February 13

The View

The View

Later this week, we are hosting a tour to the coffee growing regions of Costa Rica for about 50 C-level executives from the Office Coffee Service sector of the coffee world. A trip like this always revitalizes me. It reminds me of how huge, and diverse, and broad, and profitable coffee is. The OCS folks represent approximately 30% of the total coffee sold in the United States. Plus the OCS roasters also typically sell products through multiple channels such as commercial, grocery, and even specialty and so represent an even larger proportion of coffee sales.

This tour is, for most of these participants, the first time they will have visited an origin country and experienced a specialty coffee farm. The OCS operators and distributors have started recognizing that greater attention to quality coffee translates to potentially higher customer satisfaction and higher revenues.

It is easy to lose sight of the vast scope of coffee when all you focus on is our day-to-day businesses in the specialty industry. But starting next month that all changes as we enter into the tradeshow season and participate at all levels in the industry. Soon will be Coffee Fest NY, AFCA, the International Restaurant and Foodservice show, and the National Coffee Association with the SCAA and the NAMA One Show following hot on their heels. These shows represent the key market segments that comprise our industry other than grocery. (And many in grocery will likely be at one of these shows as well.)

Which leads me to wonder what this year will bring? There are substantial challenges that face Specialty Coffee not the least of which is a definition of what specialty coffee is. Many restaurant and foodservice operators see specialty as a coffee beverage with additives, such as alcohol or flavorings. Many OCS operators see specialty as flavored coffee. Some cafes see specialty coffee as a beverage made by a professional barista using traditional methods. Some believe that only espresso with no additives is special. Is ice coffee special? Growers see specialty as meeting the minimum SCAA cupping score of 80 or above. And so on.

The industry’s adherence to quality Arabica coffees is being challenged by robusta coffees and the mixed messages from some is confusing our consumers. As Ric Rhinehart said at the NAMA Coffee, Water, and Tea show, “We’ve shifted away from those coffees now,” Rhinehart observed. “Today’s best robustas and ‘naturals’ are better than they were a quarter of a century ago, but they’re not as good as the better milds. Let’s not make the same mistake again. People want to love coffee; let’s not discourage them. “ (Vending Times; December 2012) while at the same time the SCAA and CQI are moving rapidly to bring robusta into the specialty tent.

I wonder if the apparatus of specialty coffee is poised to collapse under its own weight? There are the beginnings of rumblings that barista jams, cool events, elaborate international junkets, and self-congratulatory preparation methods have not put a single extra dime of profit into the rank and file indie cafes’ cash drawer.

Then there is the problem of being top-heavy in talent. As Nick Cho wrote in a recent blog, “What are we going to do with all these twenty-somethings who we have convinced that being a barista is a realistic long-term career pathway? We have flat growth in coffee retailing and very limited opportunity beyond barista. All these golden promises we have made to aspiring coffee professionals are likely empty. There simply is no room in the retail side to absorb all this trained talent.”

According to Ric Rhinehart, the specialty coffee market in the US has reached maturity with anticipated growth of only 1 to 2% annually. The majority of growth will be in coffee producing countries. (Maybe aspiring roasters and baristas would be better served learning Portuguese and Spanish along with pulling the most perfect shot?)

I wonder if we have simply lost sight of why you should open a business in the first place – business ownership is an investment strategy pure and simple. If you are not in it to recover your investment and make a tidy sum extra for you and your loved ones, then you should just put your money into a mutual fund. At least there you are not likely to lose it all overnight.

So this year I hope we can declare “The Year of the Profitable Cafe.” Without profits, all of the other exciting elements of Specialty Coffee are just distracting wastes of time and money.

The next year should begin to answer some of these questions. The future lies in a refocus on profits and good business decisions based on local market realities. Having the most expensive and highly rated equipment in the expert hands of a highly trained barista competitor is meaningless if as a result of bad site selection your café is only grossing $135,000 a year. If you decided to open a café to make money, feed your family, and save for the future instead of just buying a job to have something to do for a few years until you figure out what you really want to do, then this coming “Year of the Profitable Café” is for you.

The profit motive is built-in and natural to those other segments – the OCS operators and the multi-million pound roasters; the medium and large chains and the green importers – it is about time to get it back into the specialty coffee industry.

Kerri & Miles

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