Mid-May Links

A smattering of news from around the coffee world:

Oregon Public Broadcasting has a nice video about the USBC in Portland. In the article, the producer did forget to mention two other PDX baristas who competed, Laila Ghambari (Stumptown) and Tom Pikaart (Water Avenue), so we’ll make sure they get a mention here. If we're being picky, it's Brett Felchner, not Brett Fletcher (edits!).

Leave it to Philly – From a city that boos Santa Claus and throws batteries at its underachieving NFL team, this might not come as a surprise. A man who apparently did not want to pay for his sandwich threw his coffee at the cashier in a Philadelphia doughnut store.

At least he didn’t steal cash and cigarettes too.

It’s up, it’s down, it’s up, it’s way down. Investors holding Green Mountain Coffee Roasters stock have been on a quite a ride over the last year. The company’s stock price went from below $40 to $115 to back down to about $45 at the end of the year. This year has been more of the same. So far, the first five months of the year have brought changes of +19%, +22%, -28%, +4% and -50%, respectively. With K-Cup patents running out this fall, traders aren’t sure what to do. Then again, judging from the last two weeks, maybe they are.

Do you find it hard to carry your coffee around without spilling it? If so, you should probably slow down and keep your eye on the cup. You will be less likely to match the “sloshing frequency” of the coffee with your gait.

One of Japanese eating champion Takeru Kobayashi’s world records is eating 69 hotdogs in ten minutes, so he probably didn’t find his latest stunt too difficult. Kobayashi drinks 42 cups of coffee in about three minutes in a promotional video for Eight O’Clock Coffee.

Fresh-roasted (really fresh) coffee is coming to Detroit. Roasting Plant, the New York coffee company that roasts, grinds and brews coffee on demand is expanding out of the Big Apple and into the Motor City. I question the assertion that it is the “best coffee in Manhattan” but it would be interesting to see how the whole operation works. link

Tension is growing between people who work/study in cafés and those who go there to drink coffee or meet friends.

Notes from SCAA 2012 (plus a few more pics)

A few more thoughts about the SCAA Event:

First observation: the SCAA is a really big deal for the specialty coffee industry. I get that now.

Congratulations to Katie Carguilo, who works for Counterculture Coffee in New York, for taking home the championship trophy.

Devin Chapman, representing Coava, was the highest finisher from Portland. He finished fourth overall.

The biggest surprise for me was that the President of Honduras (yes, the head of state), Porfirio Lobo Sosa, showed up to give a speech during the opening ceremonies.  I had no idea he was even around until they introduced him.  He spoke for about 20 minutes, emphasizing several times that “behind each cup of Honduran coffee is a family that grows the coffee.”

The most “Portlandian” thing I saw during the week happened at Coffelandia, the big street party hosted by Portland Roasting (a great event, by the way). We were walking up to the front gate when a group of naked bicyclists rode up and rode a few circles in the street. At least I think they were naked. To be honest, I didn’t notice if they had shoes on.

In addition to the USBC, I also spent some time at the Exposition, checking out the latest and greatest things coming to specialty coffee. I tried to get a photo of as many Portland faces and displays as I could (check out the higher-resolution versions here). You might see a few people you recognize. 

Public Domain was pulling shots outside the entrance to the USBC

Publisher Ken Olson and Editor Sarah Allen greeted people at the Barista Magazine booth

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Pride comes before a...

Whenever you scoff at something, beware. Pride has a funny way of kicking you in the teeth when you aren’t looking.  A healthy sense of self-righteousness can set you up to feel stupid, as I did last week.

I was doing a little shopping at a local Fred Meyer when I came across a couple products I had not seen before.  On first glance, they seemed ridiculous.

Diet tonic water?

Isn’t that sort of like selling “cholesterol-free” peanut butter?

The second thing that caught my eye was the fat-free half and half.

Yes, that’s fat-free half and half.

Half and half gets its name from being half cream and half milk. If something is half cream, it cannot be fat-free. What did they substitute for the cream? Corn syrup and some other chemical agents (er, ingredients).

Obviously, with fat-free half and half, the food companies are catering to the weight-obsessed crowd. They’re trying to pass something off that substitutes corn syrup for cream as healthier for you (“It’s okay, go for it. It’s fat-free”). I scoffed at the idea of drinking fat-free half and half, and grabbed a carton of the real stuff, right next to it.

Or at least that’s what I thought. The part of the story where pride kicks me in the teeth is that when I got home to unload the groceries, I pulled out the carton, only to find that I had grabbed one of the fat-free ones! I had grabbed the name brand without looking too closely at it, assuming it was the real stuff. Ugh.

Oops.

After mocking the thought of fat-free half and half, I had fallen into its trap (the taste and quality difference was obvious, by the way). I’m not sure whether this was a case of complete absent-mindedness or just a case of “pride cometh before a fall.” Either way, I felt ridiculous. Next time, I’ll be a little less self-righteous and a little more careful about what I pick up off the shelf.

Coffeenomics, social responsibility, and CAN coffee (a review)

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Classical economic theory proposes that the sole purpose of a business is to enrich the shareholders of a company. The profits it generates will eventually circulate into the wider economy and improve the material well-being of everyone in the society (the idea that a “rising tide lifts all boats”). The conclusion of this is that focusing on anything other than profits would hurt the value of the company and therefore society.

The theory is controversial, to say the least. In the short term, its implementation ignores many externalities (pollution, labor market instability, etc.) that are detrimental to society as a whole. Another weakness of the theory is that it relies on the belief that money (and what it buys) is the equivalent of satisfaction (utility). Notwithstanding, it is an idea that many people subscribe themselves to. They believe that profits are the only important thing in business, and any discussion of business’ effects on the environment or the rest of society are dismissed as leftist conspiracies to bring down capitalism.

