January 7, 2016 Clint Rainey via Bloomberg Businessweek
Brett Smith and Fred Houk started Counter Culture Coffee in 1995 with a simple mission. “We said let’s be the best at one thing—wholesale—and then give retailers the right tools to make great coffee themselves,” Smith says. Many of Counter Culture’s peers in the so-called third-wave coffee movement, snobby favorites such as Stumptown, La Colombe, and Blue Bottle, began the same way, hawking optimally roasted single-origin beans at farmers markets and selling to local restaurants.
Now Counter Culture is the last of its kind. In August, Chobani yogurt mogul Hamdi Ulukaya bought a majority stake in La Colombe, and two months later both Stumptown and Intelligentsia, another longtime independent, were scooped up by Peet’s Coffee & Tea, itself part of the Luxembourg-based consumer brand conglomerate JAB. Blue Bottle will begin offering ground, vacuum-sealed beans this year. Together, these three formerly indie roasters plus Blue Bottle now operate 57 cafes in 9 cities, and they’re beginning to put pressure on Starbucks.
The drama is similar to the recent upheaval in the craft beer industry, which has turned into a sudsy, better-tasting minor league for conglomerates such as Anheuser-Busch InBev. “There are a lot of reasons why scaling up gives access to a better product,” says Oliver Strand, who’s covered the rise of third-wave coffee for the New York Times and Vogue. Getting the best beans is easier when you’re buying in large quantities, and roasting becomes more consistent. But size and quality don’t remain complementary forever—eventually you become Folgers.
“I don’t think it’s ‘This is the end of the third wave’ and we’re all going to be drinking Starbucks tomorrow,” says Sam Lewontin, manager of New York’s Everyman Espresso and a two-time finalist at the U.S. Barista Championships. The risk, he says, is that “somebody with veto power up the chain loses sight of the important things.” The reason Everyman Espresso has been a Counter Culture customer since 2007, he adds, is the attention it gets from a company that doesn’t obsess over market share. “Buy from roasters that operate cafes,” Lewontin says, “and you are understandably second-string.”
Those cafes have seen major changes, as well. Early on, one of the third wave’s key characteristics was a keen, almost obsessive attention to detail, evidenced in lengthy descriptions of their beans’ terroir and use of the “pourover” brewing technique, which allows a skilled barista optimal control of temperature and brew time. But now, with precision automatic brewers coming into vogue, the focus has shifted from the coffee to the customer. Last January, Blue Bottle’s James Freeman announced that his company would be phasing out wholesale altogether so it could better “control the contexts, methods, and outcomes” of its product. Up-and-coming West Coast chain Philz Coffee is keeping pourover alive, but almost as a gimmick.
Smith, who runs Counter Culture solo now, says that, while his company “intends to be part of the conversation,” it isn’t about to go corporate. Counter Culture is transparent about what some would consider its proprietary roasting information, such as which beans go into its various blends. Rather than try to court retail customers, it builds sales offices that double as training centers for wholesale buyers. There are now 10 of these in the U.S.—airy spaces tricked out with the top brewing equipment—and an 11th is nearing completion in Los Angeles. And there are two roasteries: one in Durham, N.C., and another that opened last year in Emeryville, Calif., the birthplace of Peet’s, coincidentally. More than 90 percent of Counter Culture’s revenue comes from wholesale, with estimated 2015 sales of about $25 million.
Next spring, Counter Culture will move into a spiffy new Durham headquarters that’s half-roastery, half-coffee-college. There’s still no cafe, but Smith is stoked about the mock home kitchen, which the company will use to stage its first classes for, yes, ordinary coffee drinkers. “We’ve done a great job with the wholesale training program,” he says. “The next phase is to bring that education directly to consumers.”