One of the hottest companies in coffee is cutting out the middleman.
Oakland, California-based Blue Bottle Coffee will soon close its wholesale business, founder James Freeman announced on the company's blog Monday. Blue Bottle will focus on operating its 20 retail cafés--18 in the U.S. and two in Tokyo--and its subscription service, Blue Bottle at Home, which ships coffee directly to consumers.
In explaining the decision to wind down its wholesale business, Freeman cited Blue Bottle's inability to control the way its coffee is prepared and served in other cafés. "I get nervous when we can't control the contexts, methods, and outcomes that are part of the experience of drinking our coffee," Freeman wrote.
Blue Bottle served its first cup of coffee at San Francisco's Ferry Plaza Market in 2002 and has since established itself as one of high-end coffee's "big four" that includes Stumptown, Intelligentsia, and Counter Culture. Unlike Starbucks, these companies have built their businesses around single-origin coffees that place meticulous attention on growing, roasting, and brewing beans, allowing them to fetch between $4 and $7 per cup. Now a Silicon Valley darling, Blue Bottle has raised $116 million in financing from high-profile investors such as Instagram founder Kevin Systrom, Twitter investor Chris Sacca, and Google Ventures.
Blue Bottle did not return a request for comment.
While some entrepreneurs may question the decision to eliminate an entire revenue stream, Counter Culture Coffee co-founder and president Brett Smith was not surprised to see Blue Bottle simplify its business model. "They know the challenges of doing both retail and wholesale, so I think the focus makes sense," he says.
Counter Culture's business model is the exact opposite of Blue Bottle's; it primarily sells coffee wholesale to cafés and restaurants, with no retail business. Smith believes consumers' willingness to pay more for specialty coffee is a trend that will only grow, leaving enough demand for all the third-wave coffee players. "I think there's a lot of room for more of this migration to better quality coffee," he says.
As the field gets more crowded and a mainstream heavyweight like Starbucks enters the fold with its single-origin Reserve lines and a new hipster small-batch roasting facility, it makes sense Blue Bottle wants to play defense and not leave its brand experience in the hands of others.
"Taking responsibility for absolutely every drink made from our coffee is a logical next step for us," Freeman wrote. "[C]rafting increasingly delicious coffee is an iterative process that only works when your buyers, production teams, roasters, baristas, and cafés are interconnected."