On getting independently wealthy by roasting super-premium coffee...

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Our good friend and local Coffee Hero, Michael Smith, writes that he’s taken up home roasting because of the rising prices of Espresso blends from Seattle roasters.

The view from beach house number five on my privately owned island in the Carribean.

Even though Michael doesn’t mention names in his post, he could be referring to us when he writes that “one Seattle roaster [which] saw my May 2009 Espresso price list…raised his whole bean price 50 cents a pound, because he was priced lower.”

Michael goes on: “There are two ways to put more cash in the register.  You either increase your customer base through competition and marketing or you squeeze the customers you already have a little bit more.”

He’s right. Seattle’s roasters are overcharging their customers. We’re gouging, we’re greedy, we’ll suck any of those sacred green bills from the living. (In fact, I’ve already applied for a job at a big, sleezy investment bank — I hear they’re always looking for my type.)

 While I can’t speak for other roasters, Michael’s conclusion is certainly not true for Seattle Coffee Works. 

Before I go on let me state that, yes, we did increase the price of our Seattle Space Espresso Blend by 50 cents to $13.45 per pound (that’s a whopping 3.861%), and, yes, we reduced the price of our Swiss-Water Process Fair-Trade Organic Decaffeinated blend, which we call Our Best Decaf. We also adjusted (up and down) many of our single-origin coffees to better reflect the different cost bases for the different coffees we source. This had nothing to do with Michael’s price list but was a long planned adjustment in our pricing structure. On average, our coffees are probably now cheaper than before.

Michael writes the price of coffee should generally decrease because of coffee futures, oil, commercial real-estate, and because almost everything else in this economy that costs money has gone gotten cheaper.

His observation sounds true at first; yet if you look little more closely you’ll find that price development in a specific industry often has very little to do with price development in the overall economy. Case in point: While many goods and services have gone down in price, some have gone up.

For instance, softwood lumber has seen a price increase of 6.7% year over year – despite a prolonged decrease in building activity. Pure conjecture doesn’t help explain price increases or decreases; it all depends on the specific economic activity.

The reason we had to increase the price for our signature Espresso blend is very simple: we use a large percentage of coffee from East Africa in this blend, and simply put that coffee has gotten 20-30% more expensive during this past year. Our modest price increase doesn’t go very far to cover that increase.

And our costs also don’t adequately reflect any of the services a roaster provides, namely the work involved in sourcing really high quality beans, the storage—both the quality of storage as well as the space—packaging, the continuing sourcing of new-crop coffee… the list goes on. If our prices were so high as to actually make us some serious money, you would likely find us lounging on the beach rather than in downtown Seattle.

Other than some of the big chains no one has gotten independently wealthy in our industry. The adage: Start with a big fortune to make a small fortune, certainly holds true for most of us in specialty coffee.

There are exceptions. Check out the coffee aisle in any large supermarket. Despite the comparatively low overhead and the less-than super premium coffees on offering, you’ll be hard-pressed to find coffee that’s cheaper than what your local roasters charge. (Trader Joe’s and Costco are an anomaly, and this would warrant another post.) That would explain the nice earnings at some of the large coffee companies. I know that some especially savyy folks have indeed retired to some beach in Central America.

But here’s the deal, Michael. In addition to roasted, we’ll also sell you green coffee for your home roasting. It’s cheap. It’s straight from our roastery with the added services (minus the actual roasting) provided by the roaster.  And by the way, if you order online with the code: STORE, we’ll package your coffee, ready to go for you to pick up in the café, with no additional shipping costs.

So check out some of the new, outstanding coffees we’ve recently received:Sulawesi Toraja Sapan MinangaSidamo MoredocofeTanzania Blackburn EstateEl Salvador Capitales UnidosHonduras Las Capucas. We look forward to seeing you back for your green (or roasted) beans sometime soon! Or, just for a chat over an expertly pulled double espresso ($1.82 + tax.) 

Picture credit/source: http://www.flickr.com/people/18220192@N04/ / http://www.flickr.com/photos/18220192@N04/2053190004/

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