Roaster School Online – Ep #12 – Production Roast Planning

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Hi everybody, this is Joe Marrocco here at Mill
City Roasters in gorgeous Minneapolis. I just came up from where I work at Cafe Imports
right down the street to hang out with you all again. Thank you for inviting me into your
homes and your roasting spaces maybe onto your device. I don’t know, maybe you’re not at home nor in your roasting space–who knows where you are, I’m glad I’m with you, I’m glad you’re with me. So today we’re going to talk about something quite a bit different than
roasting something that I have found in my experience to be maybe the thing that roasters
hate the most about their job. It’s the thing that makes roasters wonder whether they should go in in the morning that kind of thing and that is building out your inventory and your
your roast schedule for a particular day, taking the information that you have coming to you, taking the coffee that you have in your inventory and actually putting it into production, building
out that spreadsheet. I know that spreadsheet sound really exciting and so I hope that you
stay with me throughout the entirety of this class. Okay so, what do you do how do you go about figuring out what it is that you need to roast on a given day? The first thing you
have to start with is the inventory that you have in place, the inventory that you have
in place maybe just simply the coffee that you have on the shelf sitting around, it could also be the inventory that you have sitting in a warehouse with an importer or various warehouses with importers it’s very important that when you are building out your schedule sheet for your roast days that you have that schedule sheet linked directly up to an inventory sheet
and it’s very important that you have the inventory sheet list, not only the coffees
that you have in stock in your warehouse, but also the coffee’s that you have in stock in
all of the warehouses including and not limited to the contracts that you have that you may
have yet to approve, that you have coming on the wate, etc. Building out some spreadsheets that you can operate online using a tool like Excel or Google Sheets, something like that
is going to help you save days and hours of time. If you’re only writing stuff down and
keeping track of things on paper and that paper disappears then you have to go running around talking to all of the warehouses where you have coffee stored and figuring out what what it is that you’re going to do. Keeping things delineated on a spreadsheet will also help hopefully with making sure that you are purchasing coffee with enough time head of time so that as your coffee is being bought and sold in roasted you have more coffee coming into your facility. It’s also very important that the inventory you have on hand in your
facility is enough such that if a shipment coming to you is delayed or ruined or something happens that you still have coffee that you can get out the door. So, I recommend that as you’re building your space that you build your space for the inventory that would last
you 2 weeks, not just one week and that you try to think about getting shipments on a
regular basis for whatever coffee you have coming in. This is very difficult the smaller
you are. The larger you get it’s easier to get some systems kind of in place so preparing for those systems while you’re still small will allow you to grow into those systems
when you’re big and allows that just to flow. Part of this whole thing also revolves around how you build out your pricing. So inventory, the amount that you’re paying for that inventory,
both in price per pound for the coffee but then also in the storage facility, and how
many hours it’s going to take you to roast that coffee and how long it’s how much cupping you’re going to do on the coffee…all of these things should be tracked and you can plug
all of those things into your inventory sheet so that when you are going to build out your pricing model you can look at your sheet and you can know exactly how much it cost you
to roast a particular pound of coffee. Then, once you have that information and your funneling it to a particular price per pound for that coffee then on your website, or whatever way that you communicate your pricing, you can have that pricing be tied out to that
particular coffee, so that when somebody orders that coffee you know exactly what to charge them and then you can take that order and turn it into your daily roasting schedule.
