Below is a list of factors to consider when understanding your coffee/tea manufacturing and/or brand.
Public Information to Follow
Financial Model Considerations
- Irregular cash flow
- Seasonality of orders: Hot coffee tends to be a colder weather drink. Seasonal brews should be factored in appropriately.
- Wholesalers payment terms and conditions
- Profit drivers
- Brand – A deep understanding of your total addressable market and how your brand resonates and captures this market. This area will be baked into your assumptions and revenue drivers.
- Managing inventory – Make sure demand matches your finished goods production throughout the year. Important metrics will be:
- Days Sales of Inventory (DSI): (Avg inventory/COGS) * 365 which measures the average number of days it takes to sell off inventory.
- Inventory Turnover: (COGS/Avg Value of Inventory) which measures how many times inventory has been replaced in a period.
- High utilization of assets (if you are roasting the beans yourself) – maximizing production and minimizing waste. This will require monitoring unfinished to finished goods.
Recent Industry Metrics (Companies <$5M revenue)
Highlights from this vertical analysis and financial ratios:
- Advertising in the post pandemic world is half 2019 (revenue is higher year-over-year)
- Higher cost of coffee beans towards the end of 2021 weren’t passed along to the consumer
- Manufacturers are delaying payments (days payables increasing) to venders and shortening the time to receive payments (days receivables cut in half) compared to pre-pandemic
- Cash and other short term assets are higher than pre-pandemic (current ratio)
For more information on building financial models see here.
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