Third Wave Coffee Brands: 5 Questions with Co-Founder of Dogwood Coffee

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Dogwood Coffee

Earlier this year, brandchannel contributor Claire Falloon experienced “slow” coffee purveyor Blue Bottle to learn how to make herself a cup of its sought-after java. One cup took her 35 minutes to make. That led her to ask if she was really enjoying the coffee or “is it all the loving effort I’ve put into the making of it?”

While there is no doubt the post-Starbucks coffee movement has taken coffee quality and creativity to a new level, it’s unclear how much of each brand’s quality and reputation is based on intangible desires invested in the brand by the consumers themselves.

For example, when Blue Bottle recently made the surprise announcement that it would cease wholesaling, fans grimaced but celebrated the move as one of quality control. But when Portland cult fav Stumptown was acquired by Peet’s Coffee—with both in turn owned by Caribou stakeholder JAB Holdings—fans shouted disappointment. And with Chicago’s Intelligentsia reportedly looking for a buyer, the Los Angeles Times recently looked at the consolidation of coffee brands.

The struggle with “selling out” has long faced other industries like music and beer. And now it’s coffee’s turn. To get an idea of how small, popular coffee brands are balancing scale, expansion and staying true to what made them popular, brandchannel spoke with Dan Anderson, co-founder of Dogwood Coffee.

Founded in Minneapolis in 2010, Dogwood quickly made a name for itself, with sites like Thrillist and Complex naming it one of the nation’s best roasters. Today it has two locations in Minneapolis with one more on the way in nearby St. Paul and another in Winnipeg, Canada.

dogwood factory

brandchannel: Peet’s was bought and then, in turn, gobbled up Stumptown. Now Intelligentsia is looking for a buyer. Are many of the worried fans justified in their concern about the big money taking over third wave coffee brands?

Dan Anderson: That’s a tough one—I’m not sure exactly where the balance comes between resourcing continued growth and quality and “selling out.” As I understand it, the companies will continue to run themselves and stick to what has made them so successful. I suppose as long as the quality is maintained and more accessible to more people, it’s hard to judge too much solely on where the resources are coming from. In an odd way, it’s actually a bit encouraging to see the interest in specialty coffee and to know a lot of people see coffee continuing to grow toward the specialty side.

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brandchannel: Is there a relationship between the years of financial struggle the small, third wave coffee businesses face that makes them more open to accepting buyout offers?

Anderson: That could be. I think the challenge with a coffee business is that they are capital-intensive up front. For instance, you are always paying ahead for your green coffee inventory that you then sell over time. With growth, that pay-ahead number continues to grow and grow. Also, in retail, you use quite a bit of capital up front to build out the space, etc., and then earn back your return over years. We also know the bar has been raised for the resources going into shop buildout these days.

I suspect each scenario is different for those companies, but maintaining growth and quality while always trying to up your game, I could see how many coffee businesses would be open to these types of investment from outsiders. What makes coffee companies popular is often how good they are with coffee and with marketing their brand and their space—and being good at those things doesn’t necessarily make you a strong and strategic business person. The strong businesses that impress me are the sustainable ones, such as Counter Culture.

brandchannel: Quality control aside, does a brand like Stumptown eventually suffer due to its association with huge, private equity players? That is, does expansion undo small and local brand personalities of many third wave coffees?

Anderson: Not necessarily—however, as a consumer myself, I am more drawn to smaller, independent businesses and products when available. For me, it’s relatable and I want to support others trying to make a go of it, too. I do think small and local are big contributors to the growth of third wave coffee brands. However, I believe quality has been the biggest contributor to their success.

[Editor’s note: Last year, Dogwood wrapped up a longstanding partnership with local Minneapolis auto dealership Morrie’s. One Saturday a month, Dogwood would produce coffee for a special auto event put on by the dealership. Gearheads and barista hipsters are not a typical social pool in third wave coffee.]

brandchannel: How did the Morrie’s partnership benefit Dogwood’s brand and would something quirky like that lose some of its charm as you get bigger and more popular?

Anderson: We did that for one season at the request of a friend. I do, however, think it’s important to be engaged with your local community and to be a supportive presence. I think that would prove to be more challenging with growth. I always hope to measure our growth by personal connection. So much of what we do is in relationships—from working with producers, to our wholesale and retail customers, and just within the Dogwood staff. That connection of knowing and being known is an important foundation for us and one I will continue to use to measure our growth.

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brandchannel: Dogwood has been celebrated for its roasting, and now you’re expanding inside Minneapolis and into Winnipeg. How does Dogwood choose its expansion opportunities?

Anderson: Our mission statement is that “Dogwood Coffee Company exists to support and spread the enjoyment of delicious coffee. Our participation is rooted in relationship, cultivated by discipline and grown through original expression.” So, really if the growth opportunity fits this mission and we can handle it in terms of resources—both people and financial—then I think it’s generally great to grow and expand your impact.

Coffee

brandchannel: How does Dogwood balance quality control against that growth and scaling up production?

Anderson: It really comes down to the people and our shared commitment to quality and each other. It’s a measure of everyone within Dogwood. Can we do this opportunity without compromising what we know and do? Also, in a lot of ways I believe growth can actually fuel quality. When you’re setting out to open a new retail location or roaster location, it forces you to look at what is working and where you can improve. Often you have to deconstruct the pieces of what you’re doing in order to put together something new.

[Editor’s note: Images via Dogwood’s Instagram feed]


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