The third wave generation is getting older — and specialty coffee now means business

third wave barista
  • In its early days, young aspirational “third wave” coffee business owners focused on novelty, networking, and building a brand
  • Today, those same actors have grown up, and their priorities have changed – in Australia, nearly half of small businesses are reportedly currently owned by people 50 years or older
  • Specialty coffee actors have matured, and so has the industry, as it shifts from novelty and carving out a space to seeking stability and growing a business

MANY “THIRD WAVE” coffee businesses began as start-ups or passion projects, led by hopeful entrepreneurs wanting to change the coffee industry. Now, as many of these young business owners have grown and changed, so too has the industry. 

In its early days, businesses offering third wave experiences were the outliers in the coffee sector. Striving to elevate coffee’s quality and messaging, they sought to add “craftsmanship, specialty and individuality” to an industry that was largely mainstream.

A central component of this was creating and building communities. Countering the convenience of large-scale chains, these third wave businesses offered spaces to connect and interact with coffee in new ways, and provided new information about coffee to their customer base. 

Like with any new venture, the novelty factor was everything, as was being associated with it. Industry players early on sought to carve out a unique, recognisable brand name for themselves by investing heavily in the “wow” factor and in building and belonging to a network.

Participating in trips to coffee origins, events and their after-parties, cuppings and trade shows was a prerequisite for industry credibility and visibility. They also offered a chance to explore and expand modern ways of thinking about and sharing coffee. 

This movement went hand-in-hand with the social media boom of the early 2000s, which offers another dimension to networking and, research shows, plays a big part in securing customer loyalty. 

These new, digital avenues for third wave businesses to share their work and connect with a global audience led to collaborations, easier business-to-customer communication, and created a better-established overall “presence” in the growing industry.  

Now, times have changed. As these young coffee pioneers have grown up and developed their enterprises, their priorities have shifted – having built their brand, they are now trying to grow their businesses. 

The honeymoon phase is over for the third wave crowd    

Specialty coffee is still a relatively young industry. Although Erna Knutsen coined the term “specialty coffee” in 1974, it wasn’t until the end of the century that it exploded in popularity across major consuming markets. 

Despite this young age, the industry has grown at a remarkable speed – and now, it appears that the “honeymoon phase” following this boom may be coming to a close.

“Third wave coffee as it was birthed was exciting and paved the way to where we are now, with a focus on quality, craft, and a connection to origin and the producers,” says 2014 US Barista Champion and Coffee Business Consultant Laila Ghambari.

“However, it also came with snobbery and leaders who weren’t always fit to lead. The industry has now grown to a point where it’s no longer those select key players leading the way. Others have joined the space, and the industry is better for it. If growing up means better understanding business, operations, and leadership excellence, I’m here for it.”

Other pressures have undoubtedly contributed to the maturation of third wave businesses, including difficult economic climates and growing responsibilities towards staff, clients, partners and investors. 

For many, these changes may have simply gradually come around as a result of business owners growing older and juggling priorities, be it having a family, expanding their business, or staying afloat through a global pandemic followed by an economic recession.

In Australia – one of the most popular markets for third wave coffee – coffee shops mushroomed between 2005 and 2020. Today, Australia has around 28,700 cafes and coffee shops. Meanwhile, nearly half of small businesses in the country are reportedly currently owned by people 50 years or older, and the average age of cafe managers is reportedly 40 years old

For others, the shift away from idealism to a sharper business focus has been more brutal. The COVID-19 pandemic saw many smaller, third wave businesses close their doors, and the ones that remain face additional pressures of rising costs, inflation and supply chain issues.

“If you did not have the resilience to respond and pivot during COVID, your business unfortunately didn’t survive the pandemic,” Laila says. 

“Even if you did survive, those who were only holding on by a thread eventually shut down, even after restrictions were lifted. Business didn’t bounce back as quickly as they hoped, government support dried up, and they lost so much resilience that just a few more days of closure due to a weather incident did them in.” 

As a result, many “fun” aspects of early third wave business – including parties, trips and events – have become less of a priority. Instead, many are focusing on organisation, prioritising financial literacy and fostering meaningful relationships in order to keep their ventures running.  

“Should you be throwing parties when you don’t have savings? Probably not,” Laila says. “As a business grows, gains profitability and is able to save money, it then gains flexibility on deciding where to invest.”

Specialty coffee people are changing, and so is the industry   

As the demographic of third wave business owners has grown and changed, so too have their responsibilities and focuses. To stay on top of these and stay relevant in a competitive landscape, many are embracing the increasingly ‘mainstream’ status of specialty coffee, and are seeking out ways to become more cost efficient. 

But shifts in business operations inevitably lead to product changes as well. As many larger companies continue to acquire third wave businesses, there are concerns that this will have an impact on quality. This is of particular concern for smaller coffee businesses, as they must seek out ways to lower costs to remain competitive.

Weighing out cost efficient changes without reducing the value that is provided to customers is a delicate balance, and requires understanding customer demographics, and what they’re willing to pay for.

“If your customer base doesn’t drink espresso or drip and isn’t going to pay high prices for a bag of coffee, then choosing a ‘lower quality’ coffee to save money would be a good call,” says Laila. 
“The average consumer isn’t going to buy that rare coffee you’re selling for $12 a cup or way more – those coffees are rare, and there are just enough people who do want that extreme quality and experience so we can have the best of both worlds. A business being able to cater to both is going to depend on their reach.” 

The third wave generation has aged, and the industry has changed along with them. After the early days of experimentation and obsession with novelty, they are less willing to take risks as their responsibilities grow and they navigate a new, tougher economic landscape.

“Risk is best situated for those who can afford it, and most small businesses can’t,” Laila says. “We need to be looking to the mid-tier brands who are still independently-owned and have the time, employees, customer base, and visibility (resources) to innovate.” 

This may have a lasting impact, particularly on new players in the sector. Unlike the pioneering, “start-up” business owners before them, new businesses will inevitably be influenced by and learn from the mistakes of their predecessors, focusing on growing a business over positioning themselves in a wave of novelty. 

Coffee Intelligence

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