While there are some leftists who do want to get rid of capitalism, there is a wide middle ground between the two viewpoints. More today than ever before, select business leaders realize that taking care of the environment and the people who work for them are important too. In Portland, for example, many coffee companies have taken up the mentality that they want to treat their employees and coffee growers fairly. Portland Roasting is a leader in this area, but is not the only one building stronger links between the coffee growers and coffee drinkers. If you stop in at Stumptown’s Annex, for example, you can learn about several of the growers  who raise coffee for the company. By raising the profile of the growers, roasters can differentiate the coffees more easily and sell them at higher prices.

Whereas Portland is the leader in producing more sustainable coffee, the city’s coffee companies do not hold a monopoly on trying to make the world a better place. Smaller roasters in Seattle, San Francisco, Chicago, Kansas City, Durham and other cities across the country are building a movement that is benefiting coffee drinkers and coffee farmers.

CAN Coffee

One participant in this movement is an organization known as the Community Agroecology Network (CAN), based in Santa Cruz, California. In 2001, CAN was founded by Dr. Stephen Gliessman, a researcher in environmental studies at UC Santa Cruz, and Robbie Jaffie, also a lecturer in environmental studies at UC Santa Cruz. CAN comprises a network of coffee cooperatives that includes communities in four coffee-producing countries—Mexico, Costa Rica, El Salvador and Nicaragua—as well as resources from UC Santa Cruz. The coffee is grown and processed outside the US by the cooperatives then sent to the United States. Santa Cruz Coffee Roasting Company roasts the coffee once it arrives and CAN sells it under the AgroEco label.

CAN recently sent me a bag of AgroEco coffee for review [note: CAN sent the coffee at no charge, but none of the links are affiliate links]. The coffee arrived at my house in a vacuum-packed bag. It was labeled as a single-origin, light roast from a coffee cooperative in Nicaragua called Union de Cooperativas Augusto Cesar Sandino (also called UCA San Ramón, or UCASR). I looked for a roast date on the package, but could not find one. When I asked Daniel Fuentes, CAN’s Marketing Coordinator, about this, he told me the company roasts in small batches and goes through its inventory in less than two weeks, so when the coffee arrives in the customer’s mailbox, it will have been between one and three weeks since being roasted. CAN will grind the coffee if a customer chooses (but if you care about freshness, why would you do that?).

Fresh out of the French press, the coffee had a sweet aroma, but the sweetness did not dominate the coffee. I picked up hints of unsweetened baker’s cocoa and rose petals in the medium-bodied brew.

The thing that stood out the most to me about CAN’s coffee was its unique label. Most coffee labels trumpet the coffee’s unique flavors, or highlight its story, but the AgroEco label was primarily used to give the facts about the coffee’s sustainability. If you look at it in the picture, you can see what makes the label unique. CAN is very transparent about where the coffee came from, the demographics of the coffee farmers in the cooperative, and the prices that farmers received for the coffee. The cooperative received $3.42/lb for the coffee, significantly higher than the Fair Trade price or the market price for coffee.

How can the farmers be paid a higher price for the coffee and the roaster still make money? One of the ways CAN does this is by cutting out middlemen between the growers and the roaster. Coffee typically passes through several hands before it reaches the consumer, each of which take a cut of the purchase price. In this case, the coffee goes from the coffee cooperative through an importer directly to the roaster, who then sells the roasted coffee to consumers. The more direct supply chain lowers overhead costs, making the coffee more profitable for both producer and roaster.

Though not certified as organic, the coffee from UCASR is grown without pesticides or herbicides. The costs involved with obtaining certification can be too high for some farmers, and the return on the investment does not always pay off. One of CAN’s goals is to help promote farmers who produce their coffee without chemicals, whether or not they obtain the official organic certification.

The coffee from UCA San Ramón is also shade-grown, so instead of clear-cutting forests to grow only coffee, the coffee is grown beneath other trees. Mango, citrus and cacao trees are grown in and around the coffee, providing additional food and income for cooperative members. Thus, the shade-grown coffee helps diversify the farmers’ production risk and increases their food security. Raising coffee this way also provides more habitat for wildlife, especially migratory birds.

CAN shortens the supply chain to provide more benefits to growers

Overall, the quality of the AgroEco coffee was somewhere between Ristretto (perhaps Portland’s best) and Starbucks coffee. If social and environmental issues factor heavily in your coffee-purchasing decisions, AgroEco coffee would be worth checking out. Given the company’s transparency, you can feel confident you are supporting coffee growers and their communities. In a country where the collective spending decisions of consumers shape the direction of both economic and political decisions, choosing which products to carries much responsibility. The choices are yours, make them wisely.

For more information about CAN, visit http://www.canunite.org.

Expensive Water

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One of the phrases you hear in the service industry is “the customer is always right.” I disagree. Without a doubt, there are some customers who are wrong. However, retail businesses need to remember they are in the image business and try to build goodwill with both current and future customers whenever they can. Sometimes they succeed, and other times they fail. Here are a couple examples:

Today, I was sitting in a café that I regularly frequent when a woman walked in the front door and asked the barista, “How much is a cup of water?”

Without hesitating, the barista answered, “It’s seventy-five cents for the cup.”

The woman appeared to be hoping the water would be free, so unsurprisingly, she did not buy it. With a curt “thank you,” she turned and walked out the door. As a frugal consumer myself, I don’t blame her. I would balk at paying that much for a cup of water.

Trying to figure out how annoyed the woman was, I watched her as she returned to the parking lot, where her husband was waiting for her with a stroller (and, I assume, a small child).

From my perspective, the barista should have given the woman a cup of water. A woman walking around the neighborhood with her husband and a stroller likely lives nearby and could turn into a repeat customer. The barista’s response was an example of being “penny wise, pound foolish.” The cost of a cup is insignificant compared to what a loyal customer would spend in the future. However, I doubt the woman comes back anytime soon.

