Coca Cola Looking to buy Stumptown

WotB

It seems Coca Cola is attempting to acquire the coffee shop side of Stumptown. The roasting is a separate entity and will not be included.

Thoughts?

mycuppa

Most likely a strategic move one step closer to replicating what they have done here in Aus with CCA buying Grinders. If it goes to plan, once they tie up various beverages, they then offer "portfolio pricing" to lock out competitors - cross subsidizing weak performers with their best product lines. All the standard typical practices applied in attempts at consolidation - happens across every industry.

admin

WotB wrote:

It seems Coca Cola is attempting to acquire the coffee shop side of Stumptown. The roasting is a separate entity and will not be included. Thoughts?

Looks like it's true, although so far the buying remains anonymous: Stumptown Coffee Has Been Sold, Industry Sources Tell WW "Stumptown, the iconic and fiercely independent company that helped define coffee in this city, has been sold to a New York investment firm, according to records and interviews with industry officials. A coffee industry executive has confirmed for WW that Stumptown

WotB

On a side note, it seems the investment company that bough a majority stake in Stumptown also approached the larger players in the US coffee scene (Intelli, Blue Bottle, Counter Culture) to try to make a super coffee conglomerate.

admin

interesting angle on this... how the boutique independent roasters in the US are starting to get snaffled up! http://www.nytimes.com/2011/06/08/dining/for-stumptown-espresso-might-be-big-business.html?_r=1

WotB

The end of the article mirrors my thoughts that I posted on my blog. The acquisition is all about profitability, not quality of product.

mycuppa

Australia is going to head this way very soon - consolidation is just around the corner. Capacity/Supply in Australia far outstrips demand. A lot of roasters like to create the impression they are unable to keep up with orders, but this is really about marketing an image of success. This country can't support almost 400 brands - it's just ludicrous - small players pretending to be big, big players promoting themselves as small, niche and specialty. Consumers are confused and the market is over-saturated. Consolidation will come in 3 ways - Small, struggling roasters who have great products but have difficulty in go-to-market will end up in tears. Around a 1/3 or more of the small roasters out there are 1 step away from going broke through either massive capital outlay to fitout "cafes" and combined with high DSO's from bad/slow paying customers....... Some may form alliances or partnering to create enough scale to make it reasonable to service clients. This is somewhat challenging as individuals and personalities are sometimes larger than the brand. Very few (if any) will be acquired by larger or complimentary companies. The pace of new coffee companies opening does not look as though it will slow down. Barriers to entry are low, barriers to success are high........not many people have a spare $1M to use for working capital.

FreshCoffee2

Good post mycuppa. Efficient description of stuff that happens in coffee industry. WotB.....when has anything in the slick coffee branding world ever had anything to do with actual product quality? Smoke and mirrors mate, smoke and mirrors! Good marketeers with little substance and lots of investment capital grow much more strongly than honest johns. Jaded quote of the day 😉 Rgdz, Attilio

DoubleRistretto

mycuppa wrote:

Capacity/Supply in Australia far outstrips demand. A lot of roasters like to create the impression they are unable to keep up with orders, but this is really about marketing an image of success.

I'm not sure you guys are right - won't the good boutique roasters just keep taking market share from the big established players [eg Vittoria, Lavazza, Piazza d'Oro, Segafredo etc]?

mycuppa

DoubleRistretto wrote:

I'm not sure you guys are right - won't the good boutique roasters just keep taking market share from the big established players [eg Vittoria, Lavazza, Piazza d'Oro, Segafredo etc]?

Distribution channels get "locked up" and significant capital is needed to grow a business - organic growth can only take so many people so far. The big players primarily feed the growth occurring in domestic coffee equipment takeup. The physical roasting capacity of all the roasters installed in Australia is astonishing and combined with the massive containers that are imported from overseas - this adds up to a lot of supply. You could easily argue that if the overseas roasting capacity was removed, there would still be available capacity. The greater dilemma facing the local industry are the 400+ brands and marketing the offer to a customer - this is likely to be key to the future of coffee in Australia. Product quality and service are destined to fall into secondary categories, however, they are the primary motifs to use in sales campaigns. Coffee follows wine by around 5 - 10 years. Winemakers have been doing it tough for a while and many unfortunately have to take their hard-earned quality products are move them through alternate channels at break-even or loss in order to move stock. We are fortunate at the moment that distribution of coffee is more fragmented than wine.

E61

mycuppa wrote:

Some may form alliances or partnering to create enough scale to make it reasonable to service clients. This is somewhat challenging as individuals and personalities are sometimes larger than the brand.

This is so true mycuppa. Sometimes it feels as if the Australian coffee industry is dominated by personalities and egos. Instead of being focussed on, and being motivated by quality and service some players are driven by the insatiable, and often improbable desires to dominate. Sometimes there

FreshCoffee2

E61 wrote:

........... a) This mad frenzy just results in poorly serviced customers and perpetuates an ameaturish looking industry run by cowboys. b) I think many businesses in our industry should be looking to competitors as potential strategic partners, rather than being threatened by a little healthy competition.......

.......well actually from my point of view as an experienced coffee merchant, yes and no.... the mad frenzy to gain clients at all costs in order to compete with others resuts in clients becoming totally overserviced and trains them to think that overservicing is "normal". Then, clients that are being serviced in a perfectly normal professional manner are given to believe they are being underserviced......go figure. The cost of "servicing" clients is hidden but never the less a legitimate and sometimes substantial cost to the supplier. Examples: clients obtaining demanding more than one delivery a week clients obtaining demanding breakdown service to their equipment for which they are not inclined or simply refuse to pay clients obtaining demanding "quality control" visits over and above the regular number of supplier representative visits budgeted over a period of time. By and large this also means the client is passing the buck for their own product quality control.. Huge topic, not quite so easy to analyse, & it could be said that the cowboys are actually all the newcomers taking advantage of low start up costs to go into coffee roasting and supply business and end up reducing margins and increasing service costs to break in, in an atmosphere of ever increasing costs...... b) Yes there has been lots of healthy competition in the last 15 years and it has got us where we are now where our Australian espresso culture is as good as any you will fiond eslewhere but as stated by someone else above, its now out of control (my words) and all that may happen is that new brands will take market share from established brands fragmenting the currently available market rather than growing it, while reducing margins and increasing costs exponentially for everyone. Just another opinion. Regardz, Attilio very first Crema site sponsor

admin

Fresh Coffee wrote:

.......well actually from my point of view as an experienced coffee merchant, yes and no.... the mad frenzy to gain clients at all costs in order to compete with others resuts in clients becoming totally overserviced and trains them to think that overservicing is "normal". Regardz, Attilio very first Crema site sponsor

interesting, and wouldn't presume to argue with someone at the 'pointy end' of the industry on this; I guess my only question is that raised above - is it that the smaller 'boutique' - for that read 'quality' [hopefully] roasters are cannibalising each other, or are the big guys slowly losing their huge market shares to younger, better, more enthusiastic, higher-quality providers?? to me, that has pretty big implications - either way... A