Blue Bottle Worth $700 Million?

I know this was announced a little while ago, but I thought it was worth discussing. A lot of this applies to other companies in coffee too. Would love to hear people's thoughts and feedback.

Music:
"Quotes 2" by Anders Bothén

[MovieRantMatt]

Great synopsis of the thought process behind the acquisition of the majority of shares. I am a bartender, and a barista at Blue Bottle coffee and have currently been with the company for about 2 years. I have had my own struggles comprehending business choices, and the methods they have been implementing, but I have stayed with them because of their ability to hire amazing people. Then the Covid-19 issue hit, and all the cafe's have closed... and we ARE STILL BEING PAID. As long as we continue our education through supplied curriculum, and do our weekly call with our manager, we are being covered, and THAT is rare and amazing. It shows a lot about the character of the company, and I am honestly very grateful. Lol, never thought I would miss those lines to the door...

[KostasSiderisBarista]

Blue Bottle is the Apple of coffee. Not the best coffee (as Apple doesn't sell the best tech), but same marketing strategy. Their marketing strategy doesn't focus on the product specs. They focus on passion, ethics, culture, morals. They find things to connect people and attach themselves to the brand. These brands are the future of marketing. Beyond the product...

[manalicream]

Good video. Hair looking particularly excellent in this one.

[marshallfuss]

Brilliant analysis, James. They are also fanatic about keeping their online customers happy and accommodating their requests.

[lciamp]

Everything you are saying is true. But honestly, I love Blue Bottle because they teamed up with Humphry Slocombe to make the best coffee ice cream ever.

[GrimJackien]

Thanks. I think it is a great summarisation of Blue Bottle. My introduction to blue bottle was when I lived in the states and was a tonx customer. Honestly, I loved my Tonx subscription, and while I am a very happy customer of hasbeen for longer here in Europe, I feel some of the best regular high standard coffee I have tasted has been from Tonx (I have had better coffee made for me, but a regular high quality to show up on my doorstep, I found Tonx to be the best). After Blue bottle purchased Tonx, there was a notable drop in quality (not to bad or even average, but no longer a sizeable gap to everybody else). While I did enjoy the blue bottle book, I did find some of the methods a bit focused on trying to promote their method rather than truly informed (on a side-note, I did find the first edition of your book one of my favourite coffee books. I did not know you were the author when I found your channel, but your passion and knowledge shines through in both platforms, and your choice of packaging / binding for the book an absolute ingenious choice). I think you are absolutely correct that for people who are not passionate about coffee, but want a better cup of coffee than the regular chain coffee-shop, blue bottle has become the choice for them. The only similar comparison I can make is with how Rolex is viewed by people who are not passionate about watches. Rolex is viewed as the one of the best, if not the best watch manufacturer, by the general public, but to the people who are truly passionate about watches, they could a lot of better watchmakers and just view Rolex as a well made mass produced (i.e. not hand made) watch. I do think that Blue Bottle have to be commended on their marketing and the brand them have created, and while to the people who are passionate about coffee, they will probably never be viewed as the best, but I think they will help to get more people interested in coffee, and help to grow the market for truly great coffee.

[lorenmark]

I absolutely dig you, James.

This is a well thought out video, although branding alone is insufficient to keep consumer loyalty in knock-off brand product creep.

There must be something inherent in the product that is very difficult to replicate. It’s do-able, but extremely difficult.

[frankrachlitz]

Good insights. It think Blue Bottle’s ability to also bring “speciality” into retail supermarkets also plays a part. I think BB have been some of the first at a large scale to bring in Coldbrew (in the milk cartons) and with perfectly ground you again have a possibility to premiumize the growing coffee category in supermarkets - combined with the Blue Bottle brand.

[ianholiday]

I had never thought of Amazon being a (prime:) driver for Nestle buying Blue Bottle, and in turn generating such a high valuation. I get that BB has created a strong brand identity with a cult following, but not sure how it will help Nestle battle Amazon in the online retail game. It would be more interesting if Nestle Doubled down on the DTC model, in their own right, and really made an effort to go around Amazon, using social media, e-commerce, and developing their own technology to stay closer and more connected to their customers. Unless BB is able to come out with some amazing DTC product, or they are able to scale their cafe's at a fast clip, I don't see how Nestle can leverage BB brand in such a way as to justify the $700mm valuation.

[edwardwong]

I used to go Blue Bottle in Oakland where James (Freeman, not Hoffman, although I confuse them all the time) off of Mandela Pkwy and buy micro-batches every week back in 2009 AD. And then he opened a great cafe in downtown Oakland, where Gov-elect Brown dropped in casually and hit on my wife. And we both voted for him. Blue Bottle - great brand. And James just explained why they opened one of their first international cafes in Japan. They reflect the Japanese culture of perfection, and likewise, they appreciate Blue Bottle. I am also a Nespresso and Starbucks fan but for different reasons. Interesting insight by James.

[dickarbot]

First the german Reimann family invests a fortune in "Speciality Coffee" buying all the Brands in America. At the end of the day, they had a bought a base that Nestle really got interessted in. Afaik, german Reimanns & swiss Nestle it took them month to negotiate a deal. As Reimann familiy is worth 30 Billions. you need to come up with a real number to get them interessted. While 700.000.000 is an insane amount for us, for them it's peanuts. With all this Reimann's now took in another 40 Billions of investments so theses days JAB has a staggering 70 Billions on hand.. The big question is: what happens next? James, I really cherrish your view on that transaction and want to thank you for sharing it. It sparked the need to thinking of communicating to customers in 2018. These days the big chains are copy the speciality coffee communication. It's a about time to reset our communication.

[jazzfeyer-salo]

Thanks for the thoughts! I was hoping you would bring the amazon/online/pods connection back around at the end of the video. Left me unsure of the connection between blue bottles brand potential and the necessity of brand wrt amazon/online pod sales.

But it’s an interesting connection I hadn’t considered!

[ncooty]

Interesting, but very abstract, particularly for viewers unfamiliar with Blue Bottle. More examples might have made this more accessible.

Also, there's a big difference between paying $700M and buying a majority stake based on a $700M valuation, particularly when both parties are then incentivized to overstate the valuation. This reminds me of WeWork. People love selling hype when they have no real value to offer.

[oompaloompa]

Another reason might be but correct me if i’m wrong as I’m not overly familiar with the american coffee culture is that there is not an abundance of good reliable independent coffee shops. For example where I’m from in Sydney, Australia within a couple minutes walk you’ll have over 40 coffee shops which basically all make a decent cuppa. There is no room for a blue bottle over there. However, I feel blue bottle as a chain are or have become one’s go to (independent) coffee shop in the states.

[basenjibill]

Great analysis, James. Acute reasoning, as usual.

[wertyk]

I think it's Starbucks that should be worried about BB cafe's all over major cities in the US and later other countries.

[garrettcphillips]

So does Nestlé own the company or the blue bottle still have it in Nestlé just buy used a company?

[shumakriss]

I had a subscription to both Atlas and Blue Bottle for a period of time and found a lot of great coffees from Atlas. They're both about the same price. Do you have any opinions on subscription? Are you planning on making your own subscription service anytime soon?

[Crazee]

Wonder what your thoughts are on Campos coffee

[coffeebarguatemala]

An interesting point of view. Thank you for sharing it.