Exploring the world of coffee
A professional investor’s perspective
Ron Kleist, President
Loring Smart Roast, Inc.
Santa Rosa, CA, USA
LEGAL DISCLAIMER:
Ron Kleist is NOT a coffee
professional, unless…
LEGAL DISCLAIMER:
Ron Kleist is NOT a coffee
professional, unless loving to
drink a great cup qualifies me as
such
Roasting Professionals
• Artists, not scientists
– I live in California’s “wine country” and am
surrounded by people with exquisite palates and a
passion for great taste
Roasting Professionals
• Artists, not scientists
• Creating exciting new products and
introducing them to their local community
– Dealing with several variables including crops,
seasons, consumer tastes
Roasting Professionals
• Artists, not scientists
• Creating exciting new products and
introducing them to their local community
• Searching for improved tools and raw
materials.
Personal History
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Sealed Air Corporation – $2.73 Billion USD
Genzyme - $20.1 Billion USD
Sprint - $8.47 Billion USD
JDSUniphase - $2.41 Billion USD
Personal History
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Sealed Air Corporation – $2.73 Billion USD
Genzyme - $20.1 Billion USD
Sprint - $8.47 Billion USD
JDSUniphase - $2.41 Billion USD
Loring Smart Roast, Inc. - Private
Life Cycle Curve
Life Cycle Curve
Double-Humped
6
4
2
0
Start
Early Adopters
Slump
Acceptance
What I See in Coffee
• Huge Market - $50++ Billion USD Beverages
What I See in Coffee
• Huge Market - $50++ Billion USD Beverages
• Growth – influx of new addicts (China, India)
What I See in Coffee
• Huge Market - $50++ Billion USD Beverages
• Growth – influx of new addicts (China, India)
• Proven Profit Potential
What I See in Coffee
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Huge Market - $50++ Billion USD Beverages
Growth – influx of new addicts (China, India)
Proven Profit Potential
Ripe for Change
– Starbucks 20 years ago
What Investors Want
• Growth
– Big potential
$50 Billion of Coffee Beverages Consumed Each Year
$50 Billion of Coffee Beverages Consumed Each Year
6,000,000 Tons of Green Beans Converted Each Year
$50 Billion of Coffee Beverages Consumed Each Year
Nexus = Roasting
6,000,000 Tons of Green Beans Converted Each Year
What Investors Want
• Growth
– Big potential
– Big margins; >50% gross margins so you can afford
to invest into developing a brand
What Investors Want
• Growth
• Unique Answers
– Intellectual property
– Trade secrets
What Investors Want
• Growth
• Unique Answers
• Brand Opportunity
– "The exceptional results that we reported today
for our fiscal third quarter are a testament to the
strength of the Starbucks brand, to the depth of
the company's organizational capabilities, and to
the dedication of our partners around the world,"
commented Troy Alstead, cfo
What Investors Want
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Growth
Unique Answers
Brand Opportunity
Positive cash flow > profits
– Difficult when bean prices jump fast
– Your business ends when you cannot pay your bills
Hot Buttons
• From Bean to Cup
Hot Buttons
• Fresh-roasted
– COSTCO
– Whole Foods
Hot Buttons
• Fresh-roasted
• Precision brewing
– Equipment
– Education
Hot Buttons
• Fresh-roasted
• Precision brewing
• Consumer education
– Evangelists
– What percentage of market needs to demand a
good cup of coffee for Specialty Coffee to
prosper?
Threats
• Beans!!
– Hunt Brothers (Silver)
– Ethiopia’s Bean Soup
– Global warming & reduced production
Threats
• Beans!!
• Credit
– Buying/Leasing becoming more difficult
Threats
• Beans!!
• Credit
• California’s Cancer Concern
– What happens if a warning is posted everywhere
that coffee is consumed?
Threats
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Beans!!
Credit
California’s Cancer Concern
Worker healthcare
– Ergonomics, cervical cancer, poorly educated
Promising Signs
• Be, Act & Learn… Together
– What you are doing here, now, will have profound
benefit to you and your customers for years to
come.
– Politics aside, there is enormous benefit when
working together
Promising Signs
• Be, Act & Learn… Together
• Big players educating the market
– Starbucks marketing >$2 billion annually
– $100 million spent by McDonalds in 2009 just for
the coffee portion of their marketing
Promising Signs
• Be, Act & Learn… Together
• Big players educating the market
• Professional organizations creating standards
– SCAA/SCAE raising standards for excellence
– Quality and consistency go up
Promising Signs
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Be, Act & Learn… Together
Big players educating the market
Professional organizations creating standards
Supply chain changes to meet new demands
– Bean growers
– Roaster equipment manufacturers
– Brewing equipment manufacturers
Words of Wisdom
• Coffee has been counter-cyclical
• Great coffee is only in its infancy
• Specialization is being seen in one industry
after another
– Comment from Costco manager
Loring’s Role
• Get closer to the market to understand its
needs; be a resource to “movers & shakers”
Loring’s Role
• Get closer to the market to understand its
needs; be a resource to “movers & shakers”
• Continually improve our technology
• As beans change and consumer tastes change,
can we provide you with tools that enable you to
do what you want with your beans
Loring’s Role
• Get closer to the market to understand its
needs; be a resource to “movers & shakers”
• Continually improve our technology
• Help reduce threats
• Reduce dependence on fossil fuels and therefore
reduce global warming
• Improve yield of precious resource: coffee bean
• Healthcare for coffee farmers & pickers
Flavor-Lock Roast Process™
• No tipping/scorching
Flavor-Lock Roast Process™
• No tipping/scorching
• Even heating during roasting (typical air roaster)
– Air flow remains unimpeded; virtually no “cookie”
– Stack or drum fire virtually impossible
Flavor-Lock Roast Process™
• No tipping/scorching
• Even heating during roasting (typical air roaster)
• Closed-Loop Atmosphere
– Near-zero oxygen
– Higher humidity
– Reduced seasonal affect
Flavor-Lock Roast Process™
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No tipping/scorching
Even heating during roasting (typical air roaster)
Closed-Loop Atmosphere
Rapid cooling
– Cool in less than 4 minutes
Free Coffee Roaster!
• Smoke-free
Free Coffee Roaster!
• Smoke-free
• Odor-free
Free Coffee Roaster!
• Smoke-free
• Odor-free
• Scorch-free
Free Coffee Roaster!
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Smoke-free
Odor-free
Scorch-free
Risk-free (risk of fire)
Free Coffee Roaster!
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Smoke-free
Odor-free
Scorch-free
Risk-free (risk of fire)
Hassle-free (consistent results, easy to control)
Free Coffee Roaster!
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Smoke-free
Odor-free
Scorch-free
Risk-free (risk of fire)
Hassle-free (consistent results, easy to control)
Cost-free (almost)
– Panda
Tak!
Tack!
Takk!
Dank U!
Danke!
Kiitos!
Pakka Per!
I will do my best to answer
any questions you have