The Goatley family has a deep connection to Central America – and to coffee. Richard was born in El Salvador and Tim was born in Guatemala and his parents worked as missionaries in the area. While they were living there, they met and befriended some local coffee farmers and, after returning to New Zealand in 1993, those two worlds collided when Richard, Tim and Phil set up Altezano Brothers in 1999.
In the ‘90s and early 2000s, Richard Goatley says there “weren’t lots of people bringing raw coffee into New Zealand”. John Burton had started in 1985 and Fairtrade was just starting out, he says, but “90% of the brands were buying the same green beans and roasting them”.
They saw an opportunity to bring in “high quality specialty coffees from Central America that weren’t available here and compete with the commodity stuff”. At times that has been quite difficult, he says – whether it’s due to difficulties sourcing coffee in turbulent times in those countries or pesky pandemics that emptied out cities of coffee drinkers – “but on the whole we’ve been able to do that”.
Like many other New Zealand coffee brands, in addition to roasting, they also invested in a mobile coffee cart and took it to a range of different gigs. They had “a few hits and plenty of misses with that” and eventually opened their first cafe in Symonds St, Auckland.
“‘Wet coffee’ is good for cashflow but it’s really difficult to be profitable, and it usually takes longer to get paid when you’re selling beans, so they complemented each other.”
Altezano – a combination of the Spanish words for altitude and artisan – gets its coffee from all over the world now, but it still sticks by a very particular set of parameters.
“We’re 100% specialty. We want traceable, in season, specialty grade coffee … If we say we want traceable coffee that means when the coffee is processed they need to keep it separate from the rest of the coffee from other farmers in the region. They need to make sure it has the right moisture content, and that all has cost implications for the mills, and the farmers, and us, the buyers.”
Paying a premium for that quality and transparency is now generally accepted by New Zealand and Australian coffee drinkers, he says.
“Because the industry has always been dominated by the specialty industry, we now enjoy a very high standard of coffee.”
A number of domestic coffee brands like Allpress, Supreme, Eighthirty, Atomic, Havana and L’affare have been sold to bigger companies or private equity firms in recent years and whether it’s a way to fund growth or a way for founders to exit and get a return for the effort they’ve put in, Goatley is “more than happy for other brands to be bought”. But scaling up is slightly counterintuitive to the idea of specialty, he says, and that can make it hard to retain the values as you grow.
“You’re producing so much that you can’t buy enough of a specialty product and still call it specialty.”
Being small also means you can be nimble when things inevitably change.
“If I’m supplying BP and doing their coffee, that’s at a contract rate, and your margins are so tight that any price changes might make you bleed.”
Rather than seeing these purchases as an issue for independent operators, he sees the recent rationalisation as a good opportunity for niche players: cafe owners are an eclectic bunch, so they may not want to keep buying beans from big corporates, which often struggle to get their small business tone right, and some of the founders who led the growth and created the loyalty in the first place tend to drift away from the business when it’s sold, so the connection is lost and the potential for the cafe to switch coffee roasters increases.
While Altezano has grown (it now has three flagship cafes after closing one cafe and a hole-in-the-wall last year, it supplies around 50 cafes and restaurants, mostly in Auckland, and has steadily increased its ecommerce sales across the country since they launched a new website this year), it’s approach has been to go deeper rather than wider. Just as many wine drinkers are willing to pay a premium for unique flavours and understand the concept of terroir, the same is increasingly true in the world of single origin coffee.
“We have a lot more options now. We always have something in our stable that is really quite special and it tends to be our filter offering. We struggle to charge a massive premium on it, but you always want to have something different. That’s your fun stuff; you need the sizzle and the steak.”
Even without a pandemic, he says it is increasingly difficult to make a buck in the coffee game, however.
“In New Zealand, we’re fighting the big foreign exchange elephant in the room. Right now, growers aren’t getting a cent more, but it’s costing us a boatload more to bring in [because of the exchange rate and freight increases], which is why you end up in these perverse situations where the price goes up but the farmers don’t benefit.”
It’s also increasingly easy to get into the cafe business, which means there is now a whole heap more competition.
“Back in the day, there would have been one cafe on a city block that would cost a lot to open, and there was some margin there. Now you’ve got six cafes on one block, often owned by really young people.”
As an example, he points to the experience of brother Phil, who opened the first franchised Sierra Cafe in New Zealand.
“Aside from paying a lot of money for the franchise rights, you had to buy everything yourself. You probably needed $300k to open a cafe. Now all you need is the idea and you sign your life away in credit forms. What is quite common is if you’re a known entity and you’ve been successful before, you can have your equipment supplied [by the roasters as part of a supply deal]. But if you aren’t, you need finance and there are usually pretty onerous rates. There’s a lot of liability behind those doors and a lot of it is fuelled by this romantic notion of what it’s like to run a cafe.”
There is a lot of elasticity when it comes to what people will pay for a coffee and the rise of alternative milks proves it, he says, but that also creates additional challenges.
“I have clients stressing out about charging $6 for a latte, but every day there are people paying $7 for a coffee because they want oat milk … You need to be busy and serve coffee after coffee [if you want to be profitable] and lots of different choices actually slows production down. When I started out you’d see two lattes, a cappuccino and a flat white, you’d group them together and pump them out, because it was all cow’s milk. Now you’ve got soy, oat and coconut, so you’re bouncing back and forth and there might be a few different grinders up on the bench with different beans.”
He thinks the coffee industry has taken a leadership position when it comes to thorny issues like compostability, recyclability and ethical trading. And the next big area of focus is energy: Goatley is currently looking for a decent sized commercial roaster that’s 100% electric and has the potential to be sustainably powered. At the moment, all commercial roasters are powered by natural gas.
“You need a lot of heat and a massive amount of energy going in in a short amount of time. There are smaller electric ‘sample’ roasters, including one developed in Dunedin called Kaffelogic, and the obvious answer commercially is if you’re not roasting for 50-100 cafes, you’re roasting for your own cafe. I think we’re going to go further down the path of cafes doing their own roasting in their own cafes with small roasting equipment that’s efficient.
Most of us take our coffee completely for granted. It’s become an enjoyable part of many daily routines and something we would struggle to go without. But as he says, “coffee is a natural product, often grown in developing countries with sociopolitical challenges. It’s not static, and every year is different.”
He still loves working in the industry and dealing with these ongoing challenges, and while the past few Covid-influenced years have been hard, he’s “weirdly enjoyed” dealing with those short-term challenges, too.
“Isn’t that the fun of it? I think it’s way more interesting. If you’ve done something for 20 years, you can go on autopilot. You get comfortable. Who you’re in business with is like a marriage. Tim is my brother, my work husband, and we went through it all together and we’re closer now than we ever have been. It’s forced us to focus on things that are far more critical than others.”
For Goatley, “not all growth is worth it or delivers a better outcome” and just as they still deal with many of the coffee farmers they met back in Central America, the fundamental question of their business is still “how do you source your coffee and where is it from?”
