Coda Coffee Company Endures Growing Pains to Become One of Colorado’s Largest Roasters

Coda Coffee Company Endures Growing Pains to Become One of Colorado’s Largest Roasters

By Ian McCue, content manager
8-minute read

In short:

  • Brothers Tommy and Tim Thwaites founded Coda Coffee Company in 2006 with a loan from their parents, who cashed out their retirement fund to support the business.

  • The Coda team survived a 300+% increase in the price of coffee around 2010 by taking pay cuts and increasing prices.

  • After earning big books of business from a grocery chain, large restaurant franchiser and food supplier, Coda is on track to grow by 20-30% year-over-year in 2019.

 

Coffee was the Thwaites brothers’ first love. 

Tommy and Tim were introduced to the coffee industry in the mid-90s when they started working at Dillanos Coffee Roasters in Sumner, Washington, a business owned by the father of one of Tommy’s high school friends. The brothers worked at Dillanos through college, and Tommy spent a few years there after earning his degree.

But soon after college ended, the brothers fixed their eyes on another industry. 

Tommy and Tim both planned to be pilots, and the latter moved to Colorado because the clear skies and sunny weather made it an ideal place to log flight hours. But the duo slowly realized that a long, low-paying grind awaited before they could earn gigs with a major commercial airline. Furthermore, a downturn in passenger demand post-9/11 led to layoffs and fewer job opportunities. This steered Tommy and Tim away from aviation, and they ended up selling insurance and mortgages, but those experiments flamed out after just a few months.

 

A roastery’s beginnings

At the time, Tommy, Tim and their significant others all lived together. It was in that climate that they hatched a plan to return to what they knew: coffee. In 2005, the brothers decided to start their own roastery. Coda Coffee Company got its start in Denver with just three investors: the brothers’ parents -- who cashed out their 401(k) to loan them money -- and a great aunt.  

The Thwaites brothers founded Coda Coffee, now one of Colorado's largest roasters.


Tommy and Tim’s parents, by then retired, worked for Coda with no pay to help the fledgling roastery get off the ground. Every account won or lost, it seemed, could determine the fate of the business.

“If it didn’t work, we were all moving into someone’s basement together, and we were screwed for the rest of our life. I mean not really, but that was kind of the mentality then,” Tim said. “There was nothing else to go on -- we didn’t have a pool of cash to hire more labor or anything like that.” 

The brothers lived in low-income housing in Coda’s early years. Tim lived off the student loans of his then-girlfriend and now-wife Jessica, along with $500 or so a month in reimbursements for the mileage he logged delivering coffee in his truck. He was just 25 when he co-founded the business, and he was responsible for roasting the coffee -- a craft he had honed since he was 16 -- and packaging it. 

Tommy, four-and-a-half years his senior, worked on expanding the business and building relationships with customers, mostly cafes and restaurants in the Denver area including a coffee and smoothie chain called Maui Wowi. Jessica was Coda’s second hire and spent the company’s early years answering the phone, managing accounting and fulfilling orders.


Building the foundation

The company grew quickly, with revenue more than doubling from 2006 to 2007. It was proof that there was indeed unmet demand for high-quality coffee in Colorado.  

“I just remember people saying, ‘I can’t believe you started a roaster in Colorado because it’s so saturated, there’s like 15-20 roasters in the greater Denver area,’” Tommy said. “We’re like, ‘Well, we just came from Seattle where there were 200 roasters in that same footprint.’ We just didn’t see it as saturated.”


“I just remember people saying, ‘I can’t believe you started a roaster in Colorado.'"



Coda’s commitment to finding the best coffee beans, even when good alternatives may be much less costly, helped it stand out. This is tied to the fact that Tommy and Tim are willing to put in the time and effort required to work directly with farmers in other countries. By traveling to farms that are sometimes off the beaten path, they can inspect the plants with their own hands and share techniques for growing premium-quality beans.

In addition, both brothers had been in the industry for a decade-plus before they went out on their own. That experience and knowledge of roasting and other aspects of coffee production showed in the final product.

Coda's premium coffee beans are the result of its founders' years of experience.


Price spikes slam Coda

Coda’s business was humming along until the price of coffee began climbing in 2008. The baseline price of beans rose to more than $3 per pound in 2010 -- it’s around 90 cents per pound today -- putting the young roaster in an extremely difficult spot financially. In response, Coda increased prices, laid off a small number of employees and dramatically reduced the salaries of Tim, Tommy and Jessica.

“It was terrible, stressed every night,” Tim said. “In hindsight, it’s just money at the end of the day, but at the time you feel like you’re letting your employees down. … The hardest day of my life was having to let go of one of our employees that had been with us for a super long time that had special needs.”

sign up for the growwire newslettersign up for the growwire newsletter


Around that time, Coda mistakenly avoided paying employee taxes for a short period due to an issue with its payroll software. The IRS promptly slapped it with a hefty fine that took years to pay off. 

