December 15

Publisher’s Prologue

Publisher’s Prologue

The coffee world is changing. The tsunami that was the Third Wave has run out of steam and a new Forth Wave is washing over the industry bringing a different focus and measures of success. Consolidation is creating a new playing field with JAB taking controlling interests in Jacobs Douwe Egberts (JDE), Caribou, Peets, Intelligentsia, Stumptown, and now Keurig (see industry leader reactions below). The only companies that will survive and thrive in the future will have found success in marketing to the Millennials. And one thing is guaranteed: Unless we as an industry can find a way to ensure producers are more fairly compensated for their work in growing excellent coffee, the product will cease to exist.

Don’t take my word for all of this. I invite you to read the thoughts of 27 leaders representing numerous segment of the industry from all over the globe.

And finally, below are a few of the reactions of the news of Keurig’s sale by our State of the Industry writers. We would value your opinions as well!

Rick Peyser, Lutheran World Relief

“I hope that the acquisition will expand the company’s capacity to provide consumers with high quality coffee sourced from a sustainable supply chain.  This has been the company’s history and is still the basis its success to this day.”

 

Andy Newbom, IP Coffees

“I greatly fear that this along with the Douwe and Masters plus Peets etc will mean more pain and lower prices to farmers. They already announced that they are extending terms from net 30 days to net 180 days to IMPORTERS. This will reflect back to producers who will get their payments extended even farther than they already are. and it will very likely push prices down even farther. importers and exporters have to account for 5 months loss of working capital into their cost of sales and since the client won’t pay, the farmer will”

Howard Chapman, Royal Cup

This investment follows many more by this same group, which seems to be seizing an opportunity to grab a significant stake in the evolving high end coffee market, both through the shop segment as well as complimentary single serve. My takeaway is that this is another affirmation that coffee is “hot”, and is a great industry to be in. We noticed at CTW this year that there were “investment types” mingling and checking out the show floor, so this isn’t a complete surprise.

Darron Burke, Burke Brands LLC

“I think the continued consolidation in the coffee industry by the large international food conglomerates represents a significant opportunity for the smaller, more quality-focused coffee roasters, especially at a time when Millennials are driving a shift towards independent, more transparent, artisan food manufacturers.”

 Donald Schoenholt, Gillies Coffee

“JAB Holding has become a coffee version of Toru Iwatani’s Pac-Man eating everything that falls in their line of sight.”

Marty Curtis, Artisan Coffee Group

As I read the release about Keurig being purchased, I have mixed feelings about it. It kind of reminds me the good OLD Days of Ma Bell. If you dig deeper, it’s probably a good thing for JAB and their target market.  It is a really good thing for the Artisan Style Coffee Company’s out there.

 

Randy Anderson, JoeTap

This is more than just a game changer. It changes the rules and muddies the waters a bit. Starbucks and Keurig have about 3 years left of a five-year agreement they signed almost 2 years ago. It will be interesting to watch how Starbucks responds. The Keurig/Starbucks relationship was a bit shaky anyway when they amended their agreement in 2014. Starbucks had spent a lot of money on their line of Verissmo machines and single serve capsules. In fact, I think the whole world will be watching as this will be the first time since Starbucks has defined and dominated the market both domestically and globally that there has been any true competition for them. This leaves three major players globally I think – Starbucks, Nestle and now JAB holdings although it will be interesting to watch how JAB plans to either consolidate any or all of their interests or allow them to function autonomously as they are currently doing. It will also be interesting to see how they leverage newer technologies like the JoeTap cold brew dispensing system going into the Caribou stores. While JoeTap is a blip on the radar screen, I think it is a microcosm of the strategic move JAB had in purchasing Keurig. I believe JAB wants to be the market leader and will watch for any opportunities to trump Starbucks.

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