The wholesale coffee business often grapples with thin profit margins due to the pressure of competitive pricing. However, the Remote Barista model offers a promising alternative, empowering businesses to break free from this margin-cutting cycle.

In a landscape where competitors vie for sales through steep discounts, maintaining profitability in the wholesale coffee business can be challenging. The Remote Barista model emerges as a beacon of hope, offering a departure from the norm by providing enhanced value to clients, setting businesses apart from competitors, and fostering long-term client relationships.

Profitability Advantages of Remote Barista Deals

  1. Increased Value Proposition: By delivering superior value to clients, businesses can command higher prices, mitigating the need for steep discounts that erode profits.
  2. Unique Selling Proposition: The Remote Barista model distinguishes businesses from competitors, making direct comparisons difficult for clients and reinforcing the value proposition.
  3. Client Retention: Establishing long-term relationships with clients minimizes churn and extends the lifetime value of each customer, contributing to sustained profitability.

While adopting the Remote Barista model incurs costs, as with any business endeavor, the rewards significantly outweigh the investments. Let’s delve into the figures and juxtapose the two Remote Barista model options (all-inclusive versus selling the machine) with traditional wholesale arrangements. If you’re unfamiliar with the distinctions between these approaches, we suggest reach out to the Grow Your Roastery Team.

“We’ll explore two distinct approaches:

A) Full-Service Provision: You’ll handle everything, including equipment installation and maintenance.

B) Outsourced Installation & Maintenance: You’ll delegate equipment installation and maintenance to the machine supplier. For further insights into this approach, refer to this article.”

Let’s begin with Approach A, where you’ll perform comprehensive services, including equipment installation and maintenance.

Profitability of approach A: Full-Service Provision

First, let’s examine the revenue aspect. Here’s how the comparison stacks up:

Revenues

Now, let’s break down each line individually:

  1. Price per Cup: These figures are derived from our industry experience. In the Remote Barista models, the price per cup reflects current market estimations. This price per cup estimation is based on an assumption of 100 single espressos per kilogram. For the standard wholesale deal, the price per kilogram is $28.00, an average observed in the boutique/specialty coffee wholesale market, inclusive of the average wholesale discount.
  2. Number of Cups: This metric is primarily contingent on the scale of the client you engage with. Producing 2000 cups per month equates to approximately 67 cups per day—a figure typical for machines in establishments such as hotels, restaurants, catering services, cafes, or offices. You may notice that the number of cups for the Remote Barista columns exceeds the ones for standard wholesale deals. This divergence is attributable to the enhancement in the coffee experience facilitated by Remote Barista solutions. Consequently, clients are inclined to sell more coffee (a proven fact!), resulting in an uptick in the number of cups sold.
  3. Monthly Revenues: This figure is a direct consequence of the preceding calculations—specifically, it results from multiplying the number of cups by the price per cup.
  4. Client Lifetime: Our analysis is informed by insights gathered from consultations with various coffee businesses, which reveal a higher propensity for clients to switch suppliers within standard wholesale partnerships. While the two-year timeframe is not scientifically validated, it’s grounded in qualitative data obtained from our industry consultations. The Remote Barista solution enables you to secure longer-term commitments from clients through contractual agreements, as you offer a comprehensive solution. Furthermore, given the absence of comparable offerings in the market, switching suppliers would represent a discernible downgrade for clients.
  5. Lifetime Revenues: This figure represents the cumulative revenue generated over the duration of the client’s lifetime engagement. It is computed by multiplying the monthly revenues by the client’s estimated lifetime.

Costs

Let’s delve into each cost line individually for a closer examination:

  1. Bean Costs: Calculating this figure entails initially determining the cost of beans per kilogram or pound. Subsequently, you’ll need to ascertain the amount of grams utilized in an average cup. It’s worth noting that if your client brews double shots, you can consider charging for two cups accordingly.
  2. Machine Installation Costs: These costs are determined considering that you possess the capability to independently install and maintain your machines, a skill acquired through our bootcamp training. Consequently, you qualify for a discounted rate from the machine supplier. Additionally, ancillary equipment such as fridges and water filters may be necessary, and the total expenditure for all these components constitutes the value entered in this category.
  3. Running Costs per Machine: This figure encompasses various expenses, including labor costs for your service efforts, expenditures on cleaning materials, the procurement of spare parts, and other maintenance necessities required to keep the machines operational.
  4. Barista Services: Thanks to our streamlined operations, we’ve managed to minimize the required Barista Services per machine to an average of only 12 hours of work per machine per year. Despite this efficiency, we maintain our commitment to delivering the highest quality in-cup experience possible.

Profitability

In conclusion, it’s evident the significant impact this unique business model can have on your profitability. The gross profit per client is exponentially larger, highlighting the potential for substantial financial gains.

Break Even per Machine

In the All-Inclusive model, one significant recurring cost item is the machines, including other installation materials. However, as illustrated, we achieve Break-Even just after 11 months. It’s rare to find another investment opportunity where Break-Even occurs so rapidly.

Machine Lifetime is >10 years

While our calculation example is based on a client lifetime of 5 years, it’s important to note that the machine can be utilized for over 10 years. This presents the opportunity to either extend the current client’s lifetime by at least an additional 5 year period without requiring new equipment investment or repurpose the same machine for another client. Additionally, it suggests that our calculations may include costs that are on the higher side. We adopt this approach for cautionary purposes, opting for a conservative perspective due to the complexity involved in accurately assessing real costs, including the degressive depreciation of equipment over time.

Profitability of approach B: Equipment installation & maintenance is outsourced

As the revenue side remains consistent between the two alternative approaches, we’ll proceed directly to the cost side. Here’s a comparison of the cost aspect across different models:

Costs

Let’s now review the two lines that have changed compared to Approach A:

  1. Machine Installation Costs: Under this model, you rely on the machine supplier’s network of technicians for installation assistance. Consequently, you receive a reduced discount on the equipment, resulting in higher overall costs.
  2. Running Costs per Machine: Opting for professional technicians to service your machines incurs higher expenses compared to self-repairs. You’ll be responsible for covering the costs associated with regular service intervals and any maintenance issues that arise.

Profitability

In conclusion, while this approach may be slightly less profitable than the first, it still outperforms standard wholesale deals by a significant margin. Therefore, if you’re apprehensive about managing the technical aspects yourself, opting for this model initially is advisable. You can always consider upgrading once you have a few machines in operation, thereby enhancing your profitability further down the line.

Break Even per Machine

Under this approach, the Break-Even per machine is approximately 15 months, compared to the 11 months in the other approach. Despite this difference, it still represents a fantastic investment opportunity.

Conclusion

The Remote Barista model emerges as a game-changer in the wholesale coffee business, outperforming standard wholesale deals in terms of profitability and client satisfaction. While self-service installation and maintenance yield higher profits, collaborating with external technicians presents a viable alternative for businesses concerned about technical aspects. Both approaches offer substantial growth potential, promising a bright future for businesses embracing innovation.

Now you might wonder, how much (time and / or money) you have to invest to be able to serve your clients with this model. If so: Reach out to the Grow Your Roastery Team. They will guide you through the steps needed to get there.