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Innovation
Building the Javabot experience: How Roasting Plant found the strategy to match its tech
IMD’s Jim Pulcrano explains how Roasting Plant found the business model to bring an innovative new technology to market.
Whether brewed in an espresso machine, cafetière or Turkish cezve, coffee has always been more than just a drink. Over the centuries, humans have drunk coffee not purely for the taste, but also for medicinal, ritual and social reasons. In 17th-century Britain, the coffee houses were known as “penny universities,” as customers came together to debate the science, politics and literature of the day. In 2022, the trend was still on an upward trajectory, with global sales of $18.9bn, up a huge 33.2% from as recently as 2017.
Founded in 2001 by industrial engineer Mike Caswell, Roasting Plant brought innovative coffee technology in the form of its Javabot™ Coffee System. The Javabot conveys unroasted beans through clear penumatic tubes, roasts them, and after resting, sends them to fully integrated superautomatic brewers.
Javabot’s integrated in-store automation enables Roasting Plant retail stores to deliver 20% to 30%+ EBITDA, far better than the average. The technology lowers labor requirements by 30% compared to Starbucks and roasting coffee in-store provides a 4x to 8x margin gain.
With the Javabot, Roasting Plant hoped to make a big splash in the market. However, as Mike and his team soon discovered, commercial success requires more than a great technology; it needs an understanding of customers and the strategy to match.
The price of industry buy-in
Caswell had an inside view of the coffee industry. His role as a director of profit improvement at Starbucks gave him an understanding of the logistical reality of running coffee stores, from managing supply chains to reducing product waste. It also gave him an awareness of a growing group of customers who were looking for a higher-quality coffee than these chains could offer. Through the Javabot, Caswell looked to solve the logistical issues, while bringing a vastly superior product to market.
On the logistics side, the machine offers stores a one-third reduction in labor costs, significant margin gains from in-store roasting, reduced waste and a more streamlined supply chain. Suppliers deliver unroasted beans directly to outlets, without a requirement for them to be warehoused after roasting, meaning that optimal freshness is assured.
Committed and rigorous, Caswell led the company and created 24 worldwide patents and two registered trademarks, and opened 7 stores in the US. He was also dedicated to refining and augmenting the Javabot, adding new features, including in 2015 a SuperChiller to cool hot-brewed by the cup coffee for zero dilution iced coffee.
“Industry buy-in is essential; no technology can thrive without it.”
However, despite the solid business case for the Javabot, few within the coffee industry were interested. Having already achieved ample financial success, major players such as Starbucks and Costa did not see the need to acquire a new technology whose implementation would involve restructuring of their supply chains, and many struggled to believe that a machine could make as good a cup of coffee as a human.
Roasting Plant opened in New York in 2007 but moves towards a licensing model for further US stores faltered. Bogged down by legal wrangles with licensees, the business was losing momentum.
Wake up and smell the opportunity
Rather than go into his shell, however, Caswell was bold enough to try a different approach.
Jamie Robertson, a business strategist with extensive corporate leadership experience, on the hunt for a new project, was introduced to the Roasting Plant team by one of his IMD professors – a powerful example of the power of networking. Robertson wanted to bring Roasting Plant and Javabot to the UK but, rather than become a licensee, he was keen to partner closely with and take on a significant role in the business. A joint venture was created.
The new UK joint venture would be led by Robertson as CEO, and Caswell serving as a director supported by the Roasting Plant corporate team from the US. This structure allowed Roasting Plant to try out its business model in a new market, geographically distant from their main business, which meant they could experiment freely, learning lessons and exploring opportunities, with few repercussions for the main business if the venture ultimately failed.
As it turned out, the UK operation proved an almost immediate success. The first store opened at London Bridge in 2019, and consistently achieved a 25% operating margin. The second opened in 2020, generating 82% more revenue than the first store in its first 10 days. The UK expansion was not the obvious next step for Roasting Plant, but a positive intent and a willingness to step outside their comfort zone paid dividends for Caswell and Robertson.
More than just a cup of coffee
Robertson understood that, although the Javabot already made great coffee and delivered superior business economics, it needed to become the centerpiece of a great experience, too if the retail strategy the company had chosen was going to succeed. In the licensing model, there had often been a mismatch between the aims of Roasting Plant to build a superior brand and the licensees’ prioritization of reducing cost and volume. In the UK operation, however, Robertson chose to put the emphasis squarely on customer experience.
The Javabot already offered consumers greater speed of service, and the ability to select their own blend of beans. But the UK stores doubled down on the all-round experience, capitalizing on the exciting spectacle of the beans flying through the clear tubes of the Javabot. Robertson hired a designer to make the most of this selling point of the Roasting Plant experience, helping the business to stand out from the competition.
Roasting Plant’s journey from promising technology to viable international business had not been without setbacks. But thanks to the company’s willingness to take a risk on a new JV, the combination of a fresh, innovative approach and the cutting-edge Javabot technology has taken Caswell and his business where they wanted to go.
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