Chicagoist Grills: Intelligentsia Coffee & Roasting Works CEO Doug Zell

By Chuck Sudo in Food on Feb 13, 2007 4:00PM

Few coffee roasters can match the reach and influence of Starbucks like Intelligentsia. In its twelve years, the company has grown from a small storefront café on Broadway to a booming wholesaler capable of recording nearly $12 million in sales annually. In addition, its three cafés (located downtown on East Randolph and in the Monadnock building, in addition to the flagship Lakeview store) each reflect the clientele of the neighborhoods they serve. Most importantly, Intelligentsia walks the walk when discussion turns to sustainability. Not content to merely comply with purchasing standards set by certified fair trade cooperatives, which basically sets a minimum for compensation of coffee and tea growers, Intelligentsia established its own standards of fair trade.

Intelligentsia's "Direct Trade" philosophy bypasses the cooperatives, who receive a share of fair trade sales for their marketing and promotions, to work directly with coffee and tea growers, paying them far above market value for their product, establishing best practice guidelines for growing coffee, exchanging farming information between the growers in its network, increasing awareness of how their business affects the communities in which their growers are located, and ultimately bringing consumers the best coffees available. Intelligentsia is so committed to this philosophy that they're hiring an independent auditor to ensure that they're sticking to it. It's a philosophy that earned Intelligentsia Roast Magazine's 2007 "Roaster of the Year" award.

Not bad for a business that founder and CEO Doug Zell planned with his wife in his parents' basement after a failed tea business on the west coast. Intelligentsia's latest moves include opening a café in ... Los Angeles? Indeed, late spring sees the opening of Intelligentsia's latest retail location in Silverlake, and both foodies and fellow -Ist-a-verse bretheren there are stoked. Being the rah-rah type territorial, we decided to place a visit to Zell at Intelligentsia's Fulton Street roasting works to discuss Intelligentsia's decision to open a retail location on the west coast, further elaborate on the Direct Trade philosophy, and look back at how Intelligentsia has grown over the years. The interview was conducted last week, on a snowy day just like today. In other words, perfect coffee-drinking weather. Our full interview with Doug Zell follows the jump.

Chicagoist: Of all the places to open another café, why Los Angeles?

Doug Zell: I think that the food scene is really picking up there. It sort of reminds me of how it was here, five or six years ago. Local chefs there are looking for inspiration and developing new offerings. The culinary community there is in the right place, and I think that having a store where you’re able to buy artisan coffee would be a good complement. We’re opening in a neighborhood called Silverlake, which is, sort of, I guess you can say it was once the Wicker Park of Chicago; there’s a burgeoning food scene in Silverlake, with a gelato shop, a cheese store, a wine shop nearby. All these things are coming together, and we’re really lucky to have found the location that we did.

C: Why not open another store in Chicago?

DZ: We already have three stores here, so I think we’re well represented. Opening another store would be like ... opening another store. I don’t know that it would have as much impact as opening (in LA).

C: So when you’re looking at opening future stores, will you be looking at places and cities where you feel your coffees would make an impact and complement that city’s culinary scene, like New York, or Miami?

DZ: Oh, absolutely.

C: How does Intelligentsia’s practice of “direct trade” differ from following established free trade guidelines?

DZ: Direct Trade is an extension of our sustainability practices. I think that fair trade has brought a lot of these issues — fair market prices, minimum living wages for coffee farmers — to light, and that’s a really positive thing. We wanted to dig in further ourselves and find out who was growing the coffee, how they were being compensated, and not only pay better prices for the coffee, but actually have a hand in developing the coffee from the ground up. As it stands now, in twelve different countries, we’re meeting a pricing guarantee directly to the grower, instead of the representing cooperatives. We’re getting back to the core of it, and also investing in modern farm technologies, processing, and best practices. So we’re paying great prices, there’s a level of social responsibility, but there’s also the selfish motivation of creating better and better coffee. I think it’s really cool that it’s working. We get to do the right thing for social responsibility, but we’re also creating the best coffee.

C: So is that a large reason why Geoff (Watts, Intelligentsia’s main coffee buyer) and you do a lot of traveling, to make sure that these best practices are being followed?

DZ: Yeah. Geoff is traveling in excess of 250 days a year. So he’s basically acting as a liaison between the farms we deal with. Say you have a coffee grower in Kenya, one from Honduras, and one from Nicaragua, and there may be some best practices that they don’t know about. And Geoff is able to share these ideas with them. Our ultimate goal is that we’ve really raised how coffee is perceived in the world, similar to a fine wine or a good meal, instead of just a caffeine delivery system. By making it continuously better and better, it raises the bar and expands how the market should be. You walk into a restaurant and you see an extensive wine list, but still can barely get a decent cup of coffee. Now we’re seeing places offering French presses of different origins. (A restaurant’s staff) is talking about them, with varying price points — why this one costs a little bit more — and seeing similar aesthetics (associated with) wine applied to coffee.

