I have always been a coffee house aficionado. The cacophony of sounds emanating from caffeine-buzzed coffee drinkers and pulsating espresso machines appeals to my love for vibrant and hip locales.
Starbucks, which is largely credited with bringing specialty coffee to America, was my first orientation to this whole craze. As a young entrepreneur in Chicago back in 1993, I would indulge in an espresso at my favorite Wacker Drive location, amid a sea of boisterous traders from the Chicago Stock Exchange. Few of us at that time pondered the effect this coffee house trend would have on the culture of American society.
Many years later while on a business trip to San Francisco, my client recommended that I break rank with Starbucks and try a place called Peet’s Coffee & Tea. Amusingly, I thought my client was referring to some lowly guy named Pete who perhaps had a ramshackle vending cart on a downtown street corner nearby. Instead, I was excited to discover a Peet’s store which evoked a pleasant atmosphere and a strong coffee aroma (that can cling to your clothing if you hang around in there too long). “
Seismic News that Steamed the Coffee World
Sophisticated coffee lovers nationwide were recently stunned to hear the news of Peet’s Coffee & Tea’s majority stake acquisition of the highly popular Intelligentsia Coffee roasting company that was founded in Chicago. This followed another recent caffeine jolt by Peet’s: the announcement that they were purchasing Portland, Oregon-based Stumptown Coffee Company. This means Peet’s Coffee & Tea has acquired what are arguably two of the three new wave roasters. The remaining one is Counter Culture, which is situated in Durham, North Carolina.
‘Outrage’ is the general reaction among purists in the coffee community, as they grapple with what they see as the corporatization of this much beloved industry. This, despite assurances by Peet’s – as well as the leaders of the acquired coffee companies – that the founders would retain a “significant stake and active involvement in the business and daily operations.”
The most immediate concern is whether the popular Intelligentsia and Stumptown brands will be altered to bring them into greater alignment with the Peet’s model. The prevailing belief is that these two brands will remain independent because of the long-term value proposition inherent in their respective models.
A Reset for Specialty Coffee?
Personally, I think that these coffee industry consolidations will ultimately prove to be a good thing. Peet’s has been particularly active in its efforts to acquire small emerging roasters. Prior to this recent spate of acquisitions, they joined forces last year with a venture capital firm to purchase Mighty Leaf Tea, a move that gave Peet’s a more robust presence in the premium tea arena.
Against the backdrop of Starbuck’s continued industry domination, Peet’s clearly believes that there are massive opportunities for growth when continuities of scale are effectively executed. Besides, America’s palate for coffee is making a profound shift beyond Starbucks; I can vouch for that.
So what does the future now hold for the coffee industry? Well, the facts certainly speak for themselves. The retail value of the U.S. coffee market is estimated at $46 billion, according to the Specialty Coffee Association. Moreover, an estimated 30 million American adults indulge in specialty coffee drinks on a daily basis. The most popular drinks are espresso, mocha, latte, cappuccino, and frozen coffee beverages.
Speaking of coffee, it’s time to return to my exquisitely made drink at Little Owl Coffee in Denver. Man cannot live by freelance writing alone.
Michael Scott is a Denver-based journalist focusing on the intersection between free markets and economic freedom. You can follow him on Twitter @biz_michael