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,

they’ve 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 they’ve 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 "We’ve got to do something about this."

They’ve 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

time. We are speed oriented, and we are speed food oriented. But it's a whole another story.

The thing that I find interesting is you used to walk down on a supermarket aisle, and there

would be sign that said "Coffee" and when you got on that coffee aisle, there would

be cans of coffee. Then, there would be canisters or bins of whole bean coffee. Then, there

were 1 pound bags of coffee. Now, you're going down, and you're actually seeing boxes of

coffee, and within the box of coffee are these single capsules. Within 5 years, you will

not even see whole bean, bulk coffee line priced in any supermarket in the United States.

Dave: Wow. Dan: Those are dying quickly. 1 pound bags

of ground coffee ... It used to be just whole bean, but ground coffee is now taking over.

Cans are going by the way. For example, Folgers in about 10 years ago, invested tons of money

in their new can. It's a plastic ... It looks like a paint can for cripes sakes. They-

Dave: It is Folgers I mean. Dan: This is what for 3 million dollars’

worth of design get you? People can't wait to empty it out, the coffee, so they can use

it as paint can. They made the switch recently and said all of their focus is going to be

on single cup performance. This is a huge deal, huge deal. Craft is now getting into

it. Most of us never saw this coming. The other thing about Americans, which I love

to disparage our fellow citizens, is that first of all, no matter how much you try to

force us, we refuse to learn the metric system. It's foreign to us. It feels foreign to us.

We don't like it. Dave: It's like learning French or something.

Dan: It is. I absolutely ... Something that doesn't belong in the United States, even