Kobos Coffee (Part 2) - How Kobos came to PDX

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[Part 1 of this history can be found here]

Originally from Massachusetts, David Kobos spent many of his years growing up in New York. The pursuit of higher education eventually led him out West, and he spent four years getting a master’s degree from Reed College. After graduating, he taught in Milwaukie for a couple years. During this time, Kobos used to stop in and get coffee from Boyd’s Little Red Wagon.

“That's how I got started drinking real coffee," he said.

After his time in Milwaukie, Kobos moved back to New York, where he got a job as a teacher at a school in the Lower East Side (of Manhattan). In his free time, he began exploring restaurants in Chinatown and Little Italy, which were both nearby the school. He became fascinated with the city’s food and coffee culture and began visiting the shops of the Lower West Side too, where the Shapiro Brothers and the McNulty family were famous for roasting coffee.

At some point during his culinary explorations, Kobos met his future wife and got married. The couple went on a honeymoon to the Pacific Northwest and then returned to the Big Apple. Together, they really got into exploring restaurants. His wife was a good cook, he said, so they began to shop at higher-quality markets, trying to duplicate at home what they had been tasting in restaurants. The couple also drank plenty of coffee and visited all of New York’s famous cafés.

Kobos recalled some of the smells in the neighborhoods where the stores roasted their own coffee:

"There was this one little Italian roaster, down in Little Italy, who used to take one kind of coffee and just burn the hell out of it. You could smell it if you went anywhere near that place,” he said, laughing.

Eventually, the Kobos and his wife decided they needed a change of scenery. Remembering the beauty of the Pacific Northwest, they decided to move across the country to Portland, where they would indulge their love of food and coffee by starting a cookware and coffee retail store (and a family). It was a lot of change in a short amount of time, and their friends were skeptical.

“’You’re doing what?’—that’s what they asked us. They thought we were crazy,” Kobos said, recalling the reactions of his friends and family. “You’ve got a job already. Why would you want to do that?”

Undeterred, the couple moved forward with their plans. However, plans soon changed. The original plan was to ask Boyd’s Coffee to roast coffee beans for Kobos to sell in the store, but when David asked them, they turned him down. It was a pivotal moment for the Kobos story.

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Selling Frappuccinos in the UK

Below, I have embedded an ad from a campaign that Unruly Media is running in the UK for Starbucks. I would like to hear your opinion. Beneath the video, I have given mine.

One of the challenges for any company is to decide if it wants to go for fast growth and large profits, sacrificing a few of its values along the way, or if it wants to remain true to its roots, even if it has to sacrifice some economic gains. For most businesses, profits come first. This is especially true for public companies, where there is tremendous pressure put on management by the shareholders to go for growth and profits. I think you can guess which path Starbucks chose.

Starbucks began as a place that wanted to be true to the coffee and the café experience. Now it boldly sells milkshakes, with whipped cream and caramel sauce.

To be honest, I like the graphics, the bright colors and the crisp audio of the spot. It has a sharp feel to it. The business school-trained part of me thinks it’s a fine ad, and I know that Frappuccinos have some of the best profit margins at Starbucks, so I understand the reasons for the campaign. At the end, however, watching this ad reminds me why Starbucks took the “Coffee” out of its new logo. How about you?

[Disclosure: Unruly Media, an advertising company, asked me to write an editorial about the ad. Feel free to pass it on to anyone you know in the UK]

Sustainable Harvest - Changing the way coffee business gets done

Whenever you buy something, it is easy to forget that your transaction goes beyond the store where you purchased it. Whether you think about it or not, what you choose to buy affects other peoples’ lives, and these purchase decisions have economic, social and environmental consequences.

The coffee we buy, for example, is at the end of a long and complicated supply chain that begins in some very remote places. There are over 25 million coffee growers in the world, many of whom have very small plots of coffee trees. Trying to make a living off a small coffee farm is very difficult, especially if the companies purchasing the coffee are solely motivated by profits.

To learn more about how the system works, I visited Sustainable Harvest, a green coffee importer based in Portland. Dane Loraas, a Quality Control Manager for the company and Katie Gilmer, a Relationship Coffee Manager, were my hosts when I visited the company at its Pearl District headquarters. They spent an hour with me explaining the company’s business model and answering my questions.

