October 3, 2017 • 19 mins
The majority of Americans drink at least one cup of coffee every day. The kinds of drinks and the companies producing them have changed dramatically over the past few decades. Consumers increasingly want their caffeine kick to be gourmet and iced. Meanwhile, artisanal coffee companies are being snatched up by big roasters, much as craft brewers have been acquired by bigger counterparts. This week on Material World, Jenny and Lindsey dig into what's happening with the country's favorite stimulant. They talk with the leaders of Illycaffe Spa, La Colombe Coffee Roasters and Blue Bottle Coffee Co. about why gourmet coffee is growing, how cold drinks got so hot and why industry consolidation is expected to continue.
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Episode Transcript
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Speaker 1 (00:00):
I like it early in the moarning. For most of us,
there's one thing we absolutely have to have every morning. Coffee.
Oh for sure. I couldn't go about my day without
at least two or five cups of coffee every morning.
It's the best part of waking up and all that
(00:25):
don't have to be the fancy guyd covenience. I'm Jenny
Kaplan and I'm Lindsay Rupp, and today on Material World,
we're talking about my favorite drink, coffee. We're digging into
how drinks of all from those giant tubs of coffee
(00:47):
grounds to cans of draft Latte's, and how the industry
got crafty and reverted back to big business. Sixty of
Americans drink coffee on a daily basis, according to the
(01:08):
National Coffee Association's seventeen National Coffee Drinking Trends Consumption Tracking Report.
That's up from fifty seven last year. In particular, gourmet
coffee consumption grew of daily consumption was gourmet and this
year's study compared to forty in two thousand twelve. Coffee
(01:29):
has come a long way since those big folders and
maxwell house containers many of us grew up with. Now
we hear about single sourced coffee, fancy espresso based drinks,
and cold brew. The places we go to get coffee
have changed a lot too. People still make coffee in
their homes, but many are Starbucks loyalists or love their
(01:50):
local boutique coffee shop in the neighborhood. The craft coffee
community is kind of like craft beer, right. Dedicated consumers
will go out of their way to get coffee from
a more our teas and old place. The business side
feels a lot like craft beer. Two big corporations have
been on buying sprees, snatching up smaller roasters to appeal
to coffee enthusiasts. We talked to Todd Carmichael, the co
(02:13):
founder of La Colombe Coffee, about how the drink has
evolved and it's come a long way. Well, yeah, it's
been a riot. I mean coffee from the turn of
the centuries, of the nineteen hundred. Today it's your You
could you can't even almost reconcile the two of them
copy it. You know. In the early nine hundreds was
a commodity of all the coffees in the world, a
(02:33):
kind of blended together and it kind of roasted the
same profile and put in cans. The origins of coffee
as we know it today can be traced back more
than two decades. We spoke with Andrea Ellie, chief executive
officer of Illy Cafe and grandson of the founder of Ili,
for an education on the evolution of coffee. Well, it's
a continuous evolution, you know. It started, it's over twenty
(02:56):
years with a gourmet coffee. People discovered quality thanks to
Arabica beans, thanks to express so expresso based drinks, and
this also created a lot of interest. You know, also
because the narrative of coffee, it changed dramatically and since
then there has been a continuous evolution. Initially this coffee
(03:20):
craze was out of home, you know, coffee shops and
mostly expresso based drinks. And then it became you know,
pure origins. That's also very interesting. And in the last
let's say fifteen years, then the boom of capsule systems.
(03:40):
Because capsule system allows you to get the same quality
that you get in a coffee shop at home, in
a very convenient and a very consistent quality. And this
is made because couple are singles served. This made the
amount of type of coffee that you can enjoy at
home to explode, and in the meantime, you know that
(04:01):
quality and pleasure content was improving these which is the
first virture of coffee. One of the biggest players in
all this is Starbucks. Our friend Craig Giemona cover Starbucks
for Bloomberg. We asked him to help illustrate how Starbucks
pushed the movement forward. Yeah. I mean, Starbucks is obviously
(04:21):
a gigantic restaurant company, if you want to call it that.
I mean, there's something like thirteen thousand Starbucks in the US.