C: Do you see Intelligentsia’s influence on other coffee roasters?

DZ: I hope so. I’d say yes, in the city and also on a national level. Specialty coffee is a very tight-knit community; it’s hard not to be aware of what’s going on if you’re paying attention. We’re seeing more and more roasters getting closer to growers, and getting involved (in development). In that regard, I think the analogy between wine and coffee is best. I think that more coffee roasters are getting involved, trying to have a hand in developing it. It’s a great trend that’ll drive prices upward, and hopefully consumers will drive the prices up, as well.

C: You business philosophy is similar to Starbucks, in that regard, except that it seems like Starbucks today is about so much more than the coffee. It’s about getting a cup of coffee and buying a CD, or producing movies. Do you see this as a negative?

DZ: Let’s be honest. Without Starbucks, the public’s awareness of specialty coffee would be a lot less prevalent. Where they are now versus where they were ten years ago are different things. That they're successful at the expense of other smaller companies that weren’t developing coffees is irrelevant, I think. I don’t think they’re the devil, if that's what you're trying to ask. They do a lot of things right, and they raise public awareness about coffee. They basically opened the door. It’s similar to how Sam Adams opened the door to public awareness for microbrews. I think that the fact Starbucks is so ubiquitous has driven up the expectations for what is expected of an independent coffee roaster. Sadly, in a lot of places, Starbucks’ execution is a lot better than a lot of independent (coffee stores). You can’t just be independent and expect to be successful.

C: It’s also hard to find fault for a company that extends health benefits and profit sharing to all its employees.

DZ: Well, yeah. The bar they’ve set in the past ten years is high. They have made real estate much harder to get, because they have a lot of the best locations. But, speaking on behalf of independent coffee roasters, I don’t really think about that. For us, the best competition is ourselves.

C: Ten years ago, you were trying to sell tea on the west coast.

DZ: Actually, it was from ’89-’95. It was a bottled iced tea.

C: What lessons learned from that previous business did you apply to Intelligentsia?

DZ: I think in that tea business there were a lot of things that were out of our control. We didn’t brew it, didn’t bottle it, we didn’t distribute it ourselves. A lot of that was left to outside sources. We really lost control of it. The other lesson was that our business acumen was only OK. But then, what we know about coffee and tea now from what we knew ten years ago are immeasurable.

C: Was there any point when you and your wife opened the Broadway store when you thought you wouldn’t see any light at the end of the tunnel, and you’d have to close the store?

DZ: Actually, this weather sort of reminds me of it. I think it was January of ’96, and there was a big snowstorm. I think that day we saw, maybe, ninety customers at our Broadway store. And now, the average number is something like 800 transactions a day. We remember thinking that, having just moved here from California, that this just might work.

C: How important was landing Charlie Trotter as an account to the growth of Intelligentsia?

DZ: I don’t know. I certainly think it was very helpful, and don’t want to diminish the value of that. We’ve been very successful in the culinary community. Trotter used to have this chef who would come in as we were opening, after a long night in the kitchen. He must have been 25 at the time. My wife and I had him over for some wine one night. He just seemed like a lost soul at the time, he was working really hard. I think he disappeared, and we sort of lost touch with him. Then, eleven years later, I get a call from someone who does press work for us in Los Angeles who said, “There’s this guy here who says he knows you. He says is name is David Myers, who opened this acclaimed restaurant called Sona in Los Angeles. So we flew out to meet him, walked up, and it’s this guy who, eleven years ago, was sitting in our store after a long night at Charlie Trotter’s. He placed our coffee in his restaurant, and got us started in Los Angeles.

C: Nowadays, Intelligentsia coffee is in the buzz restaurants, like Alinea and moto. How hands-on, how involved, are chefs like Charlie Trotter, Grant Achatz and Homaru Cantu in making their respective house blends?

DZ: It varies by chef. But what we’re trying to do now is move away from the idea of a blend and into specific origins, like Tres Santos. We’d like to move towards seasonal offerings. A tomato salad from Chicago wouldn’t be your focus in January; we want to do the same thing with coffee. We want our coffee in these restaurants to reflect the seasonality of the menu, because the great chefs are adjusting their menus with the season. Blends are great, but it’s not unlike single-malt scotch, where you learn the characteristics and flavor, versus a blend. I also think wine people are focusing on more specificity, and I think we can offer coffees that reflect the seasonality of the menu.

C: You’ve re-launched and re-branded the teas for Intelligentsia, as well. A lot of the offerings are organic certified. How’s that aspect of the business doing?

DZ: It’s growing, but not at a rate that’s outpacing the rest of the business. We expect to see some jumps in tea (sales), and from an organic standpoint, we really want to do as much certified organic as we can. It continues to grow each year. I think for us the focus there is we get teas of the best quality, regardless of how we grow our tea. The public has become more aware of what organically grown teas means, and are willing to pay a bit more for it.