Somewhat ironically, a man came in a few minutes later, pleading for help.

“I know that restrooms are only for customers, but could I please use the bathroom?” he politely begged.

The barista nodded in assent and pointed him to the back of the store. This time, she didn’t figure it was necessary to hold the line on the rules.

The stories illustrate what Seth Godin would call  the “scarcity mindset” versus the “abundance mindset.” In the first case, the barista acted as if the cups were scarce and that by giving one away she would hurt the business. She missed an opportunity to help the woman (and maybe create a loyal customer). The second time around, the barista bent the rules to be generous with the customer, even if he did not buy anything. He was careful to thank the barista on the way out, and it appeared he was leaving with a good impression of the café.

Each of the two customers came in asking for essentially the same thing (something for nothing). The barista had the opportunity to build goodwill with both people who came into the cafe, but only did with one. She might think that being successful 50% of the time is good enough, but there are a lot of cafés out there competing for business, and whether or not “customers are always right,” they certainly think they are.  Treat them well—your business will prosper.

Pursuing success with the Harada Method

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Over the last year, I have occasionally talked about creating a new path for yourself, following dreams and doing something that gives you a sense of satisfaction and success. Along those lines, today I am sharing a video that I put together from a talk that Norman Bodek recently gave at George Fox University.

Bodek is the founder of Productivity, Inc. and Productivity Press. Around 1980, he started the two companies to bring the best of Japanese management to America. Through them, he brought what we call Lean Manufacturing to this country. I have been working with Norman for the last couple years, helping manage his newsletter and website and doing some writing/editing for him. In the video below, Norman discusses the Harada Method, a personal/professional development system that he is now bringing to America for the first time.

The method is named after Takashi Harada, who developed the system. Harada is a former teacher/coach in Japan who teaches companies and individuals how to be successful. By starting with a goal in mind, the Harada Method helps you become self-reliant and create a clear path toward reaching your goals. The video gives you a better idea of how the method works.

(If the video doesn't show up in your browser, click here.)

This coming October, we are holding a workshop at the Marriott on the Waterfront and I wanted to share the video with you, in case you might like to attend, or in case you just happen to be interested in reaching your fullest potential in life. Whether you work for a Fortune 500 company or are thinking about starting your own corner coffee shop, the method can help you be successful. If you have any questions about it, you can send an email to bodek@pcspress.com or hutchens@pcspress.com and we will send you some more information.

Buckle up, we care about you (really!)

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Language matters.

Walking down the street near Belmont Ave. today, I noticed the following sign at the exit of an apartment complex’s parking lot. The sign caught my eye for its choice of words and for its callous connotation. Can you guess why?

Thanks for caring

Hint:

Tenant=person who lives at the place

Tenancy=agreement to pay rent in exchange for the right to live there

There is a subtle, but very important, difference between saying “we value your tenancy” and “we value our tenants.” By valuing tenancy, the sign implies that they want you to buckle up so that you can pay your rent. I am sure (well, I hope) that whoever wrote the sign for American Property Management intended to say they value their tenants but made a mistake in the writing/editing process. Surely, they care about the people that live in the apartments, right?

It could be an innocent mistake, or perhaps it was a Freudian slip.

Then again, maybe they were just being honest.

Flying high and keeping your costs down

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When you go to Coffeehouse Northwest (on West Burnside) and look at the menu board, you might choke a little bit when you see that an espresso costs $3. I know I did the first time I saw it. Even with the run up in coffee prices over the last year, most cafés still charge between $2.00-$2.50 for an espresso, so $3 seemed spendy. However, there is a way to get around the lofty price, by ordering a “flight,” something you won’t find on the menu. A flight is a pair of espressos, one of each of the two types of coffee on grind (my guess is that calling it a “flight” has something to do with how you feel if you drink them too fast). CHNW keeps two different espressos available, usually from Sterling and often both single-origin coffees. Today’s offerings were from Ethiopia and El Salvador, respectively.

If you order the flight, they only charge you $4.00 total for both of them. If you plan to spend more than an hour there, this is a good deal. Coffeehouse’s baristas know what they are doing, and they pull good shots. They will also let you spread out your espressos so that you don’t get buzzed too quickly.

That’s your bargain-hunting tip for the day.

On a side note, while I was sitting in the café today, I overheard an interesting conversation about stripping (I just report what I hear, okay?). Three women at the next table were having a very open conversation about how to make good money working at a strip club. It sounded like the most important rule is that you sell the customers without letting them know they are being sold. According to the most experienced of the three, between “acts” you get down off the stage and work the crowd—talk to the customers, shake their hands, ask how they are doing, etc. The more social you are, the better, because creating a connection with the customers pays dividends.

I’m sure there’s a business lesson in there somewhere…

Coffeenomics, Dunkin’ Donuts and Private Equity

Today, in case you  missed it, Dunkin’ Donuts (DD) held its initial public offering (IPO) on Nasdaq. By all accounts, it was a successful IPO. The stock was originally supposed to be priced at $16-$18 per share, but the day before the sale, the owners raised the target price to $19 because they sensed there would be more demand for the stock than originally believed.

The sellers were right. On the first day of trading, Dunkin’s price jumped nearly 50%, closing at $27.85 per share. It was a good day for the owners.

I don’t want to dwell too much on the stock’s price or where it might be going, though that would be an interesting discussion (Forbes has a somewhat pessimistic take here). What I do want to talk about is a small part of the Forbes article that caught my eye:

“The members of the consortium recently paid themselves $500 million in a special dividend, which ended up as debt on the company's books, so the IPO proceeds will essentially go to pay for that little kicker.”

The ‘consortium’ consists of three private equity firms: Bain Capital (Mitt Romney’s former company), the Carlyle Group and Thomas H. Lee Partners. They had previously purchased Dunkin’ in a leveraged buyout (LBO), meaning they borrowed a lot of money (~$2.4 billion) to buy the company.