I mean, it's long been a joke that you know
there's a Starbucks on every corner. I mean, there's that
famous Onion article about Starbucks opening a Starbucks in the
bathroom of a Starbucks. So there's a lot of Starbucks,
and it's certainly I think when you think about Starbucks,
they are certainly credited with kind of bringing European coffee
(04:44):
culture to the US. I mean, I think there's coffee
snobs out there that might might not like that statement,
but the bottom line is that it's true. I mean,
you go back twenty years or thirty years, and it
was sort of folgers and just giant things of canned coffee,
and Starbucks kind of introduced I think, better coffee to Americans.
(05:04):
There is kind of a symbiosis between Alien Starbucks because
Starbucks did interpret in the American way the authentic Italian
coffee culture, which is I would say really is a
kind of interpreting in the best possible way. I don't
(05:27):
say we are the only one, of course, but we
try to interpret in the best possible way the Italian
coffee heritage. Now espresso, my grandfather has been the you know,
innovator with the pressure espresso, and since then we have
been the first exporting Italian espresso in the world and
so on. And so Starbucks, by picking this Italian coffee
(05:49):
culture well and making it adapted to the American consumer,
they've been excellent in spreading the coffee culture, raising the
level of awareness. And uh so Americans literally discovered high
quality coffee thanks to Starbucks. Going back to the days
(06:11):
before Starbucks, the dollar cup of coffee at a deli
or you know, even Dunkin Donuts, I think it was
just a cheaper, kind of completely commodity market. And Starbucks
introduced people to four and five dollar cups of coffee
and now it's gone beyond that. More recently, this continuous
(06:31):
revolution is the is the new revolution. It is so
called third wave, which is about micro roasters, including coffee roways,
roasting coffee and exporting roasted coffee from Nicaragua, from Costa Rica,
from O Columbia, whatever. It's about really unique specific origin qualities, preparations.
(06:55):
It's about new drinks like cold brew is an amazing
success that everybody drinks it, and it's it's very interesting
and so on. So the revolution continues. It's an ongoing revolution.
We spoke with one such roaster, Todd Carmichael, who co
founded lack Alone Coffee in ninet. You heard from him
at the top of the show. Todd has been in
(07:17):
the coffee business for more than three decades. Also fun fact,
he was the first American too solo track across Antarctica
from the coast to the South Pole. I guess it
started in two where Um, the small company in Seattle
was the first. Tip offered me a job in a
warehouse dragging grain sacks around. It was a small company
(07:39):
at the time, three cafes, little Rolla Street. It was
called Starbucks. Um. I was pursuing my degree in business
and you know, I was working in coffee and I
just never separated the two. And it's some I don't
know how many years later, but I'm still kind of
doing the same thing. Black Alone now has about twenty
six cafes across the country, and its newest innovation is
(07:59):
a canned draft latte. The drink is sold in stores
across the country as part of the growing trend of
grocers stalking more ready to drink brands. The draft latte
is response to two things, really, you know. The first
is that, you know, the consumer is interested in drinking
their drinks cold. Um. And it was so much so
that it became hyper material that when I finally took
(08:22):
the time to look at the drink critically, I realized
that there was a missing component. Uh. In a hot latte,
you have three components. Have concentrated coffee, you have real milk,
and you have the third, which is vapor. In the
case of a hot drink, it's water vapor. And when
I looked at the cold category, I realized that vapor
piece was missing. Uh, you know, it's these were They're
(08:44):
not lattis, they're not cappuccinos, they're just kind of it's coffee, milk. Right.
So I went out and the mission was to reintroduce
vapor into a cold latte. And I did that by
compressing nitrous ox side uh into a liquid, mixed that
liquid with coffee and milk, and as long it's under pressure,
it's a liquid. At the moment you release the pressure,
that liquid gas becomes that third ingredient, vapor UH. In
(09:07):
order to get that done commercially, I had to reinvent
the aluminum can. Increasingly people are drinking their coffee cold.
Grocery stores are giving more and more shelf space to
cold brew and other kinds of fancy ready to drink coffees.
This is the ice age. I mean, if you would
have told me twenty five years ago that more than
(09:28):
half of the coffee is consumed on premise would be cold,
I wouldn't believe you. But that's that's the case. Today.
Black Alone was still pretty much independent. The majority of
the company is owned by the billionaire founder of Chibani Yogurt.
But more and more big companies are buying up their
smaller competitors. J A. B Holding Company has acquired Cureg,
(09:50):
Caribou Coffee, Pizza, Coffee, and Tea, Stump Town and Intelligentsia.
