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Can the coffee craze continue?

First, breathe in the aroma. Let the fumes penetrate deep into your inner being, and experience the quality of the fine vintage prepared by the local producer.

Next, take a small sip. Slosh the potion around your palate, and absorb the fine flavors locked in by the master roaster.

Then, swallow and sense the after-effect. Questions about origin and vintage come to mind. Opinions -- "It has a specific flavor nuance indicating a pleasant plethora of assorted bean blends," or "There's a strong, sour taste denoting an inferior processing" -- are declared.

It's espresso education -- the new, hip way to do coffee and one of Alaska's hottest entrepreneurial industries.

The specialty coffee industry has evolved from hobby status to big business in Alaska, allowing roasters and retailers alike to elevate espresso to a prosperous economic enterprise. From Ketchikan to Fairbanks, coffee companies now brew high quality caffeine while furnishing a central location for relaxed conversation. Nationally, the Specialty Coffee Association of America (SCAA) reports U.S. retail sales per year will skyrocket from over $1.5 billion in 1989 to an estimated $3 billion in sales by century's end.

"Back in 1975 when I started roasting coffee, it was a 50-50 chance whether anyone had ever heard of a latte, let alone order one in a coffee shop," says Anchorage's Cafe Del Mundo owner and roast master Perry Merkel. "Now you can get espresso in shops all over the state."

Retail's Robust Resolve

Charlene Crozier, general manager of Anchorage-based Cafe Fonte, says that since opening its doors in May 1992, the firm's retail sales have increased between 10 percent and 20 percent each quarter.

"In Alaska, we (Cafe Fonte) have three stores and employ 25 people, not including the roasting plant," Crozier says. "It's fun to be in this. I have the best job in Anchorage, I know I do. Making Cafe Fonte more than just a daily stopover in the daily routine is what I enjoy doing."

Adds Sitka mobile espresso cart owner Rita Danner, "Even if you don't have a place to sit down, atmosphere can be created through a friendly attitude and a desire to please every customer. It keeps them coming back."

After watching the coffee craze hit Anchorage, Danner decided to take the idea to Sitka. "I figured if I could establish a steady clientele among the fisherman, locals and tourists, I could make a mobile cart successful," she says. "Right now, at the height of summer, I'm putting out 150 cups a day."

Heritage Coffee Co. in Juneau has been grinding its way into capital city culture since 1974 when owner Grady Saunders opened his first retail shop, Quaff's Coffee and Tea. In 1977, Saunders renamed his company Heritage Northwest Inc., and began doing business as Heritage Coffee Co. He started roasting his Arabica coffees from around the world in 1983, 90 percent for the retail outlet.

Saunders, national president of the SCAA, says southeast Alaska has taken to espresso with a passion. In the last 18 months, 20 machines have gone into operation.

"As any good mechanic knows," Sauders says, "one uses all the tools at his disposal to accomplish the best job possible. The espresso machine can be thought of as the distiller for coffee. Used incorrectly, it can bring out everything that is bad about coffee; used properly, with the right blend, it can produce an exquisite elixir."

Kaladi Brothers Coffee owner and industry aficionado Mark Overly reveals that 50 percent of the U.S. population drinks two cups of coffee a day. Fifty percent of those consumers have switched to specialty coffee drinks. He claims that in Anchorage, about 95,000 cups could be dispensed from commercial machines every day.

Overly says his company, purchased in 1988, began by producing no more than 1,000 pounds every month. Back then, Kaladi Brothers featured only four types of beans and one decaffinated roast, and used a two-group (espresso station) manual machine.

In 1991, he expanded his out-of-the-way retail location on the Seward Highway frontage road and upgraded production machinery. Kaladi Brothers now produces 20,000 pounds of coffee a month. The company opened a second location on the Old Seward Highway in late 1992.

"The secret to retail success for the local coffee industry," says Overly, "is maintaining a support network for Anchorage's smaller guys. In any market there has to be a support role. You've got to help the people you supply keep up their quality and keep their machines running."

All Alaska coffee companies agree that customer confidence is paramount when operating a beverage dispensing business. "It's what makes for steady customers," says Bear Paw Coffee Co. proprietor Dave Pizzuto.

"Thirty-two years in merchandising taught me you don't have to be the best tailor out there, but you do have to be able to find the best tailor to work with." Pizzuto means that plenty of decision-making goes into opening a business, and coffee is no exception. He observed other companies' operations in Anchorage, Seattle and San Francisco before opening Bear Paw in Anchorage in December 1992.

Watching experienced coffee traders and then working with a list of positive attributes represented by each company, Pizzuto got busy creating his idea of a coffee house by combining the strengths of others with his own innovations such as fresh pastry service and gourmet candy sales.

Coffee on the Road

Mobile espresso carts, a recent spin-off of street-corner fast food vendors, fill the void in coffee coverage left by a lack of prime commercial space. Light-weight mobile units equipped with sinks and refrigerators do business on crowded street corners, at catered events and in the lobbies of several department stores, requiring only an electrical outlet. These units sell for about $10,000 or more for fully-operational carts powered by a generator and water pump.

Alaska's two major players, Cafe Del Mundo and Kaladi Brothers, sell espresso machines, also ranging from hand-pumped versions to fully-automatic models. To supply their outlets, the companies provide the training necessary to sell a quality product in any environment.

