About:


My name is James Hoffmann. I write about coffee, and about the coffee business. Most of my time is spent focusing on Square Mile Coffee Roasters in London.

I also travel and talk a lot on many of the subjects I write about here. For more information or to get in touch click here.

Ingredient Or Product

June 11th, 2013

I had a vague realisation recently, though don’t know if it actually means anything. I think there are two different ways that roasters think about the coffee they sell.

Some, typically speciality and smaller roasteries, tend to think of the coffee they sell as ingredient. Similar to any other ingredient that a chef might buy in, sourced based on a combination of its provenance, its flavour and its price.

I think many of us quite like this idea, of coffee as an ingredient that can be used skillfully – though as we’re quality focused we’re probably pleased there aren’t many techniques (like brining, for exmaple) that could be used to improve cheaper cuts.

Then there are coffee roasters, who we might think of as being much larger, more commodity, who don’t really sell coffee as ingredient. Instead they create products. They have research and development teams, product development budgets and protocols.

Both sell bags of roasted coffee. The mindset is vastly different, as is the methodology. It is pretty hard to find a way for R&D and product development thinking, if what you are selling is a simple ingredient.

Maybe there is nothing in this. Maybe I’m just wrong and simplifying everything to the point of meaninglessness. However, I think that if you want to innovate in coffee then it is important to look for different viewpoints and mindsets to see if they take you to new places.

The price of espresso in London

June 4th, 2013

Looking through the Allegra London Coffee Guide, I noticed that each of the 125 places inside has the price of coffee listed for most drinks.  124 of them served espresso, so I thought it would be a little interesting to have a look at the distribution of prices charged.

Essentially this the price for a double espresso – many places serve doubles as standard (mostly due to naked portafilter use), and so if two prices were listed for espresso I used the higher of the two.

Prices range: £1.30 – £2.60

The average price charged: £1.89

The mode price:  £2.00

The distribution:


via chartsbin.com

Anything meaningful to take away from this?  Well – pricing that has 5p increments isn’t very popular.  (May as well round up.) The mode is more interesting to me than the average. I’d say that the lowest pricing is probably bad data, and is for a single espresso (or at least I hope so).

One could dig further into the data, map out average price by part of the city – see the impact of rent on the price of coffee. You could go further and split out the outside/cart operators from that too, though the takeaway would likely be that they stand a higher chance of profitability (but maybe not high turnover).

Does the pricing itself mean anything? Is it expensive? Is it cheap? I can’t really comment.  All I would say is that if I were planning to open a shop, and focused on serving high quality drinks, I’d know with some confidence that the market can bear at least £2.00 quite comfortably.  I would also add that as a consumer my expectations do change with the pricing.  I’m extremely unlikely to spend £1.30 on an espresso, because I would suspect it wouldn’t be good.  However, I’d expect that a £2.00 be pretty damned tasty…

The problem with quality

May 30th, 2013

The problem with quality is that it is neither a requirement for, nor a guarantee of, success. I’m pretty sure that everyone reading this is, to some extent, a believer in the importance of (product) quality.  Be it green coffee, roasted coffee, or cups of coffee – we all value the quality of it with respects to our time and resources. However, it often seems to me that we spin this tale around ourselves; that as long as what you do is of excellent quality then the rest will take care of itself.  I wish this were true, but every day it becomes increasingly apparent that it isn’t.  Just because your cafe serves great coffee, doesn’t mean it is going to be a success.  It seems blindingly obvious when written like this, but all too often I feel like our message is the opposite of that. You might argue that your definition of success is different than mine.  You might argue that your passion runs so deep that you see no other choice than to pursue quality, and to offer anything else is morally repugnant, or failure.  If this is the case, then I might ask why you chose to commercialise the thing you love?  You might be chasing quality as a route to recognition – though this is something that is difficult to sustain month after month, year after year. Back to the context of cafes – we often talk about how quality can overcome location, you can become a destination cafe.  Or quality might turn a tiny location into a viable business. Quality above all else. I held this view for a long time, but “the foolish and the dead alone never change their opinion 1. Now I see the capacity and ability to achieve quality as success.  Everything else is a hurdle in the way of doing what I want to, which means that profitability, marketing, efficiency, systems and structure must be achieved in order to get to a place where quality is possible (and even enjoyable).  This isn’t just semantics, it is more about a mindset and prioritisation of goals.  Starting by trying to achieve great quality regardless of these hurdles is a very painful path, from which few emerge unscathed. Quality is not the means to an end.  It is the end.

