STiR coffee and tea magazine

38 STiR coffee and tea | 2024 Issue 3 (June / July) T Third Wave specialty coffee companies are now poised to compete with industry giants like Starbucks. Perspective by Fionn Pooler The Big Business Reality of Specialty Coffee Specialty coffee brands that started out as anti-establishment have now become big business investments. he coffee industry has come a long way since the days of Folgers and Maxwell House. Specialty coffee is now big business, and the industry is awash with cash. Large companies have bought up many seminal third wave brands over the past decade, from Blue Bottle and La Colombe to Stumptown and Intelligentsia. Despite claims that they would keep their independence, the reality is that the lines are already beginning to blur. Blue Bottle and fellow Nestlé subsidiary Nespresso have teamed up for a line of coffee pods, La Colombe followed suit with a Keurig collaboration, and Alaska Air- lines is now serving Stumptown. What started out as a few plucky entrepreneurs fight- ing back against corporate dominance and mediocre coffee has become everything it once opposed. And it's not just the glamorous, high-profile companies—venture capital and pri- vate equity money has poured into small roasters and mini-chains around the United States, the UK, and Europe. Meanwhile, big companies have begun snapping up re- gional players like in the case of JDE Peet's purchasing Brazil's Maratá's Coffee & Tea and taking over roasting operations for Caribou Coffee in the US. It all adds up to a general theme of consolidation and homogeneity, of big money pouring into a rela- tively small industry. This is not to say investment is bad. Businesses need money to start and grow—it's the type of investment and what it wants in return that can cause problems. It's hard to shake the feeling that all the venture capital and private equity money flowing into specialty coffee over the past decade or so is warping the industry in ways that we haven't yet begun to grasp. People have been investing in companies since the dawn of capitalism, paying for a sliver of what they hope will grow to give them a bigger slice. Private equity (PE) and its offshoot, venture capital (VC), takes that idea and supercharges it to the point of ab- straction. Venture capital usually comes first and involves investments in startups with scope (or at least ambition) to grow quickly. When you read about a coffee company raising Series A, B, or C funding, that's venture capital. "The primary motivation for getting into VC, it's an extraction thing," notes Peter Roberts, professor of organization and management at Emory University. "Nobody should look at VC and think of it as a benign force. It's indicative of a series of structural issues, but they're also protagonists. At the end of the day it starts with this idea of, what are the return aspirations of the individuals who invested in your fund?" Specialty coffee prides itself on do- ing things differently. The whole point of the third wave was to distinguish Stump- town, Intelligentsia, Blue Bottle, and oth- ers from the companies that came before. Certain brands—Stumptown is a good example—even gained a reputation as anti-establishment. "Punk is in the bones

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