It’s hard to shake the feeling that all the money that has flowed into specialty coffee over the past decade or so is warping the industry in ways that we haven’t yet begun to grasp.
Wow. What boggles the mind (and also horrifies) is that ~not once~ are the growers mentioned by any of these groups. There is so much money in coffee, yet all of it stays in the pockets of the same investors. Coffee is a product, not a plant. Thanks for starting this conversation!
Exactly - the goal with these investors is to extract as much wealth as possible from the company, and one easy way to do that is to squeeze margins on stuff like green coffee. I didn't really get into that part of things, I think it warrants a separate article really. Thank you for reading, and for your insightful comment!
As someone who has seen a lot of different roaster retailers (nano, mega, bootstrapped, VC, you name it) I think there is a counter-intuitive relationship between size and sustainability. It is true that fiduciary responsibility to maximize profits is a force for cost optimization that only plays out at publicly-held companies; it is true that when non-coffee-native professionals enter a company they can try and "optimize" around costs, including green costs.
But the farmer-pay programs of large companies, including large publicly-held companies, are often better-funded, better-managed and (in my opinion) more effective than what you see at teeny companies. One reason is that running a program that tries to tend to the welfare of a supplier is actually really complicated, and you need to have a strong enough organization to afford staff to run it. Another is that these companies are under much more scrutiny; they are more likely to see a farmer-pay program as being in their best interest.
Someone who is a buyer/roaster/GM of a whole coffee business will not have time to research where their buying dollar is being allocated, or what a fair price might be. And their margins might be such that they do not have a whole lot of room to do so. We can assume their heart is in the right place, I find that to almost universally be the case.
The obvious exceptions are small(er) companies that have foregrounded social justice (Torqued, Pachamama, eg) and have explicit mechanisms for paying farmers a higher price than the market would otherwise suggest.
It's like the dentist example in the article. When the money shows up, some things get better, just because there's enough capacity to do what all agree is the right thing.
Of course there are also businesspeople who try and cost-optimize everything, including green, farmers be damned. And of course as a whole the pricing mechanism we use for green coffee if generally failing to correctly reward farmers for the risks they take and the value they produce.
But the logic of paying farmers as little as possible to save money is not just for big companies or for a specific funding model. It's something every actor of every size can do, or refuse to.
I agree that there's a lot of nuance to the situation, which is why I did my best to present that nuance in the article. As both Sarah Kluth and Tony Konecny told me, there's no right or wrong answer - some PE firms are good, some are bad; some small companies work very hard to ensure that they source coffee equitably, and some don't.
And to further explore this nuance, one of the future parts of this series will also examine different approaches to PE/VC investing in coffee and how they've affected the companies involved.
Thanks for this article. Really enjoyed it. I am a regular café-goer, no coffee connoisseur by any means, but have always loved finding a good café no matter where in the world I've lived. And I love observing trends in cafés.
Wasn't aware of all these acquisitions going on, so thanks for shedding light on that, and the broader power dynamics shaping coffee culture and cafés.
I am fascinated by how coffee culture moves across countries, including the influence of Japanese coffee culture on global coffee trends (currently reading Coffee Life in Japan by Merry White, which I recommend if you want a dive into Japanese coffee culture and history!).
I am writing this from Louisa, a Taiwanese coffee chain that just opened up their first café in Singapore, and Louisa (at least the one shop here) clearly plays on multiple trends - Starbucks/Tully's-like coffee, Taiwanese tea, and more. It's fascinating to watch niché coffee shops in Singapore (and Hong Kong, where I've also lived) and how they fare, especially as they face competition from bigger established chains (Starbucks, Coffee Bean & Tea Leaf) and/or the likes of Blue Bottle (which like you mentioned started out niché and has now received massive investment).
Thanks for your comment, and for reading my piece! I agree that watching coffee trends move through countries is fascinating - here in Scotland where I'm based I get to see them come up from London or from the US or Australia and take hold up north. Everyone loves a flat white now, and cold brew is becoming more and more popular! I wonder what the next trend will be?