I’m getting a little in the weeds, I’m sure. Do we have any questions coming in yet? Nick? Nothing coming in yet, okay good. So, I want to take a moment because I’m going to kind of walk you through with this looks like, okay. So, in your roasting facility– or you’re roasting company is most likely going to be selling multiple products that are created from or
derived by the inventory in green coffee that you have in stock. For instance, we’ll just say you have a Brazil, a Colombia, and an Ethiopian coffee. Of those three coffees, it may be the case that you have an espresso blend, that you have a house blend, that you’re selling
each of those coffees as single origin coffees, and maybe you also have a dark roast blend. So you need to find a system that takes the orders that you’re getting in for a house
blend, a dark roast, an espresso, a single origins, etc., and tells you how many bags of each type of coffee you’re going to need. So, if you’re getting an order with–for ten 5 lb bags and twenty 1 lb bags of various coffees, you have to then sort through all of those orders and
count up how many pounds of each individual coffee you need to roast and how many roasts of those coffees you need to do and what type of roast you need to do on those coffees. This is why it’s so complicated. So, if you can build out a spreadsheet system that allows you to put in those orders and then sort backward into your inventory and then takes from that inventory and shows you exactly what kind of roast you need to do for that day, it simplifies this process considerably. If you have to do all of this on paper the frustration is going
to be that if you make any kind of mistake you’re either going to short roast or going
to long roast. If you long roast, you’re going to have extra inventory that may not be purchased until that coffee is a couple of days old or you’re going to be short and you’ll have
to turn around and roast more coffee. If roasting more coffee means that you have to roast multiple coffees that you’ve been blend together that can prolong your day in a way that is very
difficult to overcome and, you know, one particular blend might end up taking you 3 additional
roast and that’s not something that we like to do. You’ve heard me speak in the past–pardon me– you’ve heard me speak in the past about the beauty of the pre-roast blend, and this is where a pre-roast blend can really be helpful, because you can get a certain number of orders for that blend and instead of having to piece together your inventory for three different coffees, you can blend exactly what you need and do one roast of that particular blend. Other tricks are if you are doing a post roast blend, having that post roast blend be comprised of other single origin coffees that you are roasting and at those single origin roast profiles so that when you are roasting an Ethiopian coffee you know that is you are selling 8 lbs of Ethiopian coffee and you have an 8 lb roaster and six of those pounds are going into 1 lb bags and 2 of those pounds are going into your blend, then all you have to do is one roast of that Ethiopian coffee. Hopefully that is tracking with you all. On the inverse side of that, it’s very rarely that simple. Generally, what will happen is that you will roast the coffee that you need and you’ll either be a little bit long or a little bit short on any particular coffee on any given day. So what do you do with the coffee that is long? There are a few things that I have seen companies do. One thing that I’ve seen them do is use that coffee for a separate product all together that allows for that coffee to be any coffee at any time. Whether it’s putting it wit a flavor base, just blending it in with flavor base, or using it for their cold brew product, just taking all the left over coffee at the end of the day and blend it in to whatever they’re using for that cold brew or keeping tubs of your extra roasted coffee and then the next time you roast a batch, taking from that tub and adding it to your new fresh roasted coffee. All of these things have pros and cons, the reality is that it’s not an exact science because you have a lot of things pushing and pulling on that
quantity of coffee that you are roasting. Another beautiful thing about tracking very closely,
every roast that you do, all of the inventory that you have and all of the orders that you
have and try and integrate those together is you can track very closely something that we call shrinkage. Shrinkage is the amount of product that goes into your building versus the amount of product that comes out of your building. We think of shrinkage in coffee
roasting generally just as how much it loses during the roast process itself. However, we know that we’re losing coffee from the time that it comes into our building until the
time that it goes out of our building in bags. Some of it’s lost in smoke, some of its lost in the cooling tray as it’s moving the coffee around, bits of coffee get broken off,
some of the beans get broken, we lose some of it just when were scooping, it falls to
the ground. There are lots of places and ways the shrinkage can occur keeping that trick
inch tight of course allows you to have a better bottom line. However, more important in my opinion than keeping shrinkage tight is knowing what your shrinkage is so then
you can price according to what your shrinkage is. In general, we see about 18 to 22% of your green coffee will be lost in shrinkage and companies that keep their shrinkage tight
it’s closer to 18%, in larger and more industrial companies that shrinkage goes up, generally because the systems have more holes in them and there’s less attention paid at each step
along the way. So, the more attentive you can be the better you are going to be at this.
