Green coffee at $4.50 per pound becomes roasted coffee at $6.80 before you pack it, and the bag that sells retail for $18 yields a different margin than the five-pound bag you wholesale to a café for $42. If you book green purchases as an expense and roasted sales as revenue without the steps between, wholesale looks like charity and retail looks like print-money.
Specialty coffee roasting is a manufacturing business with two margin profiles, one shrinkage event, and a WIP that lives in the roaster and the cooling tray.
Green-to-Roasted: Where Weight Disappears
Roasting loses 12–20% of green weight as moisture. A 10-pound batch of green at $4.50/lb ($45) that yields 8.4 pounds roasted has a green-only cost of $5.36 per roasted pound before any other cost.
Book it in stages:
- Green purchase:
Dr Inventory — Green Coffee $45/Cr Cash $45. Quantity 10 lb at $4.50, by lot and origin. - Roast: Transfer green to WIP:
Dr WIP — Roasting $45/Cr Inventory — Green $45. Roast, then transfer to roasted:Dr Inventory — Roasted $45/Cr WIP — Roasting $45, but now at 8.4 lb quantity. Unit cost is now $5.36/lb. - Shrinkage is implicit: You did not lose $8.04 of value — you repriced the remaining pounds. Do not book shrinkage as a separate loss unless beans are burned or spilled; the weight loss is part of the conversion.
If you produce defective roast (quakers, scorched batch), then book the loss: Dr COGS — Roast Loss $X / Cr Inventory — Roasted $X for the pounds wasted.
WIP That Isn't Just Beans
Work-in-process for a roaster includes not just beans in the drum but also gas, labor, and packaging staged.
- Direct labor: Roast time, profiling, and cupping. Track minutes per batch and apply a loaded rate.
- Machine cost: Roaster depreciation and maintenance per batch. A $18,000 roaster over 5,000 batches is $3.60 per batch.
- Packaging: Bags, valves, and labels are inventory until used, then part of roasted inventory cost or a separate packaging cost. Don't bury a $0.75 bag in general supplies.
A fully costed roasted pound might be $5.36 green + $0.90 labor and machine + $0.50 packaging = $6.76. That is the cost to compare against wholesale $8.40/lb ($42/5 lb) and retail ~$12–$18/lb depending on bag size.
Wholesale vs. Retail: Two P&Ls, One Ledger
Wholesale and retail have different prices, different costs, and different cash cycles.
- Wholesale: 5-lb bags at $42 ($8.40/lb) to cafés, net-15 terms, delivery cost, and account concentration. Margin per pound is $1.64 ($8.40 − $6.76), 19.5%. Volume is high, margin low, cash is delayed.
- Retail: 12-oz bag at $15 ($20/lb) direct or via e-commerce, with shipping, platform fees, and marketing. Margin per pound is $10+ after fees, but volume is lower and acquisition cost is higher.
Keep the streams separate: Revenue — Wholesale Roasted, Revenue — Retail Roasted, and corresponding COGS — Wholesale and COGS — Retail that each reflect the same $6.76 cost but different fees and delivery.
A single blended margin hides whether wholesale growth is actually diluting profit.
