Small-time coffee shops going the way of craft breweries and are being snapped up by the big boys, but should coffee snobs be worried?
On Tuesday, Peet’s Coffee & Tea announced its acquisition of Stumptown Coffee Roasters, a high-end specialty coffee company based out of Portland.
The terms of the deal were not disclosed but Stumptown was careful to assure fans it would continue to operate as a separate brand and its items would not be sold in Peet’s branded shops, or vice versa.
“We both fit well under a family of coffee brands run independently and treated as separate businesses but with similar values,” Joth Ricci, president of Stumptown, told the New York Times.
The move comes amid unprecedented growth in the $40 billion coffee industry. Specialty coffee represented some $3.48 billion in U.S. sales in 2014, a more than 21 percent increase over the annual sales average in the previous three years, according to the Specialty Food Association.
A similar spike in the demand for small-batch craft brew is occurring in the beer industry. Craft beer generated over 19 percent of the $101.5 billion in U.S. sales. But according to recent figures, 90 percent of beer purchased in the U.S. is produced by only 11 companies, and beer giants have been gobbling up small craft breweries. Earlier this year, L.A.'s Golden Road brewery was bought by Anheuser-Bush. MillerCoors bought Saint Archer Brewing Company and Dutch brewing giant Heineken bought a 50% stake in Lagunitas, the sixth-largest craft brewer in the U.S.
So should lovers of independently owned coffee shops be concerned? The coffee industry is a bit more complex, say experts. In the early 1990’s, Starbucks may have displaced hundreds of local businesses owners, but the rise of specialty coffee has brewed a demand for something different.
“The little guys always get nervous that these shops are going to set up shop across the street, coupon the hell out of their neighborhood customers to buy them away, and put them out of business. It happens, but nothing like the slaughter we saw with Starbucks,” Kevin Sinnott, a coffee expert and author of "The Art & Craft of Coffee."
He says millennial coffee enthusiasts will stay loyal to or continue to actively seek out smaller operations “as long as the Wi-Fi works and the beans are fresh.”
But that doesn’t mean bigger brands won’t try to replicate the success of a Stumptown. Starbucks opened Starbucks Reserve, a high end bean roaster and café in Seattle that sells expensive, and exotic brews. Chobani founder Hamdi Ulukaya invested in La Colombe Coffee Roasters, which buys exclusively from small-holder farms and socially responsible coffee-growing associations.
Stumptown’s founder Duane Sorenson was once hailed as the “Che Guevara of the rock-star barista movement” in an Esquire magazine article, but when David becomes Goliath concessions must be made. Stumptown was able to grow in large part due to an influx of cash from TSG Consumer Partners, a private equity group, in 2011. It now sells cold-brew bottles and nitrogen-infused coffee in cans at stores throughout the country.
Sinnott acknowledges that even though the trend may be to think small, not all little guys want to stay little.
“Intelligentsia, which practically invented coffee snobbery here in Chicago, actually put itself up for sale this week,” Sinnott says. “They appear to be looking for just such a Stumptown-style acquisition. They're hoping for $100 million.”