BeanScene Magazine

When Archie Papadopoulos opened his café in Melbourne’s Albert Park just over two years ago, he had a lot of expenses to cover. Staffing, stocking – the list of expenses for a new business goes on – but one cost he didn’t have to cover was the cost of his coffee equipment.

“Financially, not having to pay for the machine really gives you a kick start when you’re opening a business,” he says. “There are a lot of issues you have to cover. Luckily the machine wasn’t one of them.”

Archie, like many café owners Australia wide, got his espresso machine for free as part of his arrangement with his coffee supplier Map Coffee.

Well – not exactly free. The machine, along with cups and umbrellas, were given to him as part of his contract to exclusively purchase Map Coffee.

Two years later, Archie emphasises that he couldn’t be happier with the arrangement, and he’s just signed another three-year contract. In addition to the equipment and coffee, Archie notes he’s benefitted from the support of his Account Manager Giovanni Ienari.

Archie was able to try out the coffee and the machine before committing to the contract, and he notes that the open and honest approach that Giovanni has brought to the relationship has ensured he’s never looked back on his decision.

“I’ve knocked back eight different roasters since I opened, they’ve offered me everything from furniture to take-away cups and even television sets,” he says. “But I won’t do it.”

While this close roaster relationship has proven beneficial for many cafés, others have decided to go it alone. Mister Bojangles, a distinguished café located in a competitive neighbourhood of Melbourne’s inner northern suburbs, is one such venue. When owners Lou Camboni and Marika Mato took over the café a few years ago, they decided to replace the existing loaned machine with one they purchased themselves. The move was a calculated effort to ensure they weren’t locked into any roasting company, and had the freedom to change coffee suppliers as they wished.

“When you sign on with a company, it’s hard to tell if the quality is going to be consistent. The only way around that is to purchase your own machine and grinders,” says Lou, who’s gone through three specialty roasters since opening his café and is currently sourcing their coffee from newcomers Axil Coffee. Lou notes they’ve been quite happy with their decision, as they’ve benefitted significantly from the quality of beans and support they’ve received from Axil.

“It gives you so much power not to have a contract. It also keeps roasters on their toes,” adds Lou.

The decision, however, was an expensive one. The pair invested around $20,000 into having their own machine.

“We were aiming for the top and for that we needed the top equipment,” he says. 

As the owner of the equipment, Lou is responsible for covering the service and maintenance costs. It helps that the pair are experienced coffee connoisseurs, and knew what they were getting into when they purchased the equipment. With a technical background, Lou is able to cover most of the servicing and minor repairs of the machine himself.

As the Australian coffee scene continues to mature, Lou and Marika’s decision versus Archie’s is becoming increasingly representative of the decision cafés across the country are faced with. Although many cafés are choosing to purchase their own equipment, increasing levels of competition are seeing roasters do whatever it takes to win a contract – and offering free equipment is topping the list of the most popular way to win business. 

Ducale Coffee’s General Manager Henri Kalisse can’t help but express his frustration at the current arrangement. While he notes Ducale does provide free-on-loan machines – as the market requires – he welcomes the move for cafés to purchase their own equipment.

“All of us here at Ducale, if we were to open a café, we would invest in our own equipment,” he says. “You wouldn’t expect the grocer who’s selling you potatoes to provide you with a deep fryer, but for some reason in the coffee industry we expect that kind of arrangement.”

Especially in situations where cafés are looking for top-of-the-line machines, he says most roasters simply can’t afford to pay for top brands and still generate a return on investment just selling coffee. He notes that not all cafés starting out need top-end espresso machines, depending on where they are pitching their business and the skill set of their baristas.

“We want customers to be using the kind of equipment they want to use – if they can use it,” he says. “Espresso machines can be like Ferraris. There are a lot of kids out there I wouldn’t give a Ferrari to.”
Ducale, like many roasters, has an arrangement with an espresso machine manufacturer, and provides a number of options to their customers. While they are quality machines, Henri notes that it may not be the right fit for every customer. When a café isn’t comfortable with their machine, he says this can cause more angst than the supposed savings helps.

“It’s a bit of a false economy,” he says. “They think they’re getting the benefit from a free coffee machine, but if it’s not the coffee machine they want, they’ll spend more time stressing over the machine than they will taking care of their customers.”

The economic problems that free on loan systems create extends beyond just the café and roasters, but all the way up the supply chain.

Andrew Ford, of specialty coffee importer and trader MTC Group, notes that the trend towards free on loan that emerged in the 1980s resulted in significant cost and cash-flow implications for specialty roasters, which has in turn caused problems on the supply end.

“[Roasters] have to outlay $10,000 to $20,000 for a new café account and they don’t recoup that investment for two to three years. This means that they don’t have the free cash to buy green coffee,” he says. “So the green coffee industry captured their share of the growth in the market with free credit to the roasters.”

Andrew notes that the situation today is that cafés are now expecting free on loan equipment, and roasters are in turn expecting credit for green coffee.

The reality is that many cafés would love to purchase their own equipment, but for many start-ups with little capital the offer of a free machine is simply too difficult to pass up. If capital is the problem, however, there does exists an alternative in the form of finance companies that offer equipment to rent, with the option to purchase the machines down the track.

Silver Chef is one such company. Based in Brisbane, the company’s rent-try-buy arrangement offers 12-month rental agreements to give cafés the flexibility of choosing their own equipment without the costs. Silver Chef purchases the equipment on behalf of the cafés, and then rents it to them. At the end of the agreement, the café has the option to purchase the machine from Silver Chef, with credit for 75 per cent of what they paid throughout the year.

“Financially, there’s a huge benefit to not paying for a machine, it’s all about working capital,” says Damien Guivarra, National Sales Manager for Silver Chef. “We would say to cafés to hold onto their working capital. It’s the most valuable thing you have as a business.”