🔒Portland’s foodie scene continues to lure gourmet coffee shops and increasing revenues

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On a recent sunny afternoon, Catherine Walsh, co-owner of Arabica Coffee Co. in Portland, sits in her swanky new coffee shop, Crema, sipping from a cappuccino decorated with heart-patterned froth and recalling a simpler time in the city's coffee scene. Walsh is surrounded by young professionals hunched over iPads, as jazz rolls through speakers hidden discretely on the exposed brick walls of this 19th-century former warehouse.

In 1995, when Walsh and her husband, John, opened Arabica Coffee downtown, the biggest bean on the block was Green Mountain Coffee just down the street. Green Mountain, a Vermont-based roaster, had the luxury of being attached to a popular bagel shop — the bagel is arguably another relic of the '90s — and was abuzz daily pumping out 20-ounce cups of drip coffee to the carbohydrated masses. The Walshes set up a smaller operation a couple of blocks away — a quiet, rustic spot with hardwood floors and exposed brick that was the kind of place you'd want to linger to read or write. The couple had moved from Seattle, where coffee was considered an art form, and they wanted to bring to Portland a new trend popular on the West Coast — espresso drinks. Crazy stuff.

“Everyone told us that we couldn't compete with Green Mountain,” Walsh recalls. “That we'd never make it.”

But the Walshes love specialty coffee — a somewhat pliable term that refers to roasters and baristas who regard coffee as a culinary experience that surpasses the complexity of wine. Specialty coffee professionals source and roast top beans with attention to subtle variations in flavor, often traveling in person to foreign farms for small-batch sourcing and experimenting at length with a particular bean to decide on the best roasting technique and in-store preparation.

In the beginning, Walsh remembers spending a lot of time educating her customers about espresso — that it isn't, for example, more caffeinated than drip coffee — and steering them away from the burnt dark roast that was the norm elsewhere in town.

“When we first opened, people wanted giant cups and cream and sugar because coffee as they knew it, it didn't taste so good,” she recalls.

Walsh's Arabica and Mary Allen Lindemann and Alan Spear's Coffee By Design, a fellow pioneer in Portland's local, independent coffee community that had opened the year before, together established a coffee culture in Portland that today boasts three coffeehouses per 10,000 people, as many specialty and commercial coffeehouses per capita as Portland, Ore., and second in the country only to Seattle in coffee shop density. Of the specialty coffee set, there lately has been particular buzz. There are now 10 locally owned gourmet coffeehouses on the Portland peninsula that roast their own coffee, up from four spots a decade ago, and in July a new roastery with top-notch pedigree plans to open in the Bayside neighborhood.

Portland's specialty shops range in size from The Speckled Ax, the new storefront of Matt's Wood Roasted Organic Coffee, which last year grossed less than $250,000 in wholesales, to the granddaddy of local specialty coffee, Coffee By Design, which through aggressive East Coast wholesales has grown into a $5 million business with four shops and a roastery on Munjoy Hill.

Why is specialty coffee so hot in Portland? Perhaps because Portland has the ingredients that historically have supported an artisanal coffee scene: a relatively affluent population, a robust foodie culture and a strong Buy-Local mentality.

“We've been constantly surprised at how many stores communities can actually support,” says Dan Lief, associate editor of Fresh Cup Magazine, a trade publication for the specialty coffee and tea industry. “I think that places right now have the advantage that there's this growing interest in culinary exploits of all kinds and people really wanting to know more about where their food and drinks are coming from and a locally roasted coffee shop can play into that really well.”

Portland's specialty coffee community is going through a growth spurt: The Walshes' second coffee shop, Crema, opened in the Old Port in March; The Speckled Ax graced upper Congress Street in May; and Bard Coffee is looking for a second location in Greater Portland to open as soon as possible.

“The thing that's interesting to me,” says Coffee By Design co-owner Mary Allen Lindemann, “is trying to figure out how much coffee Portland can support because we are a fairly small city. Ultimately, that's going to be the customers' choice, where they want to go.”

Coffee cultures

Portland's specialty coffee shops, with their $4 lattes, immaculate foam artistry, and Wi-Fi-rigged workspaces, compete for the same small clan of urban professionals and creatives. To romance the caffeinated, the shops must distinguish themselves in the two areas industry analysts say consumers care about above all else: coffee quality and shop atmosphere. The Speckled Ax on Congress Street features glowing space-age siphons imported from Japan and an $18,000 hand-built Slayer espresso machine that is one of only 20 in the country. Coffee By Design downplays coffee couture in favor of a laid-back, friendly atmosphere in its three locations throughout the peninsula and another in Freeport. And Bard Coffee on Middle Street, which times every pour, measures drink density with a palm-sized refractometer, and even weighs the water, celebrates the geek side of coffee prep.

