Category Archives: Market News

A Green Pod? Trade-off between Convenience and Environment

This is an interesting article from the New York Times on the problem faced by coffee industry– how to make gourmet coffee preparation convenient to customer while preserving the environment.

A Coffee Conundrum
By MURRAY CARPENTER

WATERBURY, Vt. — Green Mountain Coffee Roasters has built a reputation as an eco-friendly company since it was founded nearly 30 years ago.

It started composting used coffee grounds in 1983, helped develop an eco-friendly paper cup in 2006 and last year installed a huge solar array on the roof of its distribution center. The company’s motto, “Brewing a Better World,” reflects its belief that it has a responsibility to help improve living conditions in regions that grow coffee beans.

But its recent growth has been fueled by a product that runs counter to its reputation. More than 80 percent of Green Mountain’s $803 million in sales last year came from nonrecyclable, nonbiodegradable, single-use coffee pods and their brewing systems. This year, the company expects to sell nearly three billion K-Cups, the plastic and tinfoil pods that are made to be thrown away — filter, grounds and all — after one use.

Now Green Mountain and its rivals are beginning to wrestle with the waste issue and searching for ways to make the packaging greener. Possible solutions include more use of biodegradable packaging, programs to recycle the pods or making the coffee filters themselves reusable.

“The whole concept of the product is a little bit counter to environmental progress,” said Darby Hoover, a senior resource specialist for the Natural Resources Defense Council. “If you are trying to create something that is single use, disposable, and relies on a one-way packaging that can’t be recycled, there are inherent problems with that.”

In the battle for market share, single-serve systems are helping coffee remain competitive, Judith Ganes-Chase, a consultant to the coffee industry, said. “The industry has to be innovative. There is a lot of competition from other beverages in the marketplace,” Ms. Ganes-Chase said. “One of the biggest issues has always been the convenience factor of how to get a good cup of coffee to the consumer at any point in the day, when it is demanded.”

Ric Rhinehart, executive director of the Specialty Coffee Association of America, said that although single-serve sales were growing rapidly, they still amounted to a small percentage of the more than 100 billion cups of coffee Americans drink every year.

Green Mountain’s K-Cups come in 300 varieties of coffee, tea and hot chocolate, and a new line of blends made to be brewed over ice. The cost varies, but is often about 60 cents a cup, or $25 a pound of coffee.

At the plant, in a mountain valley between Burlington and Montpelier, burlap sacks of green coffee beans from all over the world are stacked on tall pallet loads in one warehouse. Next door, the beans are roasted. Most are then ground and packed into K-Cups.

The containers resemble oversize creamer tubs. On machines here, they are lined with paper filters, filled with coffee, topped off with nitrogen gas to prevent oxidization, and sealed with foil. The cups work with brewing machines designed by Keurig, a Reading, Mass., subsidiary of Green Mountain.

In the machine, pins puncture the foil top and plastic bottom of the K-Cup, and hot water flows through, brewing a drink into a mug. Then the little cup gets tossed.

Michael Dupee, Green Mountain’s vice president for corporate social responsibility, said some customers did not like to see the waste. “Consumers see the waste stream,” Mr. Dupee said, “and they compare it to what they had done before, and they have a perception that there is a problem.”

To some consumers, however, the convenience and efficiency override the waste issue.

“We used to make a pot of coffee, and we would be throwing it out all the time,” said Michael Hurley, who uses the K-Cup system for concessions at small-town movie theaters he owns in Belfast and Houlton, Me. “So we don’t do that anymore. And when people come in, they get exactly what they want.”

Mr. Dupee showed off a prototype that Green Mountain planned to test this summer. It is a paper K-Cup, filled with Celestial Seasonings tea, that eliminates the plastic and the aluminum foil. In addition, he said many consumers had started brewing coffee in reusable metal-mesh filters for the Keurig machines, which accept ground coffee.

Green Mountain, he said, has also commissioned a life-cycle analysis to understand the environmental costs of the K-Cups. Though he would not discuss details of the analysis, pending a third-party review, he did say the study found that most of the impacts occur where the packaging is produced, not where the waste is disposed. He said he had been working with suppliers to make their manufacturing processes cleaner and more efficient.

He also cited Green Mountain’s collaboration with International Paper to develop the Ecotainer — a hot-beverage cup with a plant-based, compostable lining — as an example of progress in packaging.