Leveraged buyouts are nothing new—they are what private equity firms do.  The firms borrow huge sums of money to buy a company that has a lot of cash or saleable assets, with the idea that they can dispose of the non-performing assets and make the company more profitable. The buyout firm is supposed to improve the operations of the company to make it more profitable and attractive to future buyers. They come in, turn the company around, and sell it after a few years for a big profit.

At least that’s how it is supposed to work.

Often, however, when the private equity firms buy a company, they saddle the company with huge amounts of debt, making it harder for the company to be profitable. Dunkin’ Donuts’ LBO is a typical example—the debt used to purchase the company ended up on the company’s balance sheet, and payments on the debt have been dragging down DD’s earnings. The money raised in today’s IPO was being used to pay down the debt.

This might lead you to ask, if Dunkin’ already had a lot of debt, why would the owners pay themselves a “special dividend” that only increases that debt? The short answer: because they can. As owners of a company, they have the right to do just about whatever they want to with the company’s assets, so paying themselves this kind of dividend is common. The investors get paid, regardless of whether or not the buyout actually improves the long-term health of  the company.

In order to make the LBO successful, the new owners ratchet up pressure on managers and employees, pushing for higher productivity and profitability. The push to make higher profits often leads to cuts in salaries and benefits, store closures and layoffs.  

The private equity firms  argue that they are just squeezing inefficiencies out of the system. They fail to advertise that these “inefficiencies” are often peoples’ jobs, pensions and by extension, their lives. Just ask the people who worked for the Chicago Tribune. The beneficiaries of the LBOs are the investors, not the system.

Here’s the bottom line: Billionaires can play games with other people’s money and lives in a way that the rest of us can only dream about.

Whether we like it or not, that’s how it is, and I don’t see it changing anytime soon. To tell you the truth, I can’t decide whether to rail against the system or try to start my own private equity fund. Maybe I’ll just start the prep work for a successful Caffeinated PDX IPO. . . How does the year 2020 sound?

Thoughts?

I Miss the Mob - a lesson in entrepreneurship

The cover of Anything You Want, Derek Sivers' new bookTweet

Today I came across a video that I thought you might enjoy. To give you a little background, Derek Sivers, the founder of CD Baby, has just written a new book about entrepreneurship that is being published by the Domino Project. CD Baby is a company that helps independent musicians manage their music sales. Anyone can upload their songs to the company’s servers, and CD Baby will managed the distribution of that music, either as a CD or as a digital download. Sivers founded the company in 1997, and it became very successful, selling millions of albums.  He sold the company a couple years ago and has since moved on to start new ventures to help more aspiring musicians.

I hope to read his book sometime, but today I wanted to share with you a video that he put on the site promoting his book. It has a pretty funny take on the differences between entrepreneurs who are in business because they love what they do and professional businesspeople who are only in business to make money.

The video is relevant to Portland, a city that has not yet lost its fun spirit. In my discussions with roasters, baristas and café owners, many of them have told me that while making money is important to them, they are happy to be doing something that they enjoy.

Thanks to all who realize that there is more to business than just dollars and cents. You help keep Portland interesting. 

Sitting down with Mr. Sustainability – An interview with Mark Stell, Portland Roasting Coffee

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In an era when it is trendy to be “green,” there are a lot of companies that like to promote their environmental credentials. If you walk down the aisles at the supermarket, you can see hundreds of products lining the shelf that are “natural,” “green,” or “earth-friendly.” Companies know that they are expected to care about the environment. They create CSR (corporate social responsibility) departments and cobble together a  few initiatives to make themselves appear more earth-friendly. Sometimes the claims are exaggerated or misleading (can you tell me exactly what “natural” means?), and sometimes the initiatives are meant to overshadow other, less environmentally friendly parts of the company (BP becoming “Beyond Petroleum,” for example). In these cases, there is nothing like a good “greenwashing” to clean up the company’s image.

Not all companies are just paying lip service to being green, however, and it is encouraging when you come across a company that strives to live up to its environmental claims. Portland Roasting Coffee is a company that backs up its green talk with actions.

I recently sat down with Mark Stell, Portland Roasting’s co-founder and managing partner, to talk coffee. Stell told me the story of how he got into the coffee business and also about the some of the projects that Portland Roasting is working on.

The first time I heard Stell speak was when he visited our sustainability class for the MIM program at Portland State University (PSU). One of the topics of that class was the triple bottom line,  where companies strive to make a profit while including social and environmental criteria in their accounting of success.

Stell told us how his company was using the triple bottom to drive company decisions. He described some of Portland Roasting’s development projects such as building wells and other water projects in the communities where the company sources its coffees. He admitted that sometimes his company should focus more on the economics, but was firm in his belief that environmental and social consequences were just as important.

Inspired to Action

We met in a conference room at Portland Roasting’s Inner Southeast Portland headquarters. Stell began by telling me about his introduction into the coffee industry.

Originally from Wisconsin, he was studying marketing at PSU when he had a life-changing experience at the United Nation’s Earth Summit in Rio de Janeiro in 1992.

“I was in Rio in ’92 as a student delegate for Portland State,” he said. “While we were there, all of these speakers kept coming up to the stage and telling us how their lives were being affected by global warming. It was a powerful moment. You never want to forget how you feel at times like those.”

Attending the summit was a watershed moment in Stell’s life, and he decided to act based on his new awareness of problems including poverty and global warming. When he got back to Portland, Stell looked for a job with a local coffee roaster. He chose to work in coffee for a very specific reason.

“Coffee is an industry where you can really make a difference. It is unique in that it is so far-reaching. There are millions of people involved in its production, and it also covers issues like poverty and equity between developed and developing countries.”

