Exceptional coffee is no longer hard to come by, and cafes, bakeries, and restaurants that once positioned themselves on high-quality coffee are having to go to new lengths to stand out from the competition. We saw coffee shops pivot to roasting coffee in-house as a way to develop a stronger brand—and now we’re seeing bakeries do it too.
We spoke to Lawrence Lai, Co-Founder of the prestigious Craftsmen and Wolves bakery, to find out why his bakery started roasting coffee in-house, and whether it’s really a good idea for other bakeries to explore.
In this fascinating interview, we discovered:
- The reason most bakeries haven’t touched roasting coffee
- A quick profit analysis on the ROI of roasting in-house
- How roasting helped Craftsmen & Wolves develop a stronger brand
If you’re a bakery exploring new opportunities to expand your brand’s reach, this interview is a must-read.
The Trend: Bakeries Are Elevating Their Coffee Game
Bakeries are hubs of craft and attention to detail, and few have generated as much acclaim for their precision and innovation as Craftsmen and Wolves (C&W), a bakery situated in San Francisco’s Mission District.
C&W sells fresh-made pastries to customers in its cafe and to wholesale customers across the Bay Area, including many coffee shops. A few years ago, Lawrence began to notice a shift in how coffee shops were thinking about their pastry and food menus.
“We had customers—even famous coffee roasters—saying they wanted to be different from other cafes. They wanted to give attention to detail to more than the coffee, but also their pastries, that both should be on the same level of quality.”
In parallel, Lawrence and his team felt there was an opportunity to take more ownership of their coffee quality. The coffee program had always been important, but with more and more high-level bakeries opening up, Lawrence wanted to maintain C&W’s prestige by reimagining their coffee program with the specific flavors and roast styles his customers preferred.
“We and the coffee shops around us were coming from two different angles, but arriving at the same conclusion: if we want to stay ahead of the competition, we need to make sure our coffee and pastries create a cohesively excellent experience.”
Despite tasting coffees from roasters around the region, he couldn’t find the coffee profile that matched their pastries perfectly.
“Most roasters in the Bay Area like to do very light roasts, and the coffee is more acidic. Those beans are great in their own respect, but they do not work well with our pastries.
I want people to try our pastries and coffee and know that they complement each other perfectly. They should have a complete, well-rounded experience.”
Lawrence knew that meant Craftsmen and Wolves would need more control over flavor experience. Roasting coffee in-house would give the C&W team all the control they could need, and it would be a natural expansion of their artisan values.
The idea made sense—but would it be profitable?
The Numbers: Is it Profitable for Bakeries to Roast Coffee?
The Specialty Coffee Association released an enlightening report on the profitability of serving and roasting coffee in 2017, and the conclusions could not be more relevant for bakeries that also offer coffee to their customers.
- Coffee retailers average a 54% gross margin on coffee drinks
- Roaster retailers average a 65% gross margin—a twenty percent relative increase
Across the board, coffee retailers who roast are more profitable than coffee retailers who buy wholesale coffee from a supplier. It’s why coffee shops that want to keep growing eventually pick up roasting.
The numbers make sense when you look at the Cost of Goods Sold and margins, but what about all the training, warehousing, and everything else involved?
“We already knew that we’d be saving money, we just didn’t know if the savings was enough to make up for training the staff to hit our standards correctly, and that was a whole new set of worries.”
Commercial coffee roasters typically range from $20K to $150K, facility build-outs add a few thousand to that, and there’s always the costs associated with training (formal education, learning curve waste, hiring team).
Starting a roasting operation was cost-prohibitive to Craftsmen and Wolves—until they realized there was a way they could roast in-house without up-front roaster, training, and warehousing costs.
We asked Lawrence if he’d like to roast coffee on a Bellwether Roaster, the world’s first zero-emission commercial roaster that follows roasting recipes automatically, requires only one day of training to set up, and doesn’t require any warehouse build-out.
The roaster’s unique closed system creates a roasting environment that can be replicated repeatedly by the roaster itself. Once a team member loads in the coffee and selects a recipe, the roaster does the rest.
“We were just a little bit apprehensive about how to train the staff but after Bellwether demonstrated how easy the machine is to use, I was like, well this shouldn’t be a problem.”
With the major startup costs associated with commercial roasting out of the way, the financial opportunity looked a lot clearer to Lawrence and his team.
|Roasting on a Bellwether||Buying Wholesale Coffee Beans|
|Pounds Used per Week||100||100|
|Bellwether Cost per Month||$1,150|
|Average Green Coffee Cost||$4.00||—|
|Cost After Shrinkage||$4.72||—|
|Total Cost per Pound||$7.37||$10.00|
|Total Cost per Month||$2,948||$4,000|
|Total Cost per Year||$35,376||$48,000|
The Method: How Craftsmen & Wolves Launched Their Roasting Program
Lawrence and his team started simply. They launched the roasting program with one single origin coffee to get to know the equipment, onboard employees, and get the word out there. Once they were comfortable with the process, they brought on a second coffee as a single origin espresso and started offering their roasted coffee in retail bags.
Then the team decided to make a custom blend.
“We felt like, well, somebody else could get the same beans and pick the same roast and we are selling the same things. We should make a custom blend that’s completely unique for us.”
The Craftsmen and Wolves team sampled a bunch of coffees and designed a unique blend that better complements their pastry lineup—and customers ate it up.
“Our roasting was very well received, but once we switched to the blend, it seemed that the momentum picked up even more. Since it’s a unique blend that’s just for us, it builds brand affinity.”
Demand for coffee served in the bakery and for C&W branded retail bags began to soar. Lawrence went from buying small boxes of green coffee to buying full-size burlap coffee bags. None of this would have been possible, of course, if the coffee wasn’t on-par with C&W’s prestigious pastries.
“We have never had such consistent beans from any roaster. I am very proud of the coffee.”
Moving forward, Lawrence sees coffee roasting as an integral part of Craftsmen and Wolves’ future.
“The Bellwether gives us more flexibility and more expansion opportunities. Our next step is to explore more roasts and sell more retail bags. We also want to start serving more coffees besides our house blend and espresso—maybe some single origins too.”
Lawrence’s Final Words to Other Bakeries
We asked Lawrence what advice he has for other bakeries looking for ways to stand out from the competition and continue to build sustainable, profitable businesses.
“I think more bakeries should look into roasting. It’s not as difficult as they think it will be. With a Bellwether, it’s so easy anyone can do it—it’s the great equalizer. Any bakery can make the investment now and become a roaster to create something new for themselves.
The only challenge is selecting beans that you like and playing with a few roast recipes to find the best one—but that’s actually a very fun process for us, and the quality is excellent.”
Both the numbers and the success stories from bakeries like Craftsmen and Wolves tell the same narrative: roasting coffee is a profitable avenue for business growth for bakeries. And now that bakeries can avoid the high costs of a warehouse and large commercial roaster, even smaller companies can access the opportunity.
Want to see how using a Bellwether roaster can help you launch your own, roasted-in-house coffee brand for under $10,000 in a matter of weeks?
Reach out for a quick demo to see how the Bellwether technology makes roasting coffee more accessible than ever before.