“That took a couple years to rebound from,” Jessica said. “I would say rebounding from [the rapid price increase] probably was the most inspiring moment, to know ‘OK, this is really going to work. If we can get through that, we can get through whatever else comes our way.’”


"I would say rebounding probably was the most inspiring moment, to know ‘OK, this is really going to work.'"  


 

Back and better than ever

After surviving that crisis, Coda kept growing at a healthy rate. In 2016, the team purchased a facility near Phoenix, Arizona, they had used as a distribution center for several years and turned it into a roastery soon after. 

This allowed Coda to churn out more coffee for two of its biggest clients: Shamrock Foods, a food service supplier, and Kahala Brands, a franchiser for fast-food chains like Cold Stone Creamery, Pinkberry and Taco Time that acquired Maui Wowi in 2015. 

New roasting equipment allowed Coda to produce more for large clients like Kahala Brands.


Around that same time, Coda struck deals with restaurant groups Edible Beats and TAG Restaurant Group, which own some of Denver’s most popular eateries. 

Last year, Coda added a second roaster to its Denver facility. Along with the Phoenix roaster, the addition helped scale production quickly -- sales jumped from $7 million in 2017 to almost $10 million in 2018. The coffee roaster expanded into grocery in 2018, selling its coffee at a regional chain called Fresh Thyme.

That spike can also be partially attributed to Coda opening its first flagship store, in Northwest Denver, in 2016. The retail location ultimately lost money and demanded too much time and energy, so the Thwaites sold it earlier this year to focus their efforts on the wholesale business. 

Though Coda sells mostly to businesses, individuals can purchase its beans online.


Coda sells direct-to-consumer through its website and ships out about 1,000 orders per month, primarily to subscribers of its Coffee of the Month Club. Tommy estimates e-commerce is responsible for only about 5-7% of revenue, though around 2008, the founders envisioned it would soon comprise most of their business. Today, the wholesale side of the business still drives the large majority of revenue.


Improving lives with coffee

The year after Coda launched, the brothers made their first sourcing trip to Guatemala. Coda’s coffee importer had partnered with a charity and explained that the brand could pay more for the beans, with a portion of that money set aside to improve the surrounding community.

The brothers obliged. With the help of Coda’s funds, the charity built a road to the community, a school, 80 homes with running water and electricity and a church. The projects opened the brothers’ eyes to what their business could do for faraway communities, and ever since, Coda has been on a mission to help the people who grow the beans it buys.

“I love the fact that it’s an industry where we get to go to third-world countries and really work hands-on with villages and farmers and year after year, really see the benefit we’re providing there,” Tommy said. “So it’s fun to have that tangible piece on the supply side.”

Coda's founders routinely visit the towns from which they source their beans.


Tommy and Tim source Arabica coffee (considered a higher quality coffee species) from around the globe, but they work directly with farms in Central and South America. When visiting those regions, they ask what the local area needs most, like more desks and a bigger kitchen at a school or trees planted to support the creation of a national forest. Coda then helps fund those projects in addition to buying the local coffee beans.  

“It doesn’t feel good to any of us to be profitable and step on the little guy. That’s not going to get us anywhere in the long term,” Jessica said. “We really want to see people that we work with have the same success that we have, and without developing these relationships, we don’t know what people need, we don’t know what struggles they see [or what] they need to produce better coffee or even just have happy or fulfilled lives.”


“It doesn’t feel good to any of us to be profitable and step on the little guy."  



In recognition of these efforts, Coda became B Corp certified in 2014. To earn the certification, a company must show that it balances profit and purpose by meeting stringent standards related to treatment of employees and customers, impact on the local community and environmental sustainability.

 

Coda brews its future

Today, the brothers’ parents look like shrewd investors. Coda has 40 full-time employees and projects sales to climb to at least $12 million this year. It hopes to gain a stronger foothold in the grocery category and has had initial conversations about selling its coffee in Meijer, a large Midwest supermarket chain that owns Fresh Thyme. 

With a team at the ready and new roasting equipment to its name, “We can grow today without hiring a bunch of people or buying a bunch of equipment,” Tim said. 

The team at Coda is ready and poised for growth.


Another fast-growing branch of the company is a services business the Thwaites brothers purchased and rebranded in 2014. For years, Tommy and Tim serviced their customers’ coffee equipment themselves, and they struggled to find a reliable company to which they could outsource the job. So they purchased a company, now known as 9 Bar Tech, that installs and repairs commercial brewers, espresso machines and other equipment. 9 Bar generated around $50,000 per year when the brothers purchased it. This year, sales should surpass $1 million. Margins are much higher at 9 Bar than in Coda’s core business, since 9 Bar is in the services category. 

In the next five to 10 years, Tim and Tommy hope to double Coda’s annual revenue to around $25 million. While they predict the online business will continue to grow organically, they expect most of those gains to come from adding more large wholesale clients. 

And by the end of this year, Coda will pass another landmark: Those long-term loans from their parents and great aunt will be fully paid off. 

“It worked out pretty damn good for all parties involved,” Tim said.