Co-founder, Maxime Boegler, and Technical Brand Ambassador, Nicholas Flatoff, talk about Sovda's origins and how and why Sovda strives to create affordable roasting equipment: from aiming to include small roasteries to combining expensive machines to being a vertically integrated company.
Sovda Affordability
Nicholas Flatoff: [00:00:00] Welcome to the Sovda podcast. This is Nicholas Flatoff, technical brand ambassador as always joining you from our Portland showroom. We've got some exciting stuff going on here. We're actually moving to a larger facility here in Portland, pretty excited about that, but there might be a little bit of background noise I do apologize for that. We'll just push through it, but that's not what we're here to talk about. We're actually here, I've got our CEO on the line from Belgium. That's Maxime. He's here to chat with me about affordability. We have basically six brand promises. If you've been following our newsletter that goes out, we've been discussing some of the tenants that we found our company on. We figured this one was one that was worth actually having an in-depth conversation on. So I think at this point I just want to turn it over to Maxime who's our director of our ship here. He's got a lot of great thoughts on affordability. So Maxime, what is affordability to you as far as it pertains to manufacturing and the specialty coffee industry?
Maxime Boegler: [00:00:56] Well, I think first of all, for us, I remember where we were defining these brand promises and we came [up] with affordability and from the members of the team we had, some... not push back, but sort of concern because it sounded like Sovda is cheap. And so by affordability, what we mean is really that from the beginning, the goal was to be, I would say inclusive. So not only to address to the roasters, who want the best of the best, and who really have a lot of money to invest into that, but also for other roasters who just want to grow and get better equipment.
And frankly, when we started, that's where we were at, too. So this affordability comes from a frustration, this brand promise. A frustration that we had with the equipment that we were looking for. And that's why we decided to make it one of our brand promises, something for any product we launch. But not only the products, on the way we ran the company we want to make a business model that is actually inclusive.
Nicholas Flatoff: [00:02:15] We care so much about the price point on this for you guys who are interested in the product or already have our products, Maxime's actually working remote from home, our CEO is. We don't have offices or anything like that. We're keeping the cost as low as possible to get you guys the quality products at a reasonable price point.
Any aspect of overhead that we can reduce, we really love to do that. Even our showroom, managing to subsidize that with having a live coffee roaster in. We've talked about the benefits of that in the past. The whole mentality of structuring the company to be super, super efficient at that price point level and also in design, but we'll get into that a little bit later.
So first of all, just starting off with the price point of the product and the equipment, Sovda has a pretty unique structure that we're using to get the same quality, or better quality, finish quality and manufacturing quality at just a fundamentally lower price point. And this is one of those topics that some people see, okay, it's manufactured in China, perceiving that as a negative. And we have a different philosophy. We aren't just buying products off the shelf, slapping a label on it in most cases and sending it out, we have a much more unique structure and a lot of history with China. You were there at the beginning of this Maxime. Do you want to dive into that a little bit?
Maxime Boegler: [00:03:26] So I think Sovda was born out of a frustration, a frustration that the people from Torch Coffee had when they were trying to process coffee there in China, working with a lot of natural and honey. And at the time, the goal was to sort the cherry and so they were looking for an optical sorter there. Finding really good equipment, really not affordable or finding some sorters really affordable, but really a big bet to know whether it's going to work for your specific application and not specifically done for coffee. So starting with fixing this problem started with actually finding a manufacturer.
We were already doing this and understanding how they could make a product at an affordable price point. Specifically for coffee, coffee cherry here. And then have it for their own operation. And then we realized that the next thing we wanted to sort was the coffee once it was roasted, specifically natural and honey, because Quakers. And so now three years later, we don't have a cherry sorter, but we have this color sorter, the Pearl Mini, that was initially used in the roastery in China of Torch, who was a partner from the beginning. This relationship, we still have it with the same factory who is actually in a city where you will find all the factories for color sorters, also manufacturing for non-Chinese brands, because it's really a cluster of optical sorter [manufacturers] in the same city, university with a PhD program on this topic. It's very interesting. And so it's really a hub, not only in China, but worldwide for the color sorter. And that's where we manufactured the color sorter. For other products, we are still working with the same people as the beginning. We have grown the relationship I'd say, by investing in the company, which helped us to have more influence and control on the way things are done, but also with really paving the way for something long-term. And this is, I think, what differentiates us from most of the people who work together with Chinese manufacturers and firstly, it was very natural. Maybe not only because yes, it's economically a good choice to produce in China, but also Sovda started in China.
