Leo Johnson, Kicking Horse Coffee Co. Ltd. | BCBusiness
Leo Johnson and his team at Kicking Horse roast four million pounds of beans annually at their Invermere roastery.
Why are British Columbians so obsessed with their fair trade, organic and ethical cuppa joe?
Leo Johnson, co-founder of Kicking Horse Coffee Co. Ltd., remembers pondering an entrepreneurial hunch in the mid-1990s when he and his wife Elana Rosenfeld considered carving out a place on grocery store shelves for specialty coffee alongside the MJBs and Maxwell Houses of the world. That’s when organic food was relegated to an obscure supermarket ghetto and fair trade was barely a blip on the public radar screen.
“The business is vastly different from when we started,” says Johnson, over the phone from head office in Invermere. “Back then, there were few options for organic coffee, fair trade wasn’t even in existence in Canada and in the retail grocery market there wasn’t a specialty coffee option. We saw a gap and decided to go retail.” Since then, he and Rosenfeld have amassed a string of business awards, including the Business Development Bank of Canada’s young entrepreneur and ongoing achievement awards.
Invermere, a small mountain-shrouded Columbia Valley community, hardly seemed a likely place to germinate a coffee empire when Johnson and Rosenfeld left Toronto for the Rocky Mountains shortly after graduating from university in the early 1990s. They dabbled in the smoothie and café business before launching Kicking Horse Coffee in 1996, goaded, they claim, by Rosenfeld’s mother into opening a coffee roastery.
Today specialty coffee roasting is a particularly crowded industry sector in B.C., with at least 50 businesses each roasting anywhere from 4,000 to four million pounds a year. Survival comes down to image, quality, and increasingly, being held to unusually high consumer expectations, to the point where brand tag lines overflow with positivity: fair trade, organic, shade grown, responsible, ethical, and on it goes. But it’s also about being the purveyor of a unique substance that, if not recession-proof, is at least highly resistant to economic downturns. We’ll relinquish a lot before we surrender our caffeine fix.
Nevertheless, these are challenging times in the business. The organic ghetto has become a posh neighbourhood of coffee, and more and more businesses are looking for space on the shelf. From humble beginnings when its first bag of beans appeared on the shelves at Thrifty Foods, Kicking Horse coffee is now ubiquitous, and was recently flying off the shelves at Thrifty’s for less than $10 a pound, discounted from the normal $16 a pound. (Johnson claims that all his retailers get the same wholesale price and it’s up to them to determine the markup.)
On top of the ever deepening competition at the retail end of the business, the price of raw green coffee beans at the wholesale end has doubled in the past year, hitting near historic highs of around US$2.30 a pound, driven by pressure from commodity speculators, climatic pressures on traditional growing and harvesting seasons and soaring demand from populous countries such as China, India and Brazil – annual consumption in Brazil alone has exploded from one million 60-kilogram bags three decades ago to almost 24 million bags today. Around the turn of the millennium, coffee buyers were widely criticized for exploiting farmers by paying the rock-bottom prices that fresh beans had sunk to, but today the fair trade minimum floor price of US$1.40 a pound of arabica is often exceeded.
On this unpredictable playing field, Kicking Horse is a nimble competitor. It now sells its product worldwide, employing 26 people, roasting four million pounds of coffee annually and grossing more than $10 million in annual sales from its 17 coffee varieties, all based out of a 26,000-square-foot Invermere facility. The company has resisted the temptation to open cafés, other than its sole flagship café in Invermere, and instead concentrates on what it does best: roasting and wholesaling.
“In terms of the global market, we’re a pimple on the elephant’s ass, but we’re the largest specialty coffee roaster in Canada and we keep growing,” Johnson says. “Even during the last meltdown in 2008 we were still growing.” Still, Johnson says, this past year has been the company’s most difficult in terms of sourcing fresh coffee beans. Growers in places like Nicaragua and Guatemala are often refusing to sell to their co-ops because they can fetch much more by selling on the street to “coyotes.” The upshot for B.C. coffee roasters is that certainty of supply has been interrupted and they’re spending more time on the phone with brokers, and also very reluctantly passing on these costs to customers.
Image: Luke Moilliet
Jon Meyer (left) roasts a batch at his Oso Negro
roastery, nestled in the Kootenay town of Nelson.
B.C. coffee connoisseurs
One thing Johnson has learned after 15 years of coffee roasting, the average B.C. coffee consumer is far more sophisticated than he or she was when Starbucks was as exotic as coffee got west of the Rockies, and there was next to zero awareness about the global, environmental and social impact of the coffee trade. “I think it would be pretty hard to enter the market these days without being organic and fair trade,” Johnson says.
Many observers credit Starbucks for bringing coffee culture to North American cities, opening its first B.C. outlet in 1987 near the SeaBus terminal on Vancouver’s Cordova Street. These days Starbucks sits in brand purgatory, somewhere between the low-rent Tim Hortons and upscale Caffè Artigiano. A recent arrival whose first stop was Commercial Drive would think they had encountered a citizenry obsessed with caffeine, from old boys’ clubs like Café Calabria to relatively recent arrivals that keep sprouting up. And it’s not just an urban phenomenon. Visit Nelson and linger at the café fronting Jon Meyer’s Oso Negro roastery, watching the ceaseless flow of traffic through the front door, and wonder why you’re not in the coffee roasting business.
