Blue Bottle’s Growth Spurt

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[O]ne development yet to happen in third-wave coffee, and its absence may be one of third-wave’s defining traits, is a craft-focused, direct-trade-roasting, single-origin-brewing, bespoke-shop coffeehouse chain going national. Sure, some companies send out café colonies, but a countrywide map of their territory only has pins on their hometowns and Manhattan (maybe also Chicago and Seattle). None of the companies has even pin-cushioned a large region. So when Blue Bottle Coffee announced they were expanding into LA, and then last month announced they weren’t just expanding but buying two companies in the process, it represented a huge burst of growth.

And because of Blue Bottle’s recent, unprecedented fundraising, this is likely the first of many, many announcements. In 2012 Blue Bottle raised $20 million from investors and in February they announced another $25.75 million, much of it coming from venture capitalists. The company expects the recent round to fund up to five years of growth.

This is the first big purchase since then. Blue Bottle bought Handsome Coffee Roasters and the online coffee subscription service Tonx. Both will fold into Blue Bottle, with Handsome’s roastery and retail space becoming Blue Bottle’s first LA coffeehouse and the Tonx team starting a software and technology department while rebranding Tonx as Blue Bottle. (Along with the mergers, Blue Bottle announced it will open a roastery in Tokyo, something of a spiritual homecoming for owner James Freeman, who was inspired by Japan’s coffee culture.)

The news of the deal broke on Fresh Cup’s deadline, and we couldn’t reach Freeman to ask about his plans before press time. Likely, he would have kept his cards close, as he has in other interviews. “Could we be the first twenty-store chain, or fifty- or 100-store chain that doesn’t suck?” he said in a New York Times Dealbook article in February, leaving it a mystery whether or not he would try. Talking with Slate in March he said, “The question I keep getting is, ‘How are you not going to screw this up?’… And the answer is, ‘I don’t know!’”

It seems one answer is to expand down multiple paths. The Handsome purchase builds a solid brick-and-mortar base in a major market, which is in line with Blue Bottle’s past success. The Tonx crew, though, brings a new dynamic with a powerful and proven platform for online retail, which surely warms the techy cockles of Blue Bottle’s venture capital investors. Then there’s the company’s ready-to-drink New Orleans iced coffee, announced in March.

Whether or not Blue Bottle goes for filling the map with pins, they have the cash (and investor expectations) to expand. It’s the first test if a company can go big and stay third-wave.

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Cory Eldridge

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