In this article we'll discuss selling Ready to Drink (RTD) Coffee through private label agreements with coffee suppliers / roasters. We'll map out what the end to end process for selling RTD coffee looks like and why you might want to consider selling coffee this way. We'll skip over some information that we can cover in more detail in future articles.
What is Ready to Drink Coffee and Why Should You Sell it?
Ready to drink coffee is a container of hot or cold coffee or tea for one person, typically served ready to drink without need for reheating.
Ready to drink coffee is a new way of selling your product that might be more sustainable for your business.
Instead of selling ground or whole bean coffee, you sell ready-to-drink beverage products made with private label coffee roasters .
You can start this type of beverage business by partnering with an established company (a private label partner) who is already producing high quality, gallon size RTD beverages like cold brew iced teas and steamed/hot cocoa that are both shelf stable and refrigerated until opened. This saves businesses time since it's not necessary to produce large quantities of these types of drinks yourself.
Your customers will consistently buy the same great tasting drinks every time they visit your store (or website) because it tastes exactly like what they already purchase and like.
Private Label Roasters - Who Are They & What Can They Provide?
Private label roasters, or co-packing companies, are companies that produce ready to drink coffee beverage products for other businesses - usually smaller sized beverages in gallon form instead of single serve cups.
They work with the customers to create the product they want exactly how they want it with custom ingredients used to make their signature drinks taste just right for their customers especially if they have specific requests about what is needed to recreate their recipe iced teas iced coffees iced mochas , hot chocolate milk steamed/hot cocoa , etc.).
Using private label coffee roasters often leads to benefits such as lower prices, more flexibility for your business knowing you have a reliable supplier who can help grow your brand, a closer relationship with your supplier so they know your exact needs and wants, and an easier time getting started starting up since you don't have to create or develop a recipe.
Private label roasters also provide high-quality products that are consistent every time, no matter the size of the order.
Large private label roasters may even set up Automated Virtual Depots (AVDs) for their suppliers which means you won't have to keep inventory on hand at any one particular location because everything is shipped from a central warehouse directly from the supplier, but this does take extra funding to start out.
How Private Labelling RTD Coffee Can Help Grow Your Business
Following a private label strategy will make it easy for customers to find what they're looking for quickly and easily when they come into your store.
By selling a pre-made, just add water or milk type of ready to drink coffee beverage you can have a product that customers will always return for consistently every day if they find your product comparable to their favorite RTD beverages at other businesses.
Think of it as an upselling strategy. You're catering to their needs by making the coffee shopping experience simple for them, and that creates a pattern in your customer's minds that they want to continue.
For example: Let's say you sell a private label brand of drip coffee that averages $1 per serving, but your competitor charges $2.50 per cup for an RTD beverage from the same exact coffee roaster.
By giving customers the ability to come into your store and see these options side by side can increase impulse buys and overall sales revenue at your business.
How to Find a RTD Private Label Roaster to Partner With
Once you decide you want to start selling ready-to-drink coffee beverages by partnering with a private label roaster there are two ways you can go about getting started:
- You can contact companies who produce the same types of RTD beverages, but without a contract. There are many large companies out there who privately label themselves so it may be difficult to identify which particular company produces the products you are looking for.
- You can look into "co-packing" companies, or private label roasters, who produce a wide variety of coffee-based RTD beverages that you can identify with. When looking into co-packing companies try to find one that is contracted with big name brand names in the industry and has been producing their type of beverage for several years if possible because this shows they are experienced in what it takes to make a quality product.
The Benefits of Selling RTD Coffee
There are many benefits to selling ready-to drink coffee beverages including being able to grow your own business by providing customers with a new product offering, having a long term sustainable plan for growing your company with a proven supplier, using specific ingredients so you don't have to worry about buying in bulk/inventory, allowing for fast growth when trying to expand your customer base by selling a popular product, and being able to increase sales with an add-on that customers will appreciate.
Further, there is increasing demand for RTD beverages across the board. According to the World Coffee Report, 56.7% of global coffee consumption was in brewed form and 43.3% was in instant/powdered form. However, the percentage of brewed coffee consumption on a global level is decreasing (down to 51.7% in 2016) while the percentage of instant coffee consumption is growing (up to 48.3% in 2016). In addition, Beverage Industry reported that refrigerated RTD coffee alone had amassed $487 million in sales in 2020, which was a +20% increase from the previous year.
Considerations Before Signing a Contract w/ a Roaster
Before signing any contract with a private label roaster it is important to be completely comfortable with the idea.
The most important factor in deciding if you want to sell drinks made from coffee that was roasted by someone else, or roast your own coffee and then package and sell it is whether or not you will focus on marketing and sales.
If you are set on focusing primarily on marketing and sales, it may be best for you to sign a contract with a private label roaster supplier so that you can concentrate more heavily on those aspects of your business. However, if successful marketing and sales lie in your future but the idea of roasting coffee seems daunting, hiring a company to do the roasting for you may be ideal.
Also consider what your options are for store space, as you will have a limited amount of refrigerator and shelf space.
You can always roast more coffee than you have room to sell by purchasing a small roaster and selling the excess online or perhaps on a small scale at farmers markets.
You could also purchase ground coffee from one supplier and whole bean coffee from another supplier so that you have all different types of beans available in your stores. If this is not an option however, you can choose to sell only those drinks with higher profit margins, such as flavored lattes rather than plain coffees or brewed teas.
The most important step is to consider your options carefully before signing any contract with a private label roaster supplier. Once a contract has been entered into, it can be difficult or impossible to terminate.
Ready to drink coffee is now a popular product line for many different types of businesses. In order to make the most out of this opportunity, it's important that you do your research and consider all options before signing any contract with a private label roaster supplier.
Allowing someone else to roast your beans may be ideal if marketing and sales are where you want to focus because they'll have more experience than you will in those areas.
However, if successful marketing and sales lie in your future but the idea of roasting coffee seems daunting, hiring a company to do the roasting for you may be best so that you can concentrate on other aspects like inventory management or customer service instead.