“I think coffee should rise to the level of the other restaurant businesses” in Portland, says Bob Garver, owner of Bard Coffee and the Wicked Joe wholesale roastery and a World Barista Championship judge. Science — with scales, formulas and frequent “cuppings,” the industry term for precise taste-testing — helps Bard's baristas deliver the consistent flavor this coffee shop has chosen to hang its hat on. Garver and business partner Jeremy Pelkey, in true specialty coffee form, decide by trial and error how best to roast each coffee bean to bring out desired flavors and which brewing method should then turn the roasted bean into a drink. Despite competition from nearby Starbucks and Mornings In Paris, Bard's coffee-geek vibe has managed to defy skeptics and gain a respectable toehold to the tune of between $400,000 and $500,000 in annual sales.

“We believe there's lots of room in Portland for people who are serious about our craft,” says Garver from behind the bar on a busy afternoon as Pelkey and two baristas zip around him, pouring water over fresh grounds set over a weighed glass Kalita server and pulling espresso from the shiny Simonelli machine Garver bought recently from the World Barista Championships. “Portland's got a wonderful food scene and we feel like the coffee in Portland should meet or exceed that standard.”

Bard's popular latte pour competitions attest to the seriousness with which some Portlanders now take their coffee — the monthly charity event often maxes out at 17 barista competitors and a capacity crowd of 50 onlookers.

Portland coffee craze isn't unique — Americans love their coffee and, increasingly, their espresso. In 2011, according to the firm First Research, there were 20,000 coffee shops in the United States accounting for an industry valued at $10 billion in sales. About 40% of those total coffee sales were classified as “gourmet,” according to the National Coffee Association. And while cups drunk per day by specialty coffee drinkers has stayed put at around 2.5 since 2001, the earliest data available, the Specialty Coffee Association of America has watched total sales grow annually to today's current estimated value of about $18 billion. In keeping with reliable quarterly growth since 2009, this year's first-quarter sales were up year-over-year by 8.5%.

Globally, coffee consumption is also on the rise thanks to growing demand from emerging markets like China and India. These new markets have created supply challenges and subsequent price increases that squeeze independent coffee shops. Last year, thanks to increasing demand and bad weather causing an unusually small crop from major supplier Brazil, coffee futures doubled from an average of $1.50 per pound to upwards of $3, an industry record, forcing roasters and coffee shops to raise prices. Coffee futures have since stabilized, but area specialty coffee shops are still stinging from the crunch. Matt Bolinder, owner of The Speckled Ax, this month began roasting a non-organic Speckled Ax line to allow more flexibility if the price of quality organic beans skyrockets again.

More markets

In the former office of the town junkyard in Portland's industrial Bayside neighborhood, young couple Will and Kathleen Pratt plan to open Tandem Coffee Roasters in July. The Pratts earned their coffee stripes working for California-based organic micro-roaster Blue Bottle Coffee, considered among the top 10 roasters in the country. Will worked as a roaster and Kathleen as East Coast operations manager. The couple moved to Portland from New York City in March and had planned to wait at least a year to open their roastery. But by April 1 they had signed a lease to rent the tiny building on Anderson Street, which is next to like-minded businesses like the Urban Farm Fermentory and local microbreweries.

“We were really surprised at how big the coffee culture is,” says Kathleen. “And the fact that nearly everybody roasts themselves was really awesome.”

The Pratts project first-year sales of $300,000, most of which they hope will come from wholesale to area restaurants.

“The food scene really drew us up here,” says Kathleen. “We saw the potential for wholesale here. That was really exciting.”

Across town at Crema on Commercial Street, Cathy Walsh has the same idea. About 20% of Arabica's annual $400,000 revenue currently comes from wholesale and Walsh sees a lot more potential in the area market. In this 3,000-square-foot shop, about three times the size of the Arabica shop, the Walshes finally have room to display their micro-roaster and advertise their wholesale capacity. Already, Walsh says showing off the roaster has resulted in more wholesale inquiries. She hopes that wholesale and cup sales at Crema will double the company's revenue in the first year, and on up from there.

“There's a lot of high-end restaurants in town that sell bad coffee, so that's a potential market for us,” says Walsh.

Problem is, Walsh says catching the attention of those high-end restaurants has been challenging because coffee does not seem to be the chefs' priority. But renting this space is a gamble Walsh says she and her husband felt they had to take to survive after the recession and rising bean prices winnowed their sales at the Free Street location. It was no longer feasible to survive solely on that labor of love.

“It was because we were struggling financially that I felt we needed to take big action and that's what we did,” says Walsh. “There's only so much you can squeeze out of one little coffee shop.”