Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue.
Joe Angellotti has already turned his love for coffee into a pair of successful cafés – but that first taste wasn't enough. The Toronto entrepreneur, now enraptured with everything about the brew, has started roasting his own beans in a Mississauga warehouse under the moniker Pig Iron Coffee Roasters.
Doing so allows Mr. Angellotti, who co-owns Lit Espresso Bar locations on Roncesvalles Avenue and College Street with his sister Nicole Angellotti, to have even greater control over his customers' coffee-drinking experience. Now he wants to share his roasts with the world.
And the world already likes his roasts: Lit barista Josh Tarlo, with the help of Pig Iron's product, came in third place at the World Brewers Cup in Melbourne, Australia, last month, putting the brand on an international stage. Pig Iron has six wholesale accounts, including the two Lit locations, but the company is primed to expand.
The more Mr. Angellotti has gotten involved with coffee, the greater perfection he seeks.
"All I think about is coffee. Even when I'm sleeping. If you don't have the love, I don't think you could be a good roaster," Mr. Angellotti says.
The Lit cafés used to brew with widely acclaimed Stumptown beans, but brokerage fees and shipping costs started to add up. Mr. Angellotti finally bought his own roaster for $45,000 in 2011. The vintage 1988 machine was shipped from Barcelona to Oklahoma, where it was rebuilt and then sent to Canada four months later. Mr. Angellotti spent the next year developing relationships with growers and importers and perfecting his roasts.
He isn't sure what he should do next to build his wholesale business. He is sinking Pig Iron's profits into buying the highest-quality coffee so that, when he shops his roasts to potential clients, the product will speak for itself.
A year from now, he'd like to have 10 additional accounts. But he's wondering whether focusing his finances on the roasts is the right step. Should he instead hire a salesperson to hit the road and bring in new accounts? Mr. Angellotti is certainly capable of expanding production: right now, he and one colleague roast for only two days a week.
And he's not in any particular financial strain. He took out $45,000 in loans – and contributed $20,000 of his own savings – to finance the roaster and set up his Mississauga warehouse. Pig Iron's current accounts are slowly paying these down.
With Lit and Pig Iron's third-place finish at the World Brewers Cup, Mr. Angellotti wants to attract potential wholesalers not just in Canada but abroad as well. But should he hire someone to sell his product, or let the coffee speak for itself?
The Challenge: What's the next step Pig Iron should take to expand its wholesale business?
THE EXPERTS WEIGH IN
Daniel Baer, partner and Canadian retail leader at Ernst & Young, Montreal
Mr. Angellotti should take one step back and decide on the best growth strategy given his limited capital. What is the best option to capitalize on the brand he has built? It might be wholesale. But it also might be building out to more retail stores, it might be franchising retail stores, or it might be international expansion. He might start his own e-commerce site and advertise there.
You have to consider that Mr. Angellotti has built up a brand and certain quality standards. Once you do wholesale, you give up part of the control of that brand – not in terms of the quality of the product, but how it's displayed, how it's sold, how it's priced. Whoever is ultimately going to be selling this coffee, whether it's another café or a retailer or whomever, it always has to fit with the brand that he's built.
He also has to decide the type of wholesale client that he wants to deal with. Given that he's got a pretty high-end brand, I think ultimately it could be a two-pronged strategy. One is that he will need a dedicated person to visit different markets. When you try and sell a premium product to a niche category, it's best done with personal interaction. He has also got to figure out ways to promote that brand at the same time. That might be through an e-commerce site, or staging targeted events, but he's really got to define who those wholesale clients are and then have a dedicated team to attack those clients.
Tracy Allen, founder and CEO of Brewed Behavior, a coffee consultancy in Overland Park, Kan.
Once Pig Iron is making consistent quality coffees, the next step is taking their show on the road. Coffee sales, like any sales, are heavily weighted upon relationships.
Look for a salesperson and consider a personality type with charisma, someone humble enough to handle rejection, a solid self-starter, and a true actions-speak-louder-than-words coffee enthusiast. Give them a base salary and multiple opportunities to achieve self-funding commissions and bonuses. Most importantly, this person should be a dedicated ambassador of your brand and all it represents by both learning and teaching at every opportunity.
Make sure your company is in it for the long haul. There seems to be a trend of retailers deciding they can become more vertically integrated up to including having more control over their roasts by simply buying a roaster. This can actually lead to more unknowns in the process from farm to cup. The long-term relationships that wholesale roasters have with producers, the years of defining and consistently tuning coffee roasts, in addition to the pipeline of latest training techniques, can often be a difficult model to replicate for a retailer-turned-roaster.
Stephen Armstrong, chief executive officer of Ultimate Bean Roasting Company Inc. and president of Speakeasy and licensed Q Grader, Hamilton, Ont.
Pig Iron should work on partnerships – with people or companies that are not their expertise. Find ways to attract people to your cause. For me, I want to work with farmers, and I don't like the retail stuff. My strategy has been making strategic partnerships with people who are really good at sales and distribution. We each own a percentage of our companies; forging solid partnerships has been the key to our growth.
A diverse approach is understandable for a small business, but in my experience, the most successful entrepreneurs are experts in very particular facets of their field. Becoming a Q Grader, the most prestigious credential in the coffee industry, would certainly grow their reputation.
In the past decade at least a half dozen world-class, direct-trade roasteries have opened their doors in the GTA. In addition to the question of how to set themselves apart, Pig Iron should also consider how best to catch up to, and keep up with, roasters who are employing the same model and have a sizable head start in the marketplace.
Locally, they can also get people invested in their products – they have storefronts and can enlist the help of their client base to develop and improve blends, host cuppings and public education nights, and sponsor community events.
THREE THINGS THE COMPANY CAN DO NOW
Hire a salesperson
Put someone on the ground who loves coffee as much as the Pig Iron team and isn't afraid to talk up the products.
Define its value proposition
There are a lot of roasters in the GTA – Mr. Angellotti and staff need to let the public know why Pig Iron is different.
Put the brand out in the community
Lit's cafés are already integral parts of their communities; promoting Pig Iron, such as through event sponsorships, will boost the brand's profile.
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Interviews have been edited and condensed.