Moving Up Or Selling Out?

Since WW first uncovered the sale of Stumptown Coffee to a large investment firm, the public discourse about Portland's famous coffee roaster has changed from "Has it sold?" to "What happens now?"

It isn't just the integrity of the coffee that's at stake. WW has talked to coffee-industry veterans who have been part of corporate buyouts. They say for employees, it's a question of job security and quality. (Stumptown has a reputation for offering generous healthcare coverage and benefits.) But for the company itself, perhaps the most valuable commodity at stake is its image: No amount of money can buy the street cred Stumptown currently enjoys. And once lost, it's very, very difficult to get back.

Umberto Bizzarri founded Torrefazione Italia when the family moved from Italy to Seattle in 1986. Like Stumptown founder Duane Sorenson, Bizzarri was then heralded as an authentic artisan roaster, every bit as appealing and cool. A Seattle Times article in 1989 describes him puffing on a cigarette in front of his coffee-roasting shop in a "fine blue pinstripe cotton shirt" and "purple paisley Italian silk tie." Torrefazione Italia, the article said, was the "darling of coffee cognoscenti" and had just been named the best in the city by The New York Times.

In 1994, the company had two stores and 800 wholesale clients when it sold to an investor to pay for further expansion. Shortly thereafter, that investor merged the company with Seattle's Best Coffee.

"When my father sold to that third-party investor, we had a big party, an introduction to this new family that was investing into our family business," recalls Emanuele Bizzarri, Umberto's son, who was in charge of coffee production at the time. "And the final word of my father's speech was, 'I'm still here, I still own part of it, nothing is changed.'"

But behind the scenes, Torrefazione Italia changed dramatically. Four years later, Torrefazione was sold to Atlanta-based AFC Enterprises, the parent company of Popeyes Chicken & Biscuits. "People became a number, not a face," Emanuele Bizzarri says. "You start to cut corners. When you start to pay less for products, you get inferior quality, and the business ends up suffering. The idea of keeping something small and high quality was down the drain."

In 2003, Bizzarri founded his own company, Caffe Umbria, which has just two stores, one in Portland. When Umberto Bizzarri left the company in 1998, his employees had his declaration "Nothing is changed" chiseled into a tombstone as a gift.

But corporate investment doesn't necessarily mean a drop in quality. John Weaver was the master roaster at California-based Peet's Coffee & Tea for over two decades. He saw the company grow from a privately owned business with a single store in Berkeley to a publicly traded corporation with about 160 stores in several states, and coffee on the shelves of some 8,000 grocery outlets. Despite the expansion, Weaver says the quality of Peet's product did not change significantly—but customer perception of it did.

"One of the things we noticed in the tasting room, especially when we were growing and there were murmurs that [Peet's was] going public, was customers started to complain that the roasting had changed, that it wasn't the same," he says. "In reality, nothing had changed. Just the perception of 'going corporate' was enough to make them skittish."

Weaver now owns and operates a small coffee company, Weaver's Coffee & Tea, in San Rafael, Calif. Peet's is still based near Berkeley. "I don't think they're viewed as a local company anymore," he says. "The perception of young people is that it's just a big corporation."

Dan Rogers, an associate professor of finance at Portland State University, says the extent to which a company is affected by a corporate buyout can vary greatly. Medford-based Harry & David, the mail-order fruit basket business, was bought out by private investors in 2004 for $253 million—and filed for bankruptcy protection in March of this year. "Outside investors came in, and really they made some wholesale changes in the company," he says. "And it cost a lot of people their jobs."

Rogers says Stumptown's Sorenson needs to be wary about the ways in which the new owners want to increase the company's value. "What we'd like to see locally is that the business expands, hires more people, reinvests in the growth of the business, and becomes more valuable," Rogers says.

Jim and Patty Roberts know the backlash when the public thinks you've sold out. They founded Coffee People in 1983, and it became beloved in Portland until it went public in 1996. Jim Roberts says they had sold off much of the business already, but the public didn't know it and presumed they walked away with a big paycheck.

"It's a compliment to the company that the community felt like they owned it," he says. "Naturally, if they see a company as no longer seeming local, it's like a lover has been spurned."

With new owners, the company grew to about 700 employees. "I remember Patty wrote the first employee manual. It was in pen, and it was five pages. And it was all about us, and how we were throwing a party, and the customer was the guest," he says. "The last one had about 200 pages and was written by a law firm downtown."

Coffee People eventually ended up in the hands of Starbucks. Its shop at Portland International Airport is all that's left.

After several years away from the bean business, the Robertses returned in 2002 with a new store, Jim and Patty's Coffee, at the corner of Northeast 50th Avenue and Fremont Street, where they serve Stumptown Coffee.

This time, he says, they're staying small and staying local. 

WWeek 2015