Back to the Grind
Nearly two decades after selling his iconic Coffee Connection chain to Starbucks, George Howell is about to attempt a comeback. Can the café visionary retake the coffee world, or has his time passed?
In the next decade, the Coffee Connection opened locations in Faneuil Hall, Newton Centre, and Beacon Hill. Several more had opened by 1988, the year Howell flew to Seattle to scout out a coffee chain that had transfixed that city. The three owners of Starbucks had opened their first shop in Pike Place Market in 1971, sourcing their beans directly from Alfred Peet. Their devoted customer base eventually attracted the attention of Howard Schultz, a New York–based housewares executive who’d noticed that the shop was selling an inordinate number of his drip coffeemakers. After trying Starbucks coffee for himself, Schultz realized he’d found a game-changer. He convinced the owners to hire him, and eventually became the company’s chairman, president, and CEO.
“Howard Schultz was telling us he was going to take over the world,” Howell recalls. “He said that right from the start. He had a national strategy, while we had regional ones.” So as Starbucks moved East, Howell prepared himself for the arrival of the “wave of darkness.” (Howell, legendary for his lightly roasted coffees, generally despises dark roasts, and has been known to refer to Schultz’s company as “Charbucks.”)
“George was terrified that they were going to completely put us out of business,” recalls Andrew Frank, Howell’s marketing director at the time. “We repositioned our cafés, relaunched our menus, and prepared for the dark roasts that were coming.” As part of the defensive positioning, Howell began looking for ways to make up for the loss of drip-coffee sales during the summer months. That led him to investigate the new West Coast trend of selling iced cappuccino drinks. Frank began experimenting with recipes, finally settling on a creamy blend of espresso, milk, ice, and sugar that was mixed in soft-serve ice cream machines. Frank also came up with the name, a play on the frappe. In 1992 the Frappuccino was born.
Howell began an aggressive expansion to fend off Starbucks. He brought on a board, raised venture capital, and doubled the number of Coffee Connection stores in one year. By the spring of 1994, the chain had 23 locations and was doing $16 million a year in sales. That same year, after opening more than a dozen Starbucks locations in Washington, DC, Schultz announced his intentions to break into the Boston market. At the time, Starbucks had almost 300 stores and annual sales of $164 million. Schultz twice offered to buy Howell’s stores, but was rejected each time. “He thought they didn’t make good coffee,” says Joe Caruso, a board member who advised Howell at the time. “I told him, ‘It has nothing to do with the coffee, it’s real estate and capital and merchandise.’ And he was really offended by that.”
Eventually, Schultz approached Howell with a third offer that was more than just a real estate deal. “He got smart, and told George that he wanted the respect and the name and the quality,” says John Rapinchuk, who was a Coffee Connection board member and remains a close friend of Howell’s. Schultz paid $23 million, and promised to keep the Coffee Connection name on the bulk of the shops and bring Howell on as a coffee consultant. When Howell agreed in 1994, he and Schultz hosted a celebration at Faneuil Hall featuring a performance by Kenny G.
To many customers, though, the news was hardly worth celebrating. One disappointed coffee drinker told the Globe that the sale was “kind of like Kmart coming in.” Allison Arnett, the paper’s former food critic, says, “Those of us in the food business felt that it was too bad. It had been something unique.”
“The sale was sad,” says Howell’s daughter Jennifer, one of his two children who are now working alongside him. “He felt criticized, and the people who loved him most were being the meanest, like he was being a sellout.” Adding to the gloom, Schultz began to abandon Howell’s vision over time. He changed the recipe for the Frappuccino. The shops stopped carrying the lighter roasts that Howell was known for. Employees were given “shifting paradigm” training to “acknowledge feelings…and talk about constructive ways to handle change in our lives.” And one day, staffers arrived to find that the Coffee Connection signage had been replaced with the green Starbucks logo.
In some ways, though, the sale was actually a relief for Howell. Focusing on Frappuccinos had distracted him from his true passion: finding the highest-quality beans on the planet. So he took advantage of his new freedom to travel and develop relationships with coffee farmers. And it’s those connections that he’s relying on to give him the edge this time around.
A lot has changed since Howell last operated a coffee shop. When he launched the Coffee Connection in the ’70s, setting himself apart from the competition was, for the most part, as simple as opening his doors and offering high-quality coffee. There just weren’t that many other options back then. Today, though, specialty coffee—the industry term for expensive, high-quality beans—accounts for 37 percent of the annual $32 billion in U.S. retail coffee sales. And sales at coffee shops across the country grew by 15 percent from 2007 to 2011, and are expected to grow by another 7 percent this year. It’s a similar story here in Boston, which has experienced a surge in cafés that offer single-cup pour-over coffees, host latte art competitions, conduct regular cuppings, and roast their own beans. The market, in other words, is becoming increasingly crowded—and not just in this country. In November, McDonald’s began selling its “specialty” McCafe beans in Canada, and Burger King partnered with Nescafe to serve mochaccinos in Latin America. The demand for quality coffee is also taking off in countries like Brazil, India, and China.
“Twenty years ago the differentiation between what we were doing in specialty coffee and what the [mainstream] brands were doing was tremendous,” says Ric Rhinehart, the executive director of the Specialty Coffee Association of America. At that time, he says, commercial roasters were sourcing lower-quality beans in an effort to maintain a lower price. “We were the antithesis. Quality was first, and price was second. Today, it’s harder to differentiate.”