Blending the Known with the Unknown
When Darrel Burns bought Gerhart Coffee in 2008, he knew a lot about the business. After all, he had worked there for his grandfather since the age of 13.
Still, there was plenty he didn’t know. Like how to transition from a traditional “Regular and Decaf” mindset to an updated approach more aligned with 21st century tastes. How to manage operations in a facility the company had outgrown. And how to navigate the growth he intended to pursue.
“I had to learn as I went,” Darrel says. “We all did.” With a combination of long-time employees – including his grandfather, Charlie, who still reports to work every day – and new staff, the combined team tackled the transformation head-on.
Going to the Source
“I needed to understand coffee flavors from a roaster’s perspective,” Darrel says. “So I went to the source.” Intensive training with coffee producers in Guatemala and other coffee bean sources, including Venezuela and Peru, gave him the knowledge and skills to create his own proprietary blends, and match custom flavor profiles for customers.
Fine-tuning flavors wasn’t the only challenge, however. Darrel also needed to fine-tune financials.
Bigger Space, Bigger Buys with Local Backing
Bob Bradfield, commercial loan officer for Union Community Bank, credits Darrel with having a vision for the business from the start. “He knew he had to change the approach,” Bradfield says, “and he had clear ideas about what needed to be done.”
Exactly how to accomplish those things, though, wasn’t always clear. And that’s where the banking relationship served as a support. “I knew Peter Miklos – Union’s Chief Lending Officer from before, and Bob Bradfield also took care of our account,” Darrel says. “I appreciated the access – to be able to talk to them when I needed to. To get their point of view and quick decisions. And to get the funding we needed to grow, especially early on.”
First came a small loan to purchase their first bagging machine. Until then, bagging was done by hand. Soon after, it was time for a more substantial project – expanding the facility itself. Inventory, supplies, processing equipment and personnel were outgrowing the existing square footage. “We did the math and figured out we were losing about 18 hours a week just moving things to get to other things,” Darrel says. “We knew we needed more space.”
According to Bradfield, Union Community Bank agreed and quickly provided the loan for expansion. He recalls how crowded the original facility was. “They had to move pallets of coffee to get to other supplies,” he says. “You could see how opening up the space would bring more efficiency and opportunity.”
Completed in October 2016, the expansion added 40 percent more square feet, which spurred growth of 45 percent in the first year alone. Since then, the growth has continued upward another 25 percent.
Another major shift Darrel made was to buy coffee beans on the futures market instead of at spot prices. This gave him greater control over costs and margins, but there was a learning curve. “It was trial and error,” he says. “The technology and markets change so quickly, I had to just dive in and figure it out.” That more effective approach to buying relies on a ready line of credit, which Union Community Bank provides. “When it’s time to buy, I need to move fast,” Darrel says. “With my relationship at Union, I know it’s covered.”
Darrel’s efforts have paid off. Buying a full cargo container of raw beans – which can range anywhere from 25 to 90 thousand dollars – now allows the company to save hundreds to thousands of dollars with every purchase.
The Bottom Line
From its early days as a regular-and-decaf coffee company, Gerhart Coffee has now developed a full line of custom blends, including new cold brew varieties, proprietary flavors, extracts, and a private-label business that spans the U.S. to the West Coast.
In his first two years owning the company, Darrel says there were no returns. Just investment. He credits Union Community Bank with seeing him through that time. Specifically, he credits the bank with providing funding, cash flow, and stability as he figured out how to scale up operations. “They believe in local business, they were there for me,” he says. “They saw the long-term potential in my company. If they were looking to make a quick buck, they wouldn’t have helped me to the extent they did.”
From here, the outlook is promising, both short-term and long-term. Inspired by entrepreneurs like Milton Hershey, Darrel is bullish about the company and its future. “I’m proud of the growth and the jobs we’ve created here,” he says. As for the long-term vision, he’s building toward another generation of success. “Someday,” he says, “I want to hand this down to my children.”
With the enduring demand for a great cup of coffee – and Darrel’s drive and determination – that goal looks to be well within reach.Contact a Business Banker