šŸŽ™ļø Coffee Powerhouse

[4 minutes to read] Plus: La Colombe's rise to $900 million sale

Weekend edition

šŸ˜„ The world is getting more optimistic.

Thatā€™s according to a global survey finding optimism in everything from health to the economy ā€” 50% of humans surveyed predict the economy will improve this year.

And 41% say theyā€™ll use social media less often this year, perhaps because of growing evidence that ā€œdemonstrates a negative association between social media use and mental health issues.ā€

Today, we'll discuss something quite optimistic: the story of La Colombe, a coffee business that just sold for $900 million.

All this, and more, in just 4 minutes to read.

ā€” Matthew

Quote of the Day

"Rome wasnā€™t built in a day, but they were laying bricks every hour."

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šŸ“ŗ WATCH: How Annapolis cooks feed 4,400 midshipmen in 20 minutes

šŸŽ§ LISTEN: Junk to Gold by billionaire Willis Johnson, via Clay Finck

šŸ“– READ: How OpenAI plans to deter 2024 election misinformation

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La Colombeā€™s Rise to $900 Million Coffee Power

A dive bar encounter

Two part-time baristas in Seattle meet at a dive bar, become best friends, move to Philadelphia, and open a one-off coffee shop in a run-down area of the city. 

That doesnā€™t sound like a path to a $900 million coffee brand, right? But thatā€™s how La Colombe, which Chobani bought for $900 million last month, got its start, just as the third wave of coffee was taking shape in America (led by Starbucksā€™ rise in the 1990s).

The founders of La Colombe, Todd Carmichael and J.P. Iberti, met in 1987 at a Seattle grunge bar. Today, their Philadelphia-based coffee shop chain and maker of canned lattes has cafes in its home base, Philadelphia, as well as in Chicago, Washington, Los Angeles, Boston, Austin, and New York. It has thousands of wholesale customers, including many restaurants. You can buy canned lattes or cold brews in stores like Walmart and Costco, and the company sells canned drinks and beans directly to customers online via its thriving e-commerce business. 

ā€œCoffee shouldnā€™t just be salt and pepper on the table,ā€ Carmichael said of the initial vision. ā€œWeā€™d bring coffee to a whole new level.ā€

Hauling bags of beans

Before La Colombe ā€” French for ā€œthe dove,ā€ symbolizing peace in cultures and languages ā€” Carmichael was a coffee roaster and an alum of Starbucks, and Iberti was working part-time for Torrefazione Italia, an Italian coffee company.

La Colombeā€™s initial business plan was rooted in a deep belief in a restaurant renaissance that would take shape in America, driven by an influx of Italian and French cuisine. La Colombe would sell coffee via cafes and those new European restaurants. And it would source the best quality coffee it could directly from farmers. 

ā€œWe sampled hundreds of types of coffee,ā€ Carmichael said. ā€œOur business model was trying to appeal to chefs ā€” selling to restaurants. Weā€™d say, ā€˜Chef: Coffee is a spice,ā€™ and we sold them,ā€ despite much higher prices than competitors. 

Carmichael and Iberti traveled to Italy and France to taste some of the worldā€™s best coffee, which informed their own flavors. They bought roasting equipment, grinders, and accessories in the south of France and Northern Italy. They brought all of their expertise to Philadelphia, an interesting choice to open a shop ā€” location, of course, can make or break a business. But they chose Philly because it didnā€™t yet have any coffee competition, unlike Seattle and New York. 

ā€œWe loved the cityā€™s architecture, layout, and walkability,ā€ Iberti said. ā€œThere were very few cafes, and we saw a city with great bones. Also, the proximity to New York City.ā€

The business partners went door to door, talking to chefs at Phillyā€™s best restaurants. They roasted in the middle of the night at their cafe. Later, they traveled to El Salvador and Haiti to visit coffee farmers.

Now, La Colombe has several Philadelphia cafes and, nationally, it has grown to 32 cafes in six states and DC, plus launched a canned beverage line and other retail products ā€” the latter being the real reason itā€™s worth nearly $1 billion.

A pivot to cans and scale

By 2007, La Colombe decided to expand with cafes in New York. Chicago and Los Angeles followed. But the cafes arenā€™t what jolted the brand.

Although a private equity firm wanted La Colombe to expand its cafe footprint, Carmichael and Iberti disagreed. Instead, they were fascinated with cold brew and the idea of putting coffee in a bottle and then selling it nationwide in stores. Thatā€™s how they scaled quickly.

Itā€™s the crown jewel of La Colombeā€™s growth in the 2010s: the bottled cold brew and its Draft Latte, a ready-to-drink (RTD) product that vaulted the company from a chain of cafes to the fastest-growing ready-to-drink company in the U.S. La Colombeā€™s vertical integration ā€” running every step of the journey from sourcing the beans to roasting and packing ā€” also keyed its growth.

Thereā€™s a science to how it keeps its canned lattes so tasty and foamy, which Carmichael notes is a result of several design decisions, including a special valve with a ā€œchimney-likeā€ design that doesnā€™t expose the latte to air. Rather, the valve expands the latte to allow a pin to inject the nitrous oxide without compromising the quality of the coffee.

The cans have been a big hit. You might find them at gas stations, grocery stores, and cafes nationwide. Founders estimate they can get their cans in two of every three grocery stores. 

What does all this mean? The La Colombe story illustrates the role of chance in business, markets, and life: Iberti says half of their success is rooted in luck ā€” a decision here, a lucky break there, and so on. Plus, La Colombe benefited from macro tailwinds propelling the coffee industry forward.

ā€œHad I not gone to (the dive bar) that night, thereā€™d be no La Colombe,ā€ Carmichael said. 

Dive deeper

For more, check out La Colombeā€™s website or watch how their famous draft latte is made.

See you next time!

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