Big beverage players like Coke and Pepsi are also boosting
their coffee portfolios. PepsiCo has long partnered with Starbucks to
produce They're Ready to Drink products, and Coca Cola partners
with Italy in the US and has other brands around
the world. Dr Pepper Snapple Group is also in the
(10:13):
coffee game. They distribute Hybrew which produces coldbri coffees. It
did happen in with beer, same microbreweries going along with
the consolidation of the big brewing company. So at the
same time you have this large consolidation made by mainly
(10:36):
G A. B. They invested forty billion US dollars in
the last five years in order to become a fast
follower of the leader, Nestle, you know, and now they
they are probably leading in volume, not not in value yet,
but you know, they are really really big. And now
you have two big groups consolidating over of the coffee
(10:56):
volume worldwide. Is this good? Not sure, but this is
what is happening. On the opposite side, you have a
fragmentation of the coffee market with these tiny new companies
like micro roasters, opening market, micro stores, etcetera, etcetera, with
plenty of opportunity for diversification. So I believe that this
(11:19):
micro roaster they will probably reach it, maybe a ten
percent of the market something like that. Uh. And this
is a new dynamic, but all in all, there will
be definitely more product offering for the consumer, more variety,
and the capacity to enjoy a cup of coffee in
any possible conditions and consumption occasion. Most recently, nestlely about
(11:41):
a majority stick in Blue Bottle coffee for four hundred
and twenty five million dollars. The basic broad stroke thing
that's been happening is that big guys so quote unquote
big food and there's almost nobody that's as big as
Nestle her buying up you know, hip startups. Nestley holds
the number one position in the global package coffee market,
number one. I think the big thing with Blue Bottles
(12:03):
that they sell a lot of stuff directly to customers,
and these companies now in the age of Amazon and
Whole Foods, these companies are desperate to kind of know
more about their customers, to get that data and to
have that relationship directly with the consumers. So I mean,
Blue Bottle has their cafes, but the cafes are almost
kind of just like branding, whereas I think of the
businesses them selling coffee directly to consumers. So I think
(12:25):
that was probably a big part of it. And you know,
Nestlee also wants to get more into the US. They
have them espresso business here, but you know, that's a
machine that really has played second fiddle to Cure in
the US, and they're not really you know, I think
NESTLEI wants a bigger presence in US supermarket so that
maybe they'll you'll see them take the Blue Bottle brand
and use their relationships that they have with every single
(12:48):
supermarket in the US and try to take the Blue
Bottle brand wide as a premium brand, you know, because
I think the European companies in particular have identified the
US as the best consumer market in the world. I mean,
Western Europe is certainly slowed down, and there's obviously a
lot of money to be made on premium coffee in
the US, and I think that has to be what
Nestle is thinking about, which is, um, how much can
(13:10):
we make on Blue Bottle bags of Blue Bottle coffee?
You know, in uh in Walmart and Kroger and Target,
in all these in all these stores at a time
when Americans are clearly willing to kind of pay up
for good coffee. We spoke with Blue Bottle founder James
Freeman about the acquisition and why he chose to sell.
You know, approximately six percent of our company was owned
(13:33):
by two hundred and fifty two investors before the transaction
with Nestle, So one of the desiderato was just we could,
you know, have one investor and sent two hundred fifty
two even though our two hundred fifty two were great
and supportive investors, So that was important. And also the
(13:53):
nature of our agreement with Nestle, our CEO, Bran Mean,
it's his name. He carved out way for us to
be I think, out of the eight thousand food brands
that they own, you know, we're the only standalone it
and empathy with a separate board. We don't have our
(14:14):
like you're not in the nestilating system, not in HROR
finance or anything like that. So we have a separate
governance and you know, our our plan is the same
as it always was, as to build more cafes and
make more delicious coffee. That's what Nessly is invested in.
Lock Alom's Todd Carmichael says he's a fan of more
(14:35):
competition because that leads to more innovative products. For me,
I don't want to see too much consolidation because I
like the idea. There are lots of us working on
the same problem. Competition is one of the things that
helped drive the company and drive the industry so too much.
