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Blue Bottle Coffee Case study 1

MGTB399

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Management Policy and Strategy (MGTB399)

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The Open University of Hong Kong

Academic year: 2020/2021

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Blue Bottle Coffee Company

From Shed to $700m in fifteen years!

Slow ... caring about coffee ... artisanal ... possibly weird ... but probably not ... but business savvy... would describe this company.

If we were to define it in terms of what it is not ... it is not Starbucks (no disrespect to Starbucks intended).

Their Current Website:

bluebottlecoffee/

This case study has s even sections

Please read the whole case and look at some of the YouTube videos

Whilst history might not a good predictor of the future in a fast paced and changing commercial environmental – it does inform us as to why we are where we are today... so this case has history as well!

2003 Starts as a roastery in a shed about the size of a single car garage in a back yard in

Oakland, San Francisco, California

2003 Has a stand at the San Francisco Farmers Market near the Ferry Building

2005 Opened kiosk serving coffee in a converted garage in Linden Street in San Francisco

2008 Mint Street Cafe opened in San Francisco

2009 Cafe opened in Ferry Building, San Francisco

2009 Opens San Francisco rooftop cafe at Museum of Modern Art

2010 Opened Brooklyn (New York) roastery and coffee bar

2011 Opens three stands at markets in New York; and one on the High Line Park; and one

at Rockaway Beach

Website at 2018 reports the stock of cafes as:

Boston 03 Los Angeles 13 Miami 02 New York City 13 San Francisco Bay Area 15 Washington DC 05

Kobe 01 Kyoto 01 Tokyo 08

1 Contemporary News

2 Five YouTube videos

3 On Coffee Culture

4 On Coffee beans

5 Early Commentary on Blue Bottle Coffee, 2011

6 An interview with BNET, 2011

7 Blue Bottle Coffee– 2012 Website: Some details

Under Nestlé, Will Blue Bottle Coffee Lose Its Kick?

Nestle will acquire a majority stake in the coffee business. Some loyal customers are

concerned.

PUBLISHED ON: SEP 15, 2017

By Zoë Henry

Staff writer, Inc.

Blue Bottle Bushwick. Credit: Courtesy Company

“When James Freeman, the storied founder of Blue Bottle Coffee, launched his company in

2002 from a potting shed in Oakland, California, the premise was simple: To produce fresh,

high-end coffee using single-origin beans, an alternative to what was then available on

the commercial market.

It might come as some surprise, then, that the same roaster is now owned by Nestlé - the $

billion food giant that counts Stouffer's (frozen pizza) and Nescafé as subsidiaries.

On Thursday, Nestlé announced that it would acquire a majority (68 percent) stake in Blue

Bottle. Although terms of the deal were not disclosed, Blue Bottle says the cash will go toward

continuing to expand across North America and Japan, where it already has locations in Tokyo.

By the end of the year, the roaster aims to have 55 stores, up from its current 40.

Meanwhile, for Nestlé, the acquisition is part of a broader strategy to attract more savvy

Millennial consumers, and grow its business in the U. In June, the company acquired a

minority stake in Freshly, a health food maker, and earlier this month it acquired the plant-based

food start-up Sweet Earth.

inc/zoe-henry/nestle-acquires-blue-bottle-quality-concerns

Coffee Beyond the Same Old Grind; James Freeman of Blue Bottle Coffee spills the

beans on his quest for the perfect cup of joe.

Julia Flynn Siler. Wall Street Journal (Online); New York,

29 Mar 2013:

“Abstract

In the recent book he co-wrote, "The Blue Bottle Craft of Coffee," he recalls the gurgling of the

coffee maker that his parents would program the night before, letting the water and ground

coffee sit in the machine overnight. When he is in Oakland, Mr. Freeman meets with his staff

each day in the company's production facility for their "cupping" ritual -a blind tasting of all the

coffee roasted the previous day, as well as coffee made from beans they are considering

buying.”

https://search-proquest-

com.libaccess.hud/docview/1321594376/7A6BE7E516C443CCPQ/3?accountid=

For a decent summary of the possible derivation of the slang for coffee – ‘joe’

driftaway/why-is-coffee-called-a-cup-of-joe/

How Blue Bottle Coffee turned one coffee shop into a $700 million eCommerce business

BY SAM HOLLIS

August 20, 2018

“Sixty years ago the landscape of coffee would be unrecognizable to most of us. Coffee was still

just a utilitarian beverage, used to fuel the workday of everyone from farmers to CEOs. Since

that time, an increased focus on the quality of beans, roasting techniques, and refined

preparations has fundamentally changed how we view coffee and coffee culture.”

