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What makes a good coffee

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ROLANDO VILLANUEVA President BLU COFFEE DISTRIBUTORS CORP.

ROLANDO VILLANUEVA
President
BLU COFFEE DISTRIBUTORS CORP.

 

By Bernie Cahiles Magkilat

Rolando Villanueva, a certified US medical technologist (medtech), left a promising American career for an adventure in entrepreneurship back in his hometown in Baguio.

Behind a serious demeanor, Villanueva has a hearty laugh as he details how he has grown to become the country’s leading supplier of coffee shop machines and other kitchen supplies by walking the extra mile and working behind the scenes to support aspirations of his customers that one day a Filipino coffee brand will make it to the world’s finest.

Distributorship

Established in 2013, Blu Coffee Distributors (BCD) was born to be the premier channel partner of highly acclaimed and globally trusted brands of Italian coffee machines and coffee beans in the Philippines, syrups and sauces.

Upon his return from the US, Villanueva helped his father ran the family business. He also put up his own gasoline station in Baguio. Villanueva thought of putting up a coffee shop in his gas station, but this did not work out although his gas station business has now grown into four.

However, his love for coffee has led him to make it easier for other coffee enthusiasts, who are interested in putting up their own coffee shop ventures. He then thought of working at the back end and making someone’s dream coffee shop becomes a success.

So, the Blu Coffee business was established five years ago. The word ‘Blu’ was in reference to Ateneo de Manila University because his previous business partner was from that school. The word ‘blu’ was further ingrained when his two sons entered Ateneo De Manila University.

At first, Blu Coffee concentrated in the supply of a complete lineup of coffee machines all imported from Italy, which Villanueva believes as the authority when it comes to coffee drinking and making. Villanueva also imported coffee beans from Bologna, Italy to complement his coffee machines.

The business was initially limited to coffee shops and hotels in Baguio city where they dominate the coffee espresso machines. This was later expanded to the entire country.

The coffee machines and coffee beans business expanded to a third product for gourmet syrup and sauces for coffee flavors that they import from Malaysia. These flavors make the hot and cold coffee more flavorful especially for the young coffee drinkers.

“So aside from hot coffee beverages, the coffee shops that they supplied with also serve cold drinks with ice and syrup,” says Villanueva, who received his medtech degree from the Loma Linda University of California and MBA from the Asian Institute of Management in Makati, Philippines.

In fact, the flavors and sauces business unit is where its strength lies now.

“The hot drinks are still there but Filipinos love their coffee with flavor. Since the Philippines is a hot country, more Filipinos, especially the youth want their coffee cold.

Growth

They used to be very small in the market, but Villanueva said they are now able to penetrate the market and is inching very close to the market leader.

At present, the company’s revenue has been growing between 10-15 percent and that 55-60 percent are contributions from the coffee flavors and sauces business.

Villanueva, did not give exact figure but said that revenues from the coffee machines alone reached about P40 million. Revenue growth from the flavors alone is expected to double this year.
“The coffee market has really taken off in the Philippines,” said Villanueva.

He did not stop at that but continue to provide additional kitchen supplies, including culinary and baking ovens to hotels and restaurants.

All in all, these things make Villanueva busy. He manages among others: a realty company of hotel, dormitories, apartments and buildings covering the areas of Baguio, Makati, Quezon City, and Talavera, Nueva Ecija; four Pilipinas Shell gas stations; a wine and liquor distribution in North Luzon – Philippines; and an Italian coffee and espresso machine importing and distribution company.

Technology

As the business grows, Villanueva also sees the need to automate to make their processes more efficient and faster. They need a real time accounting for accuracy purpose and tracking of inventories. So, they were looking for a solutions provider. At first, it was a toss-up between SAP Business One and Oracle Netsuite OneWorld, but the recommendation ended up with Netsuite.

Now, Blu Coffee Distributors, an importer and distributor of premium Italian coffee and equipment in the country, has implemented NetSuite OneWorld to support its rapid growth. With NetSuite, Blu Coffee Distributors has been able to capitalize on soaring demand for premium coffees across the Philippines by streamlining its business processes.

With NetSuite, Blu Coffee Distributors manages an expanded footprint of four showrooms in Baguio City, Angeles City, Cebu City and Davao City, along with its headquarters and showroom in Quezon City. Time needed for monthly financial close has been reduced by about 300 percent, while the company now has the insights needed to easily track expiration dates of perishable coffee beans.
To further streamline processes, Blu Coffee Distributors is implementing NetSuite SuiteCommerce to provide a B2B commerce portal that will allow customers to order products online. Blu Coffee Distributors worked with NetSuite Solution Provider PGE Solutions to implement its NetSuite solution.