Other coffee companies are also wrestling with the waste issue. Businesses that use Flavia pods, which is made by Mars, are able to ship the used pods to the New Jersey company TerraCycle, which will compost the coffee or tea and reuse the plastic in products like pavers and fencing, a TerraCycle spokesman, Albe Zakes said. More than 2.5 million Flavia packs in the United States have been recycled in the last year. Mars sells a billion drinks a year in 35,000 workplaces worldwide.

In Britain, Mr. Zakes said, TerraCycle has processed more than 800,000 coffee discs from Kraft’s Tassimo single-serve system. The results are being evaluated for possible application in the United States, a Kraft spokeswoman, Bridget MacConnell, said. Kraft and Mars are paying for collecting the pods, including shipping costs to TerraCycle.

Sara Lee has a simpler solution for its Senseo pods — the coffee-filled filter bags are made of paper and are biodegradable and compostable.

Nestlé’s upscale Nespresso system uses aluminum capsules, and it has started a pilot program to collect used pods for recycling at some Nespresso Boutiques.

Ms. Hoover, of the Natural Resources Defense Council, said another option was to include prepaid mailers with coffee pods, as Hewlett-Packard has done for ink-jet cartridges.

Green Mountain’s chief executive, Lawrence J. Blanford, said the K-Cups had some environmental benefits. Brewing one cup at a time means less wasted coffee at the bottom of the pot, and this reduces the overall environmental impact per cup of coffee.

K-Cups are also increasing demand for fair-trade coffees, he said, which accounted for 30 percent of Green Mountain sales in 2009. Fair-trade-certified coffees ensure that coffee farmers are paid a fair price per pound, and that coffee farms meet certain environmental standards.

Peter Meehan, chief executive of Newman’s Own Organics, said the success of the K-Cups, which are his company’s fastest-growing product, had helped Newman expand the market for organic products.

Still, Ms. Hoover wonders whether there is a simpler solution to the waste question. “At some point you have to ask, ‘But do we need this product enough that we need to be trying to find all these different solutions for the components of it, or can we just go back to the old way that we used to make coffee, and was that good enough?’ ”

http://www.nytimes.com/2010/08/04/business/energy-environment/04coffee.html?_r=1&pagewanted=printhttp://www.nytimes.com/2010/08/04/business/energy-environment/04coffee.html?_r=1&pagewanted=print

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Buzz: Otherside of the ’15th Avenue Coffee and Tea’ Coin

Just because I think both the detractors (read: haters) and the supporters of the newish Starbucks move to test the higher end specialty coffee waters have made some very salient points with regard to the changing dynamics of the specialty coffee industry.

  • Starbucks MUST be respected for its sheer ability to throw money and professional marketing at any scheme that they arrange.
  • The hipster coffee house vibe — that many of the places that are charging $20 a pound for fresh roasted coffee from reputable outfits like Blue Bottle, Ritual, Novo, Intelligentsia and Counter Culture — does not appear to be something that the Starbucks corporate people will ever be able to roll-out on a large scale.
  • What it does appear Starbucks’ wants is to leverage its sheer advantage in liquidity (read: lots of $$$) and marketing to increase their share of a market that is a sub-sector of their core industry.  As a major buyer of green coffee all over the world it seems logical that they would leverage the best of their strategic relationships to promote higher premiums, no?  It makes perfect business sense and the following article gives a more balanced look at the non-hater side of the the 15th Avenue Coffee and Tea story.

Source: Tamp Tamp Blog

Coffee Menu Sandwich sign

We finally made it to see the new 15th Avenue Coffee and Tea (”Inspired by Starbucks” as it says on the door) on Capitol Hill in Seattle. After all the specialty coffee hubbub, pressand dramaover what this means, and after reading the considerably dramatic yelp reviews, we had to see it for ourselves. It puts an interesting question out there – can Starbucks make a better Starbucks?

In New York, when we first heard about it, we were skeptical. When we think of Starbucks, we picture the lines of caffeine deprived junkies queued up by the dozen, packed into a place pumping out big milky drinks by the gallon, with rarely a smile on any face – customer or barista. Like most situations in New York, the stakes are higher, and the throngs battle it out to make it out with their drink. Does it taste like coffee? Perhaps, but what’s most important is that you made it out with something hot and you’re still alive.

Starbucks Coffee

This is the line at the original Starbucks retail location at Pike Place Market, downtown Seattle. This location used to be a fine purveyor of coffee beans only; now it looks a lot like an everyday Manhattan retail location (read: packed and stressful).