So Samuel and I were both living in China, working with Chinese people, speaking the language to some extent for me. That, so that was just, just a natural choice as well. And three years later, we are pursuing this because for the reason I mentioned before that actually in some sectors, it's just where the quality is as well, where the technologies and all the other brands also have the manufacturing partner in China, even if they are not [a] Chinese brand. So that's one of the reasons we continue to manufacture there.
Nicholas Flatoff: [00:06:50] Going back to trying to get the quality up, the quality control, with our fabrication factory, the one where we build all our cyclones, lifts, the custom engineering that we do on the side, that is a unique structure as well in that we're actually owner-partners with that factory. So we have a stake in that factory and it gives us a tighter timeline on production. It gives us a little bit more control over quality control. That's a pretty unique setup there. That's one of the big differentiators for the in-house fabrication work that we do is that it isn't contracted out. It's actually our facility, and we have employees on the ground, Sam Pan on the ground there, making sure that everything's nice and tight. Did you have any thoughts on that whole acquisition and the control that that's provided us over our products?
Maxime Boegler: [00:07:33] To me, actually, the fact that you own a part of a factory, it's just a signal that it means you are there for the long-term. What really matters is the people, actually, who are onsite and who are doing the quality control and the constant communication, because it's not because you have someone there that even meets your standards. Right? So it's, I think rather that, that is what help us reach the quality we want to reach. It's sending a signal that we are there the long-term. Yeah, it's quite unique. That's true.
Nicholas Flatoff: [00:08:07] Beyond just the way that it's fabricated and, you know, manufacturing something in an economic way and maintaining a higher quality standard, than what the industry might expect on it for the price point, that transitions over pretty well. Maybe I'll say, maximizes the design aspect of our equipment, which is it's not just that we're able to pretty efficiently build stuff at a high quality in a really good price, but the stuff that we're building actually has, I'm gonna bring an econ term here, we'll call it comparative advantage. The obvious one that comes to my mind is the destoner lift. We have an integrated fluid bed destoner that goes into one of our conveyance systems, and again, this is one of those conveyance systems where it doesn't need to go onto Sovda equipment, we do custom mounting brackets for pretty much anything you'd want to load coffee into. So this will, you know, go into competitors weigh and fills, or you could have it just drop into a Brute bin if you wanted, all kinds of different stuff. But what you're doing is able to convey coffee and destone in one flow. You guys have heard about this if you've listened to the podcast in the past. So not only is it saving a workflow step, but it's actually saving you the purchase of two pieces of equipment. You're not having to buy a separate density based destoner, which in a lot of cases, a higher output density based destoner is more expensive than our integrated density based destoner lift. So you're not buying a density based destoner plus a conveyance system. And that kind of gets into the design philosophy a little bit as well, but it impacts affordability on a more holistic level when you're building out your roastery. What kind of thoughts and insights can you bring in having been with the company for so long that are tied into the design philosophy as it pertains to affordability?
Maxime Boegler: [00:09:55] I think what you said describes it well, and to come up with a product like this, I think it's just a way a [?], the designer, the engineer, anyone really in the company is wired. If you look for affordability, then perhaps you realize that you will not become affordable by making a really, really cheap standalone destoner, because at some point you cannot go lower, right?
So perhaps just by addressing the problem a little different and taking a step back and thinking, okay, the roaster is doing those steps, conveying coffee and destoning coffee. Maybe rather than having a cheap conveyor and a cheap destoner, there is something we can do. We can take any part that is redundant and make a single product. And so I think this is really the way everyone in the company is wired to think about this affordability that allows such product to come and change how things are done.