The coffee obsession is not unique to B.C. On global commodity markets, coffee beans place second only to petroleum products on the list of the world’s most valuable traded goods. In 2010 global coffee trading topped 130 million 60-kilogram bags, up from 111 million bags in 2005. According to Agriculture Canada, in 2008 coffee sales in Canada grew to $647 million and in its 2010 report, “The Canadian Coffee Industry,” the federal agency characterizes Canada’s coffee market as one with a taste for specialty coffee, small in global terms “but sophisticated, and extremely well served which means that competition will continue to be strong.”
British Columbians tend to think of the province as the epicentre of sophisticated Canadian coffee culture, but that’s only partly true, according to Sandy McAlpine, president of the Ontario-based Canadian Coffee Association, which surveys our coffee habits with lab-like precision. Yes, B.C. has produced a number of champion baristas, such as Morgan Allen of Victoria’s Fernwood Coffee Co. Ltd., and Simon Piccolo of Caffè Artigiano, who was national champ from 2003 to 2005. Three years ago Aaron de Lazzer, Ethical Bean Coffee Co. Ltd.’s director of coffee, became Canada’s first Certified Q coffee grader, sort of like the ultimate sommelier of coffee.
In Vancouver I meet with coffee-roasting aficionado Vince Piccolo, who opened the first Caffè Artigiano on Pender Street at Thurlow back in 2000. Artigiano is widely reputed to have introduced true coffee-house culture to the city; however that’s a claim that might be disputed by the denizens of Commercial Drive. Piccolo is not short on opinions when it comes to coffee, even casting offhand criticism at his former baby, the Artigiano chain, which he sold in 2006 before opening 49th Parallel Roasters Inc., and he refers to the Italian coffee bars of Commercial as being more about gambling than good coffee.
And unlike many of his competitors, Piccolo is ambiguous about fair trade and certified organic, but instead prefers to develop close relationships with farmers. Rather than buying green beans through coffee brokers, 49th Parallel’s two buyers travel the coffee-cultivating planet to visit suppliers and buy product directly.
“I think fair trade is the minimum you should be doing,” Piccolo says. “We pay growers a lot more than they can get on the open market. I like to build relationships with growers, helping them improve their product.” He mentions as an example the ongoing relationship his company has with Helsar Farm in Costa Rica. “Every month of the year, our buyers are at point of origin. We know the growers’ kids, their dogs.”
Though coffee prices have never been so high, in some ways small specialty roasters are insulated from these spikes because, as Piccolo says, they’re already paying a premium to his suppliers that puts the price at anywhere from US$4 to US$6 a pound. Consequently 49th Parallel’s coffee retails for anywhere from $16 to a rich $22 a pound
“When people balk at paying $2 for a cup of coffee, if they really thought about what it took to get that coffee in their cup, they’d realize it’s an incredible bargain,” Piccolo says. “We’re not getting filthy rich doing this. I got into roasting coffee because I’m more of a creator than a retailer.”
Image: Luke Moilliet
Husband-and-wife team Lloyd Bernhardt and
Kim Schachte ensure their Ethical Bean roastery
in Vancouver treats growers well.
While British Columbians may consider themselves connoisseurs of coffee culture, what truly distinguishes us is our obsession with organic and fair trade. According to McAlpine, nationally, awareness of fair trade and organic coffee designations is 51 and 58 per cent respectively, while in B.C. it’s 65 and 87 per cent. Furthermore, 28 per cent of all respondents to an association survey claim to buy certified organic coffee, but in B.C. 42 per cent make that claim.
“In B.C. it’s a huge issue. Fair trade and organic is a very important business decision for specialty roasters,” McAlpine says. “Another important thing,” he adds, “is that coffee is an inexpensive enough luxury that it’s maybe not recession-proof, but definitely recession-resistant.”
Like Kicking Horse Coffee, Vancouver’s Ethical Bean, launched in 2003 by former Vancouver software developer Lloyd Bernhardt and his wife Kim Schachte, is also a pimple on the elephant’s ass. However, the company is extremely savvy when it comes to marketing its organic fair trade coffee. The company, which currently roasts 750,000 pounds a year, doubled its business year over year for the first eight years of its existence, growing to a staff of 26 today. And since 2008 Ethical has maintained steady recession-resistant growth of 20 per cent annually.
