James Freeman , Founder & CEO
Blue Bottle Coffee
Interview Conducted Wed, January 14, 2015 8 – 9 am
(JST)
1.
In various sources,
including a Japanese blog that introduces outstanding San Francisco restaurants,
Blue Bottle Coffee is referred to as the Apple of coffee. What are the origin
and meaning of this connection to Apple, Inc.? How is Blue Bottle Coffee
similar to Apple? How is your organization different?
I’m flattered that Blue Bottle Coffee has been
compared to Apple because it is the largest company in the world in terms of
revenue. I will begin by explaining how we are different. First, we are tiny.
We do not scale in the way that Apple can scale their operations. I think we
are more different than similar.
But I think people respond to us in the sense that we
are Apple like because we are unencumbered by a lot of distractions the way
Apple is. We are very focused on our people and our coffee the way Apple
focuses on their people and technology. They also make everything deceptively
simple. Tables in Apple stores look like a beautiful piece of maple furniture,
but they are filled with infrastructure including security devices, a power
supply, and internet connections, all elegantly tethered together in a single
cord underneath every table. I am inspired by this simplicity. Perhaps that is
why Blue Bottle has been compared to Apple.
2.
How did you
conceive of the product name? What is its significance?
The Blue Bottle, located in Vienna, was the name of
Central Europe’s first coffee house. We have a story about it on our website.
It’s an apocryphal anecdote about war hero Franz George Kolshitsky. When the
Turkish army laid siege to Vienna in 1683, he penetrated Turkish lines to
successfully notify Polish troops of the need for their assistance. Driven from
the city, the Turks fled, leaving everything behind. Though local residents
mistook Turkish coffee beans for camel feed, Koshitsky recognized them as
coffee beans from having lived in Arabia. According to legend, Koshitsky purchased
the bean with reward money from the Vienna mayor, using them to open The Blue
Bottle.
The croissant, also introduced following the siege, is
an interesting side note to this tale. Creating the croissant, Viennese bakers
celebrated their victory over the Turks by devouring the crescent on their
national flag.
3.
You sold your
first coffee beans at a farmers market in Oakland around 2002. Since then, Blue
Bottle Coffee has grown considerably, expanding into several cities. How have
the dynamics and operation of your organization changed during that time? How
can you maintain your perfectionist standards now that you are a CEO rather
than the owner?
In addition to serving as CEO, I am also one of the
owners. Of course, the challenges are no different whether I am 100% owner or
0%. Referring to your question about standards, “maintain” is not an option. The
concept of maintaining is a fiction. You are either getting better through
ongoing improvements in your sourcing and processing of coffee beans, or you
are getting worse. For this reason, I think about improving rather than
maintaining. One of the luxuries of this round of investment, the supplemental
funds have allowed us to invest in quality. We have added staff in the quality
control function, at the green coffee level, and at the training level. People
were able to taste this investment before they saw it.
I am concerned about making our coffee better next
year than it is this year. I want the company to be focused on continual
refinement and improvement. In the past year alone, we have already doubled our
quality-control staff, and we are cupping three to four times the coffee. We
have also doubled our green coffee-purchasing staff, and we are now flying
three to four times as many miles to different countries of origin. Adding
trainers and revising the curriculum, we have completely revamped our training
department. We are working with our head trainer to roll out that curriculum
shortly.
In a way, I feel like I have more control than I ever
had because we have the luxury of making these investments. Michael Phillips,
previously of Handsome Coffee, which we have acquired, now heads all of our
training programs, for example. We acquired the company because they have an
amazing team we intend to use to seed improvements in our own coffee. For me
and the other investors, improving Blue Bottle Coffee as we grow the company is
a priority.
Follow-Up Question:
What was the motivation for the acquisition of Handsome Coffee?
We were looking to expand in Los Angeles, but building
a roastery in the city is quite difficult due to regulatory restrictions. The
acquisition was motivated by the desire to obtain infrastructure like this, and
needed real estate, as well as a great team. The appealing location was also a
factor. Many interlinked reasons, including Handsome Coffee’s receptiveness,
account for the merger. They were ready for a change. In light of all of these
considerations, the acquisition seemed like a natural idea.
4.
What were some of
the challenges you faced in founding Blue Bottle Coffee? How did you overcome
them?
