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John Battelle in conversation with James Freeman at NewCo Oakland 2015

This is an edited transcript of a conversation between John Battelle, NewCo Co-founder and CEO, and James Freeman, Blue Bottle Coffee Founder and CEO, at the inaugural NewCo Oakland in October, 2015.

John Battelle: It’s my pleasure to speak with James Freeman, the founder and CEO of Blue Bottle Coffee. James’s company has redefined coffee, and it’s based right here in Oakland. I wanted to chat with James not only because I get fresh new packets of Blue Bottle’s whole beans every couple of weeks, but also because I have this recurring sense of dread – I worry I’m doing it wrong every time I grind his beans – that somehow the cup has not come out quite perfect. Blue Bottle has built such a strong brand around the “perfect cup of coffee.”

James Freeman: Apparently shame figures into our brand, too.

JB: The brand certainly does revolve around a certain set of values. The company you’re most compared to, at least in my reading of Blue Bottle’s press, is Apple. Do you let that go to your head? I mean, you’re being framed as the Apple of coffee.

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In person “cupping” with James Freeman at NewCo Oakland 2015.

JF: We can’t take it seriously. It’s like taking Yelp reviews seriously. You just can’t do that.

JB: Right. So so tell me how you got started – What is your creation myth?

JF: I started Blue Bottle not too far from where we are now in Oakland. If you’ve ever been to Doña Tomás or Pizzaiolo, there’s a little patio out back, with a shed. That shed is where Blue Bottle began. It was only maybe 6.5’ tall. I was always bonking my head. It was 186 sq. ft., and I would roast coffee in this small roaster. You’d put 7 pounds in, and get about 5.6 pounds out. I’d go to a local farmer’s markets and sell there. Then I bought an espresso cart from a business that my soon-to-be wife was running at the time. So, I started serving coffee. Initially, it was really helpful for customers to taste it before purchasing. People would pay $3 for a cappuccino, and it was a lower point of entry than a pricier bag of beans. From there, it just grew — more people bought at the Farmer’s Market and Blue Bottle took off.

JB: How does that compare to the scale of the operation today?

JF: It’s bigger than I ever thought it would be. We’ve got about 22 cafes and 4 roasteries. The roasteries are in Oakland, Los Angeles, Brooklyn and Tokyo. We also have cafes in those regions.

JB: The thing that’s extraordinary about Blue Bottle is that everybody in the media and Internet worlds know about you, and they all claim to have known about you first. It’s almost like a fetish – “Oh yes, I have been drinking Blue Bottle for years.” I think some of them say they were drinking it it before you even started. Why do you think this group, who have also become your investors*, latched on to the Blue Bottle so early and with so much passion?

JF: I really don’t know. I was at this event recently where they wanted me to talk about what a cult brand was. Needless to say, I wasn’t very helpful during that discussion.

JB: But you did show up?

JF: [Laughing] I did.

JB: And then you confused them. Further ensuring your status as a “cult brand.”

JF: [Laughing] I guess I did. What we do at Blue Bottle is we believe what we believe and we try to do our best. We don’t try to please everybody. But we do try to improve, to work towards this thing. I have this idea of getting better and better at something, every day, every month, every year. In my mind, working towards that – it isn’t about market research. It isn’t about asking people what they might want. It’s about introspection, and figuring out what I’m interested in trying to be really really good at, and sharing my enthusiasm for it. And I think that appeals to people.
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JB: To founders and entrepreneurs, yes. But the eternal question is one of scale. You’ve accepted quite a bit of venture money now and with that comes a set of expectations about the size of the business that you now must build. Does this keep you up at night, more than your coffee?

JF: No, it doesn’t. Because I do think it’s possible to get, with every café, a little bit better at something. Because we’re in a small number of markets, it’s not like we are going to add 60 or 8,000 cafes in a specific area. However, we can add two cafes in Tokyo Metro area, and that’s a lot. And, from there, we can double and double again and double again, and it’s still not very many cafes for Tokyo. So, I do think it’s possible to expand incrementally around a roaster and have things improve instead of getting worse.

JB: My experience is that coffee shops that have scaled do the opposite.

JF: Yes.

JB: They turn into Starbucks. How do you solve for that? How do you scale and double and double again, and keep the quality, as you put it— improving?

