Scaling beyond specialty coffee: Is the market smaller than the industry thinks?

  • For some coffee brands, scaling to reach more consumers is at odds with the ethos behind specialty coffee
  • But specialty coffee only makes up about 20% of the wider coffee industry
  • Scale is needed to achieve some of the objectives of specialty coffee

THE EMERGENCE of specialty coffee can be traced back to a focus on craft, quality, and ethical sourcing practices. Among other things, it initially sought to showcase the complex and diverse flavours that coffee could offer.

But as demand grew, some specialty coffee businesses began to scale – while others were acquired by larger food & beverage businesses. Today, despite the fact that the definition is more complex, “specialty coffee” as a concept is still largely used to refer to small, single-store owner-operated businesses rather than larger organisations.

This represents a prevailing notion in the industry – that once a company scales, it loses the right to be labelled “specialty”. In particular, larger companies are unable to apply the craftsmanship and level of quality control needed to ensure the “specialty” experience.

Despite this mindset, many believe that scale and specialty can coexist.

Martin Mayorga is the founder and CEO of Mayorga Coffee, a coffee roaster that has grown from small beginnings to a large, international operation. “Mayorga is proof that specialty-level quality can be achieved successfully at scale,” he says.

An increasing number of large companies are implementing quality control systems that can be applied across a network of stores. This is, in part, a response to the rising consumer demand for a higher-quality coffee. For example, Starbucks responded to complaints about bitter coffee by introducing the “Starbucks Method” of quality control.

As such, while these larger companies may not be able to rely on individual craftsmanship, they can depend on rigorous processes that ensure a certain level of quality. Furthermore, it could be argued that big companies are well-placed to guarantee quality as they already have control procedures in place to ensure consistency across their stores.

Really, the question may be more cultural than logistical: Can scaled-up specialty brands ever win over those who believe big brands are unable to deliver the “true” specialty coffee experience?

some argue that coffee shops can scale beyond "specialty"

High-quality vs. rare

How we are defining “specialty” may have a critical bearing on whether or not specialty coffee businesses can achieve scale. The distinction between “high-quality” and “rare” could make all the difference.

“The issue occurs when you go into hyper-specialty, which entails expensive processes for producers which create very niche flavour profiles mostly appreciated by a minuscule percentage of consumers,” says Martin. “In my opinion, that is not scalable.

“Scale is about finding large sections of the market – yet hyper-specialty continues to divide itself into more specific niche and nuanced aspects as they slice a very small percentage of consumers into virtually irrelevant (in terms of scale) subcategories,” Martin says.

Therefore, if we consider specialty coffee as representing “rarity”, it limits the market size. In contrast, focusing on “quality” allows scalability and the ability to reach wider audiences.

specialty coffee is often associated with small, owner-operated shops

Embracing scale

Martin suggests that the focus on rarity has put some producers in a challenging position – a position that is more difficult to get out of now that affordable finance is increasingly hard to secure.

He suggests that the opportunity for the specialty sector to scale “has come and gone” because consumers are now “much more selective with their money and capital is being allocated very conservatively by investors”.

This has created problems for farmers who scaled their production. “This is based on the hype around hyper-specialty,” Martin explains. “There are countless producers with Gesha that they can’t sell and naturals that nobody is buying.”

With this in mind, a way forward could be to raise the baseline of quality in the sector. 

“We should promote specialty coffee that can be appreciated by a wide number of consumers and can give producers consistency and sustainable prices,” says Martin.

Shifting the focus from ultra-high-end coffees at the apex of the market to raising the quality floor more broadly across the coffee industry would mean more pricing stability for farmers. 

This approach benefits a broader group of farmers, rather than a select few receiving more for “hyper-specialty” coffee lots.

While the idea of “quality” in the coffee industry is open for interpretation, the fundamental role of higher-quality coffee bringing greater value to producers is hard to argue with.

In addition, specialty coffee promotes core values beyond taste – emphasising direct trade and sustainability, too. As they scale, specialty coffee companies become more able to leverage their size to drive larger sustainability initiatives. For example, increased liquidity means they can forward-purchase larger volumes of coffee – offering greater security to producers.

Ultimately, as specialty coffee businesses evolve into larger organisations, they can leverage their understanding of quality and ethical sourcing practices to achieve an even greater impact – both for producers and consumers.

The pervading mindset that coffee brands can scale themselves beyond specialty is potentially a dangerous one. Achieving the environmental and social changes that so many actors in specialty coffee preach about often requires scale – and it’s high time to recognise that reality.