Recently there has been quite a lot of attention in the media about coffee companies and investment, in part prompted by the announcement that Nestle purchased a 68% majority stake in Blue Bottle Coffee, a US specialty coffee company with a growing number of retail outlets in the US (and Japan).
Questions have been raised as to why one of the largest food companies in the world would want to invest in this particular type of coffee company. For readers in the UK, for whom Blue Bottle might not be so familiar, it’s a coffee company founded by James Freeman in Oakland California that started out as a very small roaster to sell direct to consumers, which then developed into a small coffee cart in the early 2000s, and gradually expanded into a network of cafes. The deal with Nestle wasn’t the first time the company has received investment, it appears to have received $20 million in 2012 from venture capital investment, and further injection of $70 million venture capital from investors in 2015. According to the Financial Times the company received $120 million from investors since it began. So investment from outsiders as a concept is not new for the company. But this isn’t the only move from big companies to invest in specialty coffee companies. JAB Holdings, a German Investment Firm, which already owned well known mainstream coffee brands, Krispy Kreme, Peets and Caribou Coffee, has recently acquired Stumptown Coffee Roasters and Intelligentsia (two US specialty coffee companies). These high status deals suggest that these large global companies see something in the future of specialty coffee and are seeking to position themselves to take advantage of this. Although a recent article in Markets Insider suggests that these specialty coffee chains are ‘barely a blip on the radar when compared to Starbucks more than 24,000 locations’. It recognises that specialty coffee chains are starting to ‘eat into Starbuck’s footprint’ but given that the chain is still growing too they don’t see the specialty sector ever becoming a main competitor to the global giant Starbucks.
An article from Eater suggests that part of the reason these specialty coffee companies are conducive to consolidation is that on their own they had reached capacity in terms of how fast they could grow given their resources, and that these moves allowed them to reach a wider audience. As Peet’s CEO Dave Burwick stated ‘were just giving them a bigger stage to play on’. It will be interesting to see what the impact is of these consolidations. Will the coffee companies retain their individuality and maintain their current standards? There are some concerns that sales of coffee will become concentrated into fewer companies which may mean more pressure is placed on the farmer’s end of the coffee supply chain over price and quality. Only time will tell what impact of these investments will have. Is this just the start of a wave of large companies to claim their stake in the coffee market while the boom of coffee and coffee shops continues? Will these specialty coffee companies continue to flourish with their own individuality shining through, or will corporate pressures begin to influence their activities.