GCR linkedin Logo

Eversys CCO Kamal Bengougam explains why quality costs

From the April 2018 issue.

If decisions are solely driven by price as opposed to value and if your unique value proposition is based on inferior equipment, the law of nature dictates that you will, ultimately, join the dinosaurs on their road to oblivion.

 

Some people say you pay for what you get while others buy what's cheapest. But why are some things more expensive than others? Is it simply out of wanting to make a greater profit margin, or is there a real difference in quality between similar products?

Imagine someone who has never seen a car entering a car showroom and seeing the massive price differences, wondering why all these vehicles that do the same thing have such a discrepancy in cost? Is the answer branding, greed or is there a case to be made for quality?

In the realm of professional coffee equipment, this conundrum exists as well. Competitors are trying to match each other in the price stakes, but at what cost and who pays in the end? Companies must make a profit to survive, so a cost reduction almost always reflects a decrease in quality as well. More to the point, where are those costs taken from? You can't cut costs from the outside shell as that's what people see. So the savings must come from the inside, from the engine that creates the product that customers buy.

The journey of the bean begins in the grinder, then the brewing chamber - with the boilers playing the supporting role - and is then dispensed into the cup. Quality is dictated by material choice, power, boiler capacity and brewing technique - as well as the elements of control that promote and maintain in-cup quality and consistency. Developing, preserving and maintaining this trinity of grinder-brewer-electronic intelligence requires noble materials, not plastic, engineering competence and investment. Controlling their harmonic relationship requires not only great care in programming, but also information technology staff who have great insight into the journey of the bean to produce the coffee in the cup.

Ultimately, the customer pays the price as the cost of hot beverages is fairly constant in any given market. The difference comes from the products used - the equipment, the staff and the bean itself. For those who major in numbers, the difference in cup cost between a US$20,000 and a US$10,000 machine producing 50,000 cups per year for four years is a mere two cents. Do we think the customer is worth that extra cost of less than 1 per cent of the price of the final product? Would the customer be happy to pay two cents more for a better cup and would the business then be able to sell more cups of a higher quality?

In my opinion, customers can only be fooled for so long and, in the long term, quality will always win. While one may build coffee equipment with television-like interfaces, ultimately what matters most is the product you pay for, the product in the cup. When I look at the multitude of coffee shops that are scattered around the world's High Streets, I always wonder what their area of differentiation might be, what their value propositions and customer experiences are based upon. When selling hot beverages built mostly around two products - coffee beans and milk - how do you create uniqueness and compel people to spend their hard earned cash in your establishment? The root of that choice has to be steeped in genuine quality, not frills!

When I look at the traditional machine landscape, the tendency leans towards building objects defined by the beauty of their extravagant design, elegant shapes and nobility of materials. In the realm of super-automatics, it is mainly boxes with giant screens. So, how do you reconcile the two worlds with such a chasm of offerings? Should businesses be charging more for craft and does craft always equate to greater quality? Or could the two realms be reconciled to offer the best of both worlds - design, quality, consistency and productivity. Can the traditional world make a cameo appearance in the realm of automatism and introduce emotion, flair and the human touch?
Let's go back to the automobile industry where not so long ago, diesel fuel reigned supreme. Now we've realised it's a false economy to buy cheap, as the very people trying to save money through cheaper fuel are being killed by it.

So where does that leave us in the coffee industry? Shall we generate another one of these elusive waves - I think we're on the 6th but even I'm not so sure - to justify that a customer is worth an extra two cents per cup? Or will reason prevail and businesses realise that while the end may sometimes justify the means, that this end may lead to the very destruction of their business? That if success and prosperity are truly based on differentiation and that customers really value quality, then it must be provided for them without further ado.

So does that mean goodbye to free on-loan equipment linked to exorbitant pricing for low-quality coffee beans? Probably not, as people don't always wise up with age. Decisions have consequences and making poor ones - while possibly resolving today's pressing issues - surely compromise tomorrow's prosperity. If a roaster is willing to provide you a free on-loan machine and you believe that he too has to turn a profit, why would he do it if your volume of sales does not justify his investment? Why would he provide you with a decent piece of equipment and beans if his ultimate goal was to optimise his own profit? If your establishment has volume you would be better off buying your own equipment and beans separately, holding suppliers accountable for the quality your customers deserve.

If your volume is smaller, you should also do the same thing in order to compete and grow, as the roaster will surely add to your worries by supplying you with inferior products.

Finally, if you don't possess the capital to purchase the right equipment, why go into business in the first place and take a risk on the basis of providing inferior products while trying to compete in a crowded landscape?

In summary, and in general, people do reap what they sow. If decisions are solely driven by price as opposed to value and if your unique value proposition is based on inferior equipment, the law of nature dictates that you will, ultimately, join the dinosaurs on their road to oblivion.

Unless, that is, you believe your customers are worth an extra two cents a cup?

Value them, and in turn they will value you and your business.

  • GCR Newsletter

    Sign up now to Global Coffee Report's newsletter and keep up to date with everything coffee.

© Copyright 2018 Prime Creative Media Pty Ltd. All rights reserved.

ABN: 51 127 239 212

X