Building on its success, Blu Coffee has upgraded to the NetSuite OneWorld global business management solution.

The accounting department and their frontline services were excited with the new system. It was important that accounting has become very transparent but the front side of the business was also equally crucial because that answers how to grow the business. He would like a total automation processes, including handling of customer complaints down to logistics.

“We have to close the loop,” he adds.

He likened the maintenance of a coffee machine to the technology of Oracle NetSuite, which he said, has been able to track all the company’s operations real time. With Oracle NetSuite, Blu Coffee is able to monitor the expiration data, flavors, and predict trends for customers.

“That is how we differentiate from our competitors because the competitor is just simply selling coffee and machines but we are providing solutions. We have to harness the data because from all communications, the quality and expiration of products, flavors, we are able to track it all down up to the customers’ end,” he adds.

Technology also enables them to track down all of its sales people. Since Oracle NetSuite is cloud-based, operations become easier. They can track the sales, inventory, releasing of inventory and sales.

The solution provided by Oracle NetSuite has also reduced cost for the company because delivery lead time has been cut from order to 2-3 days from 5-7 days.

Blu Coffee has also outsourced its logistics requirement to a third party as part of its solution to the traffic problem. Logistics will soon be integrated for a complete seamless operation. A customer will be able to track their order.

“In the digital world I believe that is very important for end-users to be able to track real time where their deliveries are,” he adds. The Oracle NetSuite technology has also enabled them to incorporate their customers data base. Everything is about tracking and making life easier for all and facilitate better business.

Villanueva added that they have to embrace the latest technology in doing business because “I believe that technology is the future of business.”

“That is our competitive advantage and makes us penetrate the market in so short a period of time and the system is making it easier and efficient,” he adds.

Future

The coffee shop business is already big, but Villanueva expects this industry to further grow.
“There are now 15,000 coffee shops in the country and we’re just barely there,” says Villanueva as he compared his customers of about 1,000. They are only serving the more established coffee brands and their chains and franchisees, but there are small ones serving the retail market. The retail market also deserves the value of their money because they are paying in full.

These small coffee shops are also growing and that make them a potential market if Blu Coffee can capture them because the Philippines is one of the world’s largest coffee consuming country.
In fact, the country’s coffee shop business is dominated by the world’s largest coffee brand. For that, Villanueva is thankful that this foreign brand has raised the bar for the coffee drinking Filipinos.

“I am thankful because they are teaching people how to drink premium coffee,” says Villanueva. Although the foreign coffee shop brand is expensive, Villanueva said there are others that sell half the cost of their coffee but still of the same quality. He was referring to coffee shops that Blu more Coffee supplies to as they have guided them with the right products and machines to come up with the best coffee possible at affordable prices.

“A coffee shop is a very profitable business,” he adds citing how expensive is a cup of coffee in a major coffee shop brand compared to the cost of coffee used for one cup of coffee.
Premium coffee though is still at its infancy in the local market so there is an opportunity for growth. Surprisingly also, this premium market is driven by millennials. Drinking coffee from the country’s number one coffee shop has become a social status.

Customization

Because the industry is kind of trendy, Villanueva sees the need for customization, which can be further enhanced by their all-natural food and fruit sauces. The Malaysian flavors company is owned by an Irish firm with a huge production in Malaysia. It also helps that Malaysia is part of ASEAN making its importation at zero duty. The company, however, has to take a hit from the high tariffs imposed on sugar sweetened beverages.

In one quarter alone, they have at least 20 new flavors in syrup form and sauces in powder form. Some of these are not only used as coffee flavors, but also for cocktails and alcoholic concoctions.

There are different applicants so the strength is customizing their uses for every customer.
“There are coffee shops with the same flavors so what I did was customized the flavors for each coffee shop because our end-user would like to have its own signature flavor and taste. You will not be competing with each other so we request for flavors that are special only to them,” says Villanueva.

During one Davao festival, they came up with a special Durian flavored coffee. That was a big hit for one of its big chain customer company.

Villanueva did not stop at mere supply of coffee machines, flavors and sauces, he walked extra miles for his customers.

For instance, Villanueva’s team would painstakingly create recipes for customers to be able to come up with unique flavors according to the taste specifications of the coffee shop. They would prepare recipes special only to a particular coffee shop. On top of that, they also prepare marketing materials for them.

“Most of all, we train the people down there,” he adds. They have baristas to train people of their customers for free. “Training is our strength also,” adds Villanueva, who used to drink 4-5 espresso daily. Now he no longer drinks beyond 3 pm.

