The Business Economics of Wholesale vs Retail Coffee Roasting (Bram de Hoog) - EP1129 Part 4 of 5 (Map It Forward)
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Episode Description
This is part 4 of a new 5-part series on The Daily Coffee Pro Podcast by Map It Forward, hosted by Lee Safar. Our guest on the podcast for this series is Bram de Hoog, co-owner of Paso Paso Coffee, a farmer-owned coffee roastery based in Hanover, Germany.
The theme of this series is alternative trade models and farmer engagement in the consuming market.
What is the real difference between operating a wholesale coffee roastery and a retail coffee roastery, and why does understanding that distinction matter so much for profitability?
In this episode, Lee and Bram examine the financial and operational differences between these two business models, including how they approach production, staffing, pricing, cash flow, and business growth.
Bram explains that wholesale roasteries primarily supply other businesses, particularly coffee shops, hotels, and restaurants. Retail-focused roasteries, by contrast, sell directly to consumers through their own cafés, retail locations, or e-commerce operations.
While both models involve roasting and selling coffee, their cost structures and commercial pressures can be very different.
Wholesale roasteries are particularly exposed to fluctuations in green coffee prices and the financing costs associated with holding inventory. Retail operations, especially cafés, face greater pressure from staffing costs, foot traffic, and day-to-day operational demands.
The conversation also explores the limitations of small in-store roasting operations. Although attractive as a business concept, combining a small roaster with a café can create production inefficiencies and limit growth without changes to equipment, staffing, and the operating model.
Lee and Bram then discuss one of the most important differences between wholesale and retail pricing: in wholesale, both the roastery and its business customers must earn a viable margin.
Bram explains why a 20% wholesale retail margin may be insufficient for specialty coffee shops, and why discounts in the range of 30% to 50% are more commercially realistic in many circumstances.
They also examine payment terms and the cash-flow risks associated with extending credit to wholesale customers, compared with receiving immediate payment from consumers.
The second half of the episode focuses on scaling.
Paso Paso currently operates with approximately 70% of its sales through wholesale and 30% through e-commerce and direct sales. Bram explains why this balance supports production efficiency while allowing the company to participate in the higher-margin direct-to-consumer market.
He introduces the concept of peak profitability: the point at which a business is making the most effective use of its existing capacity before further growth requires significant investment.
For Paso Paso, Bram estimates that its current operation could produce approximately 6,000 kilograms of roasted coffee per month without fundamentally changing its infrastructure.
Beyond that point, expansion would likely require larger premises, additional equipment, more employees, and new investment, temporarily reducing profitability before the next phase of growth.
The conversation concludes by exploring why some wholesale roasteries eventually move into retail to capture more value, and why that decision requires an entirely different commercial strategy rather than simply opening a café or launching an online store.
This episode offers an important perspective for anyone operating, developing, or investing in a coffee roasting business: understanding which business model you're building is fundamental to making informed decisions about pricing, profitability, and growth.
Connect with Bram de Hoog and Paso Paso Coffee:
Paso Paso Instagram: https://www.instagram.com/paso_paso_coffee/
Bram Instagram: https://www.instagram.com/bram_dehoog/
Bram LinkedIn: https://www.linkedin.com/in/bramdehoog/