New York Times – 16 November 2005
By Michaele Weissman
You may think these entrepreneurs are crazy when they talk about selling coffee beans for 40 bucks a pound. When they tell you that properly prepared single-origin coffee varietals have as much depth and complexity and nuance as the finest pinot noirs. When they talk “latte art,” handing you a three-shot latte topped by an artistic memento – a rosetta – formed when perfectly textured black-brown espresso foam intermingles with the stiff froth of steam-blasted milk.
But such talk is the norm in the high-octane world of specialty roasted coffee, named by Entrepreneur magazine last May as one of the nation’s fastest-growing niche markets. Nationwide there are some 300 middle- to high-end specialty coffee roasters-retailers. At the top of this heap sit 25 to 30 strivers for whom coffee is not simply a commodity but a profitable artisanal beverage, like microbrew beer or fine wine.
So who exactly is inhabiting this niche?
Mostly, they are men in their 30′s – brainy, a tad arrogant, touched with a romantic streak that draws them to the obscure corners of the earth where coffee is grown. They respond to competition with a certain macho swagger.
Starbucks raised consumer awareness, paving the way for those of us who can do better,” said Doug Zell, 39, founder of Intelligentsia Coffee, a 10-year-old company in Chicago with 2004 sales of $9.5 million and a 2005 growth rate of 28 percent. A recent board president of the Specialty Coffee Association of America, Mr. Zell said he had little patience with anti-Starbucks hand-wringers. “I would argue that smaller players in the 1990′s who failed when Starbucks came to town drove themselves out of the business by poor execution,” he said.
Nicholas Cho, 31, founder and chief executive of Murky Coffee in Washington, D.C., agrees that Starbucks is beatable.
“If you are in the hamburger business and you can’t make a better burger than McDonald’s, you don’t deserve to be in business,” he said. “It’s the same with coffee,” added Mr. Cho, whose retail business, with expected 2005 sales of over $1 million, has expanded sixfold since its founding in 2002.
“Buying beans, roasting them, delivering service, you have to be the best,” said Mr. Zell, noting that at Intelligentsia, espresso drinks are made by hand by baristas who undergo a certificate-granting, three-month training program.
Mr. Zell compares the premium coffee business today to the wine business 25 years ago. Then, he says, most producers blended their wines and one tasted more or less like the next. “Only when producers opened their minds to single varieties of grapes grown in particular terrains did they start producing quality wines that got customers excited,” he said. “That’s when the wine business took off in this country.”
Premium roasters say they are prepared for the same thing to happen in specialty coffee. “We are ready for consumers who come into the store and order single-origin coffees from a particular region of Panama,” said Mark Inman, 37, a founder and principal of the Taylor Maid Farms organic coffee roastery in Sebastopol, Calif.
Mr. Inman said he discovered specialty coffee by accident when he was a university student studying winemaking in Oregon.
“I was invited to a coffee tasting,” he recalled. “I thought I would fly into the room and dazzle everyone with my palate. Instead I left there completely humbled. So far as taste is concerned, coffee offered everything that wine offered and more.” Mr. Inman said that afterward, he “bailed on wine,” putting his palate to work in his new career as a coffee roaster.
Interested in organic agriculture, Mr. Inman traveled to Central America, where he said he was appalled to see coffee farmers overusing petrochemicals made in America. Mr. Inman began working with coffee growers, encouraging them to use traditional soil-saving methods, and when they did, helping get their beans as organic and then buying them for his own roastery.
In 1993, he joined forces with Taylor Maid, an established organic farm located in food-centric Sonoma County to start an organic coffee roasting and wholesaling business.
In 2004, Taylor Maid coffee had sales of $3.1 million, having grown by 25 percent compared with the year before. A chain of organic Tailor Maid retail stores is in the works, with the first to open in Sonoma County in 2006.
Mr. Inman said he had benefited from Taylor Maid’s access to credit and its recognized sales channels. When Vincent Iatesta, 40, of Annapolis, Md., started Caffé Pronto in 2001, he had no such coattails to grab. With $150,000 in personal savings and loans from family, Mr. Iatesta, a former strategic planner, followed his bliss, starting as a coffee retailer-wholesaler, and quickly working his way into the roasting business. Not one to go halfway, he declared his intention to become the best coffee roaster in the mid-Atlantic region.
Despite undercapitalization and a bad location, Caffé Pronto sold enough coffee for Mr. Iatesta to open a second retail location, this one in a busy downtown area. With sales increasing by 45 percent a year, he expanded in 2004 to accommodate his growing roasting operation.
In its most recent ranking, the online buying guide Coffee Review gave Caffé Pronto’s Esmeralda a ranking of 91 on a scale of 100, just 1 point below the highest-ranked entry, detecting in it complex flavors and aromas redolent of lemon, flowers, sweet herbs and “perhaps a cedar toned semisweet chocolate.”
Two other Caffé Pronto coffees also won high grades. In business for just four years, Mr. Iatesta has made a place for himself among the coffee elite.
Not everyone in the business hungers for recognition as a roaster.
Mr. Cho of Murky Coffee says roasting would distract him from the retail end of things. A prize-winning barista and barista competition judge who has organized the mid-Atlantic region’s first barista competition, which will take place in Washington in February 2006, Mr. Cho takes his espresso drinks seriously.
“We’re talking true craftsmanship,” he said, describing a latte-making process that is as complicated as a Japanese tea ceremony. Approximate time of execution for this foamed wonder is one minute. But the $4 price is too little, said Mr. Cho, who dreams of opening an ultrastylish space where great coffees “hacked out of the jungle with a machete” will be as revered as fine wine and cost just as much.
“Coffee has so much more to give,” said Mr. Cho, who buys his beans from Counter Culture in Durham, N.C.
In the meantime, Mr. Cho’s business is growing. The host of an Internet podcast devoted to coffee, Mr. Cho is known in the blogosphere as the guy who made famous chefs angry when he described restaurant coffee as appalling.
“It’s true,” he said, “restaurant coffee is swill. People just don’t know what good coffee even tastes like, but guys like me are going to teach them.”
Mostly, Mr. Cho is having fun. He’s not the only one. As Mr. Zell of Intelligentsia Coffee puts it: “It’s just fantastic that I can do what I love and make money at it. I am so grateful to be living like this and not spending my days at some desk trading securities.”