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  • Dave: Hey, it's Dave Asprey with Bulletproof Executive Radio. Today's cool fact of the

  • day is that it takes about 3 or 4 years for a coffee tree to mature and start producing

  • fruit. Once it starts flowering, it will only produce about a pound of green coffee a year,

  • depending on region and altitude and soil and all that. It takes between 3 and 4 thousand

  • coffee beans to create a single bag of delicious coffee, so coffee is actually a pretty rare,

  • special commodity, but you already knew that because you listen to this podcast.

  • Today's guest is someone special. Dan Cox has been involved in just about every aspect

  • of the coffee industry for more than 30 years. He's been on TV countless times talking about

  • consumer trends, pricing, product handling. He's also one of the few people on the planet

  • you can go to for coffee legal matters and is actually part of coffee lawsuits when they

  • need a legal consultant. He's also been a 3 term president of the Specialty Association

  • of America for Coffee. The Specialty Coffee Association of America called him "Man of

  • the Year" even.

  • If you were to basically sum it up in just one sentence, Dan, is it fair to say that

  • you're old school coffee mafia? Is that accurate? Dan: I am considered "old school," certainly.

  • Well, I hang out with a clan of notorious coffee aficionados that really believe this

  • is still a pretty special product and that we're all pretty passionate about it. Since

  • I have three companions that we've traveled the nineteen different countries together

  • and countless plantations and co-ops, so I still really like what I do. I'm very fortunate.

  • I love what I do. I'm considered the top of my game, but candidly, I don't believe there

  • is such a thing as an expert. There's always something new to learn, and sometimes I hear

  • these outlandish claims that I go ... At first I say, "No way," and yet as I look deeper,

  • there's always possibilities of something new on the horizons and things happening that

  • make this still an incredibly cool occupation to work in.

  • Dave: Coffee's changed enormously over the past thirty or so years. It's fascinating

  • because you were there since the first Starbucks opened, essentially. You were involved with

  • coffee from that time frame right? Dan: Yeah. I was really lucky. In the United

  • States, coffee's been a mature product since really right after the Revolutionary War.

  • In the early 1900s, at the turn of the century, every town in the USA had a small coffee roaster.

  • That pretty much end with the emergence of cans coffee which had long shelf lives. Number

  • 2, the emergence of supermarkets where people would go into one store to buy baked goods

  • and coffees and any other stuff you can get in a supermarket. That stayed pretty ... Our

  • high point in coffee consumption in the United States was 1964 where about 76% of the people

  • drank 3.2 cups of coffee per day.

  • Then, it died. It started going backwards because of the emergence of sodas and the

  • great marketing that the soda companies picked up. The coffee industry pretty much stuck

  • with trying to attract existing coffee drinkers to change to their brand instead of enticing

  • new coffee entrants into the industry, which would be the teenagers. Starbucks came along,

  • and they also introduced a species called robustas to create price [war 03:45] so consequently-

  • Dave: Wait. Wait. Starbucks didn't introduce robusta. That was just the-

  • Dan: No. No. No. No. Dave: General coffee industry just-

  • Dan: Yeah. The coffee industry in the late 60s decided to fight the price wars. You had

  • the Maxwell House, the Crafts, the Folgers ... They knew that people would come into

  • a supermarket to buy a pound of coffee a week, so whatever they put on deal, they didn't

  • feel there was a lot of loyalty in the brands. In order to reduce prices, one of the easiest

  • things was to do, was to reduce costs of goods, and the number 1 cost of goods was the arabica,

  • so they introduced the robusta beans. If you do it slowly over time, it won't be nearly

  • as noticeable. The rise of great marketing and sodas, the decline of great coffee, meant

  • that the industry was going backwards.