jilt/upsell/blue-bottle-coffee-content-marketing/

If Blue Bottle is all about the product and the aesthetic (see the Stanford Seminar) then this is a nicely shot piece of work about their Kyoto Cafe

youtube/watch?v=FXMjz7F8Wrc

What do you think about the core argument here?

youtube/watch?v=tNp29UZ2mOU

3 ON COFFEE CULTURE

“Fanning out from the West Coast, the new reverence for coffee bears a striking resemblance to appreciation of wine and cheese. And, as with wine connoisseurship, it starts with terroir, the land the coffee is grown on. "Specialty" coffee purveyors-as distinguished from mass-marketed brands using beans of unspecified provenance and age-pride themselves on an artisanal approach and seek out small, sometimes family-run, farms where each hand that plucks a raw coffee berry could belong to a relative or community member. With their small crops, such farms can maintain a high standard of quality control-and provide a "coffee story" about the cultivation and craftsmanship that goes into the beans.

But unlike wine or cheese, java (coffee) does not improve with age. Once the ripe, red, grape-size "coffee cherry" is plucked from the bush-like tree, the skin and pulp removed, and the inner bean soaked, dried, rested-yes, rested!-shipped, and roasted, decomposition begins. James Freeman, owner of San Francisco's noted Blue Bottle (named for Central Europe's first coffeehouse), prints the roast date on each bag so consumers can avoid beans gone stale by oxidation.

Grown in 50 countries, coffee is the second most traded commodity in the world, after oil.... Part science, part art, coffee roasting takes the green coffee beans and caramelizes them to varying degrees, releasing their natural oils and aroma. And then they are ground and ready for brewing.”

( source: Janecka, Laura, Psychology Today, July-August, 2010, Volume 43, Issue 4, 44-45)

4 ON COFFEE BEANS

The preparation of the coffee bean – the selection, the roasting and the grinding is important. Consider the quotes below from two top coffee houses in Dublin about their choice of supplier

"We chose Ariosa Coffee Roasters for taste, quality, ethos, passion and consistency," Holmes says. "We tried many coffees and roasters, but Ariosa Coffee Roasters won on all counts every time. The espresso-based coffee we sell is derived from the principle of more coffee, less milk. We need the coffee to be strong, flavorsome and slightly sweet, and Ariosa Coffee Roasters's espresso does all this for us.

"John Gowan, Cork Coffee Roasters is our roaster and supplier," says owner Trish Messom. Of the Stuffed Olive store and café "We chose John because he is a small gourmet roaster who is very passionate about his coffee. He roasts the coffee beans for us in small batches, delivers, and comes down regularly to train the staff. For me the coffee is smooth, strong, not bitter."

(source: Coffee Counter Culture, anonymous, Irish Times, 26th March, 2011)

6 AN INTERVIEW ON THE BNET INTERNET SITE, 2011

No Experience Necessary - Just Midwestern Charm

By Lindsay Blakely, March 1, 2011, BNET Internet site

“The secrets to his success? A superior product and a loyal crew that’s big on Midwestern niceness.

He spoke with BNET recently about how he got started.

BNET: Your only qualification before you started was your coffee obsession. Freeman: I would roast coffee on a baking sheet at home. When I was traveling, I had this hand grinder and a French press. I would grind my coffee on the plane and I’d ask the stewardess for hot water, fill up my French press and have a nice coffee on the plane. There are even TSA-compliant grinders.

BNET: How did you get the capital to get started? Freeman: Had I known more about business, I wouldn’t have done it because I didn’t have enough money to start. But I had a couple of credit cards. I had maybe $15,000 in the bank and it seemed like a lot of money. The rent for my first production facility was $600/month and we built out this roastery in 186 square feet. It was the smallest health-certified facility in the county.

BNET: Sounds like you had to do it on the cheap. Freeman: I remember looking at plastic scoops, which I needed to get the roasted beans into the bags. They were $27 dollars, which I thought was crazy. I tried using a milk jug but it didn’t work, so I finally bought the damn scoop. I sweated every penny. In a way, that’s good training because we’re a lot bigger but I sign every check and I know everybody who receives those checks and we spend less money that we make.

BNET: How did you expand beyond the 186-square foot roastery? Freeman: I started selling bags of beans on a table at a farmers market for a few months until I could figure out how to buy an espresso cart. Then I bought the cart and that was great because I could be in charge of the drinks and people are much more likely to spend $2 or $3 on a drink than $8 or $ on a bag of coffee. I learned a ton about customer service — what customers expected, how to please people when possible, and when to give up if it isn’t working out. Then we got into other farmers’ markets.

