coffee shops diversity: It’s no wonder that cafes and roasters have a flagship product that is, and will continue to be, the centerpiece of their business: coffee. Selling beverages and bags of beans is an essential part of their business model.
However, in the modern coffee industry, many cafes and roasters have started to expand their range of products to diversify their income, differentiate their brand, and secure various sources of profit. Not only does this offer greater stability for the business, but it also allows them to sell other products that represent the values and identity of the brand.
To learn more, I spoke with José De León Guzmán and Agnese Idà from Kofra Coffee Roasters. They told me about product diversification in the coffee sector. Keep reading to find out what they said.
You might also like our article “How can coffee roasters diversify their income?
What is product diversification?
coffee shops diversity: José is the CEO and founder of Kofra, a specialty coffee roaster with four locations in Norwich, United Kingdom. He explains how Kofra started diversifying beyond coffee.
“At first, I really didn’t want to sell anything other than coffee,” says José. “Not even pastries. I just wanted to sell retail bags and coffee-based drinks.”
“After a while, staff told me they were frustrated having to turn people away who wanted to buy baked goods.”
Although any successful coffee brand should focus on sourcing, roasting, or brewing high-quality coffee, limiting its range of products can leave the business vulnerable. That’s why many brands diversify.
Product diversification is a simple concept. By adding new products, it’s possible to gain new sources of income and ensure some stability in the future if there are issues with the main product. For coffee shops and roasters, baked goods, coffee brewing equipment, and merchandise are common options.
coffee shops diversify: Agnese is the wine buyer and head of luxury product sourcing at Kofra. She points out that diversification is not just about selling more to increase profits but about aligning new products with the brand.
“We spend a lot of time sourcing, not just interesting products but products that make sense for us. We want to complement our philosophy with quality products and products from people we love working with.”
The advantages of diversification
coffee shops diversity: The immediate and obvious advantage of any successful diversification strategy will simply be an increase in sales and profits. Additionally, there are a number of medium and long-term benefits.
“By creating new product lines, you add diversity,” says Agnese. “Instead of just being a café, you can become a one-stop-shop for select products and a haven for food enthusiasts, for example.”
“Through product diversification, we have become the go-to place to find carefully selected and high-quality products that you can’t get at the local supermarket.”
coffee shops diversify: By offering new products that align with your brand’s identity, you can clarify and refine what your company is passionate about and subsequently communicate it to your customers. You can also demonstrate the ability to keep up with changing tastes and customer demands.
“In some cases, it’s about offering things you wouldn’t find in other stores,” says José. “Now people who come to Kofra stores feel that shopping with us is a special occasion.”
Diversification can also have a broader impact on the community. Partnering with other local businesses, such as bakeries, coffee farmers, or even artists, boosts the local economy and communicates your passion for doing so.
“Local sourcing is certainly desirable,” explains Agnese. “That’s why we source many of our products near our stores. For example, we offer dry-aged beef in-store and milk from local farms.”
“However, we firmly believe that local doesn’t necessarily mean better. Quality is an important factor, and we seek to work with companies that make sustainable and environmentally friendly decisions.
Food and beverages
coffee shops diversity: We’ve already seen why coffee brands diversify into different product categories. Now, what products to choose?
Firstly, although coffee should remain the main element of any café or roastery, diversifying into other food and beverage categories can ultimately be a natural or organic process.
Wine
coffee shops diversity: Wine is a great example. For years, parallels have been drawn between the coffee and wine sectors, with concepts such as terroir, palate, and experimental production.
“At Kofra, our wines are all organic, biodynamic, and low-intervention,” says Agnese. “This means there is as little interference as possible with the product and the process, showing the true expression of the grape and the terroir.”
Natural wines (or low-intervention wines) use few or no additives (such as sulfites, sugars, and acids) in the manufacturing process. The lack of stabilizers often creates fruity and complex flavors, similar to those found in naturally processed and experimental coffees.
“After finding similarities between our wines and coffees, it soon became a labor of love,” says Agnese. “Now it’s an outlet for expression for the team and the company as a whole.”
“We started with just a few bottles, and now we have over 100 wines from around the world, from highly regarded classic Chiantis to quite curious blends,” says Agnese. “The same goes for our selection of craft beers. Since the industry is growing so rapidly, there is certainly a greater demand for excellent beers.”
Beer
coffee shops diversity: José says this is another natural step, and many specialty coffee enthusiasts appreciate craft beers. Often there is what he calls the “small-batch philosophy” behind both products.
“If you like good coffee, you might also like good beer,” he says. “It was a natural progression for us. Soon our beer started selling very well, and we realized there was excellent synergy between beer and coffee.”
Research by Business Insider showed that craft beer sales increased by 15% from 2012 to 2013, and sales of India Pale Ale (IPA) alone grew by 40%. Moreover, the global craft beer market is expected to reach $200 billion by 2026.
“Kofra works with a maximum of two, three, four breweries [to keep prices] fair and make the products more accessible,” says José. “A few years ago, many breweries used espresso as a base for black beer, so we created a black beer cold brew.”
“We won the gold medal in the Best Flavor category at the UK national competition,” he adds.
Pastry
coffee shops diversity: Cakes, pastries, and other baked goods are common in most coffee shops as they pair well with coffee. However, José explains that at Kofra, the food is somewhat different, especially highlighting dry-aged meat.
“It’s a premium product because that’s what specialty is about,” he explains. “It’s about traceability. We buy meat from locally grass-fed cows that are well-treated.”
Selection of organic wines Sale of equipment and merchandise
This is another area where coffee shops and roasters can diversify. However, the storage and sale of equipment such as home grinders, scales, kettles, and coffee makers, for example, became considerably more popular as a new product category during the COVID-19 pandemic.
Coffee equipment sales increased by 11% in the United States with an average price of $139. This demonstrated one thing above all: the growing consumer interest in preparing quality coffee at home.
However, José warns of the danger of focusing too much on equipment sales. He points out that there are almost always larger retailers that can offer better prices. “We don’t sell coffee equipment because we can’t compete with Amazon,” he explains. “What we can do is sell products related to our brand.”
Brand products
coffee shops diversity: Another option is merchandising, a way to diversify your product range and promote your brand at the same time. You can add your logo or slogan to mugs, caps, t-shirts, or jackets, for example.
In any case, José insists that quality must still be at the forefront of all products, including merchandise items.
“Merchandise should be something you earn,” he states. “It can’t just be sticking a logo on t-shirts you sell. People have to create that connection, but you have to give them the quality you promise.”
“For example, the story behind our t-shirts is simple. We found the best printers in Norwich and asked them for the best t-shirts they had to try them out. I kept mine for six months and wore it to make sure it was of high quality.”
Finally, he points out that Kofra partnered with a local artist to create prints for each of their four cafes. All are available online.
“The prints are by an artist who comes to Kofra every afternoon, so she made one for Christmas that we sent to our regular customers to thank them,” he says.