In a short period of time most of the 3rd wave coffee roasters that have a national profile have either taken on major outside investors or been bought outright: Intelligentsia, Stumptown, La Colombe, and now Blue Bottle.
Is this a good thing or bad? Some will say, "It depends," but don't count me as one of them. To me it's pretty much all bad. None of these investors have any track record of making food better. They primarily make more of it and, typically, more cheaply by using cheaper ingredients, cheaper labor, cheaper whatever. They don't say any of that of course. They say "We'll expand Brand X's reach so more people have access to it," making them sound like they're doing it for the good of humanity. But the way they expand comes at a price, it always does. Look, these aren't crack coffee people buying coffee businesses. These are money people buying a chance to make more money. Conglomerate acquisitions are what they are, and they are not good for business creativity, they're not good for health, they're not good for the food.
I don't know the whole story behind any of these buy-outs. I do know that some of the companies, like Blue Bottle, had already taken on investors ($100 million in their case). That was several years earlier. After the first wave of investors came I noticed these 3rd wave notables started packaging cold brew coffee for supermarkets and opening shops and roasting plants far from home base. They were using investor money to expand their products and to expand geographically. The fact that they are now taking on more money—in some cases the new money is buying out the other investors—could mean the expansion went well. Or it could mean it went badly. Either way it'd be a good story. So far I haven't seen anyone writing about it, though. No one is talking about whether these deals were done in a climate of fear or opportunity.
One article that is particularly telling about some of the other elements in play is this interview with James Freeman, the founder of Blue Bottle. To him, fast growth is a given, as he says, "There are a few paths a company of our growth rate can take when we’re pursuing capital." To some extent you have to forgive the guy. He started his company in Oakland, just up the road from Silicon Valley. He had investors from Instagram and Twitter and elsewhere in tech. This is the way they all think. You must grow big. You must get capital big. You must sell out big. That is how success works in that world. It's classic Silicon Valley, down to the galling self-effacement of a mulitmillionaire shrugging off how rich he is after the buyout saying, "I’ve got kids at home, so security feels great."
One article that is particularly telling about some of the other elements in play is this interview with James Freeman, the founder of Blue Bottle. To him, fast growth is a given, as he says, "There are a few paths a company of our growth rate can take when we’re pursuing capital." To some extent you have to forgive the guy. He started his company in Oakland, just up the road from Silicon Valley. He had investors from Instagram and Twitter and elsewhere in tech. This is the way they all think. You must grow big. You must get capital big. You must sell out big. That is how success works in that world. It's classic Silicon Valley, down to the galling self-effacement of a mulitmillionaire shrugging off how rich he is after the buyout saying, "I’ve got kids at home, so security feels great."
The good news behind this, the news that enabled it in the first place, is that small roaster coffee technology has come a long way. You can install a roaster in a single shop and pretty much make the economics work. The big companies can buy what they will. They always do. I have faith the small coffee world will still thrive.
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