Starbucks’ reputation in New York is bad. And for people who’ve only known that big, corporate, bad-tasting, fast food retail-y experience, I don’t blame them. But as a Seattleite that grew up alongside the explosive growth of the company, I always speak positively of my very first experiences getting lattes at (where else?) Starbucks. And it was good. Our whole industry, and certainly my company, would be much less significant (even nonexistent) if Starbucks hadn’t tapped the consumer demand and opened the floodgates.

But still, there’s no denying that Starbucks lately has fallen on hard times. The coffee just hasn’t been that good, the shops are kind of dumpy, all Starbucks’ seem to have an unpleasant smell (what is the deal with that smell?). I hadn’t had coffee from Starbucks (with the exception of a Clover coffee last year) in several years. Why bother, when there are independent places, with great coffee, and great service (you can visit our tour if you need tips) right around the corners from many a Starbucks in NYC?

On the other hand, there are a lot of independent cafes that rest happily with the knowledge that they’re not Starbucks. But are they good? Well, no, not really. The coffee is ok, maybe some of the baristas are nice, and the atmosphere is decent. By and large, these cafes provide a sub-par experience. As consultants, we run into this mentality all the time, and are constantly checking that clients begin providing a much higher standard of service, and of course, most importantly, are providing the best possible product. There is simply no way that being “not Starbucks” is anything more than a lie owner/managers use to tell themselves they are doing a good job in their cafes. Most very high end cafes think of Starbucks as completely irrelevant – and while I think there are some great aspects of Starbucks (they’ve got independents trounced when it comes to retail and merchandising, for example, and it’s worth watching them for that), I generally tend to agree with the high end independents.

So when we walked into 15th Avenue Coffee on Capitol Hill, steps away from Victrola, we were keeping all of our standards as high as we do at any shop we visit. What’s the atmosphere like? Are we greeted right away? Are the chairs comfortable and are there multiple types of seating? Can we see this space being multi-functional, serving a lot of customers from various backgrounds? And of course, how is the product?

Macchiato refurbished Linea

We were greeted cordially and were provided with some suggestions about what to try. I had a macchiato, and Neil got a Costa Rican coffee. We were served in porcelain cups. The latte art on my coffee was lovely. And most importantly, the coffee tasted pretty good. Maybe not the most unbelievable, delicious coffee in the world, but certainly pleasant and drinkable, and considerably better than many independent cafes in Seattle. I’m fairly certain that most coffee consumers wouldn’t see a discernible difference when picking between 15th Ave and Victrola in terms of cup quality. In New York, this shop could make a killing.

From the back

Does that mean that Victrola needs to look out? It’s doubtful. Victrola has a strong customer base and has been making great coffee for years. In fact, my theory is that Starbucks moved to that location to test the waters in a very tough location for them, just steps away from a high-end independent. In this spot Starbucks is definitely going to see if it’s possible for them to reclaim their glory as a high-end, products focused business. I think that for quality focused independents, this new incarnation will only increase awareness and bring in more customers, especially if they launch cafes in cafe-deprived areas.

Patio

What about other, smaller, less quality-focused cafes? Should they be concerned? Absolutely — if you’re using Starbucks as your measuring stick. Those cafes are in trouble anyway, they just haven’t seen someone come along to challenge them yet. But look out, everybody. Here comes a company that means business and wants to reclaim what it has lost.

Buzz: Why the Starbucks “15th Ave” Store Is Doomed to Fail

Source: Peter Merholz of Adaptive Path, Harvard Business School
Date: 2009.07.28

Editor’s note: Peter continues the conversation he started here in his next post, Further Thoughts on Starbucks’ 15 Avenue Experiment)

Late last week, Starbucks opened a new coffeehouse. Considering they have around 15,000 outlets, this might not seem like news. But there’s a wrinkle: the new coffeehouse is called 15th Ave. Coffee & Tea, and is an attempt by SBUX to create a distinct, bespoke, of-the-neighborhood coffeehouse.

Two and a half years ago, Howard Schultz famously distressed over the “commoditization of the Starbucks experience,” and after returning as CEO, committed to transforming it.

But 15th Ave Coffee & Tea is an experiment doomed to failure, because there’s no way a corporate coffee chain can create an authentic neighborhood coffeehouse experience. Your favorite local coffeehouse is the product of someone’s passion, dedication, and probable borderline craziness. 15th Ave is the product of corporate product design and development. Read the introductory copy on the 15th Ave website:

Fresh roasted coffee. Tea picked from the far reaches of the world with care. Artisan baked breads and treats that are sure to delight. A little flair of Italia with some heavenly gelato or affogato. 15th Avenue Coffee and Tea brings these flavors of the world direct to your local neighborhood everyday.

