Fast Company has a story about how "over the last 15 years, craft coffee startups like Blue Bottle, Ritual, Verve, Stumptown, La Colombe, and Intelligensia have burst onto the scene with coffee that was more sophisticated - and expensive - than anything that had ever come before.
"It’s often described as ‘third wave’ coffee because it builds on the previous two waves: The first, which began in the early 20th century, was when coffee first became widely adopted thanks to companies like Maxwell House and Folgers that invented cheap, instant coffee that people could drink at home. Then, in the 1990s, second wave companies like Starbucks, Peet’s, Costa, and Caffe Nero entered the scene, creating a cafe culture that made premium, $4-a-cup coffee normal."
The story suggests that "third wave coffee startups started as niche brands, catering to coffee aficionados in coastal cities and growing steadily. But industry experts believe that third wave coffee is about to hit a tipping point. Over the next five years, the sector is expected to enter a period of explosive growth that will make high-end craft coffee more mainstream, ballooning from $35 billion in 2018 to $85 billion in 2025."
These expectations have brought with them big investment dollars: "Over the last few years, investors and holding companies have poured tons of cash into third wave brands. In 2015, European holding company JAB bought Stumptown and Intelligentsia for undisclosed figures. In 2017, Nestlé bought a majority stake in Blue Bottle for $425 million along with Chameleon Cold Brew, for an undisclosed amount. And besides these acquisitions, other coffee startups are being fueled by VCs. Philz Coffee has raised $75 million to date, and Bulletproof Coffee has raised $68 million, largely from tech investors. Wandering Bear, a cold brew brand, raised $8 million in funding last year."
"It’s often described as ‘third wave’ coffee because it builds on the previous two waves: The first, which began in the early 20th century, was when coffee first became widely adopted thanks to companies like Maxwell House and Folgers that invented cheap, instant coffee that people could drink at home. Then, in the 1990s, second wave companies like Starbucks, Peet’s, Costa, and Caffe Nero entered the scene, creating a cafe culture that made premium, $4-a-cup coffee normal."
The story suggests that "third wave coffee startups started as niche brands, catering to coffee aficionados in coastal cities and growing steadily. But industry experts believe that third wave coffee is about to hit a tipping point. Over the next five years, the sector is expected to enter a period of explosive growth that will make high-end craft coffee more mainstream, ballooning from $35 billion in 2018 to $85 billion in 2025."
These expectations have brought with them big investment dollars: "Over the last few years, investors and holding companies have poured tons of cash into third wave brands. In 2015, European holding company JAB bought Stumptown and Intelligentsia for undisclosed figures. In 2017, Nestlé bought a majority stake in Blue Bottle for $425 million along with Chameleon Cold Brew, for an undisclosed amount. And besides these acquisitions, other coffee startups are being fueled by VCs. Philz Coffee has raised $75 million to date, and Bulletproof Coffee has raised $68 million, largely from tech investors. Wandering Bear, a cold brew brand, raised $8 million in funding last year."
- KC's View:
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If this indeed is the next wave, retailers wanting to have a differentiated coffee program ought to be thinking about investing in a startup, or finding something different than the standard Starbucks or Peets program. But the moment would be now to start the process, before everybody else has done it.
