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May
31,2010

Specialty Coffees Win!

Author | Marc Wortman

Earlier in the year, a consumer study was released by Market Force Information, a “worldwide leader in customer intelligence solutions”.  2,000 people were surveyed.  One focus was the coffee (and tea) sector and here’s what it had to say:

- Of 2,000 respondents, 82% of them said they drink coffee.  Most cited the bigger “mass” brands like Folgers as their regular choice.

- But of those who regularly drink coffee from the bigger brands, specialty coffee enticed the majority (52%) to try a new brand that they hadn’t tried before.

- The #1 new brand tried by consumers was Starbucks.  They received approximately twice as many mentions as the #2 brand, Dunkin Donuts.


What’s it all mean?  For the record “specialty coffee” refers to any premium or gourmet coffee identified by and sourced from a specific source and climate.  For my own purposes, it’s any coffee of quality that isn’t one from one of the big grocery retail names.

I might drink my coffee black, but I drank it “double-double” for most of my life.  I switched to black so I could appreciate subtle differences in the specialty coffees of different regions, but even in the content you’ll find across this website, I won’t admonish the non-purists who add cream or sugar to their coffee.  In fact, I still encourage it if that’s how you best enjoy a coffee.

When it comes to specialty coffees, there’s an almost limitless number of varieties of how coffee can be enjoyed.  If it only came in black, there would probably be half as many people drinking it.  However, if coffee can become AN ingredient in a more complex or “specialty” drink, then I am happy for coffee to be able to play that part.  Coffee purists should relaaaax!  However people choose to enjoy their coffee is not only their business but a great opportunity to experiment.

And it’s these specialty coffees that have brought more coffee drinkers to the table.  I wouldn’t personally buy a specialty coffee from Dunkin Donuts because they can’t do it right.  They’re introducing them simply to compete, not because they have a trained barista that knows how to properly prepare one.  If coffee was only available in black, I might never have come to enjoy it so much…but I got there gradually.

Learn more about specialty coffees and what makes them great at Peet’s Coffee and Tea and Starbucks Store.  These two sites have a lot of information and coffee expertise.

May
7,2010

The LeWhif Coffee Inhaler – look out, kids!

Author | Marc Wortman

Thanks to Jacques for sending this in.

I remember when Jolt Cola first came out.  The concern was that we were going to end up with younger and younger caffeine addicts.  Sure, coffee doesn’t have a minimum drinking age but it’s simply not as accessible to children as soda.  When caffeine equivalent to a cup of coffee was put into a soda on store shelves, the schools would be filled with tazmanian devils.


Then came Red Bull, just as accessible as Jolt but slightly more dangerous because the period of consumption is shorter.  Now you get all the same effect compressed into a smaller drink.  Heck, it’s not even carbonated so it doesn’t take as long as Jolt to drink.  To be sure these “energy drinks” are more about the affect than flavor, where is Jolt?  I know it’s still around (barely), but Red Bull and the knock-offs all but kicked it the back of the shelf.

And now, David Edwards, professor of biomedical engineering at Harvard University (yeah, I checked, he’s still there – I was expecting “former professor”) has designed a product called LeWhif.  Originally designed so people could inhale the flavor of chocolate without the calories, its second generation version promises the “kick of coffee without the cup”.

Now while you drink your coffee, your toddlers can enjoy the same high without the hot bitter beverage. Look at the guy in the grey jacket on the far left, even he knows there's something wrong with this.

How does it work?  Users place one end of the stick, which is about the size of a lipstick tube, to their lips then inhale gently.  “Whiffers” intake about 100 milligrams of caffeine which is equivalent to a small cup of espresso and less than a single calorie per Whif.

Remember where you were when I predicted this will be a huge problem in the public school system!

Categorized In | Coffee News

February
26,2010

The average person drinks…

Author | Marc Wortman

…22 gallons of coffee per year (US stats). This is according to a marketing company that paid to have the research done covering the year 2000 which I decided shouldn’t be markedly different in coffee consumption from today.


The first thing I asked myself was how I compared to the average person. Not the average coffee drinker, but the average person. I’m down to 4-5 cups of coffee per day (mugs of coffee, not metric cups). I make 8-9 metric cups per day and there are four of those in a liter.

