Wednesday 18 July 2018

Blue Bottle chain boss counts the beans as Nestlé wakes up and smells the coffee

Dubliner Bryan Meehan got some of Silicon Valley's top executives to back his Blue Bottle Coffee chain. Having sold a majority stake for over €400m, he spoke to Adrian Weckler.

Bryan Meehan’s Blue Bottle Coffee chain is a major player in the US
Bryan Meehan’s Blue Bottle Coffee chain is a major player in the US
A Blue Bottle coffee shop in Los Angeles

WHAT do Silicon Valley's tech engineers, Brooklyn's hipsters and Los Angeles movie producers have in common? They're all hooked on an Irishman's coffee. Bryan Meehan's Blue Bottle Coffee chain has taken over large parts of San Francisco, New York and LA. It's also making solid progress into Tokyo. And it's about to set its sights on China and South Korea.

But the Dubliner's 50-strong chain recently attracted its most important admirer: Nestlé.

In recent weeks, the Swiss giant bought a majority stake in the coffee company for around €400m, valuing it at over €600m.

That leaves Meehan, together with company founder James Freeman and a number of Silicon Valley investors, such as Instagram co-founder Kevin Systrom, on something of a caffeine-related high.

Meehan says he's staying on as chief executive of the firm and expects to be still there in five years.

"I've championed the transaction, so I feel responsible," he says. "I'm not going to bail."

But the 49-year-old has a track record of building something new every three or four years.

Twice before, he has grown businesses that were acquired by giants.

After an early start in Guinness and a Harvard MBA, he co-founded the London-based organic food store chain Fresh and Wild, selling it later to US food behemoth Whole Foods. Then he turned to cosmetics, co-founding the Bono-backed Nude Skincare brand in 2007 with Ali Hewson. The French perfume giant LVMH bought it in 2011.

His move into coffee came about when he led a €16m venture investment into Blue Bottle in 2012, subsequently becoming its chief executive.

Since then, the chain has blossomed, with almost 50 locations and several more planned. This was helped along the way with a $73m (€62m) funding round that included Bono, actor Jared Leto and celebrity skateboarder Tony Hawk.

Most recently, its success was brought into sharp focus when Meehan took a phone call from Nestlé chief executive Mark Schneider.

"I had read an article in the FT that Nestlé was going to focus on coffee in North America," he says. "Literally two weeks later, I got a call from them. They said they loved the company and would I be interested in meeting up."

Meehan brought Schneider to one of Blue Bottle's Brooklyn cafés. Soon after, they agreed a fairly unique deal: Nestlé would acquire a majority stake for hundreds of millions of dollars, but would leave Blue Bottle alone to run as an autonomous entity.

"I don't report in to anyone there," says Meehan. "They've literally left us alone to get on with it."

The strategy is a smart one, says the Dubliner.

"The future of coffee is moving in a way that Blue Bottle is driving," says Meehan. "Nestlé got involved with us not because they thought they could do it better, but because they realise that they're not good at specialty coffee for retail and we are."

Is Blue Bottle angling to be the next Starbucks?

"Definitely not," he says. "Starbucks is an offering of convenience, while Bluebottle is on a campaign to serve excellent coffee.

"We just opened a café in Manhattan, two blocks from the Rockefeller Centre where we already have one. You might wonder how opening cafés two blocks away from each other would work, but Manhattan is so big and people often don't like to walk. Anyway, the second one is already a success. This makes me think that Manhattan would like to see more Blue Bottle Coffee."

Meehan may have taken the company to a new platform, but he himself has several other interests.

Throughout the last 15 years, he has had a parallel career as a serial property and angel investor, both through his own Greenmont Capital and later through vehicles such as UK property investment company TBE Southern. In Ireland, interests have included Kildare Village, small tech startups and premium property through his investment firm, Ailesbury Estates TBE.

Among its portfolio was a house on Dublin's Shrewsbury Road that was described as the "biggest flip of the year" in 2014. Having bought the property in 2013 for €4.6m, Meehan's firm sold it less than a year later to the then Aryzta boss Owen Killian for €6.5m.

He is similarly active in the US, with investments in the messaging giant Slack and California property. He recently made news for selling San Francisco's most expensive home. The Pacific Heights house, which had been extensively refurbished by Meehan and his wife Tara, was sold for $21.8m (€18.5m), having been bought in 2009 for $6.95m (€5.9m).

However, all of this capitalism does not, apparently, come at the cost of a conscience. Meehan is known as an advocate for business 'sustainability', regularly campaigning on environmental, organic food and ethical issues. Broadly speaking, he wants to make the world better while doing business.

So how does being bought by Nestlé square with this set of core beliefs?

This, after all, is the company that is still haunted by the controversy over marketing baby milk formula in third world countries. It also continues to face accusations of fostering obesity in developing nations through the marketing of processed food.

"I had a much more aggressive opinion of Nestlé 25 years ago than I do today," says Meehan. "I think they made a lot of mistakes in the eighties and nineties in how they marketed products and in their business ethics in developing countries.

"But if you look at their practices in the last 15 years, they've learned from those mistakes. If you look at the things they're doing today, they've become one of the most progressive companies on ethics and child labour.

"Obviously, they face concerns globally in the areas of obesity and water consumption. But what gives me comfort about that is that they have at board level a commitment to get out of products that are causing damage."

While there continues to be some debate about this, Nestlé says that it has a solid annual record of reducing salt, sugar and saturated fat in its foods and beverages. Pointing to its top three status in a global 'Access to Nutrition Index', it also says that it has habitually increased the amount of wholegrain, fruits and vegetables in its foods, as well as "micronutrients" to food in countries "where there are known deficiencies".

"They're making investments that they think are more sustainable," Meehan says. "They don't think that businesses like candy have a future."

This, he says, represents a "great opportunity" for him.

"I have a big background in sustainability, in encouraging biodegradable packaging and other things," he says. "I've campaigned a lot against genetically modified foods. Recently, I was thinking about how the campaigning side to myself had died because I was more of a CEO. But now with Nestlé, I see my role as not just a CEO but as a campaigner again."

Meehan says that he has had similar positive feedback from organisations such as Greenpeace.

Although his life, as well as that of his wife and family, is now centred around San Francisco, Meehan returns to Dublin regularly. Is the Irish market ready for artisanal coffee yet? Or is this a more expensive perk?

"Since I left ireland in 1991, it's been transformed in how we think about health and food. We're willing to pay for quality now. In Dublin, I always make a beeline for 3FE.

"Colin (Harmon, 3FE founder) epitomises where the movement is going, hires people who know about coffee and serves great food. I don't remember it being that much more expensive. I mean, you can go to one of the big chains in Dublin, but there's no comparison."

Meehan is well connected in Silicon Valley, having marshalled co-investors for Blue Bottle that include Instagram co-founder Systrom, About.com founder Tony Conrad and Google Ventures general partner Kevin Rose.

He sees a future where Blue Bottle Coffee goes beyond cafés to retail sales and online orders. "The online digital side, where people can subscribe to have it delivered, is a growing part of our business. We have 12 engineers literally working full time on that."

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