The Selling of Stumptown

Why a dealmaker bought a majority stake in Portland's iconic indie coffee company.

Stumptown Coffee is synonymous with Portland.

The 12-year-old company is often credited with transforming Portland into one of the world's best—and coolest—places to drink coffee. The company has an international reputation for purchasing the highest-quality beans, operating with high ethical standards and remaining absolutely, fiercely independent.

But last week, the city was buzzing with gossip that Stumptown had been sold. Media outlets all over the country were reporting rumors that the iconic indie roaster had sold out to corporate America.

As the speculation grew louder, Stumptown's founder, Duane Sorenson, was forced to make a rare media appearance.

On June 2, The New York Times' Oliver Strand scored an interview with Sorenson, who told him, "I still own Stumptown." Sorenson said a "buddy" had simply invested some money to help the company grow. 

Stumptown was also reassuring its employees. At Stumptown's Ace Hotel cafe, manager Robyn Brems told WW that a company representative had visited each of the roaster's coffee shops to say the company hadn't been sold.

"Everything is fine," Brems said. "Stumptown has not been sold, and that's all we're supposed to say."

By Friday, the local and national media were reporting that Stumptown was still safely in Portland hands.

But as first reported on, coffee-industry sources say Stumptown has indeed been sold to a San Francisco investment firm called TSG Consumer Partners, which is famous for buying small- and medium-sized companies and then flipping them for a huge markup. 

Coffee-industry executives have confirmed for WW that Stumptown's new investors claim to have bought 90 percent of the Portland company. 

Over the weekend, Stumptown officials backed away from their original denials. Stumptown spokesman Matt Lounsbury now says he simply cannot comment on whether Sorenson has sold a majority stake of the company to TSG Consumer Partners.

WW has made repeated requests to talk to Sorenson, but he has so far declined to call us back.

If the sale of Stumptown did happen, it could be a good business proposition for Sorenson, who has made no secret of his ambitions to take the company nationwide but lacks the capital and experience.

It also represents a change in the image, if not the reality, of Stumptown as a homegrown, anti-corporate—and even rebellious—company. 

The Pacific Northwest has a history of losing its local coffee companies to corporate buyouts. Portland's popular Coffee People had 40 stores when owners Jim and Patty Roberts took the company public in 1996—then watched it collapse. They were forced to sell the company to Gloria Jean's, a subsidiary of the Canadian-based Second Cup.

In 1994, an investment firm bought both Seattle's Torrefazione Italia and Seattle's Best Coffee and rolled them into Seattle Coffee Holdings. The combined company was then sold to the corporate owner of Popeyes Chicken & Biscuits, which subsequently sold it to Starbucks in 2003.

Stumptown appeared to be different. Local, sustainable, fair trade, artisan, cool—Stumptown is everything Starbucks isn't. Time magazine in 2010 described the company as "at the forefront of nearly every new-coffee frontier." The magazine called Sorenson "the most visible (and polarizing) figure in contemporary coffee." New York magazine ran a profile of Sorenson with the headline, "The Messiah Hails From Portland." He has been applauded for providing healthcare benefits to his employees and starting a nonprofit to give bicycles to coffee farmers in Rwanda.

Stumptown now has five locations in Portland, two in Seattle and two in New York. Its beans are sold across the country, but most locals still proudly view Stumptown as very much their own.

"It's one of the best things about Portland," says 27-year-old Bobby Raleigh, surfing Facebook at the back of Stumptown's downtown store, wearing a dress shirt, tie and Converse sneakers. Raleigh says he likes to support Pacific Northwest businesses—and he doesn't count Starbucks among them. 

"There's a big difference between Stumptown and Starbucks. People come here for this," he says, pointing to my plaid shirt and torn jeans. Then he points to his tie. "Not for this."

Olivia Mick, 21, sitting in front of the cafe, says she has heard about the sale but doesn't think it will affect the company. "I've been coming here for years," Mick says. "It's not about selling out. It's about expansion."

According to TSG's website, the investment firm takes consumer products and service companies with recognizable brands, increases their value and then sells the companies, usually within five to seven years. 

In 2003, for example, the company paid about $40 million for a 30 percent stake in Vitaminwater. TSG sold it three years later for more than 12 times the original investment.

TSG's portfolio has previously included Spic and Span cleaners, Compound W wart-removal products, Famous Amos cookies and La Victoria Mexican foods. Buyers of TSG-held companies have included ConAgra, Hershey's, 3M and L'Oreal.

Stumptown—with its strong branding, charismatic frontman, national recognition, huge growth potential and pressing need for business expertise—is a dream acquisition for a company like TSG.

By TSG's own admission, the firm doesn't always make its acquisitions public. TSG and Stumptown might have gone on for years with only a handful of people knowing about the sale.

But last week, the secret began to unravel when a coffee company executive who was approached by TSG spoke out.

Todd Carmichael is the co-owner of Philadelphia-based coffee roaster La Colombe Torrefaction, which has four cafes—two in Philadelphia and two in New York. The company has distribution centers in Las Vegas, Philadelphia and Chicago, and sells beans to some 3,000 restaurants and hotels around the country. 