At the time, he did not even like coffee, though his distaste for the beverage did not last long.

“After six months I was completely hooked. I loved it,” he said.

After a short stint at the local roaster, Stell decided it was time to move on. He and his business partner, Todd Plummer, started Abruzzi Caffè, a roastery/café in Northwest Portland. After a couple years, they sold the business and started Portland Roasting.

Since its founding in 1996, Portland Roasting has grown by leaps and bounds. Today, the company roasts about 900,000 pounds of coffee each year. Much of its coffee is sold in cafés, supermarkets, hotels and universities. Portland Roasting also sells a substantial amount in Japan.

Portland Roasting recently announced that it would be opening its own retail cafés in the Oregon Convention Center, just a few blocks away from PRC headquarters. The company will have two cafés in the building, giving the company an opportunity to showcase its products and mission. The first one is set to open in August.

Leading in Sustainability

One of Portland Roasting’s accomplishments that Stell is most proud of is receiving the SCAA (Specialty Coffee Association of America) Sustainability Award in 2005 for the company’s Farm-Friendly Direct Program. In the program, Portland Roasting pays above-market prices for the coffee and the premiums are used for community projects such as building schools or water purification facilities in the communities where coffee is grown.

In addition to investing in communities abroad, Portland Roasting has also undertaken several sustainability initiatives closer to home. These include implementing recycling programs, contracting with B-Line (a bicycle delivery service) to deliver its coffees, using biodiesel-powered vehicles, purchasing wind-generated electricity and contracting with Trees for the Future to plant trees to offset the company’s carbon dioxide emissions.

One of the biggest initiatives that employees undertake each year is putting together annual Walk for Water. The three-year-old event is overseen by Portland Global Initiatives, a non-profit that Stell founded to raise money for water-related projects in Sub-Saharan Africa. Portland Roasting works in conjunction with a capstone class at PSU to organize and promote the event, which in 2011 raised more than $30,000.

Coffee Economics

In addition to the sustainability issues, Stell also keeps a close eye on Portland Roasting’s financial position. We talked about how the recent run-up in prices has affected the company.

“It’s been tough,” he told me. “We’ve had to raise our prices three times in the last year. I know it’s been hard on our customers.”

PRC’s long-standing relationships with its growers has helped the company weather the recent price increases.

“I tell [our customers] that it could be even higher if we didn’t have these relationships. Some of our growers have been helping us out, charging lower prices than they could have, because we have been good to them over the years. Most of our growers stayed with us. There was one group who decided they had to go for the money. You hope for loyalty in return for working with someone for a while, but it doesn’t always work out. It’s sad to see that happen, but I understand why it did.”

Stell sees quite a bit of uncertainty in the future of coffee prices.

“There’s going to be a lot more competition for high-quality beans. I see that as being a major challenge. As China comes into the market, it could become harder and harder to get the best beans, so there might be more of a price differentiation between coffees, much like there is between wines. I hope that coffee still remains a beverage that everyone can afford. We’ll see what happens.”

START-ing a New Movement

In addition to his duties at Portland Roasting, Stell also sits on the SCAA’s sustainability council. He helped spearhead the effort to create the recently-released START (Sustainability Tracking and Reporting Tool) application, an online program that helps companies monitor their environmental impact.

The START project, which has taken six years to complete, was undertaken with the United Nations’ Millennium Development goals in mind. The SCAA still needs to raise a few thousand dollars to finish paying for the program’s development, but once enough companies sign up, the program will be self-sustaining.

There are several goals for START. One is to make it affordable for companies to monitor their social and environmental impacts so that they can improve them. Normally, software to do this would cost a company tens of thousands of dollars, but START is available for $150/year to participants in the program.

Another goal is to help the entire coffee industry understand its overall impact. The data that the program collects will be compiled, allowing the SCAA to release it to the public (without releasing individual companies’ data). The data will help companies see where they are in relation to industry benchmarks.

One of START’s key benefits is that it provides a forum for sharing information about development projects. The plan is for START to help companies interested in development projects to collaborate with each other. For example, if a project is too large for a single roaster to undertake, the project can be posted to START.

In addition, Stell said, START helps coffee-growing communities share their needs.

“If I’m in a community that needs help building a school, I can post it on the site so that companies that are looking for projects can work together. It’s creating a community for development.”

START also includes a certification system for companies participating in the program. To receive the certification, companies must add a certain amount of data to the START system, demonstrating that they are closely monitoring their carbon footprint and social impact. The SCAA hopes that consumers will gravitate towards companies with this certification, much like they do with Fair Trade.

More Than Hot Air

As a company, it is much easier to talk about being green than it is to actually do it. Many companies try to make you believe that they are working to help the environment, putting in as little effort as they can to build their green image. Portland Roasting Coffee, on the other hand, led by its passionate founder Mark Stell, is leading the coffee industry toward a more sustainable future, something that is not just a bunch of “greenwash.”

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Links (and laughs?) for June 24

A few links to help you waste time this Friday...

Entrepreneur has a long article on Stumptown founder Duane Sorenson in its latest issue. link

If you are interested in coffee, social media, website design and driving traffic, you might read the following story from the New York Times. The Times “You’re the Boss” blog explores why a company in Colorado isn’t getting much traffic. I bet it gets a lot this week…link

Kitsap County, Washington, has become a popular place for topless espresso stands, but that might change soon thanks to proposed regulation. One of the proposals is to limit all patrons of the kiosks to people over 18. link

In other news, every sophomore and junior boy in the Kitsap high schools just threatened to never drink coffee again…

The latest hotbed for quality coffee is. . . . Detroit? Apparently. link

The Seattle Times’ Melissa Allison details the resurgence of Starbucks in a recent post. link

This next link is only a press release, but if I were opening a coffee shop, I would have to look into selling “Weasel Premium Coffee” (if only for the name). I mean, who doesn’t “love their weasel?” link

If you are worried about a caffeine addiction (or even if you aren’t worried), you might watch this video about the history and benefits of coffee consumption. link

The best quote from an article in the Christian Science Monitor about coffee prices comes from a coffee roaster, who hopes that “somebody is going to lose their shirt” by speculating on coffee futures. link

Speaking of coffee prices, coffee consumption in China is expected to increase 15-20% each year. The average Chinese consumer drinks three cups of coffee per year, which means that the country has along way to go before it reaches the average of 240 cups per year. As consumption increases, so will the competition for beans. link

And finally, from Southeast Portland, some woodshop humor:

Everybody could use a free hole...