I don't like it. But having said that, you know,
the future is it's pretty exciting for the small and
(14:58):
a large, and you know, having more players in its
best for everybody. Andrea really says there's actually room for
many more roasters to get into the coffee game. If
you make a comparison with wine, you know, similar similar industry,
very experiential product, natural, blah blah, fantastic. Five millennia of
(15:19):
his story for wine, only one millennial of history for coffee,
so that follow coffee appears to to follow a similar trend,
you know, And if you look at the structure of
the wine industry now is only about you know, hundreds
of thousands millions of wine makers. In Italy, which is
(15:43):
the leading country for wine Number one country wine producing
country in the world, over three hundred thousands wine makers,
you know, so three hundred thousands only one thousand roasters.
So there are probably thirty coffee roasters in the world.
(16:03):
Maybe in ten years will be three hundred thousand. I
mean this is this is probable also because I predict
that another you know similarity UH compared to wine. The
most effective strategy by which UH wine. Let's say, let's
(16:24):
say peasants growing grapes UH came out from poverty because
they were also poor, and they were squeezed by wine
makers to whom they were selling the grapes. They integrated vertically.
They decided to become wine maker themselves. They made the
investment of a of a cave and starting producing wine themselves.
(16:48):
This can occur in coffee as well. Since the majority
of Americans drink coffee every day, it's easy to see
why companies are going after it. The opportunity the is enormous.
Coffee is the you know, by far, the hip as
possible drink that you can have to such an extent
that there are more people drinking coffee in the United
(17:11):
States compared people drinking tap water or or or or
bottled water. Did you know that sixty people drink coffee
every day only drink bottled water, and only forty seven
drink tap water. So that means that people literally feed
and thirst themselves, you know, through through coffee. People of coffee,
(17:34):
drinking age drink coffee, whereas like eat hummus. I think
about it, the average American drink seventeen of coffee a day,
and you look around you realize that's just about as
much as they drink all you beer, wine, and everything
else together. It is the quintessential American average coffee. Um.
(18:14):
That's it for this episode of Material World. Thanks for listening.
For more episodes, we're on Apple Podcasts, the Bloomberg Terminal,
and anywhere you listen to shows like this. For more
on coffee and all other things you drink and smoke,
follow me on Twitter. I'm at Jenny mcplan. For more
on the other things you buy, like clothes, Follow Lindsay
(18:36):
at LC Rock. Material World is produced by Magnus Hendrickson
and Liz Smith. Francesca Levy is the head of Bloomberg Podcasts.
We'll be back in two weeks. Can someone actually called me?
(19:06):
Loura gilmore over the weekends? When I was drinking so much,
Who was it, Scirrel? Megan? I was like, oh, you're
having a LOURAA Gilmore moment.
I like it early in the moarning. For most of us,
there's one thing we absolutely have to have every morning. Coffee.
Oh for sure. I couldn't go about my day without
at least two or five cups of coffee every morning.
It's the best part of waking up and all that
(00:25):
don't have to be the fancy guyd covenience. I'm Jenny
Kaplan and I'm Lindsay Rupp, and today on Material World,
we're talking about my favorite drink, coffee. We're digging into
how drinks of all from those giant tubs of coffee
(00:47):
grounds to cans of draft Latte's, and how the industry
got crafty and reverted back to big business. Sixty of
Americans drink coffee on a daily basis, according to the
(01:08):
National Coffee Association's seventeen National Coffee Drinking Trends Consumption Tracking Report.
That's up from fifty seven last year. In particular, gourmet
coffee consumption grew of daily consumption was gourmet and this
year's study compared to forty in two thousand twelve. Coffee
(01:29):
has come a long way since those big folders and
maxwell house containers many of us grew up with. Now
we hear about single sourced coffee, fancy espresso based drinks,
and cold brew. The places we go to get coffee
have changed a lot too. People still make coffee in
their homes, but many are Starbucks loyalists or love their
(01:50):
local boutique coffee shop in the neighborhood. The craft coffee
community is kind of like craft beer, right. Dedicated consumers
will go out of their way to get coffee from
a more our teas and old place. The business side
feels a lot like craft beer. Two big corporations have
been on buying sprees, snatching up smaller roasters to appeal
to coffee enthusiasts. We talked to Todd Carmichael, the co
(02:13):
founder of La Colombe Coffee, about how the drink has
evolved and it's come a long way. Well, yeah, it's
been a riot. I mean coffee from the turn of
the centuries, of the nineteen hundred. Today it's your You
could you can't even almost reconcile the two of them
copy it. You know. In the early nine hundreds was
a commodity of all the coffees in the world, a
(02:33):
kind of blended together and it kind of roasted the
same profile and put in cans. The origins of coffee
as we know it today can be traced back more
than two decades. We spoke with Andrea Ellie, chief executive
officer of Illy Cafe and grandson of the founder of Ili,
for an education on the evolution of coffee. Well, it's
a continuous evolution, you know. It started, it's over twenty
(02:56):
years with a gourmet coffee. People discovered quality thanks to
Arabica beans, thanks to express so expresso based drinks, and
this also created a lot of interest. You know, also
because the narrative of coffee, it changed dramatically and since
then there has been a continuous evolution. Initially this coffee
(03:20):
craze was out of home, you know, coffee shops and
mostly expresso based drinks. And then it became you know,
pure origins. That's also very interesting. And in the last
let's say fifteen years, then the boom of capsule systems.
