When the Covid-19 pandemic hit the US, some businesses held fast and hunkered down. Torani, the 95-year-old company that makes those colorful bottles of flavored syrup at your local coffee shop, didn’t have that luxury.
Torani needed to follow through on a plan that had been years in the making: a relocation of its headquarters and manufacturing operations from South San Francisco to a brand new building across the Bay. The Covid-19 pandemic, however, turned what was already an ambitious and expensive undertaking into a dramatic exercise in operational gymnastics.
Torani was slated to start its move in March to a spacious, 327,000-square-foot San Leandro building that would house its offices and state-of-the-art production lines. It also would serve as a Willy Wonka-esque, tourist-friendly “Flavor Factory” with a coffee-making “receptionista,” a “customer play area” to try some of the 150-plus flavors, and a speakeasy that could be accessed via a secret passageway behind a bookshelf.
But then the shelter-in-place orders came down, and restaurants and cafes were ordered to temporarily close their doors. Torani entered into pandemic planning mode and conducted a financial analysis to determine if it could weather sales drops of 20%, 30% or even 50%.
The company had borrowed around $40 million in loans to invest in its Flavor Factory.
“Could we make it? Could we hold onto everybody?” Torani CEO Melanie Dulbecco told CNN Business. “Could we pay off these loans we just borrowed? Could we keep the business running for our customers and make it?”
The privately held company, which got its start in San Francisco’s “Little Italy” neighborhood of North Beach, has been accustomed to double-digit annual revenue growth for decades. It now was projecting a 40% sales drop for the month of April and bracing for the worst.
Coffee shop sales tanked during that time. According to survey of more than 5,000 shops by payment processor Square, median revenue tumbled 55.4% between March 1 and April 30.
When April was said and done, Torani did have a sales decline on its books, but only 20%.
“And then business came back like crazy,” Dulbecco said.
What happened was that sales of Torani’s syrups started spiking at the retail store level. Americans working remotely during the pandemic had brought their coffee shop habits home with them.
And as the homebound turned to homemaking, Torani syrups and sauces were landing in concoctions such as mixed drinks, kombucha batches, and even sourdough starters, Dulbecco said.
The pickup in store sales also meant that Torani had to increase supplies of its 375-milliliter flip-cap bottles often found at retail. Coffee shops typically buy the bottles that are twice that size.
“We had to shift a lot around in our supply chain to have all the packaging materials,” Dulbecco said.
Happening in the background of this was the move from South San Francisco to San Leandro. As Torani navigated wild swings in demand, its operations were in two places on opposite sides of the San Francisco Bay.
Torani, similar to other consumer packaged goods manufacturers, experienced some supply shortages, Dulbecco said. But those out-of-stocks were minimal and short-lived as the company made a concerted effort to stock up, she added.
Torani leased a 100,000-square-foot space adjacent to its new 330,000-square-foot factory to store products, bottles, labels, caps and raw materials such as vanilla from Madagascar and hazelnuts from the Pacific Northwest. The company used some of the space as staging areas to accommodate and prepare for orders that would vary drastically from week to week.
“It’s been a roller coaster of demand,” she said. “It’s totally unpredictable right now.”
Torani is now fully moved from South San Francisco – a relocation that took six months instead of three – and is on track to post annual sales of $200 million for 2020, a double-digit increase from 2019, Dulbecco said.