So if I drink 2 liters of coffee per day, then I drink 730 liters of coffee in a year, or 193 gallons. This shouldn’t be too far from the truth. After all, I really drink 2.25 liters of coffee per day if I make 9 cups, but I rounded down. And that’s how much coffee I make just to take on the challenges of a regular day. On days where I didn’t get enough sleep the night before or just feel like having an extra coffee, it’s probably more.

So the average person drinks 22 gallons of coffee per year, and I drink 193 gallons. In fact, I’m probably pushing 200. That’s huge.  I suppose I should be very interested in the coffee-health studies I usually ignore.

Now, I’m interested in how much coffee is consumed by the average coffee drinker. That would probably be a more reasonable comparison for me. All I know by this is that I drink almost ten times as much coffee as the average person!

Categorized In | Coffee News

February
17,2010

The Coffee Investment

Author | Marc Wortman

I learned today that Colombia’s environmental agency IDEAM is predicting unseasonably scorching hot weather to take Colombia through February and into March.  When temperatures lighten up in April, they’ll be followed by rain showers, but even those will be below the average for this time of year.  This announcement comes in the wake of ongoing forest fires at a high and major rivers at a low.

It got me thinking about an investment book I once read that said if there is unseasonably high rain in Brazil, buy shares of Starbucks.  See why?  If not, it’s good to learn about the coffee investment and I know I needed the refresher.

Coffee trades as a commodity on the New York Board of Trade.  It trades alongside other commodities like oil, sugar, cocoa, metals, etc.  When you invest in coffee as a commodity, you are buying what’s called a futures contract, a standard contract to buy or sell a certain amount of coffee at a specific future date for a specific price.  The coffee in question is green, unroasted coffee since the idea before a commodities market is that the commodities are unprocessed for the most part.  Once you roast coffee, you’re processing it on its way to the retail market and into the cupboards of coffee drinkers everywhere.

There are investors who see coffee investment plays and the price of a futures contract is generally used by coffee exporters to determine the price of coffee.  There are some generally accepted standards for what coffees can go for a premium over the commodity price and what coffees can go for a discount.  However, the one thing that generally doesn’t change is what we consumers pay for coffee.  It would be a crazy world if you didn’t know the price of your cup of brewed coffee or pound of whole bean coffee until you got to the cashier and he needed to check the commodities exchange for the latest price.  What that means is that the buck stops at the consumer.  Larger retailers can flex their muscle and insist on standard or fairly standard prices so that they don’t have to deal with the price fluctuations.

But at some point, somebody between the exporter in the coffee-producing country and the retailer that sells the coffee to consumers has to deal with these fluctuations.  It the commodity price jumps, you and I pay the same for our coffee but people in the chain make less money for themselves.  If the commodity price drops, you and I still pay the same but people in the chain make more money for themselves.

So if it’s raining unseasonably in Brazil, the world’s largest producer of coffee, then coffee farmers will have more coffee to harvest than what was estimated.  This will increase the supply of coffee to the world, so that if demand for coffee stays the same, the commodity price of coffee will drop.  Supply high, demand same, price drops – if supply drops then there is less of that thing and therefore it fetches a higher price.  So in our example, the world’s largest coffee retailer Starbucks will pay less for the coffee they buy but charge us the same for the coffee that we buy from them.  That means when it’s raining unseasonably in Brazil, Starbucks will make more money that year and you should invest in them before they do so you can share in the profits as a shareholder.

So all of this came to mind today when I learned about the heat wave about to continue in Colombia.  Colombia is now the world’s third largest producer of coffee after Vietnam, and a large supplier.  This weather news does not bode well for Colombia’s coffee crops and consequently, the supply of coffee to the world.  If Brazil can’t pick up the slack, there will be a lower supply of coffee in the world and provided demand stays the same, an increase in coffee prices.

I went to the Intercontinental Exchange, which lists commodity trade charts.  For news likely unrelated to what’s going on in Colombia, the price of coffee has been dropping all day…a good time to buy a contract in light of the news out of Colombia?  It will take a finer investment mind than me to answer that question, but I’m thinking of dabbling in the commodities market for the first time in my life.

