In today’s world of coffee, there are two distinct paths, one is the institutional or national/global producer, and the other is the local/regional producer. They both have a love for coffee and creating a great product. However, the Foodie or Epicurean movement has created a huge separation between the big roasters and the small. Let me explain.
In what is referred to the 3rd wave of coffee and possibly the start of a 4th wave, the Foodie movement (thanks in part to the Food Network) has given ordinary consumers superhuman strength when it comes to knowledge and their pallets. The general population has gotten an education and is demanding great food and beverages and TRANSPARENCY about those products. The consumer can’t be fooled and will quickly call out a fake, or a ‘wolf is sheep’s clothing’ if a producer makes a claim they can’t easily support or provides average products.
This is a huge problem for the large institutional roasters, they are slow to react to market pressures, they are commodity driven, and margin focused, and they must operate on the old theory of economies of scale (but a lot cheap, sell a lot cheap, beat the smaller guys). The challenge is that in the 3rd wave of coffee, the consumer is glad to pay more for clarity in where the product came from, to know who carefully roasted it, and then connect with the ‘local’ shop that produces the final beverage. The 3rd wave coffee enthusiast is not a replicable or homogeneous marketplace entity; the 3rd wave participants are millions of markets of one. Segmentation and correlations no longer define the coffee consumer, and this very thing causes the institutional roasters to struggle with who their customer is and that always leads to a market position – price equation strategy. The price-cost death spiral (need more pounds sold, must reduce the price to get more buyers, now only attract the value shoppers that expect more price-value, and so on) removes them further and further from the 3rd wave consumer.
Ah, but he independents and specialty roasters across America are thriving and growing at a ridiculously fast pace. The independents are fast to adapt, quick to customize, personal, offer transparency end-to-end throughout the sourcing and roasting process, and are not limited by any cost-sale formula. In other words, they are creative and flexible, create a transparent custom craft product, and can sell those products at high margins because it is exactly what the consumer desires!
In conclusion, the Epicurean movement across America has created legions of educated consumers that know what they want and will pay extra for it. The artisan-specialty coffee roasters and coffee houses are providing exactly what those enthusiastic consumers are searching for. The specialty coffee industry is far outpacing the growth of the big (and old and slow) institutional coffee companies. Foodservice operators in today’s marketplaces are learning that they can’t fake it with their coffee offering, to be relevant and competitive with today’s consumer they must provide a quality cup from a great bean and has been specialty hand roasted by true artisans. Of course, history taught us many thousands of years ago; David did defeat Goliath.