BNET: Making a cup of Blue Bottle coffee isn’t exactly speedy, right? Freeman: We make everything to order. We’ll grind the beans, put it in the filter, and pour hot water over it. It’s not as unusual now, fortunately. But at the time, it was either fantastic or infuriating, depending on your perspective.

BNET: How did you get from the cart to a physical shop? Freeman: We opened a kiosk in a garage on Linden Street [in San Francisco] in a dead-end alleyway that smelled like pee. Brilliant! A pee-smelling alleyway. For the first few months, it was slow and people thought it was somewhere between crazy and a really bad idea. But then it became improbably busy.

BNET: How have you financed your growth? Freeman: In 2008 we opened a café with the help of an SBA loan, which was so annoying but necessary. All the paperwork, ugh, I remember the checks would be promised and they’d never come. Later that year, I really didn’t want to get another SBA loan so we took on an investor that owns a minority of Blue Bottle. That helped us get into the Ferry Building in San Francisco and move into our roastery in Oakland. Now we’re working with a bank and hopefully (knock on wood) that loan is going to fund a couple of shops in Manhattan.

BNET: What’s the best lesson you’ve stumbled upon? Freeman: A lot of business people especially in the food world, which now has this cache, talk about their brand and positioning and press. It’s a mistake to think about anything other than your product first and foremost. Is it really good? Is it delicious? Are you excited about it?

BNET: What else is critical? Freeman: Then when you get to the point where you have to hire people, that has to be a really high pri ority — not over product but it’s second. You have to have a crew that you believe in. Basically the people five or six years ago that I was shoulder to shoulder with at the espresso cart for the most part are running the company now. The first barista I ever trained is our director of operations.

BNET: What kind of hiring mistakes have you made? Freeman: The mistakes we’ve made have been hiring people based on their past experience rather than attitude and how it feels to sit in the same room with them and have a conversation. This is a customer service business. Even employees not directly involved in making coffee for customers, they have other customers — bean baggers, delivery drivers, etc.

BNET: So you don’t care if they know nothing about coffee? Freeman: Coffee is teachable. It’s more important to find a person you want to have a conversation with, someone who’s really engaged, enthusiastic and pleasant.”

13 | Page

Looks like Machines People and Other Stuff

We roast our coffee on vintage German roasters dating from the late 1950s. We like the simplicity of the machines, as well as the extraordinary mellowness imparted by Probat’s proprietary metal alloy of this period. No part of our roasting process is automated.

Our roasters (the people, not the machines) undergo a rigorous apprenticeship before they are allowed to roast coffee for our discerning customers. Their dedication, intuition, endurance, good humor, and willpower are tested while they learn to know the machine as well as a concert pianist knows her or his Bechstein.

We moved into our Webster Street production facility in September of 2009. Built in 1923, it is a scrupulously restored brick warehouse that has been converted into our roastery, complete with a kitchen, coffee bar, offices and cupping rooms. The straightforward materials – brick, timber, concrete, glass, structural steel – make 300 Webster Street a peaceful and inspiring place to roast and drink coffee.

Webster Street

San Francisco

Production Facility

Monday to Friday, 7- Weekends, 8-

Espresso on a three group la Marzocco Linea, and grind and brew drip coffee individually on Beehouse drippers on a drip bar of our own design.

We have an odd but convivial coffee kiosk in San Francisco’s Hayes Valley.

We opened the kiosk in our friend Loring’s garage in January 2005. Linden Street at the time was a dead-end alleyway that smelled ... (not too good)

.. so there was a certain amount of head-scratching that winter. Now, thanks to our customers and a cadre of highly professional baristas, the alleyway is one of the unlikely urban pleasures in San Francisco.

We have a small menu of espresso drinks, drip coffee, our New Orleans iced coffee, and treats from the Blue Bottle Kitchen.

We offer beans to sell, dropped off Mondays, Tuesdays, Thursdays, and Saturdays.

We use Clover organic milk and organic sugar. We serve our Hayes Valley blend. Follow the kiosk on twitter! Please drop by.

315 Linden Street San Francisco Kiosk Monday to Friday, 7- Weekends, 8-

14 | Page

Looks like Machines People and Other Stuff

Mint Street San Francisco: 66 Mint Street

Cafe Monday to Friday, 7- Saturday 8-6, Sunday 8-

Perhaps the most compelling, is the five-light siphon bar, manufactured by the Lucky i. Cremas company of Japan – the first of its kind in the United States. Here we feature a menu of three single origin coffees which changes weekly. Next is the Kyoto-style iced-coffee apparatus, which produces a delicate, refined, fragrant cold brewed coffee. Last but not least is the one-group San Marco lever machine. Clad in glorious rounded copper, it was our first machine. We think was built in the late 1970s. Sometimes it breaks, and sometimes it breaks our hearts. An aura of doomed romance, frustration, and beauty surrounds it, which makes us think of youthful love.