Brews to Bikes (book review)

When the news about the Stumptown sale to TSG  broke in Portland, the reaction was telling. In a place like San Francisco or Boston, the news would have been greeted with cheers that a local company made it big. In Portland, however, the news was met with many groans and promises to find another source for coffee. Not everyone was upset, of course, but it was a big shock to the city that Stumptown—Stumptown!—would become part of a larger conglomerate, ceding any control to some distant private equity firm.

To understand the reason people were upset, it helps to understand the culture of Portland. Portland is famous for its high quality of life and its weirdness, but not for having a business-friendly culture. The city has even been mocked in the show Portlandia for being a place “where young people go to retire.” Many would say that Portland has an anti-corporate mentality.

While there is some truth behind this image of the city, it is far from complete. Charles Heying, a professor of urban studies at Portland State University, demonstrates this when he takes a closer look at how the creative class is adding to the Portland economy in his new book, Brews to Bikes: Portland’s Artisan Economy. Heying compares Portland’s artisanal economy, where business owners produce unique, high-quality products in small batches or single pieces, with the typical “Fordist” (industrial) economy, where mass production is king and variations in the products are frowned upon. Heying and his team of student researchers describe how Portland’s artisans are making large contributions to the city’s economy, making it unique among cities.

The book takes an in-depth look at more artisan industries than you might have ever known existed in Portland. It describes Portland’s more famous artisan industries—beer, food (farmer’s markets to food carts), fashion (more than just flannel) and bike building, but also looks at other growing industries, like coffee, leather, music, and colored glass.  It also discusses how the artisans fit into the larger economic picture.

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#Trust30 Day 14 - Ambition

[Yes, there are a lot of these #Trust30 posts...here's why].

When good is near you, when you have life in yourself, it is not by any known or accustomed way; you shall not discern the foot-prints of any other; you shall not see the face of man; you shall not hear any name; the way, the thought, the good, shall be wholly strange and new. - Ralph Waldo Emerson

“The world buzzes about goals and visions. Focus. Create a vivid picture of exactly where you want to go. Dream big, then don’t let anything or anyone stop you. The problem, as Daniel Gilbert wrote in Stumbling Upon Happiness, is that we’re horrible at forecasting how we’ll really feel 10 or 20 years from now – once we’ve gotten what we dreamed of. Often, we get there only to say, “That’s not what I thought it would be,” and ask, “What now?” Ambition is good. Blind ambition is not. It blocks out not only distraction, but the many opportunities that might take you off course but that may also lead you in a new direction. Consistent daily action is only a virtue when bundled with a willingness to remain open to the unknown. In this exercise, look at your current quest and ask, “What alternative opportunities, interpretations and paths am I not seeing?” They’re always there, but you’ve got to choose to see them.” - Jonathan Fields

The author’s prompt does not quite fit my situation. I do not have a “blind ambition” that causes me to miss opportunities that I would otherwise see. Rather, I am too open to possibilities, and the reluctance to choose a more focused approach to life is creating challenges for me. There are too many distractions in my world, not too few.

However, even though the prompt is not perfect for my situation,  I am still willing to sit down and think about the ‘alternate paths’ I might not be seeing. Some of these could be:

1. Writing for a magazine or other publication
2. Start an international coffee newsletter, to combine my interests in coffee, travel, writing, business, economics and storytelling
3. Turn this site into more of a demonstration of my capabilities and let people know how they can hire me (building logos, graphics, creating presentations, speaking, editing videos, etc.)
4. Try to find a “normal” job that allows me to travel and write about those travels when not working for the company
5. Contracting with a company to write/oversee its newsletters, either internal or external

One alternative (#2 above) for what I am doing would be to create a newsletter for the coffee industry that is different from the coffee trade magazines. [side note: If you are someone who is in the coffee industry, is there some type of information out there that you are missing that you would like to have available? My crack team of researchers could start working on finding it.] I heard a marketing professor say one time that to be successful, you have to find a problem and be the solution to that problem. In other words, you find someone with a headache and then be the aspirin.

My current ‘quest’ is to make a living out of writing and other creative activities. I would like to turn Caffeinated PDX into a more important and useful site for visitors, but that is going to require some changes (and, eventually, some assistance). The blog is going to have to have a stronger message to attract more people and it also will need to grow outside the Portland area.

In essence, the current Caffeinated PDX is a first draft for the project it will eventually become. During the last several months, I have learned a lot about coffee, writing, blogging and social media. I continually remind myself that it takes time to build something successful, and that even on the days when it seems like my progress goes backwards, I am learning things that will be valuable in the long run. At some point, I will find the right mix of message and utility, and then use my “not so blind” ambition to make it work.

Coffee, Rumor and Innuendo

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Last Friday, I posted a link to what I said was a sign of the impending rapture—that Stumptown Coffee was in negotiations to be bought out by Starbucks. There was absolutely no truth to the rumor whatsoever, so you can imagine the surprise I felt today when I went online to read the latest coffee news and one of the first things to come up was a story claiming that Stumptown had been sold (though not to Starbucks).

