Value Added: Coffee executive learned how to raise money before roasting beans
By Thomas Heath,
I thought I was going to write a column about the economics of roasting coffee, but that changed as Chris Paladino recounted his secrets to raising millions of dollars for the American Red Cross.
We’ll get to Paladino’s Crofton-based Chesapeake Bay Roasting Co. in a minute, but first listen to how this one-time theater major at Rutgers became a money-raising machine.
“The first lesson on fundraising is, never make assumptions about somebody walking in the door,” he says.
Paladino, now 45, was in a Florida office of the Red Cross years ago when a guy in shorts and a ratty T-shirt strode through the door.
While others blew off the man, “I sat for an hour chatting and told him about what we did. The next day he showed up with a $10,000 check and he said, ‘You were the only guy willing to sit and chat with me.’ ”
Lesson 2: People will give to causes, but in the end they really give to other people.
Paladino talked about the guy in Newark who gave him $3 million worth of real estate. It started with a phone call in which Paladino asked if he could visit the man to thank him for a $1,000 gift.
The man poured out a long story about how the Red Cross once helped his family in a flood. Two weeks later, a $25,000 check arrived in the mail. A month later came a new SUV. The big enchilada came six months later, when the man built a $3 million facility to house the Red Cross’s new offices.
The soft-spoken Paladino is a natural networker, knowing the importance of meeting people face to face, spending time with them, talking.
They are the same skills that have allowed the chatty executive to blaze a path to financial independence; he runs and owns a chunk of the coffee roasting business and has a fat bank account.
Not a bad life for the son of a mailman who lived paycheck to paycheck. He got his work ethic from his mother, who managed a Hickory Farms store and other small New York City retail shops.
After the storms
Paladino worked his way up as a fundraiser/troubleshooter in the Red Cross starting in Florida in 1993 and eventually moved to the national headquarters in Washington. He resigned from the philanthropy in 2005 after 12 years, more than 200 fires and a suitcase full of hurricanes and floods.
“I was [in Florida] six or seven days, helping with [Hurricane] Charley,” he says. “I get off the plane at Reagan National. I get a cellphone message saying there is another storm, you have to turn around and go back. I spent 25 straight days in Florida, sleeping in a rental car and on the floor of a gym. I was 37 and thinking I was too old for this.”
He resigned and joined his wife, Pam, at the Marjack Co., a candy and snack distribution business in Landover, where he worked on strategic planning.
He and Pam purchased a small stake from the owner, Warren Coopersmith. When Marjack was sold in 2008, they had a windfall.
Pam stayed on while Chris mined his Rolodex and called Chesapeake Bay, which was a company he looked at acquiring for Marjack. It had two businesses: One was roasting and selling coffee to local coffee bars, restaurants and stores; the other was selling and servicing coffee and espresso machines.
It was a small money-loser run by passionate coffee people who needed a financial guy to manage it. After talks and a review of the company’s finances, Paladino assembled local investors, put in $250,000 of his own and bought a majority stake in the company.
To differentiate itself, Chesapeake Bay set out to appeal to the growing demand for sustainable products: It would use less energy, recycle all its materials and buy coffee grown by people who are paid fair wages.
“First,” he says, “I want the customer who wants a great cup of coffee. Second, I want the consumer who wants to buy from local sources. And finally, I want the consumer who wants to buy sustainably.”
He took over on May 1, 2010, and went to work. He let the bookkeeper go and took over the financials himself so he could follow every dime. He cut the cost of delivering coffee in half by using couriers instead of in-house vans and drivers. He negotiated with every supplier, asking for better deals in return for a long-term commitments.
The company started spending more on marketing, relentlessly pushing to get its product in more stores. It improved its in-store presentation, installing handsome, custom-made wood racks.
The coffee — much of which comes from Central America, Africa and Southeast Asia — is in 120 grocery and specialty retailers, from Mom’s Organic Market to Whole Foods to Giant and Safeway.
Paladino owns 17 percent of the company, and around 30 investors and employees own a big chunk. Sachs Capital of Potomac, which has invested nearly $1 million, is the largest shareholder.
Chesapeake Bay, in a corner of an anonymous industrial park in Crofton, has 20 employees and roasts around 10,000 pounds of coffee a week. Last year, the company sold $2 million worth of coffee. About a third of that was coffee it roasts for other brands, and the rest was Chesapeake Bay’s own brands. The company grossed an additional $1 million through sales of coffee and espresso makers, replacement parts and service on those machines. It expects to break even this year on nearly $5 million in revenue.
The company’s three big retail brands are medium-to-dark-roast River’s Edge, dark-roast Cattail and medium-roast Eco-Reef. The coffee beans arrive hard and green, and they take anywhere from 17 to 22 minutes to roast. A 72-pound bag, which ranges from $3.20 to $4.50 a pound, will make around 60 pounds of ready-to-grind coffee beans after the roast. The less time in the roaster, the lighter the roast. The darker the roast, the bolder the flavor.
The fourth quarter saw an uptick in growth, and Paladino is raising another $750,000 to boost expansion. The veteran fundraiser values the company at $5.35 million.
If it keeps growing, there could be a fat financial return in the next five years — and maybe a caffeinelike kick for the owners.
Follow me on Twitter at addedvalueth. For previous Value Added columns, go to washingtonpost.com/local-business.