Once the operator has contracted to provide private label, how does he get customers to switch to it from the national brands?
The rate of conversion is directly related to the aggressiveness and confidence of the operator. This is not a scenario one finds in the movies, "build it and they will come." This is one of "I believe and let me share with you." If the homework has been done properly and if service has been a key component, then there will be trust from the client to the operator.
Promoting the private label coffee
My company, the john conti Coffee Co., has acquired a number of OCS companies over the years. We begin conversion immediately and expect 100 percent conversion. We have usually accomplished this within a few months.
Another option is to form a partnership with a roaster to use their coffee on an exclusive basis in a certain geographic market. This is the distribution arrangement referenced above.
The benefit of using a roaster's brand is one of building upon a known and recognized product. The operator is able to take advantage of a number of opportunities that otherwise wouldn't exist. This is a very effective form of marketing.
Promotional materials are oftentimes readily available from a roaster that can be obtained at a fraction of the cost that the operator would have to spend if he were marketing a whole new brand.
Economies of scale are immediately recognized through the buying power and productivity of the roaster. The operator no longer has to incur the cost of preproduction: printing plates, inventory, volume commitments, etc.
There is no simpler way to gain a business partner than by promoting their label.
Roast your own coffee?
Doing your own roasting is also an option for an operator at some point in time. This adds several new dimensions to the day-to-day operations of a business.
Setting up a plant is not an inexpensive endeavor. Equipment needed includes the roaster, dust collection, emissions abatement, a grinder, packaging equipment, elevators for moving product, scales, tape machines, and labelers. This equipment is readily available used and could perhaps allow an operator to set up a rudimentary operation for around $100,000. Bargains do arise from time to time.
In expanding into roasting, operators must be aware of zoning laws. Many municipalities have rules concerning smoke emissions.
Roasters have to consider how their operation affects nearby businesses. I recently visited a roaster and noticed that all the adjoining properties in the industrial park were blanketed by smoke from the roaster. This makes for poor relations.
Once a plant is set up, someone needs to understand the full workings of each piece of equipment. Roasting is an art, as is effective, efficient packaging. These are two areas that should not be taken lightly and can have disastrous effects when executed poorly.
Other costs include labor and raw goods.
Once an operator has decided to have their own roasting operation, they must have the knowledge and resources to purchase, receive and store thousands of pounds of packaging film, pallets of boxes, filters and the green coffee.
One just doesn't pick up the phone and buy green coffee and throw it in the roaster and have it come out the same each time. This is a long process of education and selection to determine consistency, blends and stable supply lines that allows the operator to produce that great cup each time, day after day, month to month.
Clearly, roasting your own coffee is not something one does without planning. But it also gives the operator total control of the product and a very powerful selling point.
Our company has become a leader in the markets it serves because we can boast this advantage and deliver upon it. There is no question that being able to invite a customer to see their coffee being roasted hours before it is delivered is a major selling advantage.
The main advantage of private label coffee is that it gives the OCS operator a reputation for quality coffee. This is a great selling tool.