Benefits of Expanding Into New Markets Through Brewing Coffee
Within the competitive craft beverage landscape, many drinksmiths are starting to expand into new beverage markets to differentiate and diversify their business. Discover if expanding into coffee is right for your business.
September 5, 2018
Revised on 7/31/2020
Within the competitive craft beverage landscape, many drinksmiths are starting to expand into new beverage markets to differentiate and diversify their business. Many of our own customers have done this, and one of these beverage segments they are starting to produce is coffee.
Modern Times Beer is a great example of this. They started as a brewery, but in order to achieve further growth and provide new beverages their customers love, they expanded into producing coffee.
Perhaps, like Modern Times, coffee could be your answer to differentiating and diversifying your business. In this article, we will discuss the benefits of expanding into new markets through brewing coffee and discover if adding coffee is right for your business.
One of the biggest benefits of diversifying your business by brewing coffee is how prevalent coffee consumption is in the US. The coffee segment has been one of the fastest and most consistent growing industries over the past 20 years. According to the National Coffee Association, "Only 9% of adults in the US were drinking specialty coffee daily in 1999 and 41% were drinking daily in 2017." That is an increase of 32% over 18 years. This is due largely, in part, to the consistent trend of evolving tastes and the emergence of gourmet and ready-to-drink coffee.
The trend of consuming gourmet coffee drinks has continued to increase. According to National Coffee Association's 2020 report, "Consumption of 'gourmet' coffee (defined merely as 'brewed from premium beans') is up 25% since 2015." Craft breweries especially have an advantage in catering to this gourmet coffee crowd since craft breweries are known for creating unique, local, craft beverages that you cannot get anywhere else.
Expands Hours & Product Offerings
One of the biggest benefits of expanding your craft beverage business by brewing coffee is being able to expand your operating hours in your taprooms. The issue with alcoholic drinks is that you really can't start serving until the early afternoon at the earliest. And even then, business might be slow until the workday is done and people want to wind down after a busy day.
Coffee is the opposite side of the coin. It is the pick-me-up drink for all generations that energizes and wakes them up before going into work. By serving both the coffee and beer crowd, you can expand your hourly operations, which provides the opportunity to increase your profits.
Coffee and beer are a lot like beverage bookends. One is typically consumed in the morning and one at night...
Writer at All About Beer Magazine-Volume 35, Issue 2
How Expanding Into Coffee Has Diversified Modern Times Beer's Business
A prime example of a craft brewery taking on coffee production in recent years has been Modern Times Beer. According to Modern Times Founder, Jacob McKean, “The café activates our space at a time when we wouldn’t otherwise be open." This enables them to have a crossover between coffee and beer drinkers. Taking on a business that operates during typically closed hours maximizes their sales potential.
Breweries that have excelled in this arena are roasting and barrel-aging their beans, operating full-service cafés with baked goods or brunch available, and packaging whole bean and blended cans of coffee, as well as nitro cold brew.
As a result, they not only have specialized beans for use in their imperial stouts, they also have a whole new operation that provides another source of steady revenue.
Challenges of Expanding Into & Brewing Coffee
While there are many pros of expanding into new markets by brewing coffee, there are some challenges to starting the process of expanding into coffee. There's a big learning curve to brewing coffee and upfront costs needed to be paid before you start.
Like beer, coffees with great flavor are determined by quality ingredients. These flavors are dependent on a bean's origin and density, for example, and it takes time to begin to understand the flavors these different beans could be turned into. And so in many ways, it may be worth taking the time to start studying and experimenting with brewing coffee to become more knowledgeable before your business invests a huge amount of money into coffee, especially when you consider the upfront costs.
The upfront costs of beginning to roast and brew coffee can be extravagant depending on the size of the roaster. Prices vary depending on the volume the roaster can handle, so consider your own knowledge and potential scalability of the coffee segment of your business.
Prices vary depending on the volume of beans you need to process. Small commercial coffee roasters are available for less than $3,000. 3KG high-end models cost around $13,500 and 25K models can climb to as high as $58,500.
Writer and Researcher at Expert Market
Factors to Consider Before Percolating & Brewing Coffee
While operating a café out of your existing space might work for some breweries, others may not have the space or be ideally situated to draw regular “9-to-5” foot traffic. Existing breweries such as Oskar Blues and Two Brothers Artisan Brewing have established new locations, and even brands, to expand into the craft coffee crowd.
Having identified your new location, there are several things to consider when it comes to sourcing your product:
Do you already have a wholesaler in mind?
Will you be roasting your own beans?
If you're not roasting, who will handle this for you locally?
What specialty beans will you offer? Ex: fair trade, organic, the locale, etc.
When Modern Times set up shop in Portland, Oregon, they delayed selling beans on-site until they could figure out how to expedite the most freshly roasted beans possible from their primary facility in San Diego. This was resolved once they expand into a new space, which includes a new roaster. Providing the freshest beans possible should be kept in mind when determining whether to roast them yourself or how far away your roaster will be.
Customers of all stripes are demanding the freshest, sustainably-sourced and ethically produced products on the market, much like the craft beer you’re likely already brewing. People want to know the story behind the coffee you’d be producing. Nail down customer preferences before going all-in on your product and be sure to do a proper “cupping” before settling on which beans to use.
Expanding into a new market is a great way to diversify your business and product offerings. When considering coffee, adding coffee to your existing operation and packaging it all yourself can be a complex undertaking. You’ll likely be storing inventory in different places and using different accounts for your finances. There’s also the regular tasks of purchasing, sales, POS, forecasting, and reporting.
Every beverage you could expand to produce have their own advantages and complexities, but one constant is that having a craft beverage management system, like Orchestrated, makes it easier to manage the complexities of different beverage categories. It provides you the tools to understand, at a deep level, what drives your product margins with integrated inventory, production and data-driven supply chain management.
Speak to one of our experts to discover how Orchestrated can assist you in transforming from a make-it-up-as-you-go operations into an all-knowing, unstoppable juggernaut of a business.
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