The Summit

Date Posted:27 October 2018 

After more than a decade of writing anything and everything about coffee, each month becomes just that little bit harder to create content that is informative, interesting and relevant to lovers of coffee. A reason we often branch into retail or other topics related to our daily lives.

What I've also come to realise, coincidentally, is the rest of our coffee industry whether it's here in Australia or around the world has also reached some type of peak or summit.

Has coffee arrived at a stage of maturity and stability.

I see a space where not much new or innovative happens and the only newsworthy items making the industry press are mundane and rather boring barista and latte art competitions or the opening of yet another shiny new cafe (see our Cafe Culture underbelly story). It's all a bit #lookatme.

There is however one fundamental shift or trend that is taking shape in the coffee industry, particularly Australia's crowded and competitive environment.

Traditional wholesale coffee providers - sellers to cafes - are themselves building elaborate cafes within their own operations to show case their wares. It's not a new concept by any stretch of the imagination with coffee brands doing this ages ago and the craft beer industry has been using this model almost since it's inception.

More and more warehouses are gaining special approvals to trade as hospitality outlets against the what has been inflexible planning laws, particularly in Victoria. There remains so much confusion in Town Planning that nobody is ever really sure how permits are granted. We tried a few years ago but gave up from a lack of clear guidelines from the regulating body.

Starbucks and many other leading brands have always been about establishing halos for connecting to their customers. Some say it's an essential and even fundamental step towards creating long term brand loyalty.

In Melbourne, the small handful of roastery cafes has now ballooned into dozens and dozens, with even more in the planning and build phase. These days it's the more established, older brands with large industrial facilities adding full service food and beverage facilities complete with viewing out into the space where coffee is stored, roasted and packed.

We wondered why so many brands have headed down this path. Sure, there are some real financial benefits of not having to pay rent on a separate shop, but it's also changed their business from wholesale by adding the complexity of retail. Vertical integration allows these brands to put serious $$ behind high-end coffees to serve in their facility and impress the consumers but it also sets an expectation those same coffees are what is being made available in their wholesale channels.

Often there are rumours more than a few brands deliberately run higher grades of coffees in their own outlets and then flog an entirely different (lower) grade to their wholesale customers but with the same labels - affectionately known as the "bait and switch" routine.

It also raises an important point about boundaries. If you compete in the same segment as your customers, how is that helpful to your wholesale accounts when the consumer will inevitably realize that the authentic experience is only available in the brand's own outlet.

We think this move is a direct reaction to the difficulties of trading in the Australian coffee wholesale segment. Too many competitors and suppliers means cafes are spoilt for choice and brand loyalty has completely evaporated. It's become almost impossible for coffee sales people to break into cafe accounts without offering eye-watering incentives to the cafe owner to change suppliers, so the economics of supply are borderline or unsustainable in the short term.

The showcase model does indeed provide a key benefit for brands by creating the critical pull force. It turns the traditional push model of coffee sales and marketing upside down.

Instead of reps hitting up owners, smooching and hustling with incentives, the buyers of wholesale coffees are instead attracted to the curiosity of a showcase as it provides a simple, non-pressured environment they can sample at their own pace to evaluate their own chances of future success with a prospective wholesale partner.