So, once again I guess in brief review of what we’ve covered so far, building yourself a spreadsheet that allows you to see exactly what all of your inventory is, where that inventory is
at any given point, that tells you exactly what orders are needing to be filled and then
carries over from your inventory through your your orders to what exactly those orders need to
be as roasted will help you in building out your day’s roast schedule. Filling orders
takes a lot of time and it takes a lot of attention. If you can have all of this on a
very clean, clear spreadsheet to where it’s moving through your system you will be so
much more happy and at the end of the day, fulfill your orders in a way that your customers are going to be more than satisfied. There are some products out there in the world today that can help you with this. QuickBooks is the first thing that comes to mind. That is
something that can help you with orders that are coming in and at least gives you some
kind of an Excel Access sheet that can tell you exactly how many pounds of what you need to roast however that is more giving you just your order side of things it’s not telling
you anything about how that pairs up with your inventory at all. Cropster is a great
product that can help you monitor all of the inventory that you have coming into your building and also inventory that you have out with your importer partners and can help you integrate that and move that through your roast schedule. There is another product called Roaster Tools that you can find just online that actually integrates your cost structure, your order structure, and your inventory so that whenever an order comes in and you enter it into that program,
it can start building out your roast schedule and at the beginning of each day you can take all of the orders that have come in put it into the system and it will tell her exactly
how many bags of what you need to roast and what kind of bags you need to put stickers
on, what kind of stickers you need, how much of that is going to be ground, how much of
that is going to be whole bean, and all of those kinds of things. You can also build out your
own spreadsheets. If you are if you are feeling a little intimidated by using Excel or using
Google Sheets the spreadsheet capacity that you need for something like this is actually
fairly simple and you can always jump on YouTube, which it looks like you’re pretty good, at
and learn how to do those the spreadsheet pretty easily. There a lot of really great
tutorials out there, I really suck at doing spreadsheets and I can put it one of those
spreadsheets together fairly simple, just after watching a YouTube video and how to do it. Any questions yet? Nothing, alright good, I like it. Hopefully that means that you all are understanding what it is that I’m talking about. So as we talked about inventory control and as we talked about building out your roast schedule and all of these other things, I mentioned before that there is a component to this that boils down to your costs. One of the biggest questions I get asked to Cafe Imports from– by new roasters is how much should I charge for the coffee
that I’m roasting? And my answer to that is simple, I have no idea how much you should charge. I have no idea because I don’t know how much it cost to keep your lights on for
the rent for your building or if you own your building for the mortgage, I don’t know how
much it costs for you to pay the person that’s bagging your coffee, I don’t know how much it cost for the bag that you have purchased for your coffee, you need to be able to take
all of the costs in your business for doing business and if your business is primarily
just roasting coffee and roasted coffee is what it is that you are selling you should
know how much your business is costing you per pound that you roast so that you can take everything and you can say I’m roasting 1000 lbs of coffee a month and I and it cost me
$900 a month to operate, so therefore I have $100 profit if I sell my coffee at $10 a pound. That makes sense? So if you can take all of the poundage that you’re doing and all of
the costs that you’re doing, add all that cost up and break it out into how much coffee you’re roasting and then also look at the trajectory of your company and say, as I grow– if I grow 10% my cost per pound are going to go down in their percentage, my profit per pound
is going to go up in it’s percentage and this is how much, so you know exactly how much liquidity you’re going to have as you’re moving forward. And then maybe, you can instead of raising your prices you can actually lower your prices as you grow or you can take the
extra profit that you’re doing and you can say well now I’m going to invest in selling
espresso machines, along with the coffee that I’m roasting, or some other area of growth
within your company. But, understanding your costs understanding how your costs are going to increase as your business is continuing to grow and pacing that out is very wise
so then you can go back, look at your cost and say this is where I’m profitable, and this is where I’m not profitable. This is where my cost make sense and this is where I’m losing money. If you are losing a lot of coffee in shrinkage as you are moving that coffee through your system, that’s the first place that you can look and say how can I save some money? Where am I experiencing shrinkage? And there are a lot of places where that can happen.