  1. James Russell Lowell (1819 – 1891), My Study Windows,1899.

Response: The Sprudge Barista Pay Survey

May 16th, 2013

Like many people, I was intrigued by the results of the Sprudge barista pay survey. Mostly people are talking about how high the wages are in Australia, and there was some comment about the low wages in London/UK.

A few concerns about the survey – I’m generally not blindly trusting of self reporting of wages (in any industry). I saw numerous tweets from Australian coffee people stating that the numbers looked somewhat inflated, and that fits with the discussions I’ve had with various people over the years. I’m glad Sprudge are investigating this further too. There may well be high outliers, but I don’t believe it is representative of the industry there. I do hope Sprudge keep these sorts of polls coming and I’d love to see a future poll talking to cafe owners about this, and having them submit anonymous data would be super informative. The incentive for the cafe is they get to see how they do compared to their competitors, something almost all would find valuable.

Secondly – these numbers are both gross wages (before taxes are taken out) and converted to US dollars. (Currency exchange therefore playing a role). In the case of places like Norway the tax rates are very high, while a barista’s paycheck in London will have a little less tax taken out than one in NYC (though the undeclared and substantial portion of tips may make up for this). Finally, there is no factoring for cost of living. Numerous articles recently have highlighted the increasingly high cost of living in Australia, fuelled by a mining driven economy that didn’t suffer particularly in the global financial crisis.

These criticisms are not particularly relevant to the point that I want to make: there is no magic Australian bullet. I would wager (and please shoot me down if I am miles away) that the financial model of an Australian cafe looks very similar to a London one or San Francisco one. This seems like a confusing statement at first, considering the apparent vast differences in wages, but I really think it is true.

If we consider wage cost as a percentage of turnover (which we should) then I would be astonished to find that cafes in Australia are outside of the 25-35% range, which I believe most healthy cafes operate within. Higher than this and the cafe will likely lack sustainable profitability, lower than this and you’ve likely got an owner (or owners) working way too many hours on the floor.

If we put wage costs of 25-35% another way – if a staff member earns $12.50/hr, then you need to bank approx $35-50 for every single hour they are paid. ($280-$400 per 8 hour day, per employee.) If you have 4 full time people on each day then you need to be pretty busy – and this is counting every staff member, not just those making coffee.

For an Australian barista to earn double this then they simply need to bank double the cash per hour/day. This may be possible in places where drinks are expensive – $5 to $7 flat whites seem to be popping up in the Australian media more and more. The other option when trying to find more cash to pay staff is that you could sell higher margin products, allowing the staff cost to come up to the mid thirties, without damaging the bottom line. However, I don’t think margins in most cafes are enough to allow a staff cost of even 40% to be viable long term.  I think of things like $1 refills on drinks, and get depressed about how this affects a cafe’s ability to pay its staff more.

The challenge and frustration of coffee is that espresso isn’t hugely scalable. To do more drinks quickly requires more people, more labour, more wage cost. Baristas could earn more if they were (in traditional terms) more productive. When designing a bar it is worth bearing in mind how it will scale from a labour perspective. How many staff to do 200, 350, 700 or over 1000 drinks? Cafe owners ought to be interested in technology that allows a barista to make more drinks per hour, as this could have a huge impact on their profitability.

I think what is likely is that Australian cafes are typically a combination of productivity and better margins overall. Many people comment on the amount of food sold in Australian cafes, and with a good head chef you can have low wastage, and good cash and percentage margins on the food. Coffee, on paper, looks like it has great margins. In reality this doesn’t turn out to be true, and even when a super tight ship is being run – it is still a low cash margin product. You often need to make hundreds of drinks to pay the rent, overheads and staff before you start making any money.

Lots of cafes in London don’t do a lot of food, and what they do sell is often relatively low margin food. (Items bought in each day for example). New York cafes also typically do minimal food.