Todd Carmichael, the founder of LaCombe Torrefaction, an East Coast-based coffee company, wrote an article for Esquire that Stumptown’s Duane Sorenson had “sold his life’s work to the highest bidder.” Needless to say, this caused quite a stir in the coffee blogosphere and Twittersphere. Could it really be that Stumptown, Portland’s most famous coffee company who seemed to be everything but corporate, could be ‘selling out?’ What would that mean for Portlanders who cannot stand the idea of supporting a “corporate” coffee company? The idea seemed an anathema to many people.

There were several reasons to be skeptical about the article’s accuracy. Carmichael likes to make fun of the hipster coffee culture, as evidenced by this article, so it is not surprising that he took a shot at Stumptown. Also, the tone of the article and lack of evidence in it, lead one to believe that Carmichael, whose company is a direct competitor to Stumptown, does not like the fact that Stumptown is expanding on the East Coast and was looking for a way to give his rival some bad publicity among the anti-corporate crowd.

In response to the news, Willamette Weekly dug up a document showing that Stumptown Coffee Corporation, which is a separate entity from Stumptown Coffee Roasters, did apply for an  amendment to authority with the Oregon Secretary of State at the end of April. The new agent for the company is Alexander Panos, a managing director at TSG Consumer Partners, a private equity firm based in New York. In other words, there was a small bit of evidence behind the rumors.

However, the document does not address any questions about any relationship between Stumptown and TSG. It is impossible to tell from that document what Stumptown’s plans are, and Carmichael’s speculation is premature, unless he has other information. Esquire, if it wants to be taken seriously, needs to make sure there is more evidence before an article like this is published, especially when the author has a financial stake in a rival company.

Update: In the latest news this afternoon, also from the Willamette Weekly, Stumptown responded to the article, saying that it did open itself up to some outside investment to help fund its expansion, but that Duane Sorenson, Stumptown’s founder, is still in charge. Therefore, Portlanders can relax—Stumptown has not sold out. You do not have to worry about losing another local chain to corporate America.

Update 2 (June 2): Stumptown did allow for some investment by Panos (Sorenson still controls the company) and the plan is to expand into Chicago and San Francisco. The NY Times has the story here.

Update 3 (June 6): Willamette Weekly is today reporting that Stumptown sold 90% of the company to TSG, though it seems like the source is Carmichael. It's hard to know what to believe. . . You can read the story here.

My question is, if Stumptown had sold out, so what? It is Sorenson’s company, after all, and the last time I checked, we still live in the USA, where capitalism is the economic system. If someone wants to build a company and sell it so that he or she can fulfill other dreams, that should be his or her right. There is nothing especially noble about starting a company and staying with it until you die. Times and people change—we have to accept it. Unless, of course, the news is just a rumor or a blogger’s attempt to be funny.

Kobos Coffee (Part 2) - How Kobos came to PDX

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[Part 1 of this history can be found here]

Originally from Massachusetts, David Kobos spent many of his years growing up in New York. The pursuit of higher education eventually led him out West, and he spent four years getting a master’s degree from Reed College. After graduating, he taught in Milwaukie for a couple years. During this time, Kobos used to stop in and get coffee from Boyd’s Little Red Wagon.

“That's how I got started drinking real coffee," he said.

After his time in Milwaukie, Kobos moved back to New York, where he got a job as a teacher at a school in the Lower East Side (of Manhattan). In his free time, he began exploring restaurants in Chinatown and Little Italy, which were both nearby the school. He became fascinated with the city’s food and coffee culture and began visiting the shops of the Lower West Side too, where the Shapiro Brothers and the McNulty family were famous for roasting coffee.

At some point during his culinary explorations, Kobos met his future wife and got married. The couple went on a honeymoon to the Pacific Northwest and then returned to the Big Apple. Together, they really got into exploring restaurants. His wife was a good cook, he said, so they began to shop at higher-quality markets, trying to duplicate at home what they had been tasting in restaurants. The couple also drank plenty of coffee and visited all of New York’s famous cafés.

Kobos recalled some of the smells in the neighborhoods where the stores roasted their own coffee:

"There was this one little Italian roaster, down in Little Italy, who used to take one kind of coffee and just burn the hell out of it. You could smell it if you went anywhere near that place,” he said, laughing.

Eventually, the Kobos and his wife decided they needed a change of scenery. Remembering the beauty of the Pacific Northwest, they decided to move across the country to Portland, where they would indulge their love of food and coffee by starting a cookware and coffee retail store (and a family). It was a lot of change in a short amount of time, and their friends were skeptical.

“’You’re doing what?’—that’s what they asked us. They thought we were crazy,” Kobos said, recalling the reactions of his friends and family. “You’ve got a job already. Why would you want to do that?”

Undeterred, the couple moved forward with their plans. However, plans soon changed. The original plan was to ask Boyd’s Coffee to roast coffee beans for Kobos to sell in the store, but when David asked them, they turned him down. It was a pivotal moment for the Kobos story.

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Selling Frappuccinos in the UK

Below, I have embedded an ad from a campaign that Unruly Media is running in the UK for Starbucks. I would like to hear your opinion. Beneath the video, I have given mine.

One of the challenges for any company is to decide if it wants to go for fast growth and large profits, sacrificing a few of its values along the way, or if it wants to remain true to its roots, even if it has to sacrifice some economic gains. For most businesses, profits come first. This is especially true for public companies, where there is tremendous pressure put on management by the shareholders to go for growth and profits. I think you can guess which path Starbucks chose.

Starbucks began as a place that wanted to be true to the coffee and the café experience. Now it boldly sells milkshakes, with whipped cream and caramel sauce.

To be honest, I like the graphics, the bright colors and the crisp audio of the spot. It has a sharp feel to it. The business school-trained part of me thinks it’s a fine ad, and I know that Frappuccinos have some of the best profit margins at Starbucks, so I understand the reasons for the campaign. At the end, however, watching this ad reminds me why Starbucks took the “Coffee” out of its new logo. How about you?

