From The Australian, Entrepreneur
Accountant Ramez Abdulnour has calculated how to make a quid on the morning brew, reports Ed Charles
YOU’D think the coffee business was about selecting and suppling the product as in any food and beverage business.
But in reality it has more in common with the mobile phone business, where handsets are supplied in exchange for spending lots on phone calls. The difference in the coffee business is that the old school coffee roasters tie cafes to contracts that guarantee volumes of bean sales in exchange for a free coffee machine.
It was busting this model open that inspired Ramez Abdulnour and a new generation of roasters to start businesses that focused on the quality and origin of beans and attractive cafe accessories while not tying cafes to contracts.
You might say that coffee is Abdulnour’s family business. His parents ran cafes in Albury, NSW, and when he was studying to be an accountant they gave him one to run, which he renovated himself. Some 18 months later, he sold the cafe for a profit.
He moved to Melbourne and for the next few years concentrated on his accountancy career, advising the wealthy on tax and their property investments despite the fact that coffee still ran through his veins.
It was in 1999 on a trip to the US that he noticed how big the coffee culture had become through Starbucks. By 2003, he was back in the coffee business, this time in a short-lived partnership as a coffee roaster that left a bitter and expensive aftertaste.
But ever tenacious, in August 2005 he was back with another plan. This time the idea was to create a brand around a coffee roaster rather than a coffee roaster then brand it. He started roasting through a small contract roaster experimenting with different types of green beans and blends. Initially, the quality of Rosso Coffee was inconsistent but soon enough his approach to the coffee business started winning Rosso coffee fans. He now is supplying 20 Melbourne cafes with 500kg a week. Most recently he opened the first Rosso cafe, which is also used for barista training, at 50 Lonsdale Street, Melbourne.
The coffee market is mature in Melbourne, dominated by large roasters in the business of tying cafes into onerous contracts for the supply of coffee machines and large volumes of sometimes indifferent coffee beans. These companies also offer training manuals and barista training but often only in their own training schools. Abdulnour says that if a cafe decides to swap coffee bean brands, they will lose their espresso machines despite having paid several years worth of rent on them through their bean supply contracts.
The Rosso model aims to bring the focus back on quality beans (that in this case also happen to be organic) without the disadvantages of an onerous contract. It is a model adopted by the new wave of fast-growing coffee brands such as Brisbane’s Di Bella, which this year expanded roasting to Melbourne, and Canberra-based Kaldi, which now also has cafes in Sydney.
Rosso drew on his accountancy training to design the finance plan. The way it works is that Rosso Coffee arranges a rental agreement through a preferred finance company. The client cafe pays the rental on the espresso machine and Rosso rebates the rental costs through a discount on the supply of coffee. For instance, if a cafe orders 20kg of coffee a week, $2.50 would be rebated on each kilogram, making a total rebate of $50.
If the cafe decides to change coffee brand, it can and is free to negotiate terms with its new supplier while keeping its espresso machine. And at the end of the rental contract, it keeps the machine. As part of the Rosso service, the business will train baristas at its Melbourne cafe under the eye of in-house master barista and trainer Michael Demicoli. The service also extends to ensuring each cafe’s machine and grinder are set up correctly on site. For instance, baristas often forget to set the grind for changing batches of beans and climatic conditions and often forget that the grinding plates need to be replaced.
Part of the formula is also to offer quality branded accessories to cafes, for instance attractive branded takeaway cups and porcelain rather than basic cafeteria-style cups that some roasters supply.
Abdulnour says that one of his success stories is Sweet Agora Cafe in South Melbourne Market that is open four days a week. Since swapping to Rosso, it has doubled its throughput from 18kg to 36kg a week. With 1kg of coffee making up to 100 cups of coffee, that’s a big difference — selling another 1800 coffees a week.