On the Shoulders of Giants

How do you compete with giants in the supermarket coffee aisle?
Phil Johnson learned that lesson early on in his career.  In doing so, he brought gourmet coffee into the nation’s grocery stores and turned a loss leader item into a quality profit producer.

The Early Years
Johnson grew up the oldest of three children in Everett, Washington.  After high school, he went to work at the nearby Scott Paper Company in the shipping department.  “I couldn’t afford college at the time,” Johnson said, “So the Army made sense. The Army taught me discipline, leadership, responsibility, and convinced me that I had inner reserves.”

After service, First Lieutenant Johnson moved back to Everett and started working for The Boeing Company on the first 747.  While he recognized the high quality product that they were producing, he was not satisfied with the lack of opportunity to be rewarded for individual achievement in the workplace.  With a strong work ethic, he felt that if he worked smarter and harder than the others, then he should be rewarded in kind.

From this realization, he knew he wanted something more. Johnson’s cousin told him to consider sales.  “Phil,” he said, “you look good, and you’ve got the gift of gab.  In sales, you can get an expense account and car allowance.”

Getting a Start
Johnson started his consumer product sales career with Scott Paper and stayed with them for four years.  He then went to work for Liggett & Myers Tobacco in Eau Claire, Wisconsin, but he was asked to move frequently and longed to return to Everett.

Johnson explained that his cousin, who talked him into sales in the first place, then hired him into the grocery wholesale business.  He worked for his cousin and then later decided to open his own food brokerage business.

“The business did not work, but failing became a great teacher,” Johnson said.  “When the business faltered, one of my clients, Good Host Foods, offered me a job selling coffee to restaurants.”  Johnson’s life moved in a new direction.

A New Opportunity
Back in the late 70’s when Johnson started working for Good Host Foods, there was virtually no gourmet coffee at the supermarket level.  Good Host’s main business was institutional coffee.   Johnson wanted to get back involved in consumer product sales at the retail level by taking Good Host products and putting them into the retail stores; but how could he compete with the major national brands and the strong west coast regional brands?

“Our company offered specialty coffees and sold it to specialty stores in 100 pound bags, so I asked myself, ‘How can gourmet brands compete in a pre-packaged marketplace?’” Johnson said.

While researching the coffee aisle, he physically ran into a Hoodie nut display unit and the light bulb went off.  Coffee could flow through gravity fed dispenser bins, the consumer could see the product, smell the product, and if the display unit was built properly, they could grind the product in the store to take home.

Johnson thought it was the only way he could compete and at the same time offer consumers a gourmet coffee product that heretofore was only available in specialty stores.

Millstone Coffee was Born
After a couple of years, Good Host elected to sell their only US branch, giving Johnson the opportunity to acquire from them the retail gourmet coffee business that he successfully developed for them.  In 1981 he acquired the business, renamed it Millstone Coffee, and a new business was born.

Johnson was sure there was a certain portion of the population that, if a gourmet coffee product were offered in a supermarket setting, sales would increase for the retailer and provide them with a profit margin that they weren’t receiving on national branded coffees, a product that had previously been a loss-leaders.

The premise was that Millstone would supply and maintain the equipment at the store level, deliver the product at the store level, merchandise the product, keep the display unit clean, and ensure that the product was fresh.  The only thing the retailer had to do was check the product in at the back door and check the product out to the consumer at the front door at a healthy profit.

From Millstone Coffee to Cascade Coffee
Millstone Coffee rode the specialty coffee wave from 1981 to 1995 when Johnson sold the company to Proctor & Gamble.  At that time, the company was national in scope and was growing at about 30 percent per year.  Upon selling the business to P&G, Johnson created Cascade Coffee and sold portions of it to his employees, who then ran the company.  They signed a contract with P&G to produce product for them, and today, Cascade Coffee employs approximately 200 people and roasts coffee for some of the largest coffee companies in the United States.

In the early years of Cascade’s development, Johnson stepped away from the business, learned how to grow coffee in Kona, and in the last few years, Johnson has rejoined the business, reuniting with the talented core team he attributes to the success of Millstone Coffee. Much to his delight, his son and his wife have joined the group in making Cascade Coffee one of the premiere contract manufacturers in the country.

Johnson’s entry into the gourmet coffee business at the retail level led many consumers to discover the wonderful beverage of gourmet coffee.  The category has changed dramatically since the inception of Johnson’s idea back in 1979.  The consumer is now used to gourmet coffee and accepts it in a ground, pre-pack form that is readily available in supermarkets, in many varieties from many different manufacturers.  Where in the early and mid-90’s, a supermarket would have eight to 16 feet of bulk dispenser units, they now have eight to 16 feet of pre-packed gourmet coffee.  The business continues to evolve with the advent of single serve coffee that is still in its infancy.

Through it all, Cascade Coffee’s commitment to quality and service keep them on the leading edge of a still growing industry.

Phil Johnson, Founder Millstone Coffee, CEO, Cascade Coffee, Inc.

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