According to Villanueva, they are doing this to help their customers save on cost of hiring consultants, which charges heavy fees, which add on to the cost of business.

The cost of coffee machines will depend on the capacity. The cost ranges from P100,000 to about a million pesos. Some of the coffee machines of some five-star hotels in Manila are provided by Blu Coffee because they only want the best tasting coffee.

According to Villanueva, the quality of a coffee also depends on how the machine is maintained. Sometimes, they would go to a customer whose existing coffee machine is only five years old but their coffee quality has already deteriorated because the calibration has not been checked.

“A coffee machine that is not maintained well, will make the coffee tastes bad,” says Villanueva adding that “in the world of coffee, a good coffee is only as good as how the machine is maintained.”

“There is a big difference in the calibration, how the beans are ground, the temperature of water, and the pressure make a coffee tastes different.”

“We have become relevant by providing value added not just solutions but new solutions that you can prove are meaningful for the growth of their business.”

This value added has made their customers welcome their visits because they always expect something new that Blu Coffee can bring to the table.

“We don’t ask for anything in return, we are just happy to support our customers,” he adds.

Culture

This value adding to their customers has been ingrained in the company’s culture.

Villanueva is also considerate for their customers, who are not using his coffee beans or syrup and sauces but are using their machines. Now, Villanueva is considering of supplying their customers with local coffee to help the local coffee farmers. Sometimes, the local coffee only sells for P150 to P300 per kilo but the imported roasted coffee fetches up to P900 per kilo.

He cited that Mindanao is also coming up with quality coffee from Bukidnon while Baguio also produces good coffee varieties.

If he could have his way, Villanueva would love to see every garage converted into a coffee shop or a coffee shop in every barangay to promote a Filipino coffee shop brand that could someday rival the world’s largest. A converted garage may entail an investment of close to P1 million, including minor modifications and initial stock of worth P500,000.

Already big companies have started to notice Villanueva, as he moves and works behind the success of the coffee shop business.

A Rotarian since 1999, Villanueva looks up to all Rotarians. In Rotary International, he presently serves as a member of the ad hoc committee for the Rotary International Membership committee. His being a Rotarian has also him get into the right path and into a better businessman. The Rotary 4-Way Test has been his guiding light in doing his business.

There are now 855 Rotary Clubs in the Philippines, and close to 27,000 Rotarians helping out he needy. He applies the Rotarian principles to his way of doing business.

In fact, Rotary is his one way of unwinding being able to talk to a lot of people. As a father, Villanueva enjoys taking his kids out and loves watching them grow.

Lessons learned

Now that his company has grown big, Villanueva empowers his people to make decisions at their level although at the end of the day he is still responsible for their output. What he would like his men to observe properly is to provide the best service to their customers. They now have 45 people at Blu Coffee and additional staff in other business units.

“No matter what system you put in, it is still people at the end of the day. So, it is still customer engagement and you providing solutions relevant to them. That is how to earn loyalty because competition is stiff,” he adds.

He would rather put in system and solutions that will give him the best results than taking in cheap ones that only give him unsatisfactory output. In fact, Villanueva said that its service department has not been meeting its target because no machines have broken down, so there is nothing to fix.

“I don’t aim to earn money from teaching our customers,” says Villanueva.

A mere mention of Villanueva’s father makes him emotional. He calls him his hero. “He was very strict but I think he was preparing me for who I am today,” says Villanueva.

His late father, who passed away four years ago, used to run a hotel and the largest dormitory in Baguio as the family was engaged in real estate. He came home after studying in the US to help the family business.

Now, Villanueva, also a motivational speaker, has four kids with the eldest already engaged in the family business.

He also learned that everything now is personalized. The Philippine customers alone are very pampered and bombarded with new products.

The old business notion of the “big eating the small” no longer works in this digitally changing environment. It is already the “fast eating the slow”.

“That is where the agility of our system will play a big role in the future, how to make it faster because the business environment is no longer about scale but agility to come up with innovative products because no customer will buy an old product,” he adds.

A good coffee

He hopes that someday a local coffee shop brand can equal that of the current market leader.

From less than P5 million initial investments five years ago, Villanueva sees his company to be the top of mind for one-stop-shop solution for coffee shop business owners.

So, what makes a good coffee? Villanueva’s answer is “How do you like your coffee? Because experts will tell you what makes a coffee good, but at the end of the day the customers will determine if it is good or bad.”

But what really makes a good coffee is passion. “It is the passion of the chef that differentiates a good cook from a bad cook. If you really take care as to how it is cooked, that makes a difference. If a coffee is produced without passion, it will not taste good,” he says.

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