At the other end of the shop (and spectrum) is a thoroughly modern four-group La Marzocco GB5, with which we make our 17ft. Ceiling espresso blend. We grind and brew drip coffee individually on a drip bar of our own design. The selection of single origin coffees changes weekly.

Desserts are made at the Blue Bottle Kitchen in Oakland. We have a small selection of high quality coffee makers, grinders and espresso machines for sale. We opened our Mint Plaza café in January of 2008, in the rear of the elegant 1912 Provident Loan Building in downtown San Francisco. In stark contrast to the old limestone-clad Mint just across the street, we’ve loaded this shop with our prettiest, most delicate gear.

Shop #7, 1 Ferry Building San Francisco: Ferry Building Marketplace

Cafe Monday to Saturday, 7- Sunday, 8-

Our café consists of two coffee bars: The first, located in the main arcade, pulls either our Retrofit or Hayes Valley espresso on a three group La Marzocco paddlewheel. The north (or “secret”) coffee bar is tucked away around the corner in a side entrance. There, our baristas pull rotating single-origin espressi. The machine is an elegant gearhead’s delight: a three-group Kees van der Westen Idrocompresso lever machine – the first of its kind in service in the US. We grind and brew drip coffee individually on drip bars of our own design at both bars.

Constructed in 1898 and extensively renovated in 2002, the Ferry building is both a historic landmark and one of the great public spaces in San Francisco. After five years of peering inside from our stand at the weekly Saturday farmers’ markets, we opened our own shop in April of 2009.

Caramelized Belgian waffles made to order from 7-2 daily, as well as granola, and other treats from the Blue Bottle Kitchen

16 | Page

Looks like Machines People and Other Stuff

Berry St. Brooklyn 160 Berry Street, Brooklyn, NY:

Cafe Monday to Friday, 7- Saturday and Sun, 8-

We are roasting coffee on a vintage Probat roaster, and serving coffee on a variety of interesting devices: Slow cold drippers, brand new La Marzocco espresso machines, painstakingly restored 1958 Faema Urania lever espresso machines, and perhaps the longest and most theatrical drip bar on the eastern seaboard. All hot coffee – espresso and pourover – is ground and prepared to order ( a la minute , as we are fond of saying), and all iced coffee is brewed cold.

We opened our Brooklyn roastery and coffee bar in March of 2010. As you may know, New York City is a very big town, but there are surprisingly few places that roast coffee on a small scale, and even fewer that serve coffee in the roastery. You might think that in one of the largest and most densely populated areas of the nation, making food on a small scale is an impractical and unreachable goal. Our new neighborhood, however, is a hotbed of talented food artisans; we love being a part of a community that supports butchers, pickle makers, chocolate makers, beer brewers, knife makers, cheesemongers. And coffee roasters.

Chocolate is by our neighbors, the Mast brothers, and milk is from the Battenkill Valley Creamery in upstate New York. Please glance at our menu to see what we are roasting and serving in Brooklyn this week. Also, join us for a free public cupping (tasting) every Thursday at noon! Constructed in 1910, 160 Berry Street is a handsome brick building that has seen a variety of practical uses – glass blowers, metal smiths, barrel makers, rope factories, and now a coffee roastery. We love the vitality of our Williamsburg surroundings but also enjoy being slightly off the beaten track.

Summer in New York

Various Kiosks

“I love New York on summer afternoons when everyone’s away. There’s something very sensuous about it – overripe, as if all sorts of funny fruits were going to fall into your hands.” F. Scott Fitzgerald, The Great Gatsby. Maybe it was beginner’s luck, but in our second summer in the city, we have lined up four lovely spots to drink coffee in three of New York’s five boroughs. We’re still working on the Bronx and Staten Island.

The Highline (Chelsea Market passage) Full espresso bar: Espresso drinks, individually prepared brewed coffee, iced coffee, beans, house- made granola and other treats. Rockaway Beach (South Shore of Long Island in the Borough of Queens) Full espresso bar, Individually prepared drip coffee, iced coffee, beans, house-made granola and other treats. New Amsterdam Market (By the Brooklyn Bridge on the Manhattan side of the water) Individually prepared drip coffee, iced coffee, beans, house-made granola and other treats. Smorgasburg (Secondhand Market in Brooklyn Individually prepared drip coffee, iced coffee, beans, house-made granola and other treats.

Monday-Thursday 9- Friday-Sunday 9- Ends November 2011

Monday-Friday 8-4, weekends 8-6, Ends Labor day (first Monday of September)

Sundays 11- Ends December 17, 2011

Saturdays 9- Ends late November 2011

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