(03:40):
Because capsule system allows you to get the same quality
that you get in a coffee shop at home, in
a very convenient and a very consistent quality. And this
is made because couple are singles served. This made the
amount of type of coffee that you can enjoy at
home to explode, and in the meantime, you know that
(04:01):
quality and pleasure content was improving these which is the
first virture of coffee. One of the biggest players in
all this is Starbucks. Our friend Craig Giemona cover Starbucks
for Bloomberg. We asked him to help illustrate how Starbucks
pushed the movement forward. Yeah. I mean, Starbucks is obviously
(04:21):
a gigantic restaurant company, if you want to call it that.
I mean, there's something like thirteen thousand Starbucks in the US.
I mean, it's long been a joke that you know
there's a Starbucks on every corner. I mean, there's that
famous Onion article about Starbucks opening a Starbucks in the
bathroom of a Starbucks. So there's a lot of Starbucks,
and it's certainly I think when you think about Starbucks,
they are certainly credited with kind of bringing European coffee
(04:44):
culture to the US. I mean, I think there's coffee
snobs out there that might might not like that statement,
but the bottom line is that it's true. I mean,
you go back twenty years or thirty years, and it
was sort of folgers and just giant things of canned coffee,
and Starbucks kind of introduced I think, better coffee to Americans.
(05:04):
There is kind of a symbiosis between Alien Starbucks because
Starbucks did interpret in the American way the authentic Italian
coffee culture, which is I would say really is a
kind of interpreting in the best possible way. I don't
(05:27):
say we are the only one, of course, but we
try to interpret in the best possible way the Italian
coffee heritage. Now espresso, my grandfather has been the you know,
innovator with the pressure espresso, and since then we have
been the first exporting Italian espresso in the world and
so on. And so Starbucks, by picking this Italian coffee
(05:49):
culture well and making it adapted to the American consumer,
they've been excellent in spreading the coffee culture, raising the
level of awareness. And uh so Americans literally discovered high
quality coffee thanks to Starbucks. Going back to the days
(06:11):
before Starbucks, the dollar cup of coffee at a deli
or you know, even Dunkin Donuts, I think it was
just a cheaper, kind of completely commodity market. And Starbucks
introduced people to four and five dollar cups of coffee
and now it's gone beyond that. More recently, this continuous
(06:31):
revolution is the is the new revolution. It is so
called third wave, which is about micro roasters, including coffee roways,
roasting coffee and exporting roasted coffee from Nicaragua, from Costa Rica,
from O Columbia, whatever. It's about really unique specific origin qualities, preparations.
(06:55):
It's about new drinks like cold brew is an amazing
success that everybody drinks it, and it's it's very interesting
and so on. So the revolution continues. It's an ongoing revolution.
