for its stockholders. Partially because of increased competition from McDonald’s and Dunkin Donuts, traffic at stores open in the past months had fallen and measures have been taken to close 600 stores and cut costs - the mega chain’s first drop ever.
This announcement followed an article in Consumer Reports that concluded that McDonald’s coffee tastes better than anything Starbucks brews. That was music to the ears of Daniel C. Cox, the gregarious 59-year-old president of Vermont’s Coffee Enterprises. “We’ve spent an enormous amount of time in the last year and a half working with McDonald’s,” said Cox. “Their revenues have gone up dramatically, about 21% in coffee sales alone in one year. When you multiply that by 13,500 locations in the U.S., it’s enormous.”
Cox recently spoke with Tea & Coffee Trade Journal when we paid him a visit at his company’s gleaming new headquarters overlooking Lake Champlain in Burlington, Vermont. In fact, Cox’s office is so close to the lake that from his desk, you can’t even see the shore - just New York State on the lake’s distant edge, 10 miles away, and uninhabited Juniper Island in the foreground. “My number one job is to set the culture,” he stated. “My second job is to make sure we run profitably. My third job is selling and my fourth job is senior cupper, so I get called in constantly for arbitration.”
Originally from Buffalo, New York, Cox has lived in Vermont for the last 40 years and got into the coffee business quite by accident in 1980, while he was a 31-year-old career counselor at Norwich University in Northfield, Vermont - and still only a casual coffee drinker.
A chance racquetball game with Doug Balne led to a job offer, and Cox became the very first employee of Green Mountain Coffee Roasters, which at that time was owned by Balne and his wife Jamie. “I worked for Doug for free for a week, at a little strip mall in a seasonal tourist skiing town,” he recalled. “I was just divorced, age 31 with no kids, I had $10,000 in my pocket and so I took a chance with him.”
“Bob Stiller came in nine months later. Bob and I were partners for 11 years,” he said. “By 1992, we were doing $13 million in annual sales, making money in wholesale, breaking even in mail-order but losing in retail. The last year, things disintegrated. He wanted to go full forward with retail stores, but we already had seven stores and five of them weren’t working. We had a very unpleasant parting, and for two years we didn’t talk,” said Cox. “But now we’re friends, and he’s one of my clients.”
So is Dunkin’ Donuts, which comprises one-third of his business. Dunkin’ currently has over 7,000 stores worldwide, and 2006 revenues of $4.7 billion. It bills itself as “the world’s largest coffee and baked-good chain,” serving more than 3 million customers per day.
Another leading client is Wawa, a convenience-store chain with 563 outlets in five states and $6.2 billion in annual revenues. Wawa claims it sells over 125 million cups of freshly brewed coffee each year.
All told, Coffee Enterprises has 60 clients, 11 employees and annual sales of “$3 million and up,” which is as specific as he would get. The company has three divisions: coffee extracts and ingredients, coffee analysis and coffee litigation.
Cox said his testing division “was growing by leaps and bounds,” forcing him in July 2006 to vacate the Victorian mansion in downtown Burlington he had housed his company in since the beginning for something bigger.
“It was a fantastic house for our headquarters, but not good for the lab,” he said without a touch of nostalgia. “How we did not hurt somebody in 10 years is amazing.”
The new headquarters covers 9,000 sq. ft. on two floors and is filled with unique touches - such as coffee paintings from Costa Rica, Inca statues from Peru and coffee bean sculptures from various African countries. “Having visited at least 161 coffee companies, I knew what worked and what didn’t work,” said Cox, who has traveled to 19 coffee-producing countries.
The first division of Coffee Enterprises is extracts, usually sourced from organic Fair Trade cooperatives in Mexico. This division accounts for 60% of company revenues.
“We send this coffee out to a co-packer, which produces it into an extract which we sell to the dairy industry,” Cox explained. “Any ice cream that has a coffee flavor from Ben & Jerry’s is ours. We also sell extract to another 20 companies that make it into ready-to-drink beverages.”
The second division, coffee analysis, accounts for 35% of sales. Cox says his is the largest private independent coffee-testing company in the U.S. “We have more equipment than I know what to do with,” the coffee maven joked as he led this reporter on a tour of the facilities. “We’re fully staffed and we use a team approach. We do physical, chemical and sensory testing. We test the green as well as the roasted and packaged product. A slow week is 60 man-hours, and sometimes we do 80 to 90 man-hours per week.”
Cox says he has three or four competitors nationwide, one of whom is a former employee, Mané Alves, who now runs Coffee Lab International in nearby Waterbury, Vermont (see sidebar). “A lot of guys get into the coffee-testing business because they’re retired, and they say they can taste your coffee and evaluate it. That’s not what we do. We take it to a much deeper level,” he said. “It all starts with specification. If your coffee doesn’t have it, we can create one.”
Cox said his standard testing, “Is kind of like having your blood analyzed,” he said. “We test stuff in minutiae because all the little pieces give us the big picture.”
But it’s not as simple as it looks, he cautions. “We use traditional food-science protocols and bench top organic chemistry to work with coffee, which is different from most other guys,” he said. “When someone says, ‘Look at this coffee and tell me what you think,’ I tell him that we don’t do that, unless the customer wants a very general overview. We’ll tell you whether your coffee falls into one of three categories: commercial grade, premium grade or specialty grade. But if you really want to know what it’s like, we give you something to compare it to. And then we’ll rank it from there. But it’s not fair to take coffee as a standalone and say whether it’s good or bad.”
He added, “We don’t use a ‘golden tongue’ approach, where one person makes all the decisions, and you’re totally at the mercy of that person’s skill set and availability. Rather, we have a 100% shared philosophy. If you know something that pertains to your job, it’s your job to share that information. If I find somebody hoarding information, they’re out of here.”
While Starbucks obviously competes with Cox’s largest clients - McDonald’s and Dunkin’ Donuts - the world’s largest coffee chain isn’t exactly a competitor since Cox does not sell coffee. “Starbucks is a closed community. They mostly get their coffee from Central and South America - the same with Dunkin’, though their recipe is different,” he said. “They have very extensive labs and four different roasting locations. Every once in awhile, Starbucks calls me, but it’s usually to confirm something they already know. They don’t let anyone inside.”
Cox says he gets interviewed at least 15 times a year by major media outlets including the Washington Post, the New York Times, USA Today, Advertising Age and Good Morning America.
But those interviews rarely have much to do with coffee testing; they’re usually about lawsuits in the news, which is the focus of the third division of Coffee Enterprises: strategic planning for large coffee companies and providing expert testimony in coffee litigation cases (comprising the remaining 10% of company revenues).
“At any given moment, I’m handling four cases - people who have been burned with coffee, and I usually represent the defendant, which is the coffee company,” he said.
Asked if he ever takes cases against a coffee company, Cox replied, “The only time I think somebody has a reasonable claim to compensation is if the pot disintegrates or the bottom falls out.”
Coffee Enterprises, 32 Lakeview Ave., Burlington, Vermont 05401. Tel: +1(802) 864-5760, E-mail: email@example.com