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Ep #12 – Production Roast Planning

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<Joe> 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? <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?

<Joe> 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. <Nick> A bit off topic– a little. <Joe> We’re going to move off topic a little. <Nick> 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? < Joe> 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? <Nick> We have one. In regards to production roasting, how often do you test each roast, each coffee type a day?

<Joe> 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. <Nick> 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?

<Joe> 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?

<Nick> Do what you need to do, man. <Joe> 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? <Nick> I think that’s it. <Joe> 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! <Nick> Bye!

WRITTEN BY:

Addicted to coffee at a young age, Nick has turned his caffeinated attention towards coffee roasting education. Behind the scenes, Nick produces, directs, and edits all video series for Mill City Roasters.

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