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Tired of paper transit tickets? (updated)

Today, I want to step away from coffee for just a moment. One of my favorite things to talk about is entrepreneurship, and I have something I would like to share with you.

When I’m out traveling around the city, I prefer to walk or take public transportation. Walking around, you really get the feel of a place, and on the bus or the train, you don’t have to stress about traffic.

Since I take the bus and the train pretty regularly, I can say with confidence that it would be nice to be able to pay for tickets using an app on my phone, especially when riding the bus. Even better, the phone would serve as a ticket itself.

Tri-Met (Portland’s public transit agency) doesn’t have a system like that yet. However, a couple of my classmates from Portland State’s MIM program are trying change that. Nat Parker and Michael Gray have started a company called GlobeSherpa to develop mobile phone apps, and their most promising app at this time is called TransitSherpa, an app that acts as an electronic ticket management system for Tri-Met. I’ll let Nat explain:

Their company is currently in negotiations with Tri-Met to make the system a reality, but they need some funding to speed things up. Tomorrow evening, at 5:30pm, Nat and Michael will be at the Backspace café/pub competing in the second-to-last round of the Oregon Entrepreneurs Network’s Seed Oregon competition, a competition that helps start-up companies with funding and guidance. The winner is determined by popular vote of the audience, so the more supporters TransitSherpa has, the better chance it has to win. The winning company gets to present at the Angel Oregon conference in March, where it could acquire the funding it is looking for.

If you think that a Tri-Met ticket app is something that you would rather have sooner than later, come by Backspace tomorrow evening at 5:30 and support TransitSherpa. It costs $25, which I know is kind of steep, but it’s supposed to include some kind of food and drink spread. In addition, Nat has promised me that he’s going to be especially entertaining during his presentation.

You might wonder if I get anything out of this advertisement for them. Nope. I’m just spreading the word for them and trying to speed up the process of creating a Tri-Met ticket app. It’s 2011, and the time for e-tickets is here. Let’s help TransitSherpa make it happen.

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Update: GlobeSherpa won by two votes! Congratulations and good luck at the next round.

Coffee v. Location: Location Wins (Unfortunately)

Coffee is a very competitive industry—especially in Portland. Having a coffee shop on every other corner is one of the things that makes living in this city enjoyable. You don’t have to walk very far if you’re looking for a place to get some caffeine.

Not all cafés are created equal, though, and today I would like to talk a little about what makes a café successful. There is a difference what makes a good café and what makes a café successful. What is the number one factor for coffee shop success? I wish the number one factor were high-quality coffee. Unfortunately, in my exploration of the city’s coffee I have found that location trumps quality—even in Portland.

Fast food businesses have used this to their advantage for years. I remember my economics professor at WSU leading a discussion about what makes a the fast-food industry successful. He used McDonald’s as his example.

“What business is McDonald’s in?” he asked the class.

Several hands went up. An easy question, everyone thought.

“Hamburgers,” one unsuspecting student ventured, figuring that for the first time, he knew the answer to one of the professor’s questions.

“Wrong.” The professor smiled at our naiveté. “McDonald’s is not in the hamburger business. It’s in the real estate business.”

Real estate? But don’t they sell hamburgers?

“Think about it. Which one of you would go to McDonald’s if you wanted a great hamburger?”

No one raised their hand.

“I didn’t think so.”

He had a point.

“In every city, who has a store by the most popular attractions, where the most expensive real estate is? Yep, McDonald’s. There’s a McDonald’s in Times Square. There’s one at the Pantheon in Rome. You can find a McDonald’s by the Louvre and on the Champs Élysées in Paris. In fact, you probably can’t go to any famous place without finding one nearby.”

He was selling us on the idea that even if you serve mediocre hamburgers, you can still make a killing if you have a great location. Starbucks, who has been very successful, knew this and implemented it in its growth strategy (note: I’m not implying that Starbucks has bad coffee—or mediocre hamburgers).

To give you another example, today I’m writing this article in a café that will succeed because of its location. The café is at the heart of a neighborhood, it has lots people walking by all day and it  has a large parking lot right behind it. As it has been almost every time I have come in, the café is full of people. It is going to be successful, but not because of its coffee. In fact, I don’t really like the coffee.