This isn’t a plea that we all return to food heavy cafe models, but I did want to highlight the fact that pay is typically constricted by the financial model of the cafe. The higher the costs of goods – typically through uncontrolled or unmeasured wastage (something baristas are typically directly responsible for) – the less money left over to pay them with.

Increasing drinks prices to create better margins is another option – though the pressure does ultimately fall back on baristas to deliver more value due to the higher price point.

I’m not really trying to offer a solution. I just thought that the Sprudge post merited some discussion and, I hope, a little explanation. I think the instances where owners are paying staff a pittance and then going home to roll around on a bed of money are incredibly rare. I want baristas/coffee people to earn more.  I want owners to have successful businesses.  We face a challenge as an industry, to work towards models (because there are more than one) that pays sustainably for both the payer and the payee.

I hope more people throw in some thoughts on this, and I hope my explanations above make sense to people.  Either way – feel free to let me know on twitter.

Arabica: Origin to Extinction

May 7th, 2013

One of the best bits of my Symposium this year was working with some of the speakers in the run up to this.  My role on stage was to introduce and to host a couple of panel debates, and also try to offer some insight into the Symposium to those talking there for the first time.  I had to try to understand the topics sufficiently to ask pertinent questions on stage.

Conveniently, Professor Aaron Davis is in London and I was fortunate enough to host him for an afternoon of coffee drinking and talking about various coffea species.  He’s the Head of Rubiaceae Team at Kew Gardens, and an incredibly approachable expert in his field.  I learned a staggering amount that afternoon, and I was excited to hear him give this talk at Symposium.

I cannot recommend enough that you put 20 minutes aside to watch this video, it is a really, really great presentation – and if you pay attention I guarantee you’ll learn some fascinating things:

Keep an eye on the SCAA’s Symposium Youtube Channel for new videos that they’ll be releasing over the next few months…

Complaining about restaurant coffee

March 30th, 2013

I know there are all sorts of conversations swirling around restaurant coffee kicked off by Oliver Strand and then intensified/exacerbated by Kevin Knox. I don’t really want to dive into that particular discussion head on, instead hoping to run parallel to this.

I try not to post too much about the specific experiences I have in my working life on here, because this isn’t really a blog about my business. I must confess, however, that after nearly 5 years of wholesale coffee roasting and working with businesses across London and the UK I feel no closer to “solving” the restaurant coffee problem.

As an industry we’re pretty resentful of how restaurants treat coffee. I still cringe at the memory of the NBC audience ganging up to pick on someone from a restaurant who dared to think they weren’t doing that bad of a job.

Let’s look at this from a difficult angle, perhaps one that isn’t our own. Coffee isn’t important to restaurants. It doesn’t have a great cash margin, and there are other items that might be ordered. A brandy makes more money, has near zero wastage and my staff training is pretty minimal.

Restaurants treat coffee that way because it simply isn’t important to them. People aren’t booking tables because of the coffee service. The fact that, on the one hand, the coffee industry often complains that restaurants don’t take a culinary approach to coffee while, on the other hand, we’re slinging out our best tasting products in paper cups…

Restaurants serve coffee because they are expected to. “Get rid of espresso!” we tell them. In the USA this may actually be viable but in cultures where espresso was used to make coffee expensive and desirable that is more difficult. I once got incredibly excited because a restaurant here got rid of espresso. They did french presses. The staff trainings were incredibly enjoyable because it was just tasting and conversation. The presentation was beautiful and the coffee tasty. For their customers, who visited relatively rarely, this was an oddity in a dining world that still proclaimed espresso to be the best. The restaurant eventually felt that the risk reward ratio wasn’t working and added espresso back to it menu. I don’t blame them at all.

This restaurant had previously recognised that espresso was really hard. Staff training for a restaurant poses a challenge. Consistency is difficult. Execution is hard. Even businesses who basically just work with coffee struggle to execute consistently to a high standard, and yet we’re incredulous that a restaurant – that deals with so many ingredients and preparations – might struggle to brew a good cup.

This is where Nespresso comes in. They turn up, and they understand that espresso brewing is difficult. The difference is they come with a solution. We might argue that the product quality isn’t there, but it is still a better solution than one we have.

