Wholesale coffee roasters: What happens when your clients outgrow you?

For larger-sized roasters looking to scale operations, it can be a natural progression to take on wholesale clients. By selling their coffee products to cafés and other retailers, roasters can diversify revenue streams and strengthen their brand identities.

There may come a time, however, when wholesale clients may decide to expand their businesses – and potentially outgrow their suppliers. The prospect of losing a key account can be a daunting one, so how can roasters handle these situations?

To find out, I spoke to Anne Cooper, a consultant at Equilibrium Master Roasters, and Chris Gaag, Director of Tribe Coffee. Read on for their insight.

Why might clients outgrow wholesale roasters?

Wholesale coffee roasting is a competitive market. While price is a key determining factor, there are many other considerations to take into account, including:

Roasting capacities

Logistics

Training and education opportunities

Equipment distribution channels

Clients are increasingly searching for wholesale roasters who can offer a total coffee solution, where the coffee itself is one component of many. Wholesale roasters who can offer training courses, equipment sales, and more are at a clear advantage.

Some wholesale customers, however, may choose to move on – whether that is to find another supplier or to start roasting coffee themselves.

Anne Cooper is a coffee roasting consultant at Equilibrium Master Roasters in Melbourne, Australia. She believes that when clients decide to roast their own coffee, it’s usually for two reasons: control and cost.

“Retailers often think they will cut back on costs and perhaps gain more quality control over their roasted coffee products, especially when they are not happy with their current supplier and don’t want to go through the process of finding a new one,” she tells me.

But this process can be a challenging one to do successfully. Coffee businesses who are new to roasting will not only need to learn the necessary skills and best practices, they will also have to invest in equipment upfront.

Addressing concerns

Chris Gaag is the Director of Tribe Coffee Roasting in Cape Town, South Africa. He says he has first-hand experience of a client outgrowing his business.

“We had a wholesale customer that decided to vertically integrate roasting into their operations,” he tells me. “They franchised some of their stores and realised they could make more money roasting themselves.

“As a big roaster, we want volume, and growth equals more volume,” he adds. “If you lose a client buying 2kg per week, that’s fine. But if you lose a client buying 500kg per week, then it’s concerning.”

Managing situations effectively

Occasionally, as was the case for Tribe Coffee Roasters, former clients may become competitors once they start roasting their own coffee. In spite of this, wholesale roasters must use several business tactics to minimise negative impact as much as possible.

“At the end of the day, you can’t force clients to stay with you,” Chris says. “You’ve got to have other clients waiting.

“If you’re a small roastery establishing yourself and you have one solid customer, the most important thing you can do is continue to future-proof your business,” he adds. “Don’t forget to work with smaller customers as well – I think there is a temptation to ignore the businesses who order 2kg per week when you have a client ordering hundreds.”

From a volume and capacity perspective, a wholesale roaster’s ability to scale alongside a fast-growing client will be a decisive factor in their partnership. In some cases, the roaster simply won’t be able to keep up.

“I would argue that if you have a customer that has aggressive growth, at some point they are going to leave you,” Chris says. “Instead of worrying and stressing about the fact that they might leave, focus on building the relationship. Help them out and make sure they receive excellent service.

“If you have a client that goes from one shop to twenty, you’re going to learn a lot,” he adds. “You will have the opportunity to build a better skill set and use those skills to become the wholesale roaster that the next customer comes to.”

Working to retain clients

In addition to developing new skills and a favourable reputation, Anne believes that strong relationship management can maintain wholesale customer loyalty.

“It’s important to remember that coffee is a relationship-based industry,” she says. “Strong partnerships will often influence someone to stay loyal to a roaster or brand, regardless of price.”

But it’s not just down to the coffee you offer – providing additional services and support can help solidify relationships between wholesale roasters and their clients.

“Education and training, with up-to-date skills and equipment, will always help to show clients that they can trust you,” Anne explains. “Your customers will be better equipped to serve high-quality coffee.”

A more direct method of customer retention, meanwhile, is tightening margins. As the volume of coffee orders increases, wholesale roasters will be better able to accommodate lower margins and offering discounted wholesale prices will become more manageable.

However, while it may be an effective tool to keep customers happy, Chris warns of the dangers of reducing prices too much.

“You can hammer your margins to the point where it doesn’t make sense, save for economies of scale,” he says. “You essentially keep the account because of volume, but this can be unsustainable.”

Price transparency

An alternative approach to retaining wholesale clients is to be more open about explaining the prices you set, which Anne believes helps wholesale roasters maintain relationships and keeps margins more manageable.

“I don’t think roasters should hesitate to raise their prices in line with inflation, they just need to better communicate with their customers to ensure that they understand why,” she explains. “If a client wants the same quality in times of inflation, they have to be willing to pay for it.

“It will always come down to communication and relationships at all stages of the supply chain,” she adds.

What do new roasters need to know?

For wholesale clients who decide to set up their own roasting operations, there will be significant challenges to address from the start – which can provide the opportunity for the wholesale roaster-client relationship to continue.

“Ultimately, the client may not know how to roast,” Anne says. “So I offer to help them to learn roasting skills, as well as any essential procedures that they wouldn’t know how to implement.”

In fact, asking for support from previous suppliers can be a useful tactic for new roasters.

“People tend to think it’s easy to open a roastery or a café,” Chris says. “If you don’t understand blending, packaging, distribution, or green buying then you’re going to struggle.”

Additionally, Chris points out that partnering with roasters can be an attractive prospect to a business considering to roast its own coffee.

“If your brands are aligned and you have similar values to your client, I would personally approach them and ask to cement the partnership and go in together,” he says.

The result could be mutually beneficial – with the new roaster able to receive expertise and the previous supplier strengthening their brand.

As with any industry, wholesale clients will inevitably come and go. But whether a client swaps to a new supplier or even becomes a competitor, investing in building connections is paramount.

If a wholesale customer ultimately decides to part ways with a supplier, roasters need to ensure they respond appropriately – and manage their other clients effectively.

Enjoyed this? Then read our article on how to find a wholesale roaster.

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