THE BUSINESS OF COFFEEQUARTERLY – ISSUE 01 – 201916Starbucks EMEA President Martin Brok on developing Milan’s Reserve Roastery 26Interview: Nicholas Stone, CEO and founder of Bluestone Lane 40Why the coffee industry must act to secure farmer profitability at originCathedral of CoffeeSTRAIGHT-IN PORTAFILTERULTIMATE WORKFLOWDRIP PREDICTIONGROUP STEAM FLUSHkb90.lamarzocco.comtailored to suit the needs of the world’s busiest cafes, making espresso preparation easier for baristas. the straight-in system is designed to simplify the motions required to engage the portafilter and reduce the strain on the barista for even greater performance and everyday usability. EDITOR'S LETTERJeffrey Young – CEO & Founder – Allegra GroupWelcomet gives me great pleasure to introduce the first edition of 5THWAVE. When Allegra began researching the coffee shop market 20 years ago, the industry was a very different place. Starbucks had not long entered Europe and many consumers were getting their first taste of café culture, which has become so intrinsic to lifestyles today.In 2019 we’re fortunate to live and work among a vast global network of coffee professionals continually pushing the envelope on quality, service and product innovation. From international branded chains to boutique artisans, the global coffee market has never been more diverse, quality-driven or accessible. Today’s market is full of opportunity, but it is also harder than ever to deliver true innovation and there is no room for complacency. Intensifying consumer expectations, skills shortages, economic pressures and rising costs along with sustainability factors and rapid social change mean continual improvement and fostering customer loyalty isn’t just good practice; it’s a business necessity.With this in mind, 5THWAVE brings you the very latest inspiration and thought leadership from the businesses shaping a new era for coffee shops and hospitality. In our first issue we explore how Starbucks’ Reserve Roastery in Milan is elevating the brand to new heights and courting a new generation of Italian consumers. You’ll find inspiring leadership lessons from top CEOs along with insights from game-changing café concepts and the latest developments at origin. I hope you enjoy the issue.I03ISSUE 0104ISSUE 0103 Editor’s Letter08 ANALYSIS What is the 5th Wave?Our guide to the 5th Wave era of scaled boutique coffee shop and hospitality concepts11 INSIGHT Building an Exceptional Business Culture Seven Miles CEO Jenny Willits provides seven insights into promoting business growth and staff wellbeing14 DATA European Latte IndexHow many lattes can be purchased per hour on national minimum wages across Europe?16 COVER FEATURE Cathedral of Coffee Starbucks EMEA President Martin Brok on developing the magnificent Reserve Roastery in Milan 22 EVENTS Events CalendarA guide to the best coffee events around the world, including full Allegra Events details 24 EVENTS London Coffee Festival 2019 PreviewA preview of this year’s Trade Day and consumer line-up for coffee industry professionals ContentsPUBLISHER Jeffrey YoungEDITOR Tobias PearceART DIRECTOR John OsborneCover image courtesy of Starbucks / Matthew GlacPublished quarterly in the UK by World Coffee Portal © 20195THWAVE and associated logo are registered trade marksWorld Coffee Portal Ltd. Serendipity House 106 Arlington Road London NW1 7HP United Kingdom 1605ISSUE 014044NEWS IN BRIEFAT A GLANCE26 DATA UK Coffee Shop DataExclusive coffee shop market data from World Coffee Portal’s Project Café UK 2019 report 30 INTERVIEW Bluestone Lane Founder and CEO, Nicholas StoneThe entrepreneur speaks to us about scaling his hugely successful café concept across the US34 SPOTLIGHT Top 5 LA Coffee ShopsOur pick of the finest specialty and independent coffee shops the City of Angels has to offer36 FEATURE Frinj’s California DreamHow Frinj is building California’s super-premium coffee growing industry from scratch40 SPOTLIGHT Caravan’s Holy TrinityCaravan founders Laura Harper-Hinton, Chris Ammermann and Miles Kirby reveal how they built their brand44 FEATURE Building Climate Resilience in EthiopiaWhy a combination of climate change and low farmer profitability threaten the future of specialty coffee49 Q&A Project WaterfallWorking with coffee growing communities to improve health and wellbeing through clean water access52 Good Coffee Makes Great Art How The Coffee Art Project is supporting creative talent and coffee growing communities55 INTERVIEW Encounter Coffee Roasters, Dubai Industry veteran Jamie Elfman explains his role in importing Australian coffee culture to the UAE58 INTERVIEW Coffee Music ProjectFolk/Americana singer Daisy Chute reveals the secrets behind her 2018 competition-winning song entryUK Coco-Cola completes £3.9bn acquisition of Costa CoffeeThe US beverage giant completed its £3.9bn purchase of Costa Coffee after attaining regulatory approvals from the EU and China . “Our vision is to use the strong Costa platform to expand our portfolio in the growing coffee category,” said Coca-Cola CEO, James Quincey.SWITZERLAND Nestlé to launch first Starbucks productsThe first products developed under the $7.15bn ‘global coffee alliance’ will include ground, whole bean coffee and single serve capsules for Nespresso and Nescafe Dolce Gusto coffee makers and will be sold across 14 global markets.GERMANY JAB Holdings considers IPO for coffee divisionThe firm said the IPO offering could occur in the next 2-3 of years and would apply