Wow. What boggles the mind (and also horrifies) is that ~not once~ are the growers mentioned by any of these groups. There is so much money in coffee, yet all of it stays in the pockets of the same investors. Coffee is a product, not a plant. Thanks for starting this conversation!
Exactly - the goal with these investors is to extract as much wealth as possible from the company, and one easy way to do that is to squeeze margins on stuff like green coffee. I didn't really get into that part of things, I think it warrants a separate article really. Thank you for reading, and for your insightful comment!
As someone who has seen a lot of different roaster retailers (nano, mega, bootstrapped, VC, you name it) I think there is a counter-intuitive relationship between size and sustainability. It is true that fiduciary responsibility to maximize profits is a force for cost optimization that only plays out at publicly-held companies; it is true that when non-coffee-native professionals enter a company they can try and "optimize" around costs, including green costs.
But the farmer-pay programs of large companies, including large publicly-held companies, are often better-funded, better-managed and (in my opinion) more effective than what you see at teeny companies. One reason is that running a program that tries to tend to the welfare of a supplier is actually really complicated, and you need to have a strong enough organization to afford staff to run it. Another is that these companies are under much more scrutiny; they are more likely to see a farmer-pay program as being in their best interest.
Someone who is a buyer/roaster/GM of a whole coffee business will not have time to research where their buying dollar is being allocated, or what a fair price might be. And their margins might be such that they do not have a whole lot of room to do so. We can assume their heart is in the right place, I find that to almost universally be the case.
The obvious exceptions are small(er) companies that have foregrounded social justice (Torqued, Pachamama, eg) and have explicit mechanisms for paying farmers a higher price than the market would otherwise suggest.
It's like the dentist example in the article. When the money shows up, some things get better, just because there's enough capacity to do what all agree is the right thing.
Of course there are also businesspeople who try and cost-optimize everything, including green, farmers be damned. And of course as a whole the pricing mechanism we use for green coffee if generally failing to correctly reward farmers for the risks they take and the value they produce.
But the logic of paying farmers as little as possible to save money is not just for big companies or for a specific funding model. It's something every actor of every size can do, or refuse to.
I agree that there's a lot of nuance to the situation, which is why I did my best to present that nuance in the article. As both Sarah Kluth and Tony Konecny told me, there's no right or wrong answer - some PE firms are good, some are bad; some small companies work very hard to ensure that they source coffee equitably, and some don't.
And to further explore this nuance, one of the future parts of this series will also examine different approaches to PE/VC investing in coffee and how they've affected the companies involved.
I appreciate your thoughtful comment, Arno.
Fionn this article is SO GOOD
Thanks Ashley! Just the six months of work 😅
Thanks for this article. Really enjoyed it. I am a regular café-goer, no coffee connoisseur by any means, but have always loved finding a good café no matter where in the world I've lived. And I love observing trends in cafés.
Wasn't aware of all these acquisitions going on, so thanks for shedding light on that, and the broader power dynamics shaping coffee culture and cafés.
I am fascinated by how coffee culture moves across countries, including the influence of Japanese coffee culture on global coffee trends (currently reading Coffee Life in Japan by Merry White, which I recommend if you want a dive into Japanese coffee culture and history!).
I am writing this from Louisa, a Taiwanese coffee chain that just opened up their first café in Singapore, and Louisa (at least the one shop here) clearly plays on multiple trends - Starbucks/Tully's-like coffee, Taiwanese tea, and more. It's fascinating to watch niché coffee shops in Singapore (and Hong Kong, where I've also lived) and how they fare, especially as they face competition from bigger established chains (Starbucks, Coffee Bean & Tea Leaf) and/or the likes of Blue Bottle (which like you mentioned started out niché and has now received massive investment).
Anyway, this is just to say: Thanks!
Thanks for your comment, and for reading my piece! I agree that watching coffee trends move through countries is fascinating - here in Scotland where I'm based I get to see them come up from London or from the US or Australia and take hold up north. Everyone loves a flat white now, and cold brew is becoming more and more popular! I wonder what the next trend will be?