When Bob Richter and Steve Dunefsky formed Empire Coffee in 1984, Nachtrieb was one of their first customers. He saw private label coffee as an important tool in selling on the basis of quality versus price. Some competitors were underselling him by as much as $5 per case.
Even while the company was small, Nachtrieb sought foodservice accounts as well as offices. Many OCS operators shun these accounts since they demand more service and are more price-sensitive, but Nachtrieb thrived on the challenge of serving these accounts profitably.
He sometimes offered restaurants the option to purchase the brewing equipment. By doing so, he took the equipment value out of the equation, which allowed him to be more competitive with the roasters.
Nachtrieb found that many restaurants were receptive to a provider who could offer good service. The large roasters and foodservice distributors could sometimes offer better pricing, but rarely could they match his service.
High community profile proves key
Servicing restaurants also carried a certain amount of community relations value, Nachtrieb found. He always believed that a high community profile was a strong marketing advantage. He suspects this might be more critical in a smaller community like the Capital District that consists of Albany, Schenectady and Rensselaer County (population: about 500,000) than a larger metropolitan one.
Nachtrieb also made it a point to establish good relations in the local lending community.
"Banking is extremely important in business," he said. He asked lenders what financial information they were most interested in. If a lending officer wasn't forthcoming, he sought out another. He recognized that by giving lenders the right information, they offered more favorable terms.
By 1988, Nachtrieb was able to purchase an 18,000-square-foot building in an industrial park. He secured a favorable loan, thanks to some relationships he had made in local business and civic organizations.
Another big investment came a few years later when he decided it was time to implement management software. By 1990, the company had 12 employees, and keeping track of assets, employees and profitability was becoming more difficult.
Software investment pays dividends
"You need information to manage a business," said Nachtrieb, who always tried to recoup his equipment outlay in 10 months. OCS management software from Metroplex Data Systems gave him the necessary information to run a profitable operation.
Nachtrieb's historical information enables him to compare the long-term return on investment of different types of equipment. He learned early on that the lowest cost equipment isn't always the most profitable. "Any kind of parameter I want to put in, I can narrow it down by," he said of his software.
The investments in warehouse space and software were destined to pay off as the OCS business became more challenging in the early 1990s. The business was maturing, and new customers were becoming scarcer. Product and equipment suppliers were touting specialty coffee, but Albany was not quick to embrace it.
The community is not predominantly white collar, and Starbucks did not open a store there until some time in the late 1990s.
Nachtrieb tested both electronic airpot dispensers and single-cup brewers in the early 1990s. These systems required higher investments than traditional OCS brewers, and Albany did not have a lot of large office accounts that could justify these products. Nachtrieb further noted that the economics of servicing the widely dispersed accounts that characterize his market is different than in big cities. "Each market is different," he said.
But Nachtrieb did see opportunity in the foodservice segment — for espresso. He saw espresso as a way for a restaurant to make extra money. If a restaurant sold 15 espresso-based drinks per day, they could make an extra $50 per night.
"I saw the future," he said. "I always like to think outside the box. I knew who my competition was, and I knew they would never be bothered with it."
Restaurants respond to espresso
Nachtrieb offered restaurants the opportunity to lease commercial espresso brewers and held training for wait staff in his own facility. Restaurants were receptive. "You teach them how to suggestively sell," he said. "It's an education process to teach them to make money."