February
5,2010

Bird Friendly Coffee

Author | Marc Wortman

The Herald Times Reporter in  Manitowoc, Wisconsin recently ran an editorial piece on Bird Friendly Coffees.  The piece is written by David Smith, co-owner of the Stumpjack Coffee Company in Two Rivers.  I’ll give you the executive summary here and encourage you to read the editorial – it’s a different take on coffee certification and demonstrates an interesting corelation between coffee and the nature of things.

David points out that in a world “going green” and also becoming more cognizant of the needs in developing countries, that one certification growing in popularity is that of Bird Friendly coffees.  As it turns out, research by the Smithsonian Migratory Bird Centre points to a connection between shade-grown coffee and an environment that is a haven for migratory birds.

Shade-covered areas for growing coffee provide optimal conditions that eliminate the need for certain fertalizers and other chemicals prevalent in most farming areas.  When preserved, these areas provide an environment that support migratory birds.



I think it’s fascinating where we often equate commerce with the tearing down of nature that the Bird Friendly certification means you are not only getting a quality coffee grown under optimal conditions but are supporting a part of nature.  Check out David Smith’s article.

February
2,2010

Tim Horton’s international expansion

Author | Marc Wortman

Canadian coffee giant Tim Horton’s is preparing to announce international expansion plans when it presents its 2009 fourth quarter results in one month on February 26th.

Tim Horton’s was founded in 1964 in Hamilton, Canada by former Canadian hockey player Tim Horton and two others.  Following Horton’s death in a car crash in 1974, management of the small chain was assumed by partner Ron Joyce who took it national and expanded it into a multi-million dollar franchise.  Tim Horton’s has since surpassed McDonald’s in Canada as the country’s largest food service operator, and controls almost two thirds of the country’s quick-service coffee market – to put the brand in perspective, Starbucks holds the number two spot with 7% market share.  Today, Tim Horton’s is across all markets one of Canada’s top ten brands, measured by brand value.  The chain was sold by Joyce to Wendy’s International, who has since spun it off, still as a public company.

International expansion of Tim Horton’s locations has been mostly limited to northeastern United States, close to its strongest market in Ontario.  After the success of 12 new locations opened in New York City last summer, the company is planning its most aggressive expansion.  Expansion to date outside of North America has been limited to a small presence in the UK and Ireland.  Despite an overall downtown in the North American quick-service industry, Tim Horton’s opened over 100 new locations in the first three quarters of 2009.

It will be interesting to watch the expansion of this Canadian brand.  After all, the chain does little that can’t be replicated and does not offer a dining area that is very different from its peers, regardless of the national market.  The chain has brought some innovation to quick-service, including drive-thru coffee service and its annual ‘roll up the rim’ promotion – both of which since replicated by its peers.  It has also managed to increase the average order size at the cashier by introducing “premium” coffees (read: between their regular and a Starbucks coffee) and sandwiches.  The question remains whether a stalwart Canadian brand can bring something new to market internationally.

Learn more about Tim Horton’s.

Categorized In | Coffee News

January
27,2010

Starbucks has a great 2009

Author | Marc Wortman

In the middle of this month, Starbucks -a public company traded on the Nasdaq- reported its fourth quarter results for 2009 to close out the year. Amidst news almost a year old now of Starbucks shutting down many US locations and most Australian locations, how did they do? Very well.

In somewhat of a surprise for investors, Starbucks showed many promising signs of recovery, including the success of…its instant coffee?  Where Starbucks is a premium brand and instant coffee is not widely respected among coffee drinkers, the launch of Starbucks’ VIA brand instant coffee was met with much skepticism, including by yours truly.  You might remember by Starbucks VIA taste test where I was challenged to identify which was the instant and which was the drip-brewed Pike Place blend.  I admitted while I could identify which was which that the VIA was the best instant coffee I’d ever had, for what it’s worth.

For Starbucks, it’s been worth plenty.  A net income increase of almost 300%, and a sales increase of 4%.  But where sales increased 4%, store traffic increased by only 1%…meaning roughly the same number of people are paying more or buying more at the cash machine.  That is a healthy sign for the Starbucks brand.