The coffee that gets brought home at the end of the day that’s a major place where shrinkage takes place. If you are continuing to get shipments where your bags come in and they’re just holes all in the bags and it’s all on the floor, that’s a place that you can tighten up by
working with your imported help with a better shipping scenario. If you are see that your
destoner is not picking up all the coffee or spilling somewhere all, of these little
places where you see coffee landing on the floor or, you know, dust going up in the wind, those are places that you can tighten up your inventory and control that, and that control
is going to go directly into profit and your bottom line. How we doing over there, Nick?I’m not gonna mess with this second microphone it keeps buzzing. The question is, when you go long in production–overproduced to make sure you fulfill new orders that have come in–next weeks hits, that coffee hasn’t sold…what do you do with it?So they question is, if you go long in your production and the next week hits–so we’re assuming that this coffee is not going be absorbed very quickly, but lets say it’s roasted now if you have a guarantee of roasting same day, and this coffee’s a few days old, a week old… what do you do with that extra coffee? And
that is a great question. So there are different things that you can do with it. There are opportunities out there that you can donate coffee and so therefore, you know, build up over the course of the year a large mass of donation to where you can count that off as a tax write off
at the end of the year, that’s always a good option, but I would say the best option is
not to allow that to happen. Be careful with the way that you are putting together your
spreadsheets and your roast schedule for a particular day and you shouldn’t run into
those kinds of issues. Most companies do not have a whole lot of leftover inventory. The
other way that you can do that is by having an inventory outlet built into your system
to where that coffee, if you are going to be long, already has an automatic space that you can bring it to. So for instance, if you are doing cold brew not saying that your cold
brew is 100% 1 coffee but just having a flavor profile that that cold brew kind of hits on
then adding a little bit of another coffee is probably not going to impact that flavor
too much. So having a place where you can still beef up the poundage in another area without it being disingenuous and dishonest and all of that kind of stuff is a good idea. Having
an outlet for mistakes is always a good idea because as I like to say, mistakes are how
you learn. So if you want to learn how to be a better roaster you’re going to make mistakes. If you want to learn how to run your inventory better there are going to be mistakes. So
having a place where you can put those mistakes, to where those mistakes are accounted for and don’t lose you too much money is a really smart thing to do.A bit off topic– a little.
We’re going to move off topic a little.What would you say is a fair market price for retail coffee. If they’re roasting like this, then what are they doing? What are they doing this for?So, the question is what do I think a fair market price for retail coffee is? And, this is a very broad question, I see a lot of retail coffee that sells at a lot of different prices per pound. If you go to the grocery store you’re generally going to see around the $8/lb range for you lower end, what I would still call specialty coffee. All the way upwards of $12 to $14/lb. I’m seeing a lot of companies move away from a full pound bag of coffee down to a 12 ounce bag of coffee So that price per unit is really what that consumer is going to look at. They’re not really going to pick it up and say oh–this is only 12 ounces, they’re going to see it, they’re going to see the price, they’re going to see the unit and they pick it up per unit. It you think about it this way, it makes a lot more sense. Think about how many cups of coffee a pound of coffee makes, okay? If you are in a really nice cafe, you’re going to pay at least $2, maybe even up to $4 or $5 per cup of coffee, depending on how it’s brewed, depending on the quality of that coffee. So let’s just look at it from a $2 range, okay. $2 per cup in a nice cafe for a really nice coffee. A pound of coffee gets you upwards of 25 cups of coffee. So that pound of coffees value in a cafe setting is $50 a pound. However, we don’t sell coffee that way. So then the inverse question is, what is the value of them taking this coffee and not having to pay a cafe to exist and for a barista to take the time to brew their coffee. What I generally see is that the retail coffee bag is at about half the price of what it would cost for a company to have that coffee on bar. So if the coffee was a $50/lb coffee, if it is drank as deliciously brewed coffee in a cafe, then on the shelf I usually see that coffee on the shelf for $25 a pound. But I usually find it in a 12 ounce bag marked for about $20/lb. So generally speaking, really nice, high end quality specialty coffee is selling for anywhere between $18 to $25 for a 12 ounce bag in a retail coffee shop setting. There are coffees that are a lot cheaper than that, there are coffees that are definitely a lot more expensive than that. But I don’t think you need to say sorry for selling a really nice coffee for $18 for 12 ounces. Any other questions over there?We have one. In regards to production roasting, how often do you test each roast, each coffee type a day?Oh that is a good question. The question is in a regular rotation of roasting your coffee how often do you test the coffee? And by test the coffee I am assuming you mean either cupping or putting it into your quality control program. I, of course, believe strongly in cupping but I also believe strongly in however you’re roasting your coffee to have it go through a quality control program that shows you how your end user will also be tasting that coffee. So if you have a cafe and you’re using a brewer, taste the coffee off of that brewer and roast in a way to where it tastes good off of that brewer, too. But, how often you do that is important. If you’re developing a profile for a coffee, which