But Rita Danner went her own route, working with friends and relatives to get her business off the ground. She says her cousin, who makes cabinets for a living, built her cart and helped haul it down the Alaska Highway.

"I'm not busy all day long, but early in the morning, before some of the crews go out for the day, I sell just about non-stop from 5:30 a.m. Then I get busy again at lunch time when I cruise some of the local businesses. It's really a good day if there is a ship or two in town" says Danner.

In the summer of 1992, espresso carts began to fill the streets and doorways of Anchorage. A year later, 22 carts covered the Anchorage bowl.

Seward, a town of about 2,000, supports six independent coffee carts operating from dawn until dusk. Juneau has seven coffee vendors. Several other carts dot the ports of Southeast and Bristol Bay. Fairbanks, Alaska's second largest city, is expanding at its own pace, with three carts scattered throughout the borough and a host of in-house coffee machines sprouting up in restaurants around town. Even out-of-the-way corners of Alaska, like McCarthy, sport their own expresso counters.

Wholesale Happenings

Surpassing retail sales as the life-blood of coffee roasters are wholesale accounts. Supplying beans for this fast-paced industry fulfills a niche for local roasters. Grocery stores, restaurants and espresso carts felt the need to serve the same quality coffee available in retail coffee houses.

"Espresso has gone into places where several years ago no one would have dreamed of," says Cafe Del Mundo's Perry Merkel. "People come to us and say that they have to have our coffee because they know customers appreciate the service of a high quality product."

Cafe Del Mundo's major wholesale account, Carrs Quality Centers, Alaska's largest supermarket chain, receives nearly 70 percent of Merkel's 10,000-pound-per-week output. Merkel also provides espresso machines and training for his 10 Carrs accounts and other accounts around town.

The most recent addition to the wholesale industry, Cafe Fonte, roasts its beans in Seattle but ensures freshness by flying in daily shipments of the finished product.

Orders for Cafe Fonte coffee forced owner Paul Odom to purchase a second drum-style roaster to supply his three stores in Anchorage, a new shop in Chicago, restaurants in the Anchorage Hilton Hotel and several clients scattered across the country.

"Word-of-mouth is our best friend," says Crozier.

By 1992, 60 percent of Heritage Coffee's sales were wholesale. But, says Saunders, one aspect of the business that sets his company apart is that every pound of coffee leaving his roasting facility is roast-dated.

"This goes for all deliveries to grocery stores, restaurants and our retail stores," says Saunders. "We do not warehouse roasted coffee. This ensures our customers the freshest possible product. Our Juneau customers are inventoried five times a week, and any outdated coffees are removed and then donated to charities."

Mark Overly, the U.S. Small Business Association's 1993 Small Business Person of the Year for Alaska, says Kaladi Brothers captured 75 percent of the espresso marketplace in southcentral Alaska and is the second-highest volume machine dealer in the United States.

Subtle Shake-out

"Hot" industries like coffee catch fast, but sometimes the path to profit is a short one for some less established enterprises. Without roasting capability or choice location, small vendors risk the chance of being lost in the flood of espresso bars strategically situated in high exposure areas.

"There will always be people to continue business," says Merkel. "If one operator folds, another one will be there to take his place. Some businesses will fail and some will succeed. A shake-out will happen and the more stable businesses will adapt to fit the changing needs of the public."

In 1992, 13 coffee companies changed ownership, and four closed completely. Finding alternative methods to draw a customer's attention toward coffee is one way of ensuring uninterrupted prosperity.

Founders of the Java Joint on Spenard Road in Anchorage knew from inception that to survive fast-paced industry evolution, they had to offer something different. Managers Lenny Horton and Alec Lewis cater to the most diverse customers in town, labeling the Java Joint as alternative, trendy and ostentatious.

Lewis thinks the Java Joint has a responsibility to go further than selling coffee. "We are an alternative to the bar scene. Not only do we give people under 21 a place to hang out, but we want people to consider coming to drink coffee instead of alcohol."

Rock bands, folk singers, Irish folk dancing and alternative music are scheduled weekly. The second floor smoking section ends complaints from non-smokers. And the Java Joint is open almost all night, the only place to go after a night on the town.

A "cafe society" is Kaladi Brothers' master plan. Turning consumers from bar flies to java junkies by billing neighborhood espresso bars as "community centers" is the future of the industry, says Overly.

The tradition of meeting for coffee continues, but it now changes to meet the taste of the consumer, Overly says.

In the last year, the gourmet coffee industry has seen incredible growth in both the consumer and distributor areas, says Saunders. With this growth, new people entered into the business. As with any expanding industry, some people become involved and learn about their products, while others just see dollar signs.

"What we have seen happen is, as new customers begin to enjoy specialty coffees, they begin to learn more about them and begin to look for quality and flavor in the coffee they buy," Saunders adds. "The key seems to be 'You get what you pay for.' If you are going to spend dollars for a pound of whole bean coffee, why not spend a little more for the finest?"
COPYRIGHT 1993 Alaska Business Publishing Company, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Berger, Michael
Publication:Alaska Business Monthly
Date:Sep 1, 1993
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