Business

Treasure Valley coffee titans find ways to hang on as global forces, out-of-state competitors put on the pressure

The locally owned segment of the Treasure Valley’s coffee scene is dominated by three roaster-retailers: Moxie Java, Dawson Taylor and Flying M. They’re not quite rival empires, but they’re not friends or allies — except in their shared roles as locally grown powers fighting to thrive as competitors and economic forces squeeze them like a French press.

Competition from Starbucks and other players has forced all three companies to nail down their niches. Moxie Java is theIdaho chain with a fast-casual concept and 66 stores in the United States. Dawson Taylor gets the customers who don’t mind paying extra for one-of-a-kind coffees and more expensive coconut syrup for their lattes. Flying M is the iconic urban coffeeshop that wants to stay small and local.

The financial monster they’re all facing this year is coffee prices. Because of external factors like commodity speculation, high global demand and limited supply, the cost of a pound has doubled since last year. That is driving up every roaster’s expenses, meaning both the little guy and the big chain are charging more for a cup and hoping they don’t lose customers as a result.

For the two main roaster-retailers, Dawson and Moxie, spiking prices lent an urgency to searching for creative ways to grow. For the smaller Flying M, expenses went up 7 percent last year, making the business’ 8 percent sales growth basically a wash.

The companies couldn’t be more different, starting with the beans.

Moxie buys its beans from Royal Coffee in Emeryville, Calif., which imports from the usual suspects — Africa, Central and South America, and the Far East, plus fair trade and organic.

Dawson Taylor buys direct from small growers around the world, sometimes after the owner has flown out to sample them in person.

Flying M started roasting its own beans in Nampa in 2006, when it merged with Purple Bean Coffee. Roasting occurs three days a week.

MOXIE: FEELING OUT A GLOBAL MARKET

Moxie is based in Garden City at a “World Headquarters and Multi-Use Facility” on a lonely stretch of Chinden Boulevard. The building doubles as a low-lit bistro with a drive-through window. It sells coffee alongside quiche and gelato.

A door behind the Moxie bistro opens into a maze of industrial shelving. Beans are roasted there in small batches and packaged with color-coded labels. Moxie merchandise sits ready to ship in boxes.

Wearing jeans, a Bluetooth earpiece and a white mustache, Rick Dean is the head of the Moxie empire. His wife, Stephanie — also in jeans, with a brunette bob and delicate features — handles marketing and development, including recipes.

This month, they have an intern from Taiwan, Sara Lu, who they hope will help them push into the Asian market. They are big on charity and helping out local causes such as the Susan G. Komen Race for the Cure.

The Deans left the farming industry a decade ago, after about 35 years growing wheat, barley and lentils, and manufacturing farm equipment. They were sick of government subsidies and interference, and coffee seemed like a good second career, they said. The first Moxie shop opened in 1988 on Main Street in Boise, selling coffee roasted by White Cloud Mountain Coffee, another local bean titan. The Deans bought Moxie from White Cloud in 2001.

They are serious about staying competitive. They keep an eye on other companies’ coffee pricing. Through a “secret shopper,” they learned about the Dutch Bros. espresso-making process.

Rick Dean said the stores are up about 5 to 8 percent in coffee sales this year. One that opened in late 2009 grew 37 percent over last year at this time; the economy was so bad when it opened that sales couldn’t go anywhere but up, he said. Average earnings are up 7 to 8 percent from last year, he said, but he declined to disclose revenues and profits.

The bistro on Chinden started a full menu of food in 2006. Other shops have a smaller, cafe concept with just pastries and wraps. Selling light, quick meals “seems to be more or less the direction we’re going,” Dean said.

He and Stephanie are eyeing the Asian market. They are shopping around for a “master franchiser” and studying the markets in Taiwan and mainland China.

Why there? Rick Dean believes “the Chinese mainland is, I guess you’d say, very underserved with coffee” while “the Asian population is becoming more coffee conscious.”

DAWSON TAYLOR: HIGH-END AND DO-IT-YOURSELF

About 2 miles east on Chinden is Dawson Taylor, a company that Seattle native Dave Ledgard started 16 years ago and named after his son.

Its home base is at the dead end of West 38th Street. Ledgard shares a small office there with a former barista who worked her way up to a top sales position — partly because, he says, she never has a mean word to say about anyone.

But most of the Dawson Taylor building is a roasting room. On a recent weekday morning, the head roaster, sporting a shaved head, ran sacks of beans through a machine while listening to Rodrigo y Gabriela, a Mexican acoustic guitar duo with heavy metal roots.