  • Around late 70s or early 80s the emergence of Peet's Coffee Company in the west coast,

  • a great company based out of Oakland California and Berkeley, California. He was really the

  • instigator. Then, Starbucks picked up. Starbucks did a great job of making coffee cool, making

  • it a cool occasion, making it hip. Although, I laugh because Starbucks is probably the

  • number 1 or 2 user of milk products in the United States. Getting a black cup of coffee

  • at Starbucks is actually kind of hard. People use a lot of additives. Then in my old stomping

  • grounds, I was the first employee at a place called Green Mountain Coffee Roasters, which

  • we started in 1981. Dave: That's ginormous. Just so people know,

  • Green Coffee Mountain Roasters is a billion dollar coffee company right?

  • Dan: It's actually 5 billion. Dave: Yeah, exactly. Number 1 there. That's

  • phenomenal. What's the latest ... What is Third Wave Coffee and how is Starbucks different

  • than Third Wave Coffee? What's the Dunkin' Donuts, Starbucks things ... Give me a little

  • bit more and give people listening a kind of understanding of the amazing business of

  • coffee. Dan: Well, Third Wave is now being split into

  • 2 directions. It's pretty interesting because Starbucks is essentially looking for all of

  • their growth to be overseas, international, pretty much Asia. They're very Asia oriented

  • right now. Dave: Are you over there a lot Dan? Do you

  • see what they're doing in Asia? Dan: I don't go there, but I am very cognizant

  • of what

  • they're

  • doing over there and their plans. Dave: It's nuts. When you walk down any street

  • in a big city, there's more Starbucks there than in New York City. I swear.

  • Dan: Yeah. Well, again, in Asia, a normal city for them can be 4 or 5 million, so over

  • here 4 or 5 million person city is Chicago. Their market tiers are so much greater than

  • ours. Starbucks feels they've got United States covered pretty much on 2 fronts, retail in

  • their own stores, and retail in the supermarkets. They'll continue to make some splash, but

  • reality is they're going overseas.

  • Dunkin' Donuts, which is a pretty interesting east coast consumer, east coast retailer,

  • theyve got about 6000 stores of which about 5200 are east of the Mississippi. Most people

  • on the west coast really don't know too much about Dunkin' Donuts.

  • The other big player of course is McDonald's. McDonald's with 31000 locations, they decided

  • 2 years or 3 years ago to get more serious about coffee, and theyve done a pretty

  • good job elevating, mainly through price and a better quality product that, a dollar value

  • ... Their biggest product is their café frozen coffee drink. Boy, that is going really well

  • for them. They're doing really well. Dave: The trick to selling a lot of coffee

  • is sell a lot of milk and a lot sugar. Dan: Well, that's ... We are a fat, cold,

  • sugar based society. [If I was to saying, 07:40] what are the 3 big things we love?

  • We love fat. We love sugar, and we love cold portion. Then, distribution. Hence, sodas

  • and any product that has a lot of fat in it. The other part ... The Third Wave now is the

  • small stores, the Blue Bottles, the Four Barrels, the people that want to get into making coffee

  • literally dripped by the cup, individual. What trend that their breaking, which is unusual,

  • is we are so convenience oriented, drive-through time oriented, that we live in the era of

  • line speed, the shorter the better. In a traditional takeout drive-through scenarios, whether it's

  • a Wendy's or McDonald's, 90 seconds is the goal, from the time you order to the time

  • you drive away, they want to do that in 90 seconds. That's pretty darn quick. A minute

  • and 20 is the next one.

  • To go into a store like Blue Bottle or Four Barrel, and I love Four Barrel in the Bay

  • area, Dave: I went to one in Valencia. The one there?

  • Dan: Yes. Dave: I used to work a block away from there,

  • and I know [Tao 08:48] that had roasted there. I've written about Four Barrel too. It's a

  • great roaster and a cool environment too. Dan: It's an amazing one. I was there last

  • spring, and I don't really try to sharp shoot people, and the good news is nobody knows

  • who the hell I am, and that's fine. When I go in and I'll talk to their server, whether

  • he's a barista or just somebody ... I'll ask him a few questions, and in this case they

  • were serving 3 different Kenyan coffees. I asked him to describe the difference between

  • the 3. This guy was probably in his mid-30s. He was really good at that. I was impressed

  • that he knew the regions and he the differentiations between the kirinyagan from one area, and

  • I said "Somebody's doing some pretty good education there."