Starbucks customers are apparently enjoying the VIA coffee, which is sold not only in Starbucks locations, but also in Target, Amazon, and Costco.   CEO Howard Schultz was excited about VIA, pointing out that people can enjoy it wherever they go, as a single-serve option that “does not require costly proprietary brewing equipment.”  That sounded to me like a crack against the one-shot pod coffee machines out now, like Keurig’s.

Starbucks share value soared 162% in one year.  I don’t own shares of Starbucks but I am a regular Starbucks customer and happy to see that their decisions are being supported by great results.  It means I should be able to count on the same quality and consistency, and the occasional new product like the VIA – I still have one pouch left from when I originally bought some

Categorized In | Coffee News

January
19,2010

Malaysia police seize Viagra coffee

Author | Marc Wortman

Last week, 10 enforcement officers for Malaysia’s Health Ministry raided the premises of a distributor in Kuala Lumpur and seized their supply of coffee.  The special brand of coffee was being advertised “as enabling men to feel their full masculinity”.  How exactly did this new coffee give men the lift they needed?  The distributor was adding sildenafil into the coffee mixture to boost sales.

For those of you who don’t know, sildenafil is the drug found in Viagra for men with the floppy gomez problem.  As the new coffee became a growing hit among consumers, the Health Ministry became aware of the advertised claims, obtained and tested a sample of the coffee, and proceeded to hit the distributor responsible.  A case of ten packets of coffee mixture was selling for the equivalent of USD $60.  To account for the uplifting effects, the distributor claimed a mixture of herb extracts and honey, but nothing about sildenafil.

All of the coffee in stock was seized and the company’s owner could face two years in Malaysian prison.  It just doesn’t make sense to me, they should put this stuff in whiskey, not coffee.

Categorized In | Coffee News

January
14,2010

New wild coffee species discovered

Author | Marc Wortman

Before the end of 2009, the Royal Botanic Gardens, Kew announced the discovery of a staggering 250 new plant and fungi species, previously unstudied.  For those of you who are not familiar with Kew’s work -and believe me, before this news came out, I was one of you- they are dedicated to ultimate understanding of the worlds of plants and fungi.  Their mission statement is nothing short of: To inspire and deliver science-based plant conservation worldwide, enhancing the quality of life.  Read about the Royal Botanical Gardens center.

This year was a landmark year for new discoveries by Kew, including the discovery of seven -count ‘em- seven new wild species of coffee, a discovery that in their words could mean the long-term survival of the coffee industry.

“We’re still finding new species of coffee, including those directly related to crop plants,” says Kew’s coffee expert Dr Aaron Davis. “Coffee is the world’s second most traded commodity, after oil, with at least 25 million farming families dependent on its production for their livelihoods, yet we still have much to learn about its wild relatives. We estimate that 70% of wild coffee species are in danger of extinction due to habitat loss and climate change.”

Read all about the new coffee species discovery.

January
11,2010

Starbucks to expand Seattle’s chain

Author | Marc Wortman

First of all, Starbucks owns Seattle’s Best Coffee.  Who knew?  I only found that out recently, and it seemed like something I should have already known.  Well, it happened almost seven years ago but don’t expect Starbucks to go out of its way to make that information public.  They don’t deny it, but the acquisition helps cater to a different coffee drinking segment than Starbucks has typically targeted.

Starbucks coffee is the gold standard but is often criticized for its price.  Seattle’s is able to offer a pricepoint that is generally lower by stripping away alot of the “cafe” elements built into a Starbucks.  Starbucks is also able to replace some of its placement in grocery stores with the Seattle’s brand coffees to preserve its high-priced brand.

Starbucks made the news last year for shutting down many locations, particularly outside of the US.  A struggling global economy hurts the luxury brands, and for a drink as simple as coffee, Starbucks was no exception.  Before the end of December however, a spokesperson for the Seattle’s brand announced aggressive plans to boost expansion in the next five years.  200 potential franchisees were invited to a webinar meant to encourage sign-ups.

My guess?  During a recession, people change their spending habits.  They find less expensive ways to get all the same satisfaction, and Starbucks is wise to the fact that while there is still room in its high-price niche, customers they lost during the recession will are not coming back.  Those customers have descended into the next price segment down and are perfectly satisfied with the coffee in that segment.  The best thing for Starbucks is to preserve its brand but compete aggressively in the other niche through this subsidiary and its own wholly-developed brand.