[Disclosure: Unruly Media, an advertising company, asked me to write an editorial about the ad. Feel free to pass it on to anyone you know in the UK]

Sustainable Harvest - Changing the way coffee business gets done

Whenever you buy something, it is easy to forget that your transaction goes beyond the store where you purchased it. Whether you think about it or not, what you choose to buy affects other peoples’ lives, and these purchase decisions have economic, social and environmental consequences.

The coffee we buy, for example, is at the end of a long and complicated supply chain that begins in some very remote places. There are over 25 million coffee growers in the world, many of whom have very small plots of coffee trees. Trying to make a living off a small coffee farm is very difficult, especially if the companies purchasing the coffee are solely motivated by profits.

To learn more about how the system works, I visited Sustainable Harvest, a green coffee importer based in Portland. Dane Loraas, a Quality Control Manager for the company and Katie Gilmer, a Relationship Coffee Manager, were my hosts when I visited the company at its Pearl District headquarters. They spent an hour with me explaining the company’s business model and answering my questions.

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Tired of paper transit tickets? (updated)

Today, I want to step away from coffee for just a moment. One of my favorite things to talk about is entrepreneurship, and I have something I would like to share with you.

When I’m out traveling around the city, I prefer to walk or take public transportation. Walking around, you really get the feel of a place, and on the bus or the train, you don’t have to stress about traffic.

Since I take the bus and the train pretty regularly, I can say with confidence that it would be nice to be able to pay for tickets using an app on my phone, especially when riding the bus. Even better, the phone would serve as a ticket itself.

Tri-Met (Portland’s public transit agency) doesn’t have a system like that yet. However, a couple of my classmates from Portland State’s MIM program are trying change that. Nat Parker and Michael Gray have started a company called GlobeSherpa to develop mobile phone apps, and their most promising app at this time is called TransitSherpa, an app that acts as an electronic ticket management system for Tri-Met. I’ll let Nat explain:

Their company is currently in negotiations with Tri-Met to make the system a reality, but they need some funding to speed things up. Tomorrow evening, at 5:30pm, Nat and Michael will be at the Backspace café/pub competing in the second-to-last round of the Oregon Entrepreneurs Network’s Seed Oregon competition, a competition that helps start-up companies with funding and guidance. The winner is determined by popular vote of the audience, so the more supporters TransitSherpa has, the better chance it has to win. The winning company gets to present at the Angel Oregon conference in March, where it could acquire the funding it is looking for.

If you think that a Tri-Met ticket app is something that you would rather have sooner than later, come by Backspace tomorrow evening at 5:30 and support TransitSherpa. It costs $25, which I know is kind of steep, but it’s supposed to include some kind of food and drink spread. In addition, Nat has promised me that he’s going to be especially entertaining during his presentation.

You might wonder if I get anything out of this advertisement for them. Nope. I’m just spreading the word for them and trying to speed up the process of creating a Tri-Met ticket app. It’s 2011, and the time for e-tickets is here. Let’s help TransitSherpa make it happen.

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Update: GlobeSherpa won by two votes! Congratulations and good luck at the next round.

Coffee v. Location: Location Wins (Unfortunately)

Coffee is a very competitive industry—especially in Portland. Having a coffee shop on every other corner is one of the things that makes living in this city enjoyable. You don’t have to walk very far if you’re looking for a place to get some caffeine.

Not all cafés are created equal, though, and today I would like to talk a little about what makes a café successful. There is a difference what makes a good café and what makes a café successful. What is the number one factor for coffee shop success? I wish the number one factor were high-quality coffee. Unfortunately, in my exploration of the city’s coffee I have found that location trumps quality—even in Portland.

Fast food businesses have used this to their advantage for years. I remember my economics professor at WSU leading a discussion about what makes a the fast-food industry successful. He used McDonald’s as his example.

“What business is McDonald’s in?” he asked the class.

Several hands went up. An easy question, everyone thought.

“Hamburgers,” one unsuspecting student ventured, figuring that for the first time, he knew the answer to one of the professor’s questions.

“Wrong.” The professor smiled at our naiveté. “McDonald’s is not in the hamburger business. It’s in the real estate business.”

Real estate? But don’t they sell hamburgers?

“Think about it. Which one of you would go to McDonald’s if you wanted a great hamburger?”

No one raised their hand.

“I didn’t think so.”

He had a point.

“In every city, who has a store by the most popular attractions, where the most expensive real estate is? Yep, McDonald’s. There’s a McDonald’s in Times Square. There’s one at the Pantheon in Rome. You can find a McDonald’s by the Louvre and on the Champs Élysées in Paris. In fact, you probably can’t go to any famous place without finding one nearby.”

He was selling us on the idea that even if you serve mediocre hamburgers, you can still make a killing if you have a great location. Starbucks, who has been very successful, knew this and implemented it in its growth strategy (note: I’m not implying that Starbucks has bad coffee—or mediocre hamburgers).

To give you another example, today I’m writing this article in a café that will succeed because of its location. The café is at the heart of a neighborhood, it has lots people walking by all day and it  has a large parking lot right behind it. As it has been almost every time I have come in, the café is full of people. It is going to be successful, but not because of its coffee. In fact, I don’t really like the coffee.

Why, then, do I come here? I admit (somewhat shamefully) that it’s because the café is convenient. The location is an easy walk from my house and the baristas are friendly. So even for me, someone who really likes and appreciates good coffee, the convenience of a great location sometimes trumps sub-standard coffee quality.

It would be great if the success of a café only depended on its coffee. Then we could always get great coffee no matter what the location. If all PDX coffee drinkers banded together and demanded an end to bad coffee, we could force every café in the city to serve great coffee. Maybe in the future we will.

Then again, maybe that’s just a utopian dream that could only be realized in Portlandia.

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