So where do you think the coffee business is going in the U.S.? As I have written in previous posts, there has been major consolidation within this industry over the past few years. Long overdue by any industry standard.
Let's take a look at the factors, roadblocks, and issues this business has, moving forward in the U.S. marketplace. It is far from unique as many industries are in the same boat. But where is the next big breakthrough? Will there be another Keurig? Well no one has a crystal ball, but there are things happening, and most of them, like the 1 cup k cup machines are not on a lot of people's radar yet. But, for someone like me, who has spent more than half of their lives in this industry, I have to believe that will come along.
Again, that next big thing in my mind is still only half the equation! Consolidation of this industry is still in the really early stages, as far as I'm concerned. But, as I sit here and ponder this, I stare at my kitchen table with my new bags, labels, heat sealer, and price listings by country of all the premium coffee in the world. That's right, that's what I am doing at this exact moment while typing this. Why? Simple. I have decided to get back into the COFFEE business!! I will be offering a full line of some of the BEST Coffee you have ever tasted within the next few weeks!! I hope, you decide to become our customer! I can promise you this. It will be a completely new model of Coffee business!! So I can only say, you will be 100% satisfied, no, blown away, by what you will be getting from my new venture! GUARANTEED!! If you would like to get on our PRE-Order listing, the form is right below here. It is simply your name and email. Once you sign up, you will get ALL the details about what is going on and what you can buy!!! I pray, you all sign up. It will be a coffee lover's ultimate NIRVANA!!!
I always like to look back into the history of other businesses with strong similarities and then analyze what exactly happened to them, and where and what the "sea change" was. I just gave away a big secret, this is the type of information you just don't get anywhere else on these blogs that I see. I hope you appreciate my willingness to share these little business shortcuts with you? I truly am doing it to help you, and hopefully some CEO or Entrepreneur sees some of this stuff and decides to actually retain me, to help them stir things up, in a particular business sector someday. That's the truth. So anyway, here we go.
I mean for all intents and purposes there still seems to be a coffee roaster/manufacturer everywhere you look, especially in and around major metropolitan areas. Take Boston for instance, where I closely reside. Coffee Roasters/Manufacturers/Distributors are still tripping all over themselves. You have every size and a wide variety of choices, even though there has been some consolidation here, it is minute.(that rhymes with lute)
You have primarily privately held, family owned and operated roasters but there really is no clear dominant business. There was 1 company that could arguably be that company but they sold to a food service distributor from out of state and just from the outside looking in, that seems to be a work in progress at best! The other thing is, couldn't someone come up with a better synergistic fit than that broken down, old school way of thinking? I mean come on! A relatively smart 15 year old could come up with that business plan! There is absolutely nothing that gets me in the least bit excited about this transaction, or the utter boxed in plan you have to work with, moving forward. OOOH, here is a good one! Maybe that was the only way of getting into the New England market and now they are going to go back and acquire other businesses just like theirs in this part of the country!! What an amazing piece of forward thinking huh? Come on, are you serious?
They made the mistake of getting rid of every family member and focused on trying to penetrate the food service accounts that the company supplied coffee to, thinking they will expand their primary business. Let's just say from my perspective its a work in progress. Before that company sold, they primarily focused on building their retail brand and were pretty successful. They have all the major super market chains in the area and their crown jewel was Publix, heavily positioned in Florida and southern states. The odd part is, their bread and butter for years and years was that they were the Dunkin Donuts manufacturer. That started to deteriorate several years ago with the introduction of the Canadian roaster, Mother Parker's and they were "frozen" from taking on any new dunkin business which is not a healthy sign for a partnership! So they focused on retail and are doing ok, but like I said, Reilly Foods or whoever is trying to manage that business currently, is not making any waves within the coffee market! Status quo, short term prospectus is, probably minimize the bleeding and sell it off if they get any reasonable uptick in sales. Just a thought.
So there are many smaller roasters and all have their niches, sort of, but none seem to have any type of plan to dominate anything, so looking at it from a purely financial view, they are acquisition bait. But to who?? Well let's see for a minute.....
So within I would say a 75 mile area from metropolitan Boston there are no less than 20 roasters of varying sizes operating the same way they have been for many years, most of them. I'd say that is saturation and regardless of their size, which probably varies from $500,000 to $10-$20 million dollars in sales are just beating each other over the head for the same market share. I mean it is almost too hard to watch.
Some of these businesses are in Rhode Island and Conn, but everyone is competing for the same customers trust me, I did it for 25 years! It is basically a business where you lose one account to say, company B, so then you go out and "lowball" one of their accounts and steal that account from them. A great business model huh? You are constantly losing customers or lowering your price to keep them, and you are swimming against the tide, because you get up tomorrow and its the same thing all over again!! So basically, you scrape and fight tooth and nail to stay exactly where you were last week, last month, last quarter and last year! Exciting right? What is the point? Is there an answer?
