Market Reports

Allegra’s CEO Forum brings specialty and mainstream together

With the third wave of specialty coffee having well and truly taken hold in popular culture, the time is nigh when the big chain stores that dominate the high streets on both sides of the Atlantic have more in common with artisan cafés than they have differences. As with so many trends in the coffee industry, this new phase in the dynamics of global coffee culture has been heralded by none other than Starbucks. When it launched its flagship store, The Roastery, in Seattle in 2014, Starbucks made it clear to the world at large that specialty coffee had well and truly crossed over into the mainstream, and it is there to stay. For those coffee purists who see the world as a binary equation of specialty versus mainstream, this may have come as something of a shock, but to the industry at large Starbucks’ embrace of all things specialty was a simple expression of the symbiotic role that artisan and mainstream roasters play in pushing forward the development of coffee culture around the world. Managing Director of the Allegra Group Jeffrey Young, who is an experienced analyst of coffee trends in both the United Kingdom and the United States, says that Starbucks has long played a role as a conduit between the cutting edge of the coffee industry and the mainstream consumer. “A lot of the really serious, successful artisan roasters will acknowledge that they owe a lot to the mighty Starbucks for getting the ball rolling,” Young tells Global Coffee Report. As something of an artisan coffee shop on steroids, Starbucks’sThe Roastery is a place where, in the words of the company itself, the emphasis is on “coffee as theatre”. “Our Seattle Roastery experience created something that had never been done before, transforming a retail environment into something far beyond just a coffee shop and into the single best retail experience of any kind,” Howard Schultz, Chairman and Chief Executive Officer of Starbucks, said in a statement. Such has been the success of The Roastery in Seattle, Starbucks now has plans to open a concept store in the Meatpacking District of New York City in what will be the company’s largest outlet. “In New York, we want to take elements from what we originally created and build something even bigger and bolder, celebrating coffee and craft in a completely unique and differentiated way,” Schultz said at the time of the announcement. “We want this experience to tell our customers that we’re coming to Broadway.” Even more recently, Starbucks once again demonstrated its commitment to this strategy with plans to launch a Roastery in Shanghai, China in 2018. Taking its commitment to the world of specialty coffee beyond its Roastery stores, Starbucks has also launched a string of Reserve stores, which are focused on serving rare and high-end coffee varieties. The company has plans to open 500 of these stores around the world within a relatively short period. But it is not just Starbucks that is embracing this trend. “The UK has definitely responded, finally,” Young says. Just this year, UK high street chain Caffè Nero added the flat white to its menu. An Australian innovation, the flat white has become somewhat emblematic of the embrace of serious coffee culture in the UK. “There was a lot of resistance from the Nero management to it because I think the team took the view that the flat white wasn’t Italian, therefore it shouldn’t be on the menu, but ultimately the trend towards the flat white in Britain has been so strong that it has kind of carried everyone through,” he tells GCR. Young says that adding the flat white to the menu is about more than just making a new type of beverage – it signals a deepening of a company’s commitment to quality coffee across the board. “[Including the flat white] is about elevating coffee making standards across the business, because if you’ve got to micro-foam the milk, you’ve got to teach your staff across the company to micro-foam the milk,” he says. Young says that it is not just with the flat white that the Australian industry has led the way for other countries to follow. He cites the case of McDonald’s, which has had great success Down Under with the launch of its McCafé format, as a great example of high quality coffee crossing into the mainstream. “The big chains create an entry point for a lot of people into serious coffee appreciation,” he says. “Even McDonald’s in Australia now has a focus on quality coffee, so once their customers get used to that decent cup of coffee, they then want something different, and it’s the chains that have introduced them to the lifestyle of coffee appreciation.” Back in the US, the crossover between the mainstream and specialty worlds is perhaps best illustrated by the acquisition strategy of JAB Holdings, which has snapped up specialty coffee poster children Stumptown and Intellegentsia (through its existing holding in Peet’s Coffee and Tea), as well as main street giant, Krispy Kreme. “JAB Holdings really sees the opportunity in both chain stores and the artisan market,” Young says. The relationship between the mainstream and specialty is not all one-way traffic, however, as UK high street player Pret-A-Manger learned when it launched in the US. “Allegra’s early analysis found that Pret’s initial entry to the US was done without a full cultural understanding of New Yorkers,” he says. “They soon learned that the could not just do exactly what they did in UK.” One key area that Pret had to adjust to, for example, was the fact that the average American consumer still drinks a lot more filtered coffee than espresso. “So to not have the self-serve drip coffee available in favour of these gleaming espresso machines wasn’t in tune with the busy New York people who are just used to grabbing a coffee,” he says. The company was able to detect the red flags this raised and rectify it, and has now established a very successful presence in the Big Apple. “They were able to keep the core of Pret, but they had to tweak around the edges,” Young says. Lessons such as this one, and what the two worlds of mainstream and artisan coffee roasters are able to offer each other, will be among the main topics of discussion for attendees at the upcoming Allegra World Coffee Portal CEO Forum, which is being held at the Intercontinenetal Times Square in New York City on 15 September, 2016. “The forum is bringing together leaders of the biggest chains with the best artisan roasters in the world,” Young says. “We’re all in that room to share our knowledge and to be very open about what is shaping the industry and look at the sustainability in our industry, both in term of access to coffee and environmental issues as well as ensuring we are always making the best coffee we can.” GCR

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