Babson Magazine

Summer 2015

Higher Grounds

Celyn Brazier

Illustration: Celyn Brazier

For many Americans, “going for coffee” means making a trip to Starbucks. Around for more than 40 years, the Seattle-based company rules the coffee and snack shops market, with almost 12,000 locations across the country representing about 35 percent of market share in 2014, according to an IBISWorld report.

In the last decade or so, however, some coffee enthusiasts have moved away from “mainstream” coffee to what they consider to be a more artisanal brew. Treating coffee in a manner similar to wine, these coffee aficionados pay attention to such details as which farm the beans came from, and how the beans were grown, harvested, and processed. They talk about varieties of coffee, as well as when and how the beans were roasted and brewed.

Using their entrepreneurial skills, several Babson alumni are trying to win the attention of these coffee connoisseurs. Hans Homberger, MBA’14, whose family has harvested coffee in El Salvador for more than a century, founded Fourth Wheel Coffee in 2013, a Boston-based e-commerce company that sends U.S. customers small batches of his family’s coffee within five days of roasting. Alex Lowe, along with classmates Elvis Lieban and James Gutierrez, all MBA’14, moved to San Francisco in 2013 to co-found Artis Coffee, which Lowe describes as “a retail store devoted to the art and craft of coffee.”

Lowe and his co-founders launched Artis Coffee as students after entering their plan in a business competition and winning first place. A mentor suggested that the friends not wait until graduation, which was more than a year away, to get started, so they opened their first store in nearby Berkeley while continuing their studies at Babson’s San Francisco campus.

“We’re the first place that we know of in the country where you can come in and choose from a selection of green coffee beans and have them roasted on demand,” Lowe says. Lowe first encountered this approach to roasting while stationed in Japan with the Navy. “I would go to this little place and get my coffee roasted right there every week,” he says, and he never forgot the distinctive, fresh-roasted flavor. “Fresh coffee has no bitterness to it at all,” Lowe says. “This allows the unique flavors from the country of origin to shine through, such as the fruitiness in Ethio-pian coffees or the citrus and chocolate notes in Central American coffees.”

When customers come to Artis, staff help them choose their beans based on the flavors they prefer. Customers then can watch the green beans roast; Artis uses a fluid-bed air roaster, which heats the beans in small batches (as little as a pound) in glass tubes. Beans change from green to gold to brown in the course of six minutes. “You walk out with a still-warm bag of coffee to brew at home,” Lowe says. In addition to at least seven types of beans ready for roasting, Artis also offers a full coffee bar and sells high-end home-brewing equipment.

Lowe and Gutierrez (Lieban recently left the company) opened a second location in San Francisco in May and now employ 33 people. They also have a brand-lease store in Bangkok, which opened in February. As they expand the business, Lowe says that fundraising has been a main source of stress, but the company is doing well. The first store “blew away all our predictions,” bringing in what Lowe claims to be double the sales of an average coffee shop in the area. Plans call for opening two more San Francisco shops this year.

When Homberger first came to Babson from Central America, he was startled by the amount of cream and sugar people added to their coffee. “They think that it’s supposed to taste bitter and that it’s completely normal to add that many sugars to mask the bitterness,” he says. “This is not true.” Most people in Central America drink their coffee “black, black, black,” he says.

Coffee beans are actually the seeds of a fruit, referred to as cherries, that grow on shrub-like plants. In Central America, the deep-red coffee cherries are harvested from about November until March, says Homberger. The thin layer of fruit surrounding the seeds doesn’t taste good, so it’s removed and discarded. The green seeds are then dried and remain fresh for up to a year. Homberger says coffee begins to become bitter around 15 days after being roasted. Most of the time when people buy coffee in the U.S., he says, the beans were roasted months ago.

His goal at Babson was to learn new business models to help his family’s plantation thrive, and he founded Fourth Wheel Coffee while working on his MBA. In El Salvador, coffee plantations traditionally sell their beans to a giant mill, which blends coffee from multiple plantations into one big lot, processes the batch, and then sells it to an American importer, Homberger explains. The importer then sells the beans to U.S. roasters. Coffee farmers, like Homberger’s family, see relatively little of the profit. “For every dollar that you pay for a cup of coffee, the farmer gets at most three cents,” Homberger says.

Under their current model, the Hombergers see more of the profit, in part because they market and sell their own coffee. The beans are processed separately and imported to a roaster near Boston, which roasts and ships to order. Homberger believes customers are drawn to his family’s coffee because it is shade grown, which he says yields better flavor and provides natural pest control. His family does not use herbicides, he says, and they pay laborers wages that are 50 percent higher than average.

Homberger is currently in the process of launching a brand-new model for Fourth Wheel in which customers will purchase annual shares of the harvest and receive fresh-roasted beans every month throughout the year. He hopes this will help secure the plantation’s financial future, exposing it less to fluctuations in global coffee prices. Homberger admits that he stays awake nights worrying about the coffee harvest and negotiations with importers. “On top of this, I have my family on my back,” he says with a chuckle. “I’ve got to figure out a way to make them proud as well.”

Turns out that Lowe and Homberger met in grad school and remain good friends. They hope to collaborate somehow in the future, given their shared vision of better coffee. “The coffee landscape is shifting and transforming,” Lowe says. “There’s a whole new wave of coffee coming.” —Erin O’Donnell is a freelance writer in Milwaukee.