Carmichael says his company's annual revenues are around $18 million—about 20 percent less than he estimates Stumptown's are. 

Carmichael and Sorenson both hail from Washington—Carmichael from Spokane, Sorenson from Puyallup—and they learned the coffee trade there. Both espouse values of fair trade and sustainability, and have supported aid work in Africa.

Carmichael says he was crushed to learn that Sorenson had sold his company to "Wall Street"—and even more appalled that the Stumptown founder was keeping it a secret. 

Carmichael is also a blogger for, writing a weekly column on the coffee world. On a few occasions, he has spoken out against fads and developments in the industry in posts that have been met with anger and scorn from other coffee bloggers. 

On May 31, Carmichael wrote a blog post titled "The End of Stumptown, America's Hippest Coffee Brand." The article was light on details, but in it he wrote: "Duane Sorenson, the founder of Stumptown, the Che Guevara of the rock-star barista movement, sold his life's work to the highest bidder."

The Internet was rife with conjecture: Stumptown was looking to break into Europe. Stumptown was broke. Stumptown had been bought by McDonald's.

"Did Stumptown just get sold to Vitamin Water? Maybe it's time to switch to Clive [a small Portland roaster]," Decemberists frontman Colin Meloy tweeted.

Some have questioned Carmichael's motivations and credibility, but there is a strong paper trail to support his claims.

Oregon records show that Stumptown recently cleared its debts. Uniform Commercial Code filings show the company's financing with Columbia Community Bank was satisfied in late May.

Stumptown had been an Oregon corporation since its founding. But April 11, a new company, called Stumptown Coffee Corp., was registered in Delaware, a state known for its business-friendly rules. Another company, TSG Coffee Holdings LLC, was formed in Delaware at the same time.

In Oregon, Stumptown Coffee Corp. filed papers April 28 to take control of the company name from the previous Oregon-based corporation, Stumptown Inc. Those records show Alexander Panos, a managing director with TSG, as Stumptown's new authorized representative, sharing the same address as TSG's New York office.

Corporation records in California and Washington also show Stumptown's registration has moved to Delaware. Washington records now list Panos of TSG as president, secretary, treasurer and director of Stumptown.

An Oregon Liquor Control Commission application filed April 27 to transfer ownership of Stumptown's downtown cafe to Stumptown Coffee Corp. lists TSG's Panos as Stumptown president.

On June 1, Lounsbury was quoted in The Oregonian as saying an OLCC filing that listed Panos as president had been filled out incorrectly. "Stumptown doesn't have a president," he told the paper. On June 2, Stumptown filed an amendment to its Oregon business registration, listing Duane Sorenson as president. 

When he first wrote about Stumptown, Carmichael declined to disclose how he knew this inside information.

But as the story developed, Carmichael opened up to WW, providing more details about what he was told by TSG.

Carmichael told WW he was approached by TSG officials May 13 to see if he was interested in an investment.

Carmichael said that Panos met him at his company offices and told him TSG had already purchased Stumptown.

"Alex Panos looked me in the eye and said he purchased 90 percent of Stumptown from Duane [Sorenson] and planned to then fund a big expansion," Carmichael told WW.

Tony Dreyfuss of Chicago's Metropolis Coffee Company says he was also approached by TSG and was told the investment firm owns a controlling stake in Stumptown.

"They mentioned that they had an ownership stake in Stumptown," Dreyfuss says. "They said the way they work is that they purchase a 90 percent stake in companies. My father, who is [Metropolis's] co-owner, asked outright whether they owned a 90 percent stake of Stumptown and they responded, 'Let's just say that it fits the profile.'"

Panos has not responded to calls from WW.

According to Carmichael, Panos said his firm hoped to merge Stumptown with other coffee companies. Panos proposed that La Colombe join in and asked Carmichael if he might reach out to other specialty coffee companies, such as Chicago-based Intelligentsia; Oakland, Calif.'s Blue Bottle; and Counter Culture, from Durham, N.C.

On Monday, June 6, The New York Times corroborated this information, with both Counter Culture and Blue Bottle confirming they were approached by TSG.

Carmichael said his company had one more meeting with TSG officials May 18, and that because of a confidentiality agreement, he could not discuss details. But it was clear to him Stumptown was no longer locally owned and was under the control of TSG.

Carmichael also told WW he was not interested in merging or being part of a deal with TSG and Stumptown.

Carmichael says it's not about business rivalries or bitterness; he just wants the truth to be told.

"I have yet to see a hands-on, craft-based company, when owned by folks whose sole purpose it is to make profits for its shareholders, retain the true character of the company and its goods," Carmichael says. "My main sense is the same I had those years ago in Seattle, with Torrefazione Italia. We were told that nothing would change, but everything did change, and now it's dead. That made a big dent in my thinking and an even larger one in American coffee.” 

Additional reporting by Ben Waterhouse and Aaron Mesh.

FACT: In the mid-2000s, Stumptown purchased six $11,000 Clover machines, a much-hyped Seattle-made automated coffee brewer that was all the buzz in the industry at the time. When Starbucks purchased Clover in 2008, Stumptown immediately stopped using the machines, selling all but one.

WWeek 2015

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