We spoke with one such roaster, Todd Carmichael, who co
founded lack Alone Coffee in ninet. You heard from him
at the top of the show. Todd has been in
(07:17):
the coffee business for more than three decades. Also fun fact,
he was the first American too solo track across Antarctica
from the coast to the South Pole. I guess it
started in two where Um, the small company in Seattle
was the first. Tip offered me a job in a
warehouse dragging grain sacks around. It was a small company
(07:39):
at the time, three cafes, little Rolla Street. It was
called Starbucks. Um. I was pursuing my degree in business
and you know, I was working in coffee and I
just never separated the two. And it's some I don't
know how many years later, but I'm still kind of
doing the same thing. Black Alone now has about twenty
six cafes across the country, and its newest innovation is
(07:59):
a canned draft latte. The drink is sold in stores
across the country as part of the growing trend of
grocers stalking more ready to drink brands. The draft latte
is response to two things, really, you know. The first
is that, you know, the consumer is interested in drinking
their drinks cold. Um. And it was so much so
that it became hyper material that when I finally took
(08:22):
the time to look at the drink critically, I realized
that there was a missing component. Uh. In a hot latte,
you have three components. Have concentrated coffee, you have real milk,
and you have the third, which is vapor. In the
case of a hot drink, it's water vapor. And when
I looked at the cold category, I realized that vapor
piece was missing. Uh, you know, it's these were They're
(08:44):
not lattis, they're not cappuccinos, they're just kind of it's coffee, milk. Right.
So I went out and the mission was to reintroduce
vapor into a cold latte. And I did that by
compressing nitrous ox side uh into a liquid, mixed that
liquid with coffee and milk, and as long it's under pressure,
it's a liquid. At the moment you release the pressure,
that liquid gas becomes that third ingredient, vapor UH. In
(09:07):
order to get that done commercially, I had to reinvent
the aluminum can. Increasingly people are drinking their coffee cold.
Grocery stores are giving more and more shelf space to
cold brew and other kinds of fancy ready to drink coffees.
This is the ice age. I mean, if you would
have told me twenty five years ago that more than
(09:28):
half of the coffee is consumed on premise would be cold,
I wouldn't believe you. But that's that's the case. Today.
Black Alone was still pretty much independent. The majority of
the company is owned by the billionaire founder of Chibani Yogurt.
But more and more big companies are buying up their
smaller competitors. J A. B Holding Company has acquired Cureg,
(09:50):
Caribou Coffee, Pizza, Coffee, and Tea, Stump Town and Intelligentsia.
Big beverage players like Coke and Pepsi are also boosting
their coffee portfolios. PepsiCo has long partnered with Starbucks to
produce They're Ready to Drink products, and Coca Cola partners
with Italy in the US and has other brands around
the world. Dr Pepper Snapple Group is also in the
(10:13):
coffee game. They distribute Hybrew which produces coldbri coffees. It
did happen in with beer, same microbreweries going along with
the consolidation of the big brewing company. So at the
same time you have this large consolidation made by mainly
(10:36):
G A. B. They invested forty billion US dollars in
the last five years in order to become a fast
follower of the leader, Nestle, you know, and now they
they are probably leading in volume, not not in value yet,
but you know, they are really really big. And now
you have two big groups consolidating over of the coffee
(10:56):
volume worldwide. Is this good? Not sure, but this is
what is happening. On the opposite side, you have a
fragmentation of the coffee market with these tiny new companies
like micro roasters, opening market, micro stores, etcetera, etcetera, with
plenty of opportunity for diversification. So I believe that this
(11:19):
micro roaster they will probably reach it, maybe a ten
percent of the market something like that. Uh. And this
is a new dynamic, but all in all, there will
be definitely more product offering for the consumer, more variety,
and the capacity to enjoy a cup of coffee in
any possible conditions and consumption occasion. Most recently, nestlely about
(11:41):
a majority stick in Blue Bottle coffee for four hundred
and twenty five million dollars. The basic broad stroke thing
that's been happening is that big guys so quote unquote
big food and there's almost nobody that's as big as
Nestle her buying up you know, hip startups. Nestley holds
the number one position in the global package coffee market,
number one. I think the big thing with Blue Bottles
(12:03):
that they sell a lot of stuff directly to customers,
and these companies now in the age of Amazon and
Whole Foods, these companies are desperate to kind of know
more about their customers, to get that data and to
have that relationship directly with the consumers. So I mean,
Blue Bottle has their cafes, but the cafes are almost
kind of just like branding, whereas I think of the
businesses them selling coffee directly to consumers. So I think
(12:25):
that was probably a big part of it. And you know,
Nestlee also wants to get more into the US. They
have them espresso business here, but you know, that's a
machine that really has played second fiddle to Cure in
the US, and they're not really you know, I think
NESTLEI wants a bigger presence in US supermarket so that
maybe they'll you'll see them take the Blue Bottle brand
and use their relationships that they have with every single
(12:48):
supermarket in the US and try to take the Blue
Bottle brand wide as a premium brand, you know, because
I think the European companies in particular have identified the
US as the best consumer market in the world. I mean,
Western Europe is certainly slowed down, and there's obviously a
lot of money to be made on premium coffee in
the US, and I think that has to be what
Nestle is thinking about, which is, um, how much can
(13:10):
we make on Blue Bottle bags of Blue Bottle coffee?