Well that is part of the reason I got out of this 4 1/2 years ago. There really is no huge upside being a coffee manufacturer. I would also like to point out that not a single one of them is anywhere near capacity, as far as their roasting capacity goes. I'm going to take an educated guess and say the luckier ones, might be at 60% capacity! It is absolutely ludicrous. I mean our manufacturing forefather's have to be trembling in their graves at the thought of this type of model. You can forget about economies of scale, or any of that production mumbo jumbo because it does not apply to this industry. I would venture to guess, it is like that all across the country! The only way any of this makes sense is, whoever has the money, buy everybody else, and move on. Take all of your food service accounts, which in the business is called "down the street business" and find a full service distributor. Someone like a Sysco, U.S. Foodservice, Performance Food Group, etc., and see what you can do? This eliminates the roasters overhead tremendously. No more delivery drivers, route trucks, truck insurance, even service for equipment, minimum delivery drops etc.. Pass it on! Yeah this is real big business, forward thinking stuff here.
Then focus on the growth markets. Well what are they? Well I have a few of them and if you think I am going to tell you what they are you are, crazier than I thought. But there is opportunity out there, it is just not what you are thinking. There needs to be a new model put into play, and it needs to be done sooner rather than later. You know, I was discussing this very subject with an old friend who ran "Eight O' Clock Coffee", the old A & P brand that revolutionized super market coffee by putting grinders in the coffee aisles years ago, and absolutely "killed" it, selling fresh ground store bought coffee. I mean that was a big deal back then!
He was laughing about the fragmentation and how counter productive the industry really is. I shot 2 or three ideas about how I saw the business expanding and moving in new directions. He stoppped laughing and looked at me and said, " you know Joe, all of these will certainly work, but how do you get these old war horses to see that everyone would benefit?" I said, simple, to take a line from Jerry Maguire; " Show Them The Money!" He said OK. Where is it coming from? Because it is certainly a rock fight, and no big business is going to want to waste there time in a rock fight. They want the fight to be over, and only want to negotiate with the winner! Man, is that ever true. I made 4 or 5 phone calls, and if it wasn't that exact response, it was pretty damn close!
The last big splash was obviously the k-cup, Keurig machine onslaught. Now those are numbers and market share that any company would be interested in backing and being a part of. Well there are a few things on the horizon that are similar in potential and that's where the focus should be! But first things first! Consolidate!!! Someone has to do it! These companies, don't have the mass that a company like J.A.B., the company who bought Green Mountain, Peet's and Intelligentsia purchased have any interest in at this point, so there has to be a "bridge" company. Now if you put your thinking cap on, the "bridge" companies so far are people like giant Food Service businesses, wait a minute, let me yawn, because that is some earth shattering business school thinking. BORING!!! But there are 2 or three other businesses that could and should be approached to enter into this type of business. They would probably not make sense to you at first, but if you really sat back and thought, you would more than likely agree!
What I am talking about is something very different. Something that will still benefit from acquiring all these pieces but one that might act like a real business once the acquisition is complete. Any guesses yet? Nothing? Come on, it is right in front of your face!
Well maybe it isn't, but consolidation is. You can bet that the future of coffee in the U.S. is going to mean less choices, bigger companies and once in a great while, something life changing will come to the marketplace! My guess is, this will happen sooner rather than later. So, in the meantime, I am jumping back into the coffee world with both feet! I am going to be promoting all of our coffees right here on this blog! So again, please sign up to the form towards the beginning of this post! I promise you, no harrassing or blasting your inbox, shenanigan's. I will promise you that we are only offering you, estate coffees. We have exclusive deals with only the finest farmers in each region we sell! That's a promise. When you order our Ethiopian Coffee for instance, it is from the family, that directly produces the top 1-3% of Ethiopia's best coffee beans!
Same goes for Indonesia, same goes for our blends!!
I know you are probably saying, hey, this isn't the title of this post? Well yeah it sort of is. Because we want to be the FUTURE of the U.S. coffee business, and I can tell you right now, because of all the work I put into picking these certain coffees, we are already half way there!! Now we just need you to drink it, and then WE WILL BE FOR SURE!.
Oh the future holds all the other stuff I've written about above! The mergers, crazy cold brewed whatever's, the big guy beating on the little guy, all of that and more! But I'm back in! So please sign up, and watch for any news, which will be coming within the next 10-14 days!! We are rolling out these coffees very slowly. So you get to try them, without shoving them down your throats!
But every single thing that ultimately will become our product list will be THE BEST you have ever had! So hang on, the future of the coffee business in the U.S. is coming, and you can be as sure as the earth will keep turning tomorrow, that I'm going to be right in the middle of the whole darn thing!!
Take care and thank you for reading! Please sign up on the form I have provided so you can get on the list. The first batch of coffees are extremely special, you wouldn't want to miss it. Once we run out, we run out. Why?
Because there is only so much coffee that REALLY qualifies as the best 1-3%, that's why!! Get on board now, it is going to be a heck of a ride!!!
Fenway Coffee Roaster