Gourmet Brews : Specialty Coffee Has Become a Hot Commodity in O.C.

Americans are thirsty for a really good cup of coffee.

Across the country, more consumers are sipping gourmet coffee made from specialty beans from boutique roasters and paying a hefty premium, industry experts say.

“This has opened doors for companies like mine . . . to satisfy consumers who want to have a good cup of coffee,” said Phil Johnson, president of Millstone Coffee Inc., a privately owned coffee roaster in Everett, Wash.

Unlike Seattle-based Starbucks Corp., whose gourmet coffee cafes are perking up across the country, many small roasters sell beans to consumers, but not a cup of java.

Those that do sell coffee by the cup, like Heritage Coffee Co., a roaster / retailer in Juneau, Alaska, tend to be regional.

Unlike the Pacific Northwest, where some 50% of the coffee sold is gourmet, consumers in other parts of the country tend to buy virtually all of their coffee in large cans of well-known brands sold in supermarkets.

But as the gourmet coffee craze mounts, experts say specialty beans will be available in everything from convenience stores to grocery stores, some of which will feature do-it-yourself mini-roasters.

Even in sunny Orange County, coffee is a hot commodity.

DiedrichsCoffee, a family-owned coffee roaster and retailer in Costa Mesa, has seven gourmet coffee cafe locations in the county and plans for more. Despite the competition from other gourmet coffee retailers, Diedrichs has done well.

“We were the first coffee roasters in Orange County. It runs in our veins,” said Martin Diedrich, 35, son of company founder Carl Diedrich. “The quality of our coffee, the friendliness and experience of our staff, are all responsible for our success.”

He questioned whether some of the entrepreneurs recently entering the coffee business have the experience and preparation necessary to succeed.

“I look at this coffee craze and it reminds me of a gold rush. But to be a gold digger is hard work, and people don’t realize that,” he said.

Another local coffee roaster, Alta Coffee Warehouse & Roasting Co. in Newport Beach, is also busy with plans to market its specialty roasted coffee to retailers and restaurants throughout the county.

“We’ve also got tentative plans to open another coffeehouse in the Newport Beach area,” said owner Steve Lewis.

Still, given the anticipated growth, the gourmet coffee industry will not be spared taking a lump or two.

“There will be a considerable amount of consolidation in the industry,” said Grady Saunders, president of the Specialty Coffee Assn. of America and president of Heritage Coffee. “Companies will merge and companies will be bought,” he told an industry discussion group this week.

If local roasters’ share of the $5-billion U.S. coffee market reaches a critical mass where major brands start feeling the pinch, the big companies are likely to respond aggressively with new products and potentially lower prices, experts said.

“I think the winners from the company standpoint in the (gourmet) category will be those who stick with the quality they started with and not be overly tainted by any pricing factors that come into the market,” said Johnson.

But if more consumers develop a taste for naturally decaffeinated hazelnut-flavored coffee from hand-picked Arabica beans, will there be enough to go around?

Mike Nugent, a senior vice president at DeanWitter who specializes in gourmet coffee, said roasters will have to integrate vertically, making investments in coffee plantations and mills, to insure a source of supply.

If demand for gourmet coffee continues to grow, experts say, the beneficiaries will be the producers, who have seen prices drop recently to near historic lows.

Quest for the Best Americans have discovered high-quality coffee and are consuming more every year. U.S. retail sales trend: Java Consumption 1979: 763.0 million 1989: 1.5 billion 1999*: 3.0 billion * Flavored Is Favored Types of beans industry experts say Americans will buy in 1999: Flavored: 30% Straight: 25% Blends: 15% Decaf: 15% Dark roast: 10% Organic: 5% * Big Growth in Coffeehouses Coffeehouses and specialty bean stores will continue to increase in popularity. Number of U.S. stores carrying specialty coffee:

Bean Specialty Gift, Other Coffee- stores food stores housewares stores houses 1969 50 0 0 0 0 1979 250 1,250 1,250 2,250 25 1989 1,000 5,000 5,000 9,000 200 1999* 2,500 5,000 5,000 9,000 10,000

* To Roast or Not to Roast Coffee bean stores that do their own roasting are expected to proliferate:

Non-roasting Roasting on premise 1969 30 20 1979 210 40 1989 615 385 