JF: Well, that’s the issue. That’s the touching amount of faith our investors have put in me, that it might be possible. There is no “maintaining quality.” Trying to keep something from changing is almost a guarantee of not being very successful. You have to invest in things that people will taste before they see. You have to invest on the back end. You have to invest in people flying more miles and paying more for coffee. That’s hopefully what is going to happen. The investments will be visible in turn of cafes, but there will be invisible investments that are only perceivable when people taste something, or when they get exceptional hospitality.

JB: There are fairly standard accepted ways of growing a business like yours, one which has retail outlets and a certain brand name. One of them is to have third parties and wholesalers who make your coffee and feature it at their restaurants and establishments. You recently decided to cut all that out of your business. Why?

JF: Because nobody loves your coffee more than you do. That’s the simple truth. We had a few wonderful accounts. These places were doing exceptional work. They were spots I used to enjoy going to. But not all of the places were like that. I like building our shops. I like training my own staff. I like cooking our own cookies. I want to welcome people into this experience that I think will be delightful and make them happy and inspired. That’s what I want to create. It’s not just for me. it’s for anybody that walks into our shops. I don’t want to confuse them. You know, if they see a sign somewhere else and they have a crappy time, well, that’s a hard thing for me to say sorry for.

JB: One of the things that we celebrate at NewCo is the idea that a NewCo has a different approach to work.  It creates new working environments and work which is driven by passion or purpose rather than simply the bottom line. One of your pillars is sustainability. How does that ladder into your sourcing of coffee? JF: We emphasize organically certified products, which is 75-80% of the coffee we buy. We buy from small farmers. It’s expensive to certify organic at the source. If we’re going to go to a farm with our coffee buyer, he’ll check his list. Assuming he likes what he sees, and we all agree the coffee is delicious, we’ll purchase that coffee. What people don’t realize about organic certification is that it’s not just a stamp on bag. It’s not something which happens only on the farm. Every step in the chain of production and distribution—  from the farm, to the shipping container, to the warehouse where it’s held, to our warehouse— has to go through rigorous inspection. Organic certification is a powerful tool for getting people to change their business practices. That is an idea I wish we could share more broadly. JB: NewCo and Blue Bottle shares an investor in True Ventures. In speaking to True Ventures partner Tony Conrad, he told me that working as a barista at Blue Bottle isn’t like working as a barista anywhere else. Tony said it’s more like a calling or a profession. Is that something you encourage or did it sort of naturally happen? JF: That’s something I would like to happen more. I struggle with the professionalism of our work force, with making people feel like they’re respected professionals, that they have the opportunity to advance, and that, if they are happy where they are, that there’s a chance for rising skills and pay. For example, there’s one barista, Alex, that has worked at a kiosk at the end of the street for 7 or 8 years. He’s made four hundred thousand drinks for the company. He doesn’t want to be a manager. He doesn’t want to be roaster. He wants to work at that shop as a barista. Imagine how privileged you are a step up to that bar and have Alex making your drink, his four hundred thousand and first coffee. My point is, the more we can do professionalize our workforce and incentivize people to stick around, I think it benefits our guests as well. JB: I wanted to ask you about the city of Oakland. Did you choose it, or did it choose you? How do you feel about having your business here in Oakland?

JF: I love Oakland. I used to live here. Now I live in San Francisco, but when I lived here, I was looking for roastery space and I found a lead, and talked to the landlord and signed my first lease here. At the time, I didn’t realize you could negotiate. I just said “OK,” and signed. It’s kind of funny because I love Oakland water. We have Hetch Hetchy water here, and it’s really good for coffee and espresso. There are quality control teams in every market. We actually vary water treatment regiments in each city quite differently, because the water in every city is different. So no matter where we are, whether it’s LA, Tokyo, or New York, we’re treating their water so that it tastes like Oakland water.

JB: Now that’s a story.

JF: [Laughing] There is a little shadow of the city of Oakland in Tokyo, NY and LA.

JB: That is a good story. Finally, I feel like I would be a remiss in my journalistic duties if I didn’t ask you this: If Starbucks came to you tomorrow and said “We love what you’re doing, man. Here’s a couple billion bucks,” What would you say back to them?

JF: You know it would be weird. What do they need me for? I would teach them to make fewer drinks per hour. I would teach them to make less money per square foot. You know? I just don’t know what I would have to offer them.

JB: How about better coffee!? Seriously, though, have you ever thought about that?

JF: You know people talk about it all the time. It’s like they say, if Fidelity offered you billions of  dollars for your company would you say yes? I can’t say no— but it seems unlikely.

*Disclosure: Battelle is a minor investor in Blue Bottle Coffee

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