When I meet Bernhardt at Ethical’s LEED-certified headquarters at the end of Kootenay Street in east Vancouver, he can’t resist scrolling his iPhone, monitoring the volatile price of green coffee beans, before handing me a lab coat and hair net and ushering me into the hallowed territory of the coffee roaster. It’s a bustle of activity inside: 60-kilogram burlap sacks of coffee, each bearing an exotic name of origin – Ethiopia, Nicaragua, Guatemala, Sumatra – lie stacked like cord wood at one end of the warehouse, while the computer-controlled roaster churns out 18 kilograms of roasted coffee an hour, 16 hours a day. At the other end of the warehouse, workers bag and box the coffee for shipment to Costco, Safeway, Overwaitea and almost every other major grocery chain in western Canada. There are even a few boxes destined for China and Europe, where Ethical Bean is making tentative inroads. The roaster is matching bottom-line success with a determined social-activist mandate – every December a dollar from the sale of each bag of coffee goes to support two NGOs: Child Aid International and Project Somos, both of which operate in Guatemala. This Latin American country, as the birthplace of their adopted daughter, is close to the hearts of Bernhardt and Schachte, and it was their experience there visiting coffee plantations that got them interested in coffee roasting. “We met farmers who were being paid US$.60 a pound but their costs were US$.80 a pound,” Bernhardt says. “That really struck us.”
In addition to these philanthropic efforts, Bernhardt is gauging the surprising success of a package redesign for Ethical Bean’s eight different roasts. It’s not surprising that the company pays close attention to appearance, since Schachte is a graphic designer by profession. The new design has stripped the bag of busy product information and introduced a techy e-tracking system that allows consumers to use an Ethical Bean iPhone app to click on a bag’s distinct code to learn the who, what, where and how of the beans that have been grown, picked, shipped, roasted and ground up for their morning espresso.
And the results of the redesign – well, let’s just say that Bernhardt is pleasantly surprised. Depending on the chain, he says, Ethical Bean’s grocery monthly sales are up anywhere from 30 to 60 per cent. “A lot of people think if it says ‘Fair Trade’ then it must be. Now consumers can see where the coffee is grown and who grows it. People want to be a part of the story,” Bernhardt explains.
Gimmicky, perhaps, but it’s a way for Ethical Bean to differentiate its beans from the competition. That’s also why when Bernhardt and Schachte decided to get into the coffee-roasting game, they wanted to give specialty roasted coffee a hip, urban image with packaging that would distinguish it from the granola-eating hippie image.
“We did a bunch of research but not too much; otherwise we would never have gotten into it,” Bernhardt says, as we exit the Ethical Bean roaster into the small café for a lavender glazed doughnut. “We set ourselves up with a mission – fair, organic coffee – but at the end of the day is it good or not? I’m in a business that requires you to have a consistently high-quality product.”
Image: Luke Moilliet
Owners of the Ethical Bean roastery in Vancouver
balance fair-trade practices with meeting the
demands of a discerning clientele.
If there’s an answer to why B.C. has become a hotbed of entrepreneurs specializing in fair trade, organic coffee roasting, perhaps it can be found in the tiny town of Coombs, on Vancouver Island. David Creekmore fits the stereotype that Ethical Bean’s Bernhardt wanted to distance himself from: the hippie organic roasters in the B.C. hinterland. Creekmore and his wife Elaine own and operate Creekmore Coffee Roasting Inc., a business that one suspects is as much a means of supporting a lifestyle as a way to earn a living.
There is a rootsy vibe to the enterprise; music is a close second to coffee in Creekmore’s world. His chief coffee roaster is Nick Hornbuckle, the banjo player in the bluegrass band John Reischman and The JayBirds. “It takes a certain kind of anal person to be a coffee roaster and there are few musicians more anal than banjo players,” Creekmore says with a laugh.
Behind David Creekmore’s easygoing nature, there’s a shrewd business sense. Launched in 2001, the roastery was an amalgam of coffee enthusiasm and Creekmore’s 10-year tenure as a beer and liquor rep in Alaska during which he says he learned the ins and outs of beverage retailing. In 2004 the couple opened a small café, which Creekmore sees as an important marketing tool, a way to demonstrate to customers how he likes to serve coffee. Today the company employs 16 people, selling 90 per cent of its product on Vancouver Island and sending two truckloads of coffee every week to Victoria. Monday through Thursday, the 40-pound Primo roaster operates in a warehouse behind the café, next to burlap sacks of green coffee beans from Papua New Guinea, Mexico, Ethiopia and Nicaragua. Creekmore’s packaging is stark and simple in comparison to Ethical’s slick package designs, and its labels are produced in-house.
In the B.C. coffee roasting industry, lifestyle may be the impetus goading entrepreneurs into business, and a commitment to ethical sourcing may be the cost of entry, but for Creekmore, Ethical Bean, Kicking Horse Coffee and the dozens of others across the province, what’s in the bag will ultimately determine success or failure. As Irena Duncan, of Vancouver’s Pure Caffeination Consulting Group, points out, “Unless the small roasters can make exceptional coffee and have a master roaster they won’t last in the sector. Consumers will always come back to amazing coffee regardless of trends.”
David Creekmore has considered following the likes of Kicking Horse and Ethical Bean and expanding – another café, perhaps even a franchise, or a move into more retail outlets and supermarkets on the Mainland. But like dozens of coffee entrepreneurs dotting the province from Atlin to Zeballos, this roaster is happy where he is. And so apparently are the British Columbians who couldn’t begin their day without a fresh-brewed cup of fair trade, organic, ethical coffee.