Harvest Roasting
April Newsletter
By Don Eckles, President
Today, I want to talk about profit…how important it is to all of us…how it relates directly to our survival as a viable entity, and how to make more of it (or, any of it). Because the reality is…we need to make a profit in the short term, as well as the long term.
As I’ve mentioned many times before…the group I’m with owns 19 coffee houses and drive thru kiosks. We face the very same issues you face, on a daily basis. How do we make more money in the profitable stores, and how do we make a profit in unprofitable stores?
In football terminology, it’s all in the blocking and tackling…doing the fundamentals right, day in and day out. Those fundamentals are:
· Great Customer Service
· Great Tasting, High Quality Products
· Clean Comfortable Store
· Correct Pricing Structure
· Cost of Goods at 30% (or under) of Gross Sales
· Cost of Labor at 25% of Gross Sales
· Continual Effective Marketing
But what if you’re doing most of that, and you’re still not profitable? Then, you take off your manager’s hat, and become a CEO. It’s time to re-evaluate everything. If you’re hitting most of the above targets, and you’re still not doing as well as you need to do, then figure out how to drive costs down, and sales up. Right now, we’re trying to drive cost of goods down another 4%. If we can do that (and I think we can), it would make a huge difference to our bottom line.
There are two ways to drive sales up…bring in more customers, or, sell more to the ones who are already coming in. Doing both is obviously the preferred option.
Driving costs down is trickier. However, it’s an important piece to your long-term success. Did you know that the cost of goods on a 12 oz. latte is around 20%? That’s really good. So why is your overall cost of goods in the low to mid 30s? It is either your pricing structure or your product mix.
Currently, we are re-looking at our complete menu. We’re not going to cut costs by using an inferior product…that’s the beginning of the end for any business. Instead, we’re looking at the cost of each item we sell verses its retail price, and…how much are we are selling of that particular item.
We make a good profit on coffee, coffee drinks, coffee smoothies, and tea. We don’t do as well on pastries and sandwiches, and…we sell fewer of them. So, as we look to improve our bottom line, we need to look at removing unprofitable or slow moving items from our menu, and replacing them with higher margin items, or items that would add to the customer’s total purchase.
It makes no sense to sell an item for which you make little or no money. In a coffee house, most of what you sell is coffee, coffee drinks, smoothies and pastries. Look at each of those, and focus on the ones with the highest margins and price point.
For example…
Create a new drink of the month (or week). Make it look good and taste good, and, price it so that you make a good margin. How about a peanut butter mocha? The 12 ounce version has ½ oz. of Monin peanut butter syrup, ½ oz. of Monin chocolate sauce, 1.5 – 2 ounces of espresso, whipped cream, and chocolate drizzle. Including milk, a cup and a lid, your cost of goods (at Harvest Roasting prices) is less than 67 cents per drink. If you sell it for $3.35, your cost of goods as a percentage is 20%. WOW!!! And, customers love trying new things. Write it on your “featured drink” board, and watch them sell.
How about new customers? You can create a whole new segment by offering a premium tea program. The cost of goods on tea is even better than it is on coffee, and, you’re not just switching your coffee customers to tea…you’re bringing in a whole new customer…creating a new segment for your business. Harvest Roasting offers a complete line of premium teas…some of the best in the world. These are whole leaf teas from the Tea Smith. We have the tea, the bags, and the accessories. Everything I read in the industry and everything I sense from my conversations with industry experts tells me that tea is going to be big. And, it’s not too far away. We would love to send some samples to you, with brewing instructions for hot and iced varieties. Just e-mail us at harvestroasting.com.
It’s difficult to get a lot of good information into two pages of a newsletter, though we try our best. We are in the process of expanding our mailing list to include coffee houses in 48 states. We are also planning to hold an “Open House” at our roasting and distribution facility in Bellevue, Nebraska. It looks like the date will be Saturday, June 6th. We will begin at 10:00 a.m. and end at 4:00 p.m. Lunch and a “after show” barbeque will be provided.
At the open house, we will have:
· Training and Seminars,
· Manufacturers reps.,
· Coffee Tastings with Bill Kipper, our Director of Roasting Operations,
· Free food
· Show discounts
I will discuss the open house in more detail in the next couple of newsletters. Please set that date aside, and plan to come to beautiful Omaha for the day.
We hope to have one of our sales people, Barb Miller or Traci Gabriel, contact you within the next few weeks…to see if you are getting some good from these letters, if we can help you in any way, and if you might have an interest in coming to Omaha for our open house. Please don’t hesitate to share your thoughts with them. If you would like to contact them ahead of time, feel free to do so. Barb’s e-mail is barb@harvestroasting.com., Traci’s is traci@harvestroasting.com.
Lastly, please allow me to make a pitch for Harvest Roasting. We have been roasting the world’s highest grade Arabica coffee beans for over 10 years. And we’ve been supplying it to some of the country’s best coffee stores. We sell it for a low price because of our huge volume. You honestly will not find a higher quality coffee anywhere.
Same with our flavoring syrups and sauces. We’ve been offered distributorships for most of the names you know. We choose Mont Blanc and Monin because they are better than everyone else. No question about it.
And, we’ll ship your entire order, anywhere in the country; freight free, with an order of 75 pounds of our fresh roasted, specialty grade coffee beans. If you don’t currently use that much per week, you can order every two weeks or even every three weeks. You can get most of what you need, right here…coffee beans, syrups, sauces, smoothie mixes and powders, cups and lids, straws, sugar and condiment packets, cup sleeves, teas, and all kinds of accessories.
I give you my word that we will take good care of you. We’ll do everything in our power to help you succeed. Please contact Barb or Traci via e-mail, and we’ll get some samples out to you, right away. I think you will find that getting it all from one source, and having the highest quality products on the market, will make life easier for you. And, I’ll bet your customers will notice a good difference.
Thanks for reading this.
Sincerely,
Don Eckles