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Small Volume Packaging Gives Boost to Canadian Coffee Roastery

terrelli coffee logo

A small but long-running Canadian coffee roasting company is the subject of an informative new case study on coffee packaging, recently published by the Globe and Mail.

The study describes how husband and wife team Larry and Melissa Davidson, owners of Vancouver-based Terrelli Coffee, transitioned from running a small roastery and retail cafe to expanding roasting operations and becoming a wholesale supplier to upscale grocery stores. With a huge investment in packaging its new beans — beginning in 2008 — the owners found that they weren’t moving from grocery shelves quickly enough to warrant larger grocery contracts.

Here’s a description of the problem from the Globe and Mail study:

He sourced coffee bags from a company overseas, since it was the cheapest, charging 35 cents a bag. Mr. Davidson was required to buy in batches, with 35,000 bags the minimum. Including shipping and delivery, it cost $20,000. For the artwork on the bags, he hired a graphic designer and paid more than $40,000 for designs and printing-plate charges.

Mr. Davidson was now deeply invested in a product design that had never been market-tested. Several supermarkets were willing to try out Terrelli Coffee, but they would only have trials with 100 to 200 bags of a new brand, and they wouldn’t commit to buying more until they knew it would sell. Mr. Davidson soon found that his product wasn’t moving as quickly as he needed it to. He was forced to stick labels on the bags to differentiate between coffee types, which, with labour costs, pushed his costs even higher.

The solution occurred when the Davidsons found a U.S. company that specialized in digital laser-printing, allowing for short runs and flexible options for customization. Here’s more from the Globe and Mail:

While not quite as cheap per individual bag as the previous ones, these digitally printed bags could be produced in far smaller print runs of 1,000 bags for $1,000 all in, with no addditional costs for labelling and print plates, and reduced waste for bags that didn’t move. This more versatile approach also allowed him to design packages to change with the client, with the season or with special occasions.

This also allowed Mr. Davidson to work directly with bakeries, grocery stores and even a car dealership to create packaging using their brands and his beans. Sales increased dramatically. With the greater volume of sales and more of the bags actually making it to market, Mr. Davidson started to see profits rise.

For the full study, including specific numbers related to the revenue returns brought about by the packaging changes, read the full study here.

Comment

1 Comment

Ben

Interesting article. Are there any basic business forecast models that I could create that would help small coffee roasters understand their revenue, costs, cash flow, and unit costs? I would love to create one and post on my site (www.thebudgetcfo.com) for all to use.

Ben

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