While British high street coffee shops are criticized by politicians and newspapers for selling coffees at £2.35 (US $2.56), just up the road in the luxury department store Fortnum & Mason, nobody blinks an eyelid at prices of £50 (US $65) for 125 g of single origin coffee.
Specialty roasters are often faced with the challenge of convincing consumers that exceptional coffees will live up to the hype. Raised eyebrows and mocking headlines can greet those coffee shops willing to bet on the best coffees. Yet in the luxury market, superb quality is expected and customers don’t hesitate to pay the price.
Should roasters be targeting luxury markets? What benefits does this offer? And how can you best position your coffees for success? I spoke to Damian Blackburn, Director and part-owner of Dark Woods Coffee which sells private-label roasted coffees to Fortnum & Mason, to find out.
A cup of Fortnum & Mason’s Yemeni coffee from the Shaia’an Collective. Credit: Dark Woods Coffee
The luxury foods market is vast. In 2018, management consultancy Bain & Company reported that the sector had grown by 6% since 2017. It highlighted “consumers’ desire for authenticity, quality, freshness and transparency regarding a product’s origins” as being particularly relevant to this growth.
Meanwhile, Nespresso’s attempts at crafting an affordable luxury experience earned the brand over US $4 billion in 2015.
Luxury products in general also benefit from higher profit margins. One paper found that gross margins were on average 62% for a selection of prestigious brands in the watch, cosmetics, and clothing sectors. The industry average gross margins for apparel is widely quoted as being between 40–50%. While creating and marketing luxury products are often more expensive to produce, the high prices mean that it typically pays off.
Natural Yemen Mokha coffee from Fortnum & Mason is served as a pour over coffee. Credit: Dark Woods Coffee
Targeting the high-end market often involves selling private-label coffee, i.e. allowing it to be packaged as another brand. In the luxury market, brand names carry a lot of weight. However, for those trendsetters able to access the market under their own name, doing so will establish their coffee as products of the highest quality.
Damian tells me that while Dark Woods Coffee sells their Yemen Mokha to Fortnum & Mason on a private-label basis, “certain examples around Europe are showing how you can focus on really, really high-quality, perhaps smaller batch coffee, and present it beautifully and have an audience that’s both European and perhaps beyond.” He believes that there is “so much potential” for roasters to sell their high-end coffees directly.
And as he stresses, it’s not just the roaster that can benefit from the brand exposure. “I would not want to put a range in there [from] famous producers…,” he says. “[Selling coffees to luxury markets] gives the opportunity to put some coffees in there that are almost hidden gems, things that haven’t had the opportunities before or the access to the market.”
In fact, he argues that it makes it easier for him to do this. “It actually opens up new possibilities from a sourcing perspective as well. Fortnum & Mason are interested in smaller volumes at very, very high quality… It’s quite exciting to have a chance to work with farmers and producers that share that kind of enthusiasm and aren’t all about volume, but that are just about producing something very bespoke. It’s really quite unique.”
Dark Woods Coffee roasts small batches of specialty coffee on their Probat. Credit: Dark Woods Coffee
A luxury product doesn’t just need to be of exceptionally high quality. It will ideally come with a story, have a transparent and sustainable background, and be available in very limited qualities. Connotations of history and prestige are also beneficial.
Ottilie Cunningham, Fortnum & Mason’s coffee buyer, tells me, “We love the fact that genuine Yemeni Mokha is an extraordinary and rare coffee with such an important place in the bean’s rich history.”
Dark Woods Coffee is helping Fortnum & Mason introduce specialty Yemen Mokha from the Shaia’an Collective to their range. It is sourced through Sabcomeed, a supplier of Yemeni beans that invests heavily in supporting the producers, especially during the current civil unrest. Sabcomeed has built wells and even roads between producing communities.
From a heritage perspective, Damian says that “Yemen has played such a vital role in the coffee industry over time.” He is drawn to the movement of re-establishing the term “Mokha” to denote coffees that are “the product of these incredible mountains, super high-altitude coffees, sun drying, you know, natural processing, really carefully trying to draw out flavors.”