This is so transparently corporate marketing speak. Compare it to the website of my favorite San Francisco coffeehouse,Farley’s, which is amateurish (and I mean that by its Latin root: done for the love) and personal:

Roger Farley Hillyard broke his coffee pot back in 1988 and could not find a store to purchase a replacement part. After scouring the city, Farley’s was conceptualized as a coffee and tea store. Through various incarnations, the present day concept of creating a place of community for the community was developed….The character of Farley’s mirrors the uniqueness of the people and allows for a genuine and distinctive experience for everyone.

Faking it is not a good strategy in bed or in retail.

Perhaps my biggest beef with 15th Ave is that it’s fundamentally dishonest. Everyone knows it’s run by Starbucks, but the website and the store do all they can to suggest it’s a true independent (though the high level of interior design suggests a bankroll out of the reach of most entrepreneurs).

So why not just call it “Starbucks”? About a year and a half ago, I posted on Adaptive Path’s blog about how Starbucks could improve its experience, and many of those ideas are being attempted with 15th Ave. Do the folks in corporate feel that the Starbucks brand is so brittle that it couldn’t encompass this experience?

It’s pretty clear that there’s a high degree of consternation about the associations people have with the Starbucks Experience. I find it foolish that they’re trying to re-engage the more sophisticated end of the coffeehouse market through this new, out-of-whole-cloth creation. What Starbucks needs is a series of “experience interventions” within their existing store framework.

Instead of expending efforts creating whole new experiences, prototype and iterate improvements on the existing experience. Keep fiddling until you’ve found something that hits your sweet spot, that lucrative space above Dunkin Donuts and McDonald’s, and below the quirky and sophisticated local roaster.

When I first heard about 15th Ave, I wanted to like it. I find plenty to admire about Starbucks — when I lived in Manhattan in the mid-90s, they did more to improve the quality of that city’s erstwhile swill than any other single factor. And I think it’s great when companies pilot new concepts, particularly those that are driven by improving experiences. But the clumsy cloak-and-dagger of how this “independent” store’s status was handled leaves such a foul taste that I can only assume it will go the way of Circadia, Starbucks’ failed, late-90s attempt at a similarly funky neighborhood coffeehouse that sold booze.

Howard, stop fiddling with these distractions. Focus on improving the core.

(For those further interested in retail experience design, Adaptive Path recently published a detailed case study of work we did with Mission Bicycles, a boutique fixed-gear bicycle retailer in San Francisco.)

Beyond Coffee: ZERI Foundation

“The Pavillion” in Manizales, Colombia

The most important work of the ZERI foundation and its “Eje Cafetero” project in Colombia was the construction of the ZERI pavilion, thanks to the magnificent design of Simón Vélez and the technical support of Marcelo Villegas.

  • The first objective of this initiative was to prove that Guadua (American bamboo) is a material fit for use in construction, competitive with the most rigid standards of civil engineering.
  • The second was to discard the stereotype of poverty associated with the use of this material, in preference of branding Guadua as a symbol of the Coffee Growing Region, of innovation, sustainability and of practicality.

To strengthen the objectives of the ZERI foundation, it decided to invite Colombian architect  Simón Vélez to design the pavilion for the Hanover Expo 2000 in Germany.  The foundation was invited by the German authorities to present its vision of “humanity, nature and technology,” a modern pavilion among the likes of the pavilion of Japan.

Coffee farmers in the “Eje Cafetero” have long used Guadua to build bench terraces to prevent landslides and routine erosion.  It has also been used for similar purposes in shantytowns in that region of Colombia (hence the association with poverty).  Many have come to realize that it is quite aesthetically pleasing and also incredibly architectually reliable leading to increasing use of Guadua in construction of houses, terraces and more.

The collaboration of the United Nations Development Program, ZERI, Manizales Chamber of Commerce and German partners, the launching of Guadua onto the world stage never would have occurred.  This is also important because it has given agricultural workers in similar climates an additional resource that they can grow, use and sell.

The ZERI foundation was awarded the Sustainability Award from the SCAA in 2009 for its continued efforts to promote sustainability, environmental awareness and economic viability on a global scale. Their specific project was actually related to growing mushrooms from the  cumulative ‘waste’ of the coffee harvest – hence reducing the carbon footprint and adding value for coffee farmers much like the pilot program in Zimbabwe.