You know, in uh in Walmart and Kroger and Target,
in all these in all these stores at a time
when Americans are clearly willing to kind of pay up
for good coffee. We spoke with Blue Bottle founder James
Freeman about the acquisition and why he chose to sell.
You know, approximately six percent of our company was owned
(13:33):
by two hundred and fifty two investors before the transaction
with Nestle, So one of the desiderato was just we could,
you know, have one investor and sent two hundred fifty
two even though our two hundred fifty two were great
and supportive investors, So that was important. And also the
(13:53):
nature of our agreement with Nestle, our CEO, Bran Mean,
it's his name. He carved out way for us to
be I think, out of the eight thousand food brands
that they own, you know, we're the only standalone it
and empathy with a separate board. We don't have our
(14:14):
like you're not in the nestilating system, not in HROR
finance or anything like that. So we have a separate
governance and you know, our our plan is the same
as it always was, as to build more cafes and
make more delicious coffee. That's what Nessly is invested in.
Lock Alom's Todd Carmichael says he's a fan of more
(14:35):
competition because that leads to more innovative products. For me,
I don't want to see too much consolidation because I
like the idea. There are lots of us working on
the same problem. Competition is one of the things that
helped drive the company and drive the industry so too much.
I don't like it. But having said that, you know,
the future is it's pretty exciting for the small and
(14:58):
a large, and you know, having more players in its
best for everybody. Andrea really says there's actually room for
many more roasters to get into the coffee game. If
you make a comparison with wine, you know, similar similar industry,
very experiential product, natural, blah blah, fantastic. Five millennia of
(15:19):
his story for wine, only one millennial of history for coffee,
so that follow coffee appears to to follow a similar trend,
you know, And if you look at the structure of
the wine industry now is only about you know, hundreds
of thousands millions of wine makers. In Italy, which is
(15:43):
the leading country for wine Number one country wine producing
country in the world, over three hundred thousands wine makers,
you know, so three hundred thousands only one thousand roasters.
So there are probably thirty coffee roasters in the world.
(16:03):
Maybe in ten years will be three hundred thousand. I
mean this is this is probable also because I predict
that another you know similarity UH compared to wine. The
most effective strategy by which UH wine. Let's say, let's
(16:24):
say peasants growing grapes UH came out from poverty because
they were also poor, and they were squeezed by wine
makers to whom they were selling the grapes. They integrated vertically.
They decided to become wine maker themselves. They made the
investment of a of a cave and starting producing wine themselves.
(16:48):
This can occur in coffee as well. Since the majority
of Americans drink coffee every day, it's easy to see
why companies are going after it. The opportunity the is enormous.
Coffee is the you know, by far, the hip as
possible drink that you can have to such an extent
that there are more people drinking coffee in the United
(17:11):
States compared people drinking tap water or or or or
bottled water. Did you know that sixty people drink coffee
every day only drink bottled water, and only forty seven
drink tap water. So that means that people literally feed
and thirst themselves, you know, through through coffee. People of coffee,
(17:34):
drinking age drink coffee, whereas like eat hummus. I think
about it, the average American drink seventeen of coffee a day,
and you look around you realize that's just about as
much as they drink all you beer, wine, and everything
else together. It is the quintessential American average coffee. Um.
(18:14):
That's it for this episode of Material World. Thanks for listening.
For more episodes, we're on Apple Podcasts, the Bloomberg Terminal,
and anywhere you listen to shows like this. For more
on coffee and all other things you drink and smoke,
follow me on Twitter. I'm at Jenny mcplan. For more
on the other things you buy, like clothes, Follow Lindsay
(18:36):
at LC Rock. Material World is produced by Magnus Hendrickson
and Liz Smith. Francesca Levy is the head of Bloomberg Podcasts.
We'll be back in two weeks. Can someone actually called me?
(19:06):
Loura gilmore over the weekends? When I was drinking so much,
Who was it, Scirrel? Megan? I was like, oh, you're
having a LOURAA Gilmore moment.
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