technically all coffees are kind of always in development, but, as you get a new coffee in and you’re going through a development phase roasting that coffee in a few different subtle ways is smart and testing every one of those roasts is smart. As you put it into your full production, however, I personally do not feel that it’s necessary to cup every single roast of that coffee. I feel that it’s necessary to cup every roast that is maybe slightly different. So, if I’m roasting, and drawing the curve, drawing the curve, drawing the curve. And my roaster’s just basically and etch a sketch and I’m just drawing the same curve every single time, then I’m probably not going to have to test all of those batches, right? If I do 10 batches of my espresso in a given day, I’m not going to pull samples off of all 10. I’ll pull samples off of the first one and try it to make sure that that day’s roasts were correct. And, if one of those curves is different I’ll pull a sample of that. I’ll taste both of them if the curve that is different tastes better or is more in line with where I want that espresso, I call that a happy accident. And generally speaking, happy accidents are where you see profiles develop over time. What also will sometimes happen is if you have a roaster like for instance if you have something that is more profile focused in running a profile for you and you see that that profile is acting different in order to keep the same coffee on the same line that it used to be on, that means the coffee has changed somehow. And so you should be looking at that coffee so I may take a few different samples of that coffee over a course of a few different roasts just to make sure that that profile is still steadily creating the same coffee that it was. So, in other words think about taking a sample of your roast as asking a question. If you don’t have a question, there’s no need to get an answer. If you do have a question, then you need an answer and you need to be able to get the answer that you need. If the answer is is this hitting a profile that I want it to hit, and that it hit yesterday, then cupping is going to be fine. If the question is am I developing a profile that is going to taste good in my cafe, then putting in a cupping is not going to answer that question. Putting it through the brewer and the espresso machine in the cafe will answer that question. And, if the question is are these roasts tasting the same as I’m changing them, then the question needs to be answered by tasting every single roast that is in question.Now, when you go to cup one of these production roasts, are you cupping the SCA way, are you cupping the on a Black & Decker $20 drip pot, 174 degree max–what do you do?So the question is, when I’m cupping for these various things am I cupping the SCA way or am I cupping on just a Mr. Coffee Kind of thing. And, the answer is going to be different, ya know, if– well I work for an importer, so we’re just cupping. And we’re not only cupping the SCA way, think about the SCA as being a big umbrella that kind of gives some guidelines. Our cupping protocol at Cafe Imports is very, very narrow, narrowed far more in depth than just those guidelines. I would never take the way that we cup at Cafe Imports and implement it into a roasting company scenario. Some of the roasters that I respect the most out there do their QC through brewers, I’m just going to…can I name drop is that okay?Do what you need to do, man.Okay, so one of the icons of our industry who is one of the smartest guys out there is a man named George Howell. And the way that George Howell runs his QC is he has a bunch of Bonavita brewers that he’ll brew the coffee on and he’ll pour it into cupping bowls and they run their QC according to that kind of a methodology. So when you are tasting his coffee it’s roasted specifically for brewing in particular, and brewing in that method according to the ratios that he has set up. And then they try to duplicate that through their larger brewers and their cafes. There’s a lot of wisdom in that. That said, when purchasing a coffee, you would probably want to go through SCAA guidelines or SCA guidelines if you are purchasing that coffee according to contractual obligations. W ithin that contract there are going to be terms that are relevant to how it is that you are cupping. So if you have a rejection right contract with me and you come to me that we tasted this through a Chemex like we taste all of our coffees and we just didn’t think it had the acidity we were looking for, that to me is not valid because you didn’t actually cup it. And so, your method of analysis needs to be the same in a general sense with my method of analysis so that we’re comparing apples to apples. If we’re comparing Chemex to cupping bowl that’s not apples to apples. If we’re comparing cupping bowl to cupping bowl now we’re getting closer to being on the same page. Of course it’s not an exact science different, because I have different water than you have, I may have a different bowl than you have but at least we’re playing the same sport
now, you know, maybe that you’re playing for the Twins and I’m playing for the Cardinals
but– sorry Dave. I think that–is that it?I think that’s it.Alright. If have more questions about this stuff always feel free to shoot them over to here to Mill City and will try
to anticipate those questions. I hope that this has been a learning experience. I know
that it’s kind of difficult to just sit there and listen to me talk about shrinkage all day long, but I appreciate you weathering the storm with me, I hope it was a learning experience and I want you to know that we are changing things up…next month there will be a little bit more action, a little bit less of me just staring deeply into your eyes the whole time, A little bit more of me running around and any maybe doing a few things. Maybe with some fire, I don’t know…we’ll wait and see. So, tune again–tune in again next month to our roaster school, and in the mean time reach out to us with your questions, keep those roasters hot, keep those cupping bowls filled and keep that smile on your customer’s faces. Bye!Bye!

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