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Cascade Coffee:
Toll Roaster and Private Labeler of Specialty Coffees
By Joel Starr with Timothy J. Castle

Phil Johnson of Cascade Coffee, and his lengthy career in the field, have had a lasting impact on both the commercial and specialty coffee segments of the coffee industry. As the inventor of the “bulk, self-service coffee bin,” his influence is seen in nearly every grocery store in North America.

Whether you are “for it or against it,” the ubiquitous sales medium provides either an opportunity for sales or an opportunity for a marketing “foil” to reflect your own product against. Long out of the self-service bulk coffee bin business, Phil Johnson now works with Cascade Coffee in Everett, Washington. We recently spoke with him and his associates Tim Kirstein and Greg Thayer to learn about Cascade as well as Johnson’s history in coffee.

“My first entry into the coffee business was in 1977 when I went to work for Goodhost Foods,” Johnson told us, “it was a privately held company owned by the Slater family in Canada. My background had been consumer products sales to supermarkets and I wanted to get back into supermarkets,” said Johnson. “While working for Goodhost, I developed the bulk, self-service coffee bin concept that was executed in the first stores in the Northwest in late 1978, early 1979. It was rather slow at first and there were a lot of details to work out such as who supplies and maintains the equipment; how the product would be priced, etc. Through trial and error over the next year or two, the distribution system became defined, although products themselves constantly rotated. By 1981 we were in approximately 125 stores under the Goodhost name. In 1981 the company decided to sell the U.S. branch that I had developed for them and I ended up purchasing the retail sales division, which became Millstone.”

Vive Le Resistance!
In the late 1990’s, specialty coffee matured and locally roasted coffee became available in more and more areas and the bulk, self-service bin became the pariah of the small batch specialty roaster. Johnson commented, “The resistance to the bins is flattering on the one hand and on the other hand its sad. When Millstone was a privately held corporation, we had very strict standards on freshness. We had wonderfully expensive computer systems that allowed anyone in the chain to see how fresh the coffee was at the point of purchase. I think that now the proliferation of brands in stores doesn’t ensure freshness. There are very few companies that directly drop-off their product at the point of purchase, the rest goes through the warehouse system, and at that point the roaster has lost all control over freshness. If it goes into a store, they don’t know what that store does with the individual items.” Johnson continued, “Early on in developing Millstone, we realized that if you’re roasting the product you can control what you buy and how you roast it, obviously. If you deliver it to the store and you maintain the equipment and you are computerized - you can know how old it is and you set a standard and you pull it when its past its point of no return. I don’t believe that was being done in the late 1990s. There was never a back stock of product at store level, the coffee came in right off the truck. As we expanded, we added foil packaging and nitrogen flush to maintain freshness. The target time to get it in the store wasn’t a huge issue, it was never older than two weeks old and that product was in an oxygen-proof foil bag, once it was in the bin the degradation process began because air got to it. The bins were cleaned by our reset crews that went around to various stores on fixed schedules. They took out the bins, swapped them out and cleaned out the dirty bins at the warehouse - that way it didn’t create any problems for the store staff. It was an absolute no-brainer for the stores, we did everything, put in the equipment, we maintained it, we guaranteed the sale of the product and gave credit on unsold product,” Johnson summarized. And there you have the story of how untold millions of pounds of coffee were sold on the basis of one man’s simple idea and his willingness to execute it.

Millstone to Cascade Coffee
Once Johnson bought the U.S. retail division of Goodhost, his business really took off. “I founded Millstone in 1981, we focused on grocery retail and in 1995, I sold Millstone to Proctor & Gamble. We started up Cascade the very same year.” Johnson told us. “We formed Cascade with the part of Millstone that Proctor & Gamble didn’t want and those parts were: an office coffee division, a private label division and a toll roasting division. They didn’t want to operate the roasting plant, they just wanted the brand name, the distribution system and the people that knew how to run it. We roasted for them for a period of almost 10 years. They’ve since transferred all the roasting to New Orleans.”

Cascade isn’t just a coffee company; it’s a coffee company in which many of the employees are shareholders. “When we formed Cascade it had to be valued, when the evaluation people came in to do their work and the value was established, I told the employees that they weren’t going to have jobs with Proctor & Gamble, and I offered to let them buy in. I said I’d be a 1% owner if need be, but I told them I didn’t want anything to do with the day to day operations, They did it, they bought in and they’ve been running the business ever since.”

So, if Johnson doesn’t run the company, what does he do? We thought the same thing and asked him, “As the chairman, I advise the company. I’m there to help whenever possible… when I’m asked and sometimes…when I’m not.” He said, only half-joking.

