Retailers, consumers and prices
Coffee’s third wave
Intelligentsia Coffee & Tea founder Doug Zell is part of an independent third wave of upscale coffee houses taking advantage of America’s growing thirst for the premium coffees that Starbucks helped introduced to the masses. ( Click here to see today’s special report on Starbucks on Reuters.com, or read the report in PDF format.)
“It’s moving from a commodity to a culinary ingredient,” said Zell, whose buyers scour the globe for the best beans and increasingly are focused on treating coffee like a seasonal item — meaning the time from harvest to cup is no more than six months.
Coffee has come a long way in the last few decades. While our parents’ generation grew up on grocery store brands like Folgers or Sanka instant coffee, today’s kids are coming of age at a time when higher-quality espresso drinks like lattes are the norm.
“The consumer is becoming more sophisticated. I still think there is a long way to go,” said Zell, who recently opened Intelligentsia’s ninth location in Venice, California’s offbeat Abbot Kinney section. A tenth spot, which will be a cafe and roasting plant, is in the works in San Francisco.
While Zell wants Intelligentsia to expand, he said maintaining quality is his top priority.
“We want to grow, but we need to do it very carefully,” said Zell, who cut his teeth at Peet’s Coffee & Tea and the now-defunct Spinelli Coffee and still favors a well-brewed cup of black coffee over all other java drinks.
“The specialty coffee industry owes a great debt to Starbucks,” said “Retail Doctor” Bob Phibbs, a consultant who was chief marketing officer at the It’s A Grind coffee chain for nearly a decade.
Starbucks, the specialty coffee industry’s 800-pound gorilla, has gone more mainstream to support its 10,000-plus U.S. cafes and to counter competition from the likes of McDonald’s and Dunkin’ Donuts. At the same time, a new crop of artisanal cafe owners stepped in and have been doing all the things that made Starbucks special in its early days.
“You have independents out there that in some cases are beating Starbucks at their own game,” said Retail Prophet Consulting President Doug Stephens.