  • The other thing is, it takes 3 minutes. You place your order. You go get a seat. They

  • either bring it out to you, or you come back. It's creating the scene of coffee's meant

  • to take time. When you come here, you're going to spend 3 to 5 bucks on a cup, and you're

  • going to really enjoy it, but it's going to take time. The exact opposite and the Third

  • Wave that we happening in the supermarkets, is single cup coffee dominated by the Keurig

  • brand. Dave: Yup.

  • Dan: This is amazing. None of us saw this coming. Single cup has been around for at

  • least 25 years, but it was so poorly executed when it first entered ... We had Senseo. We

  • had Pods. They were a disaster because 1, the machines weren't very reliable and 2,

  • the product wasn't very reliable. Keurig comes along and the first 3 years, they bleed right

  • in trying to figure out how to make this thing work. They start out in the office coffee

  • industry, switched over to retail, and it's now holds first 4 of the top 10 selling coffee

  • brewers in the United States are Keurig, and out of the top 10, they hold 6 positions out

  • of the top 10. Dave: That's why I wanted to offer a cartridge

  • that could work in a Keurig machine. Oh man, the complexity of doing that! Unless you're

  • some billion dollar company, it is really hard ,and we finally did it, but it was an

  • 18 month undertaking in order to try and make that happen.

  • Dan: People forget that Green Mountain has 70 people in their R&D. They have NASA engineers

  • down in their Massachusetts headquarters, and they are constantly looking at making

  • this better. The old complaint was the coffee never tasted strong enough. Strength in this

  • situation had a relationship to the amount of coffee you could physically get into a

  • cup, the temperature, the grind, and the time. They initially had 9 grams for a 30 second

  • brew cycle. Then, they went to 11 grams. Then, they changed the cup, in the Vue cup, to 15

  • grams. Dave: That was a good move.

  • Dan: It was a good move. It settled with the fact that ... Environmentally, all of these

  • things are a disaster. They will fully admit that a pound of coffee in a bag, a 1 pound

  • bag, 1 bag, and you get about 50 to 60 cups out of it. In K-Cups, you get about 50 or

  • 60 individual capsules that had to be thrown away, and until recently, were not recyclable.

  • The industry recognized this is a disaster on environmental.

  • Dave: That was one of my problems. The ones that I make are entirely recyclable. That

  • was part of the 18 month challenge because I just don't want to make more trash than

  • I have to. I don't think it's good for the world, right?

  • Dan: Oh, it's a disaster. Here in little old Vermont, and I think there are like 3 or 4

  • places in the United States, Boulder, Colorado, Berkeley, California, Palo Alto, California,

  • and Burlington, Vermont, Portland, Oregon to a degree, we consider ourselves in the

  • leading edge of environmental concerns, and here we are ... I mean try to open a landfill

  • in Vermont. Good luck. Yet, the company realized "Weve got to do something about this."

  • Theyve been struggling with this for years, and they've got 1 solution, but it's not near

  • there yet. Dave: Is it true that they're going to partner

  • with the EcoHomes people to fill the walls of homes with old cartridges? Just kidding.

  • Dan: Listen, if you could put it in tires I would be happy. I don't care, but if you

  • could make home insulation, I'd think they'd be open to anything we could do. The new capsules,

  • the new K-Cups are made with PET #5 plastic. Out the Vues, there's a tear away feature

  • where you tear the lid, and the filter comes off, and then the cup itself can be recycled,

  • but you have to do that also when the coffee has cooled. If you take it right out of the

  • brewer, and you try to do it, there's a good chance it's going to rip and tear, and you're

  • getting coffee browns, so you got to wait a minute.

  • Again, going back to our nature, we are not a culture that revels in things that take