Nicholas Flatoff: [00:11:06] We were chatting about this, trying to figure out how to make this a little bit more streamlined, but I think when you look at the precision fill, that this is maybe something that's not quite as obvious on the surface level as the integrated destoner conveyance system, but the precision fill itself that the competitors to the precision fill are not dedicated specifically to specialty coffee. So when you're spending money on those, you're actually paying for a lot of engineering and a lot of accessories that go into making those weigh and fill products capable of packaging other bulk foods, be it nuts or popcorn or tea. And they're not, they're not that laser focused on coffee. They need to do multiple materials so they need more engineering for larger pieces and lighter pieces, and they come with different adapters and things like that that you don't necessarily need. Or in some cases you have to buy extra adapters specifically for coffee to make them work well. That's one that, you know, on the surface level just looking at marketing materials or the equipment on the website, is a little bit less apparent, but we're actually able at a similar price point to make something that does coffee better. That's why we can go all the way from the four ounce up to, I think we can do 10 pound bags out of it right now, five pound bulk bags very quickly because it's designed only to not compromise on coffee. And sure, if you put nuts in, it might not work as well. But it's not designed for nuts, you know, it's for roasted coffee. And so there's, there's no compromise on the equipment, which gets our price point down a little bit less, relative to other equipment that would maybe be at the same speed, which frankly, on the five pounds, I'm not really aware of anything that can do 12 ounces to five pounds in the same speed as the precision fill, which I guess is proof that that's working,
Transitioning over, there's a third aspect to affordability here, and this is hidden costs and transparency. If you've ever built out a coffee roastery, I mean, I'm going to draw back on my time doing roaster tech work, we would do it turnkey installs. And one of the biggest frustrations for people who are either moving into a larger coffee roastery or starting their own coffee roastery is you buy a piece of equipment and you know, let's say you drop 60 to 90 grand on your coffee roaster, and you're like, okay, that's great, we'll plop it in and we'll get it done. They don't realize that there's another, sometimes $20,000, $30,000, $40,000 in contract labor that's required to get that thing going. You have to purchase the venting, you have to pay an HVAC contractor to get the venting installed. You have to run gas lines, you have to pay a licensed gas plumber to do the certification on the lines and the costs just keeps stacking up and stacking up and stacking up. And in many cases, OEMs or the manufacturers either don't offer installation, in house installation, or you get a quote from them and it costs more than the roaster cost itself. And it's, it's wild. It's insane to see.
And I think that there's a third, the thing that we really wanted to make sure was foundational in Sovda to differentiate us from the market is that we do affordable at-cost installs. On the Pearl Mini we do it for all Pearl Minis and then it's an option if you wanted us to fly out and do your, your precision fill, your lift, or conveyance system for you.
And so then you've got us who were involved in the sales process, in the R&D process and the tech support process and in the installation process coming out and giving you a great quality service at a relatively reasonable price, much more reasonable, I mean, you know, some of the legacy roaster manufacturers, we might be a 10th of the cost per day on doing installs, for example, which is pretty wild. So Maxime, yeah, I just wanted to turn that over to you and hear some of the internal dialogue that you and Samuel had in setting up the structure of the business that way. Obviously that was before my time and that's something I'm personally curious about.
Maxime Boegler: [00:15:01] Well, for me, it's interesting what you were saying on how in the industry it is common practice to buy equipment and then figure out how you will assemble it or commission it and having no idea how much it would actually cost you. So for me being new in the industry, I didn't have this reference. So what we were doing was actually quite logical to me. So when people would buy equipment, we would tell them at the same time, how much you would cost them to assemble it and commission it, and since we are, we were at the moment, very new in this space, of color sorter for roasted coffee there isn't a technician who knows how to do this. So yes, it seems a bit incidental that we're doing it ourselves, but actually it's also, I think, linked to the business model of Sovda and how we tried to reach affordability.
So first aspect we discussed about was manufacturing in China, et cetera. The other aspect was under products or either the way a specific product is designed and basically taking out any unnecessary feature for a customer and our customer, our specialty roaster, midsize. Anything we think is not needed or doesn't justify the added cost, we take it out. So [?] product the Pearl Mini, the precision fill. And then to go back to the business model, taking out the middleman when we can. And so that means doing ourself, the installation and commissioning. So really, I think it just seems very much aligned with what we're trying to do, which is to be inclusive. And it was not a big tension or big... for us there was no other alternative actually to do than to do it ourselves in most of countries, I think in 90% of the countries where we are, we do business direct and that means we send our own technician there. This is how we can be transparent because we know exactly how much it's going to cost, we invoice people at the same time as the equipment, we do very reasonable margin on this, and that's how you reach, I think affordable, inclusive product.
Nicholas Flatoff: [00:17:36] That's a great summary of all the three tenets that we build out into the affordability foundation as one of our core values.
Okay, well, Maxime, I don't really think I've got anything more to add on the subject of affordability. You just gave us a great summary on the three points that are really quite impactful on our equipment. I just kind of wanted to give you the space to add, is there anything else that you wanted to bring up on the concept of affordability before we transition out of this podcast recording?