to its Acorn coffee and beverage division, which includes the $11bn Keurig Dr Pepper beverage empire forged in 2018. CHINA Starbucks opens 30,000th storeThe new Reserve Store in Shenzhen Bay Mix City forms part of Starbucks’ 3,600-store portfolio in China. The US chain has opened nearly three stores a day during the last 30 years and is currently opening a new store in China on average every 15 hours. Starbucks has also committed $100m to Valor Siren Ventures I L.P., a new fund that aims to ‘identify and invest in companies that are developing technologies, products, and solutions relating to food or retail’.NEWS IN BRIEFAT A GLANCENew100% organicalpro‘For Professionals’great in coffee Check alpro.com/for-professionalsfor inspiring recipes.withSOYwithSOYFOR PROFESSIONALSFOR PROFESSIONALS08ISSUE 01What is the 5th Wave?The 5th WaveTM reflects a powerful new era of scaled boutique hospitality and is the current ideology shaping business trends across the global coffee industry. Put simply, 5th Wave implies scaling up consistent high quality to achieve a highly successful, customer-centric and sustained business outcomeThe concept of 5th Wave was developed by Allegra Strategies consultancy and refined within Allegra World Coffee Portal following two decades of coffee industry research and analysis. 5th Wave is the culmination of all four previous ‘waves’ of industry development as laid out in the World Coffee Portal Stages of Coffee Industry Development Framework (opposite).The 1st Wave describes traditional 20th century coffee drinking and reflects differing historical cultures and geographies. The 2nd Wave is typified by the early growth of lifestyle branded chains, such as Starbucks Coffee Company, 3rd Wave by craft or artisan coffee, and the 4th Wave by the ‘science of coffee’. Each era has is merits and has added significantly to the depth and growth of coffee enjoyment.A reflection of the era in which we live, the 5th Wave represents a quantum leap in the calibre of vision and execution required to meet the desires, needs aspirations of today’s highly savvy and technically-engaged millennial audience and tomorrow’s Gen Z.Today’s 5th wave businesses create and consistently deliver highly-engaging and aspirational experiences to clearly defined customer target audiences. These forward-thinking businesses are highly commercial and possess the mindset to constantly strive toward excellence, meticulously engineering and refining every process. They are typically run by ambitious, well-funded entrepreneurial professionals who understand the importance of people culture, of streamlined systems and process, of training and development and investment into seamless, enabling technology – not for ease, but because of their obsession with winning positive customer experience.Quality and scale can be relative. 5th wave does not necessarily mean an offering needs to be inordinately expensive, nor does it need to be expanded across hundreds of outlets. Scaling quality for each and every customer interaction requires unflinching discipline, herculean stamina, authentic flair and relentless innovation.5th Wave is not just limited to the coffee sector. Numerous other industries deeply identify with today’s need to ‘scale up’ quality and heighten client experience in order to maintain a competitive advantage.These include sectors from retail to restaurants and hotels to fitness and technology. In the coffee sector, brands such as Blue Bottle, Bluestone Lane, Caravan, and Department of Coffee, and many others, are examples of smart businesses setting new benchmarks for quality and customer engagement. Equally, the Starbucks Reserve concept creates a new dimension of customer experience within the largest coffee operator in the world.Further detail will follow on the definition and characteristics of 5th Wave companies. No doubt this is only the beginning of the journey. In the meantime, keep your eye on the next big step in global coffee shop evolution – the 5th Wave, a new era for The Business of Coffee.CARAVAN COFFEE ROASTERSDEPARTMENT OF COFFEE & SOCIAL AFFAIRSLEADING THE 5TH WAVE 09ISSUE 01BLUE BOTTLE COFFEETAYLOR ST BARISTASBLUESTONE LANE TRADITIONAL COFFEE CULTUREBRANDED CHAINSARTISAN COFFEESCIENCE OF COFFEEBUSINESS OF COFFEE20TH CENTURYBEGINS MID-1990sBEGINS MID-2000sBEGINS 2010sBEGINS MID-2010s– COMMODITY-DRIVEN– MASS CONSUMPTION– DOMINANCE OF BULK BREW FILTER COFFEE– INTRODUCTION OF INSTANT COFFEE– RISE OF BRANDED CHAIN CONCEPTS– PROLIFERATION OF COFFEE SHOP CULTURE– CUSTOMISED ESPRESSO-BASED BEVERAGES– DEVELOPMENT OF '3RD PLACE' COFFEE SHOP ENVIRONMENTS– GLOBALISATION– FOCUS ON CRAFT– IMPORTANCE OF MICRO ROASTING– HAND-PRODUCED– ANTIPODEAN AND WEST COAST INFLUENCE– CULINARY APPRECIATION OF COFFEE– SOURCING TRANSPARENCY– SCIENTIFIC METHODS AND PRINCIPLES– ACCURACY AND MEASUREMENT IN BREWING– DEEP UNDERSTANDING OF PROPERTIES OF COFFEE AND INGREDIENTS – ATTENTION TO WATER CHEMISTRY– ADVANCED EQUIPMENT– BOUTIQUE STORE ENVIRONMENTS REPLICATED AND REFINED– OBSESSION WITH EXCELLENCE AND CONTINUAL IMPROVEMENT– COMMERCIALLY FOCUSED– CUSTOMER CENTRICITY– INVESTMENT IN TECHNOLOGY AND TEAM DEVELOPMENTRETAILS / SUPERMARKET BRANDSCOFFEE SHOP CHAIN BRANDSINDEPENDENT ARTISAN CAFÉS AND ROASTERIESCUSTOM IN-HOUSE ROASTINGSMART ASPIRATIONAL CONCEPTSFUNCTIONALLIFESTYLECRAFTSCIENCEAMBITION REFUELLINGENJOYMENTLOVEEXPLORATIONEXPERIENCE1st2nd3rd4th5thDefining CUSTOMER EMOTIONDEFINING CHARACTERISTICFOCUSPERIODFEATURESOPERATORTYPENext >