Portland Roasting enters the retail coffee scene with Oregon Convention Center shops

(Taken from OregonLive.com: http://www.oregonlive.com/business/index.ssf/2011/10/post_62.html)

A longtime local roaster will open its first coffee shop Sunday in a spot that carried Starbucks’ logo for a decade.

It’s Portland Roasting’s first step in taking on its biggest retail competitors by selling itself as a green alternative. The company will compost its cups, deliver coffee beans by bike and sell nearly all local products at a pair of Oregon Convention Center coffee shops that it won away from Starbucks during a bidding process earlier this year.

Portland Roasting spent 15 years quietly building a $6 million business by buying coffee direct from growers and selling to wholesalers and restaurants. Now it’s targeting licensed stores — the small shops and kiosks that already brew coffee under a different name — to build its brand without adding hefty operating costs.
“In order for our brand to grow, we need to have some store presence,” said managing partner Mark Stell. “The opportunity for us is to go after Starbucks.”

After almost a year of planning, Portland Roasting’s first licensed store opens in days, introducing convention goers from around the world to its sustainable mission.
“It’s opening a door where there has never been before,” Stell said.
The coffee industry is already taking note. One of its top trade magazines, locally based Roast, named Portland Roasting its large roaster of the year last week.

Licensed stores like the convention center outlets also allow the company to build its brand without assuming the biggest risks of brick and mortar businesses. The local roaster pitched the idea earlier this year to Aramark, the convention center’s food vendor, and Metro, the regional government that operates the convention center. Stell and others spent months lining up local vendors, such as Umpqua Oats, to showcase in the store.
The second store will open in December.

Portland Roasting will control the concept and products, down to the coffee beans delivered by bike from its Southeast headquarters. But it won’t own the store itself, and Aramark will employ the workers and handle operations. Other bidders couldn’t beat Portland Roasting’s focus on local products and its sustainable practices, said Teri Dresler,  general manager for Metro’s visitor venues including the convention center.

“It’s exciting to have a home-grown business that we’re doing a big business with at the convention center,” Dresler said. “National conventioneers will be here and be able to taste Portland, literally.”
Although Aramark operates the stores, Metro helps manage the partnership. Dealing with a local business made sense from a financial perspective, she said.
Aramark will pay Portland Roasting $300,000 to operate the stores over the five year contract, Metro spokeswoman Stephanie Soden said.

The food vendor had already budgeted $150,000 worth of coffee shop upgrades as part of its agreement with Starbucks, but it spent the money transforming the spots into Portland Roasting cafes instead. Aramark stands to save $150,000 during the new five-year contract, Dresler said, because Portland Roasting doesn’t charge certain annual fees that Starbucks does.
Together, the two stores generate about $450,000 every year in sales, Soden said.

Still, Portland Roasting’s retail share will remain relatively small. The 26-person company earns about 40 percent of its revenue from wholesale customers. It also has strong office distribution and institutional sales, such as hotel chains.

It’s high volume sales are rooted in its founding. Portland Roasting became one of the first coffee roasters to buy direct from buyers, giving Stell and other a chance to check fair practices first hand. But that meant the company had to buy large amounts of beans to make the process pencil out.
This year, the company expects to roast 840,000 pounds of coffee, Stell said. The Convention Center stores likely won’t drive up the volume by a noticeable amount.

The real value is in the branding opportunity. About half of the Convention Center’s foot traffic is from out of town. And the company plans to model future shops after the convention center stores. In addition to regional stores, Stell is discussing licensing opportunities in Saudi Arabia and Japan, where it already has a big exporting business.
“What we focus on is great coffee and selling that message,” Stell said.

Portland Roasting
Headquarters:
340 S.E. 7th Ave., Portland
Employees: 26
Founded: 1996
Revenue: $6 million expected in 2011, an 11 percent increase from 2010.
What they do: Distribute coffee beans that they buy from growers and roast in house. They also sell other coffee related products, such as flavored syrups.

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