By Nathan Olivarez-Giles
January 5, 2010
Coffee beans from Ethiopia are ground to make a rich, almost wine-flavored brew. Beans from Guatemala are brewed into a reddish drink that balances acidity and heavy body. There are iced coffees, popular with Asian communities; Turkish-style powdered coffees, a favorite among Middle Easterners; and espressos, long a hit with Latinos and Italians.
Gaviña & Sons has built its business by understanding the tastes preferred by various ethnic groups and then tailoring its coffees to specific markets. But the 264-employee company is far from a niche player.
"We just wanted to make the coffee that we wanted to drink, so we sold it in Cuban markets around L.A.," said José Gaviña, chief financial officer and son of the company's late founder, Francisco Gaviña.
"We sold $1,000 worth of coffee in our first year," he said. "And then we realized that Italians like the same style of coffee, so we started selling it in Italian markets. As we started making coffee for all the different immigrants in L.A., we started to take off."
As consumer tastes have changed over the last two decades, Gaviña & Sons has been bringing the coffees sold to smaller ethnic stores into larger chain grocers, alongside its Don Francisco brand made specifically for mainstream grocery stores.
The company now sells coffee in 20 states and in such chains as Ralphs, Wal-Mart, Vons and Safeway. A fifth of its business comes from making and packaging private-label coffees brewed and sold at McDonald's, 7-Eleven and Costco stores.
But in 1960, the family's fortunes couldn't have been more different.
Francisco Gaviña, fed up with Fidel Castro's communist takeover of Cuba, left a successful coffee business behind and moved his family to Miami, then to Los Angeles three years later. In 1967, while working as a dishwasher, Gaviña started Gaviña & Sons with a roaster bought from Farmer Bros., a Los Angeles coffee producer, for $500, José Gaviña said.
The company started with all of Francisco's children pitching in, and more than 40 years later, it's still a family-run business.
"We all helped out; we would brew coffee, find stores to sell it in, make deliveries, package it by hand -- all while we had side jobs and took college classes," José Gaviña said. "And now our children -- some in high school, some in college, some graduated -- they work here too."
José Gaviña's brother Pedro is chief executive. Another brother, Francisco, is vice president of operations. Sister Leonor Gaviña-Valls is vice president of marketing.
Last year, as the recession forced some wholesale customers to cut back or close, the coffee maker still managed to increase its revenue 5.5% to $114 million, from $108 million the previous year, José Gaviña said.
That's a mere drop in the coffeepot compared with the overall U.S. coffee market, measured at $44 billion in a 2008 report by the market research company Packaged Facts. The food service industry accounted for 87% of the coffee industry's 2007 sales in the U.S., the report said.
Food service businesses, which include restaurants and catering services, generated 10% of Gaviña's revenue last year, down from 15% a year earlier, the finance chief said.
"We've seen dozens of restaurants that we've sold coffee to for years, some for decades, cut back on how much coffee they buy or even go out of business," he said. "Restaurants, food service, they're still an important part of our business, but it's gone down."
The company's spots on grocer shelves have kept it growing, Pedro Gaviña said.
"We've seen an increase of our sales in grocery stores, and that's helped fill in the gap left by the drop-off we've seen in restaurants and food service," the chief executive said. Over the last five years, independent grocers have accounted for a steady 30% chunk of Gaviña's business, while private-label coffee for customers such as McDonald's, 7-Eleven and Costco have remained a consistent 20% over the same period, he said.
Even though revenue rose last year, the company is looking to keep costs as flat as possible. "We've had no layoffs, we've had no big recent expansions either, and our prices haven't changed in about five years," Pedro Gaviña said. "We aren't going out and spending money we don't need to."
That doesn't mean Gaviña & Sons is standing still, he said. The company plans to continue broadening the line of coffees it sells in grocery stores, both at big-name chains and mom-and-pop stores, Gaviña said.
Last year, large grocery store chains accounted for 40% of Gaviña's revenue, up from 35% in 2008, he said.
The increase in grocery store sales can be attributed to the recession as more people brewed their own coffee at home instead of paying more than twice as much for a cup from a coffeehouse, José Gaviña said.
The company's bestseller remains its Don Francisco brand coffee, he said, named for the family patriarch, who died in 1996 at age 93. Don Francisco is sold only in major chain grocers.
Café La Llave, the company's espresso marketed to Italians and Latinos, caught on across ethnic lines as the tastes of coffee drinkers in the U.S. changed and as major grocery stores started carrying the dark grinds, Pedro Gaviña said.
"Coffee drinkers today are more educated," he said. "They know more about coffee, and they're more discriminating in what they drink."
Gaviña & Sons first made it into a major grocer in 1984: a Lucky store in South Pasadena. Based on its appeal to targeted ethnic groups, the company has been able to double its size about every five years, José Gaviña said.
"When we started getting into the supermarkets, the big guys got mad about it because we were one more can on the shelf," Gaviña said. "There were companies that actually paid for shelf space, and we were kicked out of grocery stores. But after a few months, we'd find a way to get ourselves back into that chain and back on the shelf without having to pay extra for it."
In 2002, the coffee maker built its own 240,000-square-foot plant in Vernon, which produces more than 36 million pounds of coffee annually with beans from South America, Asia and Europe.
Much of that success comes from Gaviña & Sons' culture of family, said Daniel Medina, vice president of sales at Liborio Markets, a Pasadena grocer specializing in Latino foods.
"We've sold Gaviña coffees for more than 40 years, and the whole time, we've known the entire family," Medina said.
"They come in, in person, and test the coffee in the store to make sure what's on our shelf is of good quality," he said. "They did that when they first started and we had one store, and now we have 13 stores in three states and they still do it."
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