Unless you’re wearing a tinfoil hat and staying off the grid (except for this blog), you probably know that Peet’s Coffee & Tea — through JAB Holding — bought out both Intelligentsia and Stumptown last month. Predictably, there was much hipster angst on social media (as if that isn’t the whole point of social media), and at first I didn’t see the need to cover the story again.
After all, it is essentially an updated rehash of a post I wrote four years ago. This time around there was an enormous amount of mainstream media coverage as well. But prodded some here, there’s probably another chapter on this topic.
Some of the mainstream media have come to the defense of the acquired, noting the dual standards of how an Instagram sells for billions of dollars to Facebook and its founders are congratulated while Intelligentsia and Stumptown are showered with “sellout” scorn on social media.
However, most Silicon Valley startups scale by merely replicating data and code. With many leveraging Metcalfe’s Law, these businesses naturally improve the customer experience with scale. Contrast this with the business of coffee, which scales through the much higher friction of skilled labor and quality coffee sourcing.
These two factors are subject to a sort of inverse Metcalfe’s Law: the bigger the scale, or the more customers they serve, the poorer the quality of what they serve. Starbucks didn’t dumb down their baristas and throw out their La Marzocco machines for brain-dead, push-button Verismos because it would improve their coffee quality. They did it out of the necessity to scale to thousands of outlets in the face of a dearth of skilled baristas to hire en masse (and less expensive ones at that).
Thus do not be fooled by any of the founder rhetoric about how joining Peet’s provides access to better supply chains and whatnot. I cannot think of a single coffee purveyor that has improved with scale — at least from the consumer’s perspective of a quality end product. Investors and shareholders are a different story, however. It’s also worth remembering that Starbucks’ scaling genius was in getting millions of people who don’t like coffee to believe that they did — through flavored milkshakes and the like.
But I don’t begrudge the founders of Stumptown and Intelligentsia for taking a great risk in the marketplace when much fewer cared as much about coffee quality, for making a great product, for working hard at it, and for growing their businesses. They deserve to be rewarded for their efforts and for helping to popularize better coffee. I thank them heartily, but make no mistake: effectively this is their stop. This is where they get off.
You could argue Stumptown got off earlier than Intelligentsia. While Intelligentsia was still producing barista champions, Stumptown was already downgrading itself as a bottled coffee purveyor as its founder preoccupied himself with becoming a restauranteur. Stumptown counter-intuitively went beyond producing wholesome basics to embarking on the packaged foods path of processed, shelf-stable consumables — just as much of the food world was headed in the opposite direction. In other words: more pumpkin spice latte in a can, less Cup of Excellence.
Why the words “new” and “innovation” should never be associated with good coffee
In fact, the world of coffee today seems obsessed with the brewing-gadget-of-the-week and “new and exciting” coffee beverage concepts as a complete distraction from the basic quality of the fundamentals. These fads and come-ons hint at the side-show desperation of coffee in the 1980s when the emphasis was on faddish gimmicks such as flavored coffees (French vanilla, mocha creme, hazelnut whatever, anyone?).
Every time I see the words “new” or “innovation” associated with coffee, I know they have completely lost the plot. Those are the marketing buzzwords of factory production and packaging. Coffee is an agricultural product, and there’s a reason why we don’t seek out “new” and “innovation” when buying other agricultural products such as asparagus or pork.
“New” beverage concept introductions such as cold brew and nitro coffee (another thing to thank Stumptown for) are just a page lifted from the Jack-In-The-Box food fad marketing playbook for the Spicy Sriracha Burger. May as well package nitro coffee in a cardboard box along with an action figure from the next Star Wars movie and call it a Happy Pack. Offer good while supplies last.
I do hope both Intelligentsia and Stumptown have a ways to go still under their new ownership. But then I look no further than Starbucks and how its buyout strategy of competitors with better product played out. Whether Torrefazione Italia, Teavana, or the Clover Equipment Company, Starbucks seems to have taken a deliberate scorched earth approach that ultimately eliminates consumer access to better end product.
Thus I recommend fans get their Intelligentsia and Stumptown fixes while they still can, because there really is only one direction for them to go from here.
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