So we continue to berate the restaurant industry. We mock them for taking free equipment, instead of laying down thousands upon thousands to brew a relatively small number of low margin products. We mock them for doing a bad job with a setup that most of us already struggle on. We continue to offer the same solution to their problem, despite the fact that all and sundry can see that this solution doesn’t work. It simply doesn’t work. No matter what we do most espresso in most restaurants brewed on traditional equipment will have quality issues.

How much work have we done on looking at a solution that bridges some of the challenges around ease, while retaining the characteristics of the coffees we are so excited about?

None.

Perhaps we ought to start…

Video: Starbucks’ Leadership Lab

March 7th, 2013

I’d read a couple of things about Starbucks’ Leadership Lab – including the bill for it all clocking in at $35 million.  I don’t really know how that gets broken down, because I can’t imagine the staging of it all cost this much.

Regardless of what I think about the coffee served in Starbucks – I would still have enjoyed visiting this thing. Have a look at the video:

I have no doubt it would have inspired me as a manager/partner at the company. I can’t help but wonder what the effects would be if you put on a near identical, less brand focused, event for the public. Less about selling brands and products, and more about finding interactive ways to get people to engage with coffee.

The SCAA certainly could pull something like this off – though I don’t know if the return on investment/monetary cost currently makes it viable.

There is a little more about the Leadership Lab here. Interesting to also note the implied turnover of an average Starbucks store being in excess of $1m. Again, say what you will about their cups of coffee – they’re still winning on the other metrics in comparison to most independents.

The Golden Ratio is Everywhere

March 4th, 2013

Back in March of last year, I was emailing back and forth with Noah Namowicz of Cafe Imports.  Around that time I had the C-market on my mind quite a lot, and was trying to get a beginners understanding of all that influences it.

Back then he brought up a technical analysis tool called the Fibonacci Analysis.  I’ll be honest – I understand the Fibonacci series much better than this analytical tool.  It would be pretty easy to join countless others in their obsession with both the Fibonacci series and the Golden Ratio, and its appearance in nature and in aesthetics.  As much I could go off on a long rant about the Golden Ratio in design, architecture or design aesthetic (as it applies to coffee), I shall skip this for the sake of this blog post.  Back to trading coffee…

In March 2012 the C price had just fallen below 200, and this seemed contrary to what ought to be happening.  To quote from Noah’s email: 1

That being said, I think the technical traders and technical theory (so just based on trend lines) give a good idea of where coffee is heading, but right now technically this market is broken, there is no technical analysis aside from Fibonacci that is indicating where this is going.  Fibonacci analysis has this going down to the mid 130s.  That is a huge fall, so most technical traders are not following that theory right now.  Obviously there are external environmental factors like weather than can throw a wrench in technical analysis, but it is more often than not correct. (emphasis added)

Even though it was a declining market, back in March last year the mid 130s did indeed seem like a huge fall.  That is, however, exactly what has happened.  I checked the C-market a few days ago, to see it sitting at 136.5, so I emailed Noah again. His response:

What this says is…traders are using technical analysis, and in a year with mild weather swings, that analysis is most likely going to be very accurate to how the commodity is traded.

This is evidenced by the fact that these traders are completely ignoring the rust issue in central America.

Coffee is low now, but once the real shortage of washed milds are felt, the market will begin to trade on fundamentals again I would bet.  Traders aren’t feeling that washed mild squeeze yet because there is a lot of coffee still on the table from Colombia, Peru, and Brasil, but once that fades out, the market may jump back up.

A jump back up does seem increasingly likely – though if anything I’ve learned that I don’t really want to get involved in gambling on the C-market.  It once agains feels frustrating to be in an industry where livelihoods are so dependent on something as fickle as this.  Right now there are strikes in Colombia (not jut in coffee), which are of course tied to the prices farmers receive.  The market is paying less than the cost of production, and government subsidies aren’t closing the gap fast enough.

In truth I don’t know if this post is meant to discuss the C in general, or the mechanisms that people use to trade on it and their impact on our industry. The only thing I can be sure of is that it is interesting and worth sharing.

 

  1. Emails are quoted with kind permission  ↩︎

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