When Your Business Has Too Much Business
Tim Kirstein, president of Cascade along with Greg Thayer, the vice president, told us about Cascade’s enigmatic role in the coffee business today, “A lot of our customers are already roasters but they don’t have the ability or capacity to grow, so they come to us. We do big stuff for the small guys and small stuff for the big guys, or any combination thereof. One thing that stands out about Cascade Coffee is that the root of what we have is centered on quality. We’re not playing little league ball here, you’ve got to have clear auditing and robust quality systems or you wont get a chance to play in this market,” Kirstein said. Thayer added, “We are probably more a toll roaster than a private label operation. Let’s say you are a coffee company and you can’t produce a product that your client wants. We’ll take your green coffee and roast it to your specs, we can then package it the way you want it. Or maybe we are closer geographically to a market that you just opened up. Maybe your company is completely tapped out, they have no capacity left but they still have rising demand, in this case they could go to a toll roaster. Usually, a private label company enters into an agreement with a large company that wants their product produced under their label. A toll roaster may only do certain things for certain companies and it may be sporadic. We’re constantly juggling new products and new clients and the brands we produce prefer anonymity, so unfortunately we can’t mention who they are.”

Kirstein elaborated, “We don’t produce a branded product, we still produce the office coffee that gets the name ‘Compass Creek,’ but there is no coffee branded ‘Cascade.’ We have about a 30 million lb. annual capacity. Capacity is limited by the packaging.” Thayer chimed in, “If we’re doing 1.75-oz trial size bags, we won’t get anywhere close to that number. Phil really pioneered the bulk coffee with 5-lb. bags but the market today is convenience oriented. 85% of what we do is ground coffee. Roasting to highly specified profiles and then grinding it to another profile as well, and we have a significant flavored coffee segment.” Kirstein added, “We also have a great, state of the art flavoring process and we’ve been able to do a lot of flavored coffee and our packaging capabilities are diverse. We can do pods, filter-packs to 12-oz. packs, trial size and 1.75-oz. portion packs for the office coffee services. We still do the bulk 5-lb. and 2.5-lb. packages that go to grocery bulk business and espresso business. We want to do business with everybody that’s in the coffee business. All the people you might think about in the coffee business, we can do something for them,” said Kirstein, “Our brand is your brand, because we don’t have a brand.”

Equipment, Suppliers and Certifications
Cascade Coffee works closely with its equipment suppliers in order to maximize their company’s efficiency and growth. “We have six grinders, in 1999 we had two grinders. The grinders are Modern Process 777’s and 888’s. The roasters are Jabez-Burns Thermalo and we have one Probat 1500 R. We also have some machines from Quality Packaging; three ICA’s for packaging stand-up retail packs and 1.75 mini-brick and 12-oz. retail bags; and an OMAG that makes filter packs,” Thayer informed. “We built this plant to the size that it is in a way that a lot of people couldn’t do. We built this knowing that there was a place for private label and custom packaging,” said Kirstein, “we’ve got all the certification coffees and roast them all as well as conventional coffees. Various customers have certain auditing requirements, and we’ve spent enormous resources gaining various certifications, we are FPA and AIB (auditing processes) and we’re organic certified for roasting and packaging. We do caffeine analysis on coffee. There are a myriad of tests we perform on site. We do Agtron, another color spectrometer test, a sieve test, whole bean break-up tests, moisture analysis, oxygen analysis - there is so much science going on now with coffee, and obviously we have a team of coffee cuppers that test every roast.”

Thayer spoke of the importance of relationships among his companies suppliers, “Quality Packaging, Ultra-Flex and ourselves, have worked together many times to provide great service to our customers. We have four qualified film suppliers near the facility. The relationship building and customer sharing between us is very unique. The coffee world is pretty small, The fact of the matter is we have customers that specify the film supplier because of relationships, or the design is pre-existing, etc… whatever the customer wants, we will do, the same can be said for the types of flavoring we use, the types of valves that we use. “We want to be a solution provider,” Kirstein added.

Trade Secrets
“We can never tell you who our customers are because that’s confidential,” Kirstein told us. “We’re very careful about who we let into the plant - there are no tours…guarding customers confidentiality is extremely important to us. Our customers want their products and trade secrets protected and our security is one of our biggest selling points.”

The Cascade Brand
Cascade’s management told us they did not have a brand, but that does not seem to be exactly true…their brand, CASCADE, stands, by all indications, for quality, integrity, value and experience.

Timothy J. Castle is a past president of the SCAA. He is currently the head of Castle Communications, which specializes in marketing and publicity for the coffee and tea industries. He is a regular writer for Tea & Coffee Trade Journal. Joel Starr is a long-time Barista. He is currently a sample roaster and cupping assistant at Castle and Company in Los Angeles, California when he is not attending to his blog www.thirdwavecoffee.net.


Tea & Coffee - May, 2008
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