Caf­feine: Craft cof­fee gets guz­zled up by the con­glom­er­ates

Bloomberg Businessweek (Asia) - - Contents -

Craft beans are fol­low­ing the path of craft beer. By Clint Rainey

Brett Smith and Fred Houk started Counter Cul­ture Cof­fee in 1995 with a sim­ple mis­sion. “We said let’s be the best at one thing—whole­sale—and then give re­tail­ers the right tools to make great cof­fee them­selves,” Smith says. Many of Counter Cul­ture’s peers in the so-called third­wave cof­fee move­ment, snobby fa­vorites such as Stump­town, La Colombe, and Blue Bot­tle, be­gan the same way, hawk­ing op­ti­mally roasted sin­gle-ori­gin beans at farm­ers mar­kets and sell­ing to lo­cal restau­rants.

Now Counter Cul­ture is the last of its kind. In Au­gust, Chobani yo­gurt mogul Hamdi Ulukaya bought a ma­jor­ity stake in La Colombe, and two months later both Stump­town and In­tel­li­gentsia, an­other long­time in­de­pen­dent, were scooped up by Peet’s Cof­fee & Tea, it­self part of the Lux­em­bourg-based con­sumer brand con­glom­er­ate JAB. Blue Bot­tle will be­gin offering ground, vac­uum-sealed beans this year. To­gether, th­ese three for­merly in­die roast­ers plus Blue Bot­tle now op­er­ate 57 cafes in 9 cities, and they’re be­gin­ning to put pres­sure on Star­bucks.

The drama is sim­i­lar to the re­cent up­heaval in the craft beer in­dus­try, which has turned into a sudsy, bet­ter-tast­ing mi­nor league for con­glom­er­ates such as An­heuser-Busch InBev. “There are a lot of rea­sons why scal­ing up gives ac­cess to a bet­ter prod­uct,” says Oliver Strand, who’s cov­ered the rise of third-wave cof­fee for the New York Times and Vogue. Get­ting the best beans is eas­ier when you’re buy­ing in large quan­ti­ties, and roast­ing be­comes more con­sis­tent. But size and qual­ity don’t re­main com­ple­men­tary for­ever— even­tu­ally you be­come Fol­gers.

“I don’t think it’s, ‘This is the end of the third wave,’ and we’re all go­ing to be drink­ing Star­bucks tomorrow,” says Sam Le­won­tin, man­ager of New York’s Every­man Espresso and a two-time fi­nal­ist at the U.S. Barista Cham­pi­onships. The risk, he says, is that “some­body with veto power up the chain loses sight of the im­por­tant things.” The rea­son Every­man Espresso has been a Counter Cul­ture cus­tomer since 2007, he adds, is the at­ten­tion it gets from a com­pany that doesn’t ob­sess over mar­ket share. “Buy from roast­ers that op­er­ate cafes,” Le­won­tin says, “and you are un­der­stand­ably sec­ond-string.”

Those cafes have seen ma­jor changes, as well. Early on, one of the third wave’s key char­ac­ter­is­tics was a keen, al­most ob­ses­sive at­ten­tion to de­tail, ev­i­denced in lengthy de­scrip­tions of their beans’ ter­roir and use of the “pourover” brew­ing tech­nique, which al­lows a skilled barista op­ti­mal con­trol of tem­per­a­ture and brew time. But now, with pre­ci­sion au­to­matic brew­ers com­ing into vogue, the fo­cus has shifted from the cof­fee to the cus­tomer. Last Jan­uary, Blue Bot­tle’s James Free­man an­nounced that his com­pany would be phas­ing out whole­sale al­to­gether so it could bet­ter “con­trol the con­texts, meth­ods, and out­comes” of its prod­uct. Up-and-com­ing West Coast chain Philz Cof­fee is keep­ing pourover alive, but al­most as a gimmick.

Smith, who runs Counter Cul­ture solo now, says that, while his com­pany “in­tends to be part of the con­ver­sa­tion,” it isn’t about to go cor­po­rate. Counter Cul­ture is trans­par­ent about what some would con­sider its pro­pri­etary roast­ing in­for­ma­tion, such as which beans go into its var­i­ous blends. Rather than try to court re­tail cus­tomers, it builds sales of­fices that dou­ble as train­ing cen­ters for whole­sale buy­ers. There are now 10 of th­ese in the U.S.—airy spa­ces tricked out with the top brew­ing equip­ment—and an 11th is near­ing com­ple­tion in Los An­ge­les. And there are two roas­t­er­ies: one in Durham, N.C., and an­other that opened this year in Emeryville, Calif., the birth­place of Peet’s, co­in­ci­den­tally. More than 90 per­cent of Counter Cul­ture’s rev­enue comes from whole­sale, with es­ti­mated 2014 sales of about $25 mil­lion.

Next spring, Counter Cul­ture will move into a spiffy new Durham head­quar­ters that’s half-roast­ery, half-cof­feecol­lege. There’s still no cafe, but Smith is stoked about the mock home kitchen, which the com­pany will use to stage its first classes for, yes, or­di­nary cof­fee drinkers. “We’ve done a great job with the whole­sale train­ing pro­gram,” he says. “The next phase is to bring that ed­u­ca­tion di­rectly to con­sumers.” <BW>

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