On conglomerates buying up coffee brands, private equity, and specialty coffee's broken promise.
1: excellent article. Really well thought out and some excellent questions asked that I, too, would love to see answered.
2: a helpful resource (that maybe you already know about or maybe not) about the rise of Direct Trade coffee as a sourcing practice is the 2008 book "God In A Cup" by Michaele Weissman
Really great article, Ashley. The rise of private equity firms in company ownership—like you said, it's not like the extra cash is going towards sustainable investments. (Although I wish it would!) I hope that people with experience in that industry do reach out, as I'm curious to hear the on-the-ground perspective about what acquisitions actually entail: the scouting for where to invest / acquire; the contract negotiations; the amount of control retained (or lost) in the resulting deal.
This is a great piece, Ashley. Thank you for writing it.
It's always funny when previously hip companies get bought out and say "We're not changing! We're still cool!" and then start doing Keurig pods and selling in Walmart and whatnot. Big Steve-Buscemi-with-a-skateboard vibes.
Hey Ashley! I really enjoyed this article. I feel that you presented the information fairly, clearly, and with some great reflection questions. I'm really glad to hear CHI Intelli won their vote!
If original values are still being adhered to it would be amazing, but I would be surprised if they were. Great piece, Ash.
Excellent article. Thank you.
Really well written and informative article.
would Stumptown, if they were still run like a small private company, open almost directly across the street, less than a block, from a locally owned specialty coffee small business?
That's precisely what they're doing right now in Pasadena/Altadena, CA.
I see them now as nothing more than a profit hungry, no care for the community, typical corporate entity...but also unique that they also built their empire on Nazi roots/money.
Fascinating read, thank you. I think this growth to corporate acquisition pipeline is super interesting in contrast with the corporate investment from the onset approach you mentioned in your tweet about Blank Street.
Mostly both situations make me feel sad, as it feels like everything good and pure about speciality coffee being traded for money but, as they say, cash rules everything around me 🥲
Ashley, let's chat. The biggest, and perhaps only impact, of the consolidation (so far) were the terms of contracts... JAB wrote themselves a massive interest free loan by forcing their suppliers to front them the coffee. But it wasn't the producers who were impacted (at least not directly), it was the middlemen, those folks everyone likes to hate, but who are often the unsung heroes in the value chain. The new terms did cause a forced consolidation among traders, because only the biggest could afford to pay JAB this big interest free loan. And the coffee brands... Stumptown, for instance, has not changed how they source. If anything, it's improved under Shauna's leadership. Intelligentsia operates now as it always has, better than it ever has in many respects. They make great investments in sustainability and absolutely are focused on helping producers thrive, at least as much as they ever were. And to say that because an organization has to deliver shareholder value therefor cannot have the producer's best interest at heart, doesn't hold up. There is no correlation between their sustainability records and whether they are publicly or privately owned. None. Some of the largest roasters in the world are family owned. (Lavazza; Melitta; Tchibo...) All business have to make a profit, and there is only a small handful that are operating as a "social enterprise," where the coffee is means to economic development and poverty reduction. (This Side Up and Qima Coffees are two examples of this type of "good middlemen.") JAB isn't dictating how Peet's sources or what they pay producers, or how they treat producers. The three principles at JAB know the value and power of a brand. They don't want to kill the goose laying the golden eggs by getting in there and mucking up the brands. Absolutely, all coffee brands could be investing far more than they do in sustainability. Far more. But the act of buying brands and consolidating them onto a singled balance sheet has not proven to make things worse for producers. At least, I've not seen any evidence of such harm, including in your article. You ask: "Will the values these brands were founded on change?" You assert they have, but present no evidence, not even an anecdote, about how they have. You claim they have changed because they now have to make money in a "different way." JAB certainly is making money in a different way with that big ongoing interest free loan. But the brands are make their money, and sustaining their values just as they've always have. Often better than they ever have. But certainly not worse. Jeffery Sachs is a well known economist in the coffee space, and he is 100% in the producers corner, a very vocal critic of the industry, but I haven't heard him connect the consolidation with any negative impacts on producers, either.
You can contact me, Ashley on or off the record. I have been on the scene since 2003 and don't think our nostalgia for all that has been lost (and so much has been lost) should make us lose sight of what has been gained, especially in the spread of vastly improved local roasters and coffee shops.