Maxime Boegler: [00:18:08] I think what's really important, and what I want to communicate is that our product, depending with who you compare them, I think they will not seem affordable. For some of the products saying that $8,000 precision fill so, which is a fill and weight machine is affordable. You can argue, you can find it for, I don't know, 10 times cheaper, but actually when you go a little bit closer and look at what this product does a lot of the time you, you hear people use this and basically it doesn't do the same thing at all.
And so I think you have to understand affordable as a product. A great price for value that will actually eventually help you save money. That's maybe the last aspect we haven't really touched on, but all our product, they are really designed with the intention to help roasters improve the workflow, improve the quality, but also improve the bottom line on the business.
Nicholas Flatoff: [00:19:18] We're a premium product segment and we're only a little bit more than some of the discount product segment competitors. And I think that's important not only for build quality, but user interaction. So the ability to, for example, on the precision fill takes maybe three, four seconds to swap a filler head.
You don't need to do a full load cell swap. And that's all it takes, that and three button taps, to go from a 12 ounce bag up to a five pound bag and the five pound bags fill fricking fast. It's the funnest thing when I'm doing a remote commissionings on that, you know, I'll be like, okay, we're ready to do the first fill, do you have a bag under the spout? Are you sure you've got a bag under the spout? Okay. You got a bag under the spout. Hold it tight and tap the foot pedal. And you hear the whoooosh of the five pounds going in. And more than half the time, [the] person on the other end just starts laughing. And they're like, holy cow, that's fast. You know, you multiply that over every single five pound bag you've got to fill for the next 10 years of your roastery... we calculated it out in one use case, it was someone doing a... they had a 15 kilo roasting about 18 hours a week. They were looking at less than a 16 month ROI on it, just because of the speed and the labor that they're saving.
And, you know, if you're in a smaller roastery environment, you're maybe the, you know, the founder or one of the co-founders, the one thing he can't get back is time. So even if you're not paying somebody for labor and saving bottom line on that, you're making more time for yourself. So whether it's an actual dollars on the bottom line or time saved for yourself, you do the math pretty quick on it, and it's pretty amazing how much time you can be saving even at your current capacity, much more so if you grow, which is of course the goal for every business in coffee. You double your capacity, this equipment goes up with you. Everything in our product lineup tends to be affordable enough for somebody doing, you know, 15 hours a week on a 15 kilo or lower roaster, but it will grow all the way up to 250 kilos an hour product. And that's a massive shift there. It saves you time, saves you money, saves your employees back. You know, there's a whole aspect of ergonomics when you have a lift rather than bringing a pail up to the top of a weigh and fill. There's a ton of user interface type stuff that if you've ever used the product becomes apparent really, really quickly on how great that is and how much of a value add that is even on the financial side and time side for your roasting operations.
On that note, I think it's time to wrap it up. We appreciate all you guys tuning in and engaging with the equipment that we're putting out for those specialty coffee industry. We're super excited about it. A ton of fun stuff going on here. I mentioned in the beginning where we're relocating our showroom to a larger facility. Want to do just a little, a little bit of a primer on that.
We finished our factory testing on our precision silo, and we should be having that shipped out in a couple of weeks here. And we're going to be having that installed in our showroom in Portland. And we're not ready to sell it yet, we still want to do some integration testing with Torch Coffee who's a roaster that works out of the showroom and then all our co-roasting people, give them enough time to give us feedback on what they need on an operational standpoint to improve the product, but we're happy with the functionality of the product that's hitting our engineering goals. So now it's really just that ergonomic and interaction type stuff that we want to sort out and get actual operational experience from, from all the different perspectives that will be using the new showroom. A ton of exciting stuff going on here in Portland with our product lineup, our showroom, and if you're interested in the, give us a month or two, and we'll be able to do some remote demos or in person demos on that product, too. A pretty cool product and we're stoked about it. And with that, you know, thanks again for tuning in. Like, and subscribe, please feel free to reach out to us. You can find our emails on our website and all our product info there. And I'll turn it over to Maxime for any closing words,
Maxime Boegler: [00:22:56] Affordability for us means to be inclusive. So really, if you have any questions, you don't have to be determined to get our equipment. You can be just intrigued or just wondering up on the conversation. Reach out to us and we'll see how we can get on this journey together.
Nicholas Flatoff: [00:23:16] Thanks guys. Have a good one. Cheers.