantage of expanding is the ability to maximise an economy of scale, seeking operational efficiency and reduction of cost of goods based on volume. This marks a shift for many looking to scale up towards supplying grocery and national retail chains. 

The Spring 2024 NCA Coffee Data Report reports that 40% of US coffee drinkers buy their coffee for in-home consumption at grocery stores, and 25% from mass merchandisers.

Rather than trying to convert these consumers to enter coffee shops, it’s easier to bring the product directly to them, making it more accessible and potentially scaling impact as well. Kahawa Coffee, for example, made headlines as the first black and woman-owned coffee brand available at Trader Joe’s in the US, investing a part of proceeds into its women producer community.

While entering retail and supermarket chains can reduce the woes of logistics and distribution, it’s also a competitive market. Specialty coffee products are typically higher priced than their commodity counterparts, and banking on one or a handful of products on retail shelves may take time to pay off, especially in markets unfamiliar with a roasters’ products.

“In my judgement, appropriate scaling of a business requires diversification of products and markets to manage financial risk for both supply and distribution – COVID taught us that disruptions to businesses can be devastating when operations and sales are focused on a single channel of trade,” Spencer says.

“Consumers buy products because they are familiar with the brand, the product, or the people selling it. Reputation and familiarity does not often transfer into easy sales for new locations or new sales platforms.”

To manufacture at scale, roasters need the financial capacity necessary to buy more raw materials to build inventory for new and greater sales – a costly endeavour not available to all. Having a food safety plan in place for contracts with a major food distributor is also often a requirement.

“Many small coffee companies are not familiar with good manufacturing practices, industrial hygiene, required food safety and preventative controls,” says Spencer. “As companies grow it is often the larger customers and business costumes that begin to require inspection certificates and third-party audits to verify operations and safety practices.” 

Becoming more financially literate and efficient is another prerequisite. Working with experienced partners, such as consultants and brokers, can assist with growth. However, this can present its own set of challenges.

“Our cost of entry into the coffee industry is very low compared to other industries, meaning business owners with little to no practical knowledge other than liking coffee,” he says. “This situation creates an amazing risk of failure for operational reasons.” 

Can growth lead to an identity crisis?  

Even as brand loyalty wanes in the face of consumers’ growing desires for convenience and easier access to a variety of brands, many roasters owe their success to a regular clientele that they’ve attracted through a particular identity or set of values built around the needs of local markets and customers.

As roasters pursue a way to expand beyond these small, more localised communities, there’s a risk that they’ll need to drastically change or abandon what makes them unique in order to cater to new demographics, such as brand principles or niche marketing. 

“Once you develop your company identity and quality personality, your growth should be guided by these principles. Sacrificing one or the other for the sake of growth will create confusion and challenge the reason consumers buy from you; because they know the company, the products, or the people,” says Spencer.  

While adapting some elements of business to cater new markets, roasters must still find a balance between satisfying new customers and maintaining what made them popular in the first place.

“Consistency builds trust, trust builds loyalty, and loyalty means repeat business – without a clear identity or quality message there is no consistency.”

Achieving this balance is just as important internally within a roasting business as it is externally. Although structural and staffing changes may be required to scale and grow into new markets, adaptation won’t happen overnight.

“Decisions from small companies regarding local suppliers are usually guided by relationships and quality,” he says. “While the business grows and there is more emphasis on financial management and risk controls, the decisions from large companies regarding large suppliers have an emphasis on price and quality.”

While a growing number of roasters are looking to establish themselves in new locations or via new avenues of distribution, they need to remain vigilant of the challenges that lie ahead. 

What has worked well for them historically might not be the recipe for success in the future, and as they seek to adapt, they may lose what made them unique and successful in the first place.

Coffee Intelligence

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