I still feel like I am facing challenges. I began my
career as a classical musician, so I did not know much about business or very
much about coffee, for that matter. I knew the type of coffee that I personally
liked to drink, and that is what I wanted to produce because I thought other
people would enjoy it as well. Challenges related to growing and scaling the
vision for our company and for the shops continue.
Most challenges in my career have been more about
learning a lot of things I did not know, including learning things about people
and how to interact with them; learning about their interests and what they
might want; learning about real estate. Every year, I feel like my job is
different from the year before. I feel like I make a new start every year. The
feeling is sometimes exhausting, but also exciting. However, it’s the life I
have chosen because it’s the one I prefer.
5.
Your current wife
Caitlin was intimately involved in helping you market your coffee at the Oakland
Farmers Market. What is her involvement like now that you are the CEO of a
funded company?
She is still our head pastry chef, our culinary
director. As such, she develops recipes for Blue Bottle Coffee and teaches our
bakery managers how to make the pastries. Caitlin also collaborates with the
managers to introduce new products. She works with designers to create suitable
packaging and is intimately involved in creating products we serve in our
shops. We have pastry kitchens in all of our roasteries in all the regions
where we have cafes because I like for everything to be made in our shops. Traditionally,
cafes have used commercial bakeries, but I think this model is flawed. Bakery
pastries tend not to be very delicious. Because I like delicious pastry, we
make our own.
Caitlin is also gifted with a keen sense of spaces. She
has a beautiful eye for colors. I like white paints for our shops, and I rely
on her eye to select the right types. I depend on her insights just about every
day. In this sense, I’ve married well.
6.
Some strategists
would conclude that Blue Bottle Coffee is positioned as a snobbish “niche”
brand while Starbucks is more “casual.” Starbucks is seen as a middle-market,
commodity-driving coffee company; how would you describe your current
positioning?
I do not think that our positioning is “snobbish.” The
strategists who use these descriptors make me think of people who went to a
good college, but have never worked in the industry. I really do not spend a
lot of time thinking about Starbucks or other coffee companies. I spend a lot
of time thinking about what I want to produce and how we can both surprise and
delight our guests with a great experience around beautiful coffee made by
someone who is skilled, hospitable, and friendly in an interesting physical
space.
I think your description of Starbucks as a
middle-market, commodity-driven coffee company is accurate. That’s their cross to bear, so I am not going to
talk about them. I am interested in peak experiences. I am interested in
providing the most delicious coffee in the most hospitable way in the most
beautiful spaces to a wide variety of people.
I believe guests do not usually know what they really
want until after they see it or experience it. Had I done market research when
I started Blue Bottle Coffee, asking questions like, Do you want coffee that is
more lightly roasted than you say you like? Do you want to wait longer than you
usually do for it? Do you want to pay a little more for it? No one would have
responded yes. That is why I think
about execution based on our own standards. We obviously want to listen to
guests. But we are more interested in surprising and delighting them with
something they did not know that they would love.
7.
In another
interview, you noted that you are constantly striving to improve quality,
believing that if it is not improving, it is declining. Please describe the
process you employ to continuously improve the quality of your product.
We begin at the country of origin. Our coffee buyers
fly to different companies, where we maintain long-term relationships with
growers. The buyers are cupping coffee, observing the conditions on the ground.
These observations include working conditions, healthcare, and access to
schools and fresh water, not just the condition of the plants and the coffee
cherries. Because the quality of the coffee begins where it is grown, we
thoroughly check areas where we grow.
After we contract to purchase coffee, the supplier
will send a sample, which we cup. Cupping,
by the way, is the industry term for sampling coffee in a regimented way. We
score the cupping and log the score. Then, when the shipment arrives by ship a
while later, we will cup a sample of that, score and log it, comparing the
shipment to the original sample. That gives us a baseline for the coffee. Then,
every day, we cup every batch of the coffee scoring on a scale from one to one
hundred. This is the cupping score.
We also employ a TTI (True to Intent) score ranging
from one to five to describe the extent to which the coffee is behaving the way
we want it in the context that we are using it. If we held the Brazil coffee we
are roasting for espresso to the same standards as the Kenya we are roasting
for Kenes, that would not be an apples-to-apples comparison. But if we
juxtapose this TTI score with the logging score, we can assess how the coffee
is behaving relative to how we want it to. If we see a decline in the TTI score
to below 3.75, we do not serve the coffee. After pulling it, we re-roast it. If
the score ranges between 3.75 to 4.25, we will cup it twice to confirm that it
is behaving the way we want it. We aim for a TTI score greater than 4.25. We
subject every batch we roast in every market to this evaluation process.