Why, then, do I come here? I admit (somewhat shamefully) that it’s because the café is convenient. The location is an easy walk from my house and the baristas are friendly. So even for me, someone who really likes and appreciates good coffee, the convenience of a great location sometimes trumps sub-standard coffee quality.

It would be great if the success of a café only depended on its coffee. Then we could always get great coffee no matter what the location. If all PDX coffee drinkers banded together and demanded an end to bad coffee, we could force every café in the city to serve great coffee. Maybe in the future we will.

Then again, maybe that’s just a utopian dream that could only be realized in Portlandia.

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Be Nice to Your Guitar (and Your Customers)

This morning I listened to a live webinar put on by John Bernard of Mass Ingenuity. He spoke about how the combination of social media, cloud computing and the millennial mindset (not wanting to wait for anything) are combining to change the ways companies interact with their customers in ways so profound that it is difficult to comprehend the changes how the new marketplace works. He said that we have moved from the era of mass production into the era of mass customization, where products and services are more tailored to customers’ needs. He especially mentioned how meeting customer needs through good service is more important than ever.

Bernard cited United Airlines’ baggage handling service miscues in the case of musician Dave Carroll as an example of how companies should not respond. In case you haven’t heard, Dave’s $3,500 Taylor guitar was destroyed during one of his trips on United Airlines and he went through months of troubles with the company to try to get them to rectify the situation. Things finally turned his way after he wrote a song (complete with music video) about his troubles that became a huge hit on YouTube. There are actually three videos in the whole series. Here’s the first one:

It’s true that some people write bad things about a company just to advance their own agendas. In the past, the companies might be able to ignore them and the problems would go away. However, with the speed that information gets passed around these days, it is imperative that businesses monitor what is being said about them in social as well as traditional media (that reminds me, I need to Google ‘Caffeinated PDX’ to see if there’s anything being said about it. Hold on a minute, I’ll be right back. . . . . Okay, we’re good for now). While it is impossible to know everything that is being said about your company, you must take care to monitor the problems and put out any fires before they get going too strong.

Although I question Bernard’s claim that this one incident with United led to an $180 million reduction in market capitalization for the company, his point was a good one. Customers have more power to expose companies’ misdeeds than in the past, so companies must be more alert and responsive than ever. Of course, those of you with your own businesses already knew that, right?

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Coffee is NOT on the Way Out

Janet Morrissey wrote an article for Time this week that implied that young people are not going to drink coffee in the future because they drink Red Bull or other energy drinks instead. I disagree, and judging from the comments, so do many others. According to the article, the heavy marketing that energy drink companies have done to give energy drinks a ‘party drink’ image is a sign that coffee’s future is not bright.

There is no question that the energy drink companies have been pushing hard to reach college campuses. At PSU, there is a vehicle parked somewhere on campus at least once a week where young, good-looking people hand out free energy drinks to students. And I admit to being surprised when I read about the twenty-something PR consultant who said he didn’t drink coffee because it tastes bad (He drinks Red Bull, and he complains about the taste of coffee?).

 However, if you spend much time in coffee shops, you see young people everywhere. When I worked at Starbucks in Boston, we had a large group of regulars that came over every day from a nearby high school (sometimes twice!). The cafés around PSU are jammed every day with the 18-24 year-olds that are mentioned in the article. I stopped in at the PSU library the other day and was surprised to see a new coffee bar in the lobby. This evidence leads me to believe that coffee is not doing too badly in the under-30 crowd.

If you want to make the case that this age group won’t be drinking more Folgers in the future, that’s different. After all, this is the generation that came of age during the golden era of Starbucks. Of course they’re not going to accept the taste of pre-ground or freeze-dried coffee that has been stored in a can for six months! However, predictions that young people will not be drinking coffee in the future are like predictions that bell-bottoms would never be seen again after the 1970s. They make for a good story at the time, but years later, people look back at and laugh about them. In twenty years, we will be able to look back and this one and laugh too.

[note: Portlanders will be proud to hear that Stumptown was mentioned in the article as a place where younger people do have a good coffee experience (at the Stumptown Ace Hotel in New York City)].