In addition to this origin story and connotations of history, the coffee also stands out for its flavor complexities and is “really high quality,” says Damian. “It’s got the advantages of terrain and terroir and everything that comes with it.”
And not only is Yemeni coffee hard to come by in the middle of civil unrest, but each farmer only produces a small amount. “We can now put faces and names to the coffees as well,” Damian says. “So that’s the idea that the value is increased by these being really quite tiny, very, very hand-produced micro lots of coffee.”
With luxury food and beverages, it’s about the whole experience rather than just the product being consumed. They “deliver a sense of pleasure to whoever is lucky enough to drink them,” explains Ottilie.
Creating that sensation often starts with luxurious packaging. Fortnum & Mason chooses to package their coffee in tins. “Tin presentations are very important because they feel a bit more special, a bit more gifted,” says Damian.
The labels are also designed with visual signifiers of luxury. “Emboss or gold foil elements on the labels reflect the fact that the product’s special,” Damian tells me.
A smaller packaging size can also signify the coffee is rare (and has the added benefit of making these high-value coffees slightly more accessible).
The packaging itself can also reinforce the message that this is a product with a story. Fortnum & Mason tins, for example, include a small pamphlet explaining the coffee’s provenance.
Although it’s not written on the tin, the way the product was produced and packaged also matters. “It’s just very hands on,” Damian says, explaining that they roast a maximum of five kilos at a time to ensure freshness. The coffee tins are then filled by hand, and finally, the labels are also affixed by hand.
The materials, the details, and the work done by hand symbolize wealth and luxuriousness. It costs more to do but also helps justify the increased profit margin. And for consumers, it makes the whole experience indulgent and decadent.
A selection of Fortnum & Mason’s coffees in their distinctive tins. Photo credit: Dark Woods Coffee
While Dark Woods Coffee accesses the luxury market through Fortnum & Mason, Damian emphasizes that you do not need to have a “distribution line” to do so. He says that many roasters can see success by selling luxury products on their own premises.
If you sell your own luxury products, you also need to take on the challenge of marketing it directly to consumers. Don’t overlook online coffee sales. It’s a low cost and comparatively easy sales channel to build. 10% of the luxury sales in 2018 were online, according to Bain & Company, and year-on-year growth of online luxury sales has been in double figures for over 10 years.
The traditional brick-and-mortar approach can still pay off, however. Every major city will have streets or department stores dedicated to showcasing high-value luxury items. Alongside established luxury fashion retail stores will be cafés and restaurants serving coffee. Often the quality of the coffee offering will be at odds with the exquisite décor. There lies an opportunity for tenacious roasters to guide the restaurant into crafting a bespoke, high-quality coffee offering.
Alternatively, the private-label option allows you to maximize on another company’s existing luxury brand. The marketing is done for you, and you just have to provide the right product with the right packaging. For this, it’s important to leverage contacts and ensure that you are already roasting exceptional coffee.
You should also know where your potential buyers do their sourcing. Damian emphasizes the value of the fine foods world. “In the UK, we’ve always been perhaps heavily involved in the specialty food and drink industry, not just the coffee industry,” he says. “Knowing people like the Guild of Fine Food, attending festivals like the Speciality Fine Food Fair in London where you get a lot of buyers from Harrods and Selfridges and Liberty and people like that.”
Accessing the luxury market might mean using a variety of these channels. Perhaps you will sell high-quality own-brand products online while also supplying even more exclusive private-label coffee to other brands.
Light roast, natural processed Yemen Mokha from Fortnum & Mason. Credit: Dark Woods Coffee
While an often overlooked niche of the market, luxury products enable you to focus on the highest-quality micro lots and other rare coffees and sell them at prices that reflect their true value.
Accessing this market might seem challenging. Yet in some ways, it’s just like any other sales channel: specialty coffee shops, supermarkets, web sales… No matter which sector of the industry you work in, from luxury through to supermarkets, success lies in producing and packaging the right product, making the right contacts, and promoting yourself in the right places.