At the end of each month, I look at the scores with
the QC (quality control) head. Referring to the TTI scores, I determine whether
we pulled any coffees, if we are on the borderline with fewer coffees than the
month before or more. I also determine if a particular coffee seems to be
causing problems or is not lasting as long as we would like in the warehouse. Maybe
the coffee is not maintaining the essential qualities it must have to be
delicious when we serve it.
Everyone knows how to go back and check previous
scores, so at the shop level, staff can confirm quality as well. If the
customers receive an espresso that does not delight them, and the baristas are
struggling, I can go back and look at the data for that roast date any time. The
barista can then go back and flag a coffee.
We currently collect a lot of data. We need to figure
out how to streamline it. The process is arduous, but it allows us to
continually evaluate our success in roasting and refining. If we are able to
catch a bad batch before serving it to customers, I become excited. When I see
the scores improve, I become excited.
8.
You have also noted
that other business plans you have seen often map out marketing and branding
strategies, but do not seem to adequately describe the product. You emphasize
the importance of focusing on the product. What specific suggestions can you
give for doing so? Do you follow a system for product prototyping or design at
Blue Bottle Coffee?
Coffee is our product. You really cannot “prototype” a
cappuccino. You can only extract the espresso and steam the milk. For that
process, we have a system that aims to continually improve and refine the
product and to test our adjustments to our blends. One of our core blends is
called Hayes Valley Espresso. We want to make a couple changes in it, so we are
going to test it at one of our locations for a week. We want to see how the blend
we have made behaves under real-world conditions in a café. We will do
limited-run tests in some of our smaller shops in the Bay Area so we can assess
how the coffee behaves.
In a broader way, we are prototyping more of the nuts
and bolts of our café. It sounds mundane, but we are testing a prototype for a
condiment bar. Where should the napkins be? Should they be the first item in
the row on the condiment bar, or should they be at the end? We have
twelve-ounce lids and eight-ounce ones. Two thirds of our guests order
twelve-ounce drinks. For this reason, if these drink lids were closer to the
customer in the bar than the eight-ounce lids, would fewer customers accidently
take the wrong-sized lid, making them happier in addition to expediting the
process? Even with something as seemingly mundane as a condiment bar, there are
dozens of details we can discuss, refine, and test. We tend to conduct this
sort of experimentation in smaller shops in the Bay Area so that people from
our head quarters and I can go there and really see how the changes are
working.
9.
You raised $19.7
million in a 2012 funding round and $25.8 million in a 2014 round from diverse
investors including Matt Mullenweg, Founder of WordPress; an author;
co-founders of several tech-start ups; and skateboarding legend Tony Hawk.
Clearly, they believe your business is a worthy investment. Why? What do you
think has attracted such a diverse following of investors?
Our investors are all smart, interesting gentlemen. They
are looking to make wise investments in interesting and meaningful businesses involving
scalable concepts. Having all of your money invested exclusively in tech stocks
is probably not a good idea. I think everyone wants to have a diversified
investment portfolio. These investors are familiar with Blue Bottle. They are
aware of the opportunities in a scalable idea, and they believe Blue Bottle is
scalable.
10.
In addition to
low-cost, self-service providers like Doutors and Saint Marc Cafes, convenience
stores have entered the already-saturated, Japanese coffee market offering
ultra-low-cost 100-yen beverages. What makes you confident your planned first
store in the Kiyosumi area of Tokyo will succeed? What is your current strategy
for expanding in Tokyo and Japan nationally? What is your competitive advantage
vis-à-vis other coffee chains? Which companies do you view as competitors?
Actually, I am not confident we will succeed, but I am
hopeful! I had a 100-yen Lawson coffee the last time I visited Japan. For
basically a dollar, the beverage was surprisingly better than I had expected. To
make coffee at that price point that is not totally awful is something of an
art. I have respect for such Japanese companies, producing interesting products
under stringent economic constraints.
As in the United States, Starbucks paved the way. They
created and continue to drive the market that companies like mine are enjoying.
In Japan, Starbucks was one of the first non-smoking cafes. People are greeted
by friendly hospitality in a luxuriant-looking environment, but Starbucks is
not that expensive. What Starbucks has done in Japan and certainly in the
United States, is proved a concept, confirmed a latent demand. They’ve trained
a lot of customers to be curious about coffee, to have expectations regarding
coffee. I believe this curiosity is driving our success in the United States.
One in a thousand people who go to Starbucks thinks, “Oh, this is good. I
wonder what else is out there?” That’s our opportunity to out-execute them in
terms of coffee preparation and quality, hospitality. I think similar
opportunities exist in Tokyo.
Our company in Tokyo is different because it is not a
joint venture or a licensee. Blue Bottle Japan is 100% funded by the Blue
Bottle Coffee in the United States. For this reason, it’s going to have a much
more personal stamp on it. It is going to seem like Blue Bottle Coffee in the
United States because that is what it is going to be. When I was in Tokyo, I myself
interviewed a Japanese man who had lived in the United States to determine if
he were the right person to make decorative cupped flowers for the store in
Kiyosumi. This is an example of how we are taking a granular interest in the
look and feel of our products for our roastery, pastry kitchen, and coffee bar.
We aim to provide an authentic, Blue Bottle experience, and we are hoping that
guests will take an interest.
We have recently opened our new, beautiful site in
Aoyama. I’m excited about this project, which I think will be a lot of fun. I
love the building. Our first coffee bar in Kiyosumi, which opened in February,
will also serve as the headquarters. Then, in March, we opened Aoyama. During
the following months, we will assess whether we were right, whether people are interested.
If so, we will continue looking for further opportunities, other locations in
Tokyo.
Our Tokyo team consists of three, amazingly competent
women: Namiko, Asami and Saki are basically running Blue Bottle Coffee Japan. They
have all spent significant time with us here in Oakland, and we have spent a
lot of time with them in Tokyo. In a way, they are the three legs holding up
the stool. Beneath them, we have hired some store managers from Tokyo, and we
have some Americans who speak fluent Japanese. One will be in quality control,
another a store manager, and the third, the lead barista. I think Japanese
guests served by a young, American barista, possibly with long hair and maybe a
few tattoos, speaking refined Japanese, will be surprised and delighted. Our
Japanese guests will realize that we are doing our best to meet them where they
are.
11.
In previous
interviews, you have alluded to traditional Japanese cafés (kissa-ten). What
have you learned from them? To what extent does Blue Bottle Coffee reflect the “artisan”
mindset characteristics of Japanese kissa-ten?
I love the dedication to perfection I have experienced
in the kissaten. They are absolutely certain
that the way they are doing things—the way they always have done them and will
always do them— is correct. I love the peacefulness, the hushed, tranquil
quality of my favorite kissaten. The sensation
is quaintly outdated, like going to grandmom’s house. But I just love the feeling
that every possible detail that could matter has been carefully taken into
account.
At Hatto, one of the kissaten I like, the gentleman warms the saucer the way he warms
the cup before placing the cup on it. I admire this perfectionism. I do not
want to open a chain of kissaten
because I prefer a more modern approach. But I think that you are correct in
pointing out the artisanship of the Japanese, their dedication to craft. We are
from Silicon Valley, so we will measure. We will use scales and thermometers to
make our coffee. They are part of our culture. At the same time, we intend to
bring the same dedication to craft to the process.
Tokyo coffee is traditionally quite dark, and the
shops emphasize a lot of blends. The brewing ratios are very thick. Our
preparations techniques will be familiar to customers, but the taste might be a
bit lighter, our brewing ratio more limpid. We are going to apply our way of
thinking to certain traditional tools, techniques, and ingredients used in
Japan.
12.
Japanese people would
probably prefer to be seated while enjoying coffee rather than standing. What are your plans to localize store
management in the Japanese market to accommodate such cultural differences?
We have a few tiny stores, kiosks, really. I do not
want to rub your face in it, but the temperature was 66 F (18.9C) today here in
San Francisco. I had to bring a sweater to work! In this climate, a walk-up
kiosk makes perfect sense. In New York, we have a few small venues and a few
larger ones with seating.
In our Aoyama shop, a big café, we have about seventy
seats. We will also have a richer variety of food offerings. Even at our
roastery in Kiyosumi, we will have about twenty seats, as well as some seating
outside. The culture has shaped expectations, but not as much as the climate.
You would not want to stand outside the roastery drinking a coffee in Japan
during August. Nor would you want to stand outside in January. We will adjust
the seating to these preferences, but not the drinks. We will apply the same
methods and standards as in the United States.
13.
Alluding to the
convenient monorail from Haneda Airport to downtown, you have described Tokyo
as the way modern, futuristic cities are supposed to be. What else do you like
about Tokyo and Japan more generally? What aspects of the country or culture do
you not enjoy?
I love the orderliness and regimentation. I always
know the side of the escalator for standing and the side for walking. If you
are in a hurry on the New York subway, you are in trouble: everyone is standing
on both sides of the escalator blocking your path. I love the universal
awareness of customs and virtually universal adherence to them. Tokyo is also
breathtakingly safe and clean. I do not necessarily feel unsafe in New York or
San Francisco, but the environment in Tokyo is definitely remarkably different.
I love Kappabashi
with all of the little booths. “There’s the one where you get your stools,” and
“There’s the one that sells plastic models of food.” I love the intimate
texture, the “smallness” of different districts in vast Tokyo. Even going to
Hanto in Shibuya is amazing. It’s one of the busiest train intersections in the
world, but if you walk just five minutes, you find yourself in a small,
peaceful alley way. You feel like you are a million miles away from the city. I
love this “smallness” so characteristic of Tokyo.
I wish I could speak Japanese. Nihongo sukoshi benkyoushiteimasu.
Follow-Up Question:
How do you select staff? How did you instill your values in those you
recruit?
I participated in two job interviews just today. I
have to sign off whenever a manager is hired. I call or interview candidates in
person before signing off. I want to get a feel for the manager. I rarely veto
the hiring manager’s decision, but I know I can if I need to. Because I
interview each of them, the managers feel as if they are on the inside of
things from the very beginning. This sense of belonging has been helpful in
cultivating shared values.
Teaching about the product coffee is not difficult. A
few months of study, and you are good at it. Unless the role is specialized,
like a head roaster position, we de-emphasize the coffee part during our
interviews. The difficult task is teaching people to be polite, on time, and
considerate. We are looking for people who already embrace these sorts of “eternal”
values. We have people coming from fine dining to work with us, and we recently
had a manager from a winery join the team.
14.
You did not major
in business or economics as an undergraduate, and you do not have an MBA. Do
you feel your lack of formal training in business has put you at a disadvantage
in any way? If so, how? How do you compensate? Conversely, how have your
training and experience as a professional musician contributed to the
development of your business?
I feel that not having an MBA has been an advantage. I
had twenty thousand dollars and a couple credit cards when I started out. I
thought that was plenty of money, so I opened Blue Bottle. Had I known about
business, I would have thought, “You can’t start a business with so little
capital.” Not knowing what the usual constraints and limitations are has been
an advantage in this respect. Additionally, I can hire MBAs. If fact, I have an
MBA on the team. Not having been trained in business does not seem to be a
constraint, allowing me to have a fresh perspective.
You know that repeating something 1000 times is no big
deal when studying classical music. It’s simply part of a daily practice
session. But for people who are not accustomed to this type of discipline, the
repetition would be a big deal. Becoming a classical musician requires
formidable discipline. In comparison to that discipline, nothing I now do seems
all that difficult. My training as a classical musician has definitely benefited
me in developing the business.
15.
Based on your
experience, what is your advice how to successfully start and grow a business?
Concentrate on your product. If you are working on
your product to improve it and are aware of both its strengths and
deficiencies, you are meeting a necessary condition to make your business work.
This focus alone may not be sufficient, but it is necessary. The other details
can wait till later. I think that embedding yourself in your product is the
most important factor, though I believe it is often overlooked.
16.
Have you ever read
the book Do What you Love, The Money Will Follow published by Marsha Sinetar in
1989? You have attempted to follow her advice twice. The first time, when you
pursued your passion for the clarinet, you appear to have been unsuccessful,
but attempt two, pursuing your passion for coffee, has been wildly successful.
How would you evaluate Sinetar’s advice in light of your own, personal
experience? What did you learn from your first failed experience that helped
you succeed the second time?
I think that in the context of my first career, the
title of the book should read, Do What
You Love, and You Will Slowly Be Driven Insane. Such a title describes what
was happening with my career as a clarinetist.
The book title implies a privilege. Some people in
this world, in this country and city, do what they do not like because they
must. They may work as janitors not because that is their desired job but
because it pays the bills and feeds their family. I do not want to impute any
magic to my current success in this job that I love. I was lucky. Things worked
out. I enjoy what I do. I feel very lucky. But I do not think Sinetar’s advice
is universally generalizable.