Ledgard has 26 years of experience in the coffee biz, working for Hawaiian and Costa Rican companies, Seattle’s Best and, for about nine months, for the company that owned Moxie Java.

He is proud of the brand he started in his garage. He makes a point to use real butter in his muffins, Idaho-made honey and preservative-free flavored syrups. He says the baristas never make mochas with chocolate-flavored syrup, though — only real chocolate.

“I’m the most expensive coffee in the state of Idaho. And we’re worth it,” he said.

That’s not true for everything. A 16-ounce cup of brewed coffee from Dawson Taylor is $1.85, same as Moxie Java. One place they diverge is the latte: Dawson’s 16-ouncer costs $3.20, and Moxie’s is $2.95, but their espresso content differs.

Ledgard has a coffee obsession and a drive to excel. He says his business is “the underdog” even though it has 300 wholesale accounts in five states. He sells about a quarter-million pounds of coffee in Idaho each year. Calling his role “coffee hunter,” Ledgard says he once met with 55 different growers in Colombia during a painstakingly coordinated trip and bought the entire production of four families.

Wholesale buyers make up about 70 percent of Dawson Taylor’s business. Those sales dropped about 15 percent in 2007 as local buyers folded — wholesale is back up to normal levels now — but the coffee shops themselves kept growing every quarter, Ledgard said. One drive-through store is up 19 percent this year, while the Downtown store “is a challenge” but still manages to sell about 1,000 cups of drip coffee per day. Ledgard declined to disclose earnings and revenue. He did say expenses have gone up from 6 to 9 percent every six months.

The business is now latching on to grocery store, brew-at-home coffee as its profit-margin protection plan. Ledgard explains that more people are brewing at home, “so why wouldn’t I target grocery stores?”

The Dawson Taylor brand was already in local indie groceries, like the Boise Co-op. Now Ledgard wants to break out and put special display cases in from 12 to 15 more stores in Wyoming, Utah and Nevada. Putting displays in stores outside the Treasure Valley, like Ridley’s Family Markets, will help the brand’s exposure, Ledgard said, but he’s trying to be careful not to grow too fast.

FLYING M: THE SMALL, COMMUNITY COFFEE SHOP

Flying M owners Lisa Myers and husband Kevin don’t really see a reason to grow right now. They have two popular shops — a Nampa coffee garage and a Downtown Boise coffee house — that are at least as much gathering spots as places to nurse a cup of joe and get a Wi-Fi signal. The Nampa cafe has live music, comedy, a spring fashion show and a holiday crafts show.

“Kevin and I feel pretty strongly that the owner is a part of the everyday business, so we’re having a hard enough time stretching ourselves between the two places,” Lisa Myers said.

The Flying M, named after the cattle ranch of Kevin’s father, has baked its own food since the mid-1990s.

“We have a diverse and eclectic group of customers — loyal customers — and we’ve been here 20 years,” Lisa Myers said. “Who we are is more about the community.”

As a result, the Myers’ roasting operation is smaller scale than others. Flying M roasts only a few days a week. Most of that is for the coffee shops, but there are wholesale buyers, including the Boise Co-op, Alia’s Coffeehouse, the Calvary Chapel and a kiosk at the mall. Some have been buying Flying M beans for more than 10 years.

“The wholesale (side of the business) is more word-of-mouth, and a lot of the accounts I have, I’ve just come to know them personally as well,” said Kevin Myers, adding that Flying M doesn’t actively seek wholesale buyers. “We’re probably the smallest roaster in town,” he said.

Since they’re focused on the “downtown experience” of an urban coffee shop, retail provides most of their sales, Myers said. Gross annual sales for both stores are currently about $1.8 million, Myers said. Sales have grown every year since the business started. Unfortunately, expenses are up, too. Myers plan to raise their prices in the next few weeks or so. The 16-ounce drip coffee that costs $1.70 will go up 10 or 20 cents.

Coffee is at a price we haven’t seen since the mid-1970s, according to the International Coffee Organization, and the local roaster-retailers are passing on some of that to customers.

The average Boisean, no matter how addicted, won’t absorb all of it. But for many people coffee is a habit, a treat, a vice, even an antidepressant — so coffee did pretty well through the recession and continues to thrive, giving local businesses enough revenue to stretch out a little.

“In a bad turn of the economy, there’s about five things that hold well: tobacco, alcohol, caffeine, gambling and sex,” Ledgard said. “They’ll still buy that coffee that gets them through the day.”

Audrey Dutton: 377-6448

  Comments