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REVIEW SUMMARY
Company. Joffrey's Coffee, Tampa
Industry. Beverage
Key. Joffrey's traded volume for profitability, and focused on their strengths to significantly grow their business.
Ted Abrams came to Joffrey's Coffee nine years ago because the company was losing money — he may have used the word “hemorrhaging.”
In 2001, the situation was dire for Florida's largest coffee roaster. Without a single concrete business plan, it had already burned through one loan, and had to sell an equity stake to keep the business going. At one point, it was invested in a bakery operation that lost the company more and more money as sales volumes increased.
For Abrams, it was a perfect opportunity.
Although he wasn't a coffee drinker, and although he had only recently moved to Tampa, the business specifics were a match. Abrams' professional expertise was developed via an accounting background, and his passion was in resolving serious financial issues — otherwise known as turning a company around.
His addition to the Joffrey's fold would prove to be a defining moment for the Tampa-based coffee wholesaler. After almost 20 years of financial turmoil, Abrams was able to bring Joffrey's to profitability in 18 months.
Today, Joffrey's is growing at a healthy pace. But it took a while to get it there.
Mastering roasting
Joffrey's Coffee opened in 1984, and while the sales strategy may have been in flux, the product was clear from the beginning — Joffrey's would roast high-end, specialty coffee.
To that end, Joffrey's' first major asset acquisition would come two years after its opening. In 1986 Joffrey's hired Chris deMezzo, a New Jersey transplant who didn't drink coffee, to be their roastmaster.
It was an interesting hire to say the least. But deMezzo was willing to experiment and learn, and experiment he did. With a head first, hands-on approach to roasting coffee beans, deMezzo became an expert in distinguishing the effects of roasting each type of bean to a particular degree of doneness.
DeMezzo's developing expertise helped build Joffrey's identity as a specialty coffee producer early on. Today, the company uses beans from 18 regions around the world, and goes so far as to recommend food pairings with each product. In that respect, “We're very much like the wine industry,” says Abrams. Today, deMezzo can taste a cup of coffee and identify the regions from which the beans came.
Above all else, that expertise has motivated Joffrey's core business from the beginning. “We can bring you the best coffee you've ever tasted,” deMezzo says. Furthermore, it's what landed a relationship that would propel the business' early growth and help them establish profitability.
According to deMezzo, the Walt Disney Company's decision to deal exclusively with Joffrey's Coffee for their theme parks in 1994 came down to the taste of one cup of coffee. Now Joffrey's employs 90 so-called “cast members,” and generates 60% of their revenue from the relationship.
Joffrey's would later win another contract with Disney on a simple taste test. In 1997, the company acquired a deal to brew all of Disney's espresso products based on the taste of their own product.
But in that same year they added what would prove to become a major source of revenue for years to come. However, the business made a misstep that would eventually require Abrams' intervention.
Revenue vs. profit
That year, the company moved into a 7,500-square-foot space in South Tampa. But the change would have little impact on the company's ability to roast coffee.
Only 3,000 square feet were devoted to that business. The rest were used to start a bakery operation that would prove to be the tipping point for Joffrey's' sustainability as a business.
Abrams can easily summarize the issue with the bakery: “For every dollar we sold, we were losing a dollar-twenty.”
Not a recipe for long-term success.
It's an issue that often creates a challenge for all sizes of companies: doing business for the sake of doing business. U.S. automakers have been notoriously focused on market share, rather than profitability, and it has cost them.
The most successful companies are selective about their customer base, and only pursue ventures that promise a reasonable return on the original investment. That was the focus Joffrey's needed.
Ted Abrams knew that when he was brought on as chief executive officer in 2001. His first move: shut down the bakery.
From there, he further increased the company's focus on profitability. In Abrams' words, “What do we do best?”
For Joffrey's, the answer was coffee wholesale. While other companies (most notably Starbucks and Dunkin' Donuts) may have been built to rapidly expand their physical footprint, Abrams recognized that his company's strength lie in its small-scale roasting expertise.
Investing in the company's field of expertise propelled Joffrey's into the black and has more than tripled its revenues, from $4 million in 2001 to over $13 million in 2009.
Abrams hopes to continue to grow Joffrey's wholesale operation to increase its impact on the company's annual revenues, lowering the importance of the company's relationship with Disney.
Industry growth
Independent of in-house strategy changes, Abrams argues that the specialty coffee industry is primed for growth.
In large part, that growth is already taking place, as major coffeehouse chains are beginning to increase their distribution efforts, bringing higher-end beans to home brewers. It's a market change that Joffrey's is prepared to take advantage of.
The company also plans to utilize branding strategies to increase its business. For example, Abrams points out that he'd like to become involved in what he calls the “price-competitive” marketplace, but doesn't want to dilute the reputation of Joffrey's other products. Abrams says it's likely his company will create a new brand name to avoid that issue.
Abrams also notes that his business may be ready to take on other regions of the country. He'll be reviewing acquisition opportunities in the short term to potentially help his own company grow.
All this talk of long-term growth planning, however, begs a question for the self-admitted turnaround specialist: What's keeping Ted Abrams at Joffrey's?
Apparently it's as simple as loving what he does. “I love the industry, I love the people we have here. It gets in your blood,” he says.
It seems as though other Joffrey's employees may feel the same way; Abrams cites an average tenure of seven years for the company's staff. He suspects that may be a result of his efforts to be accessible to his employees, as well as the “visible impact” those employees can have on their small business' success. For those reasons, it seems likely that Joffrey's will continue to thrive under Abrams' direction in the near future.
At the very least, they probably won't be baking anything any time soon.
JOFFREYS REVENUES
Year Revenue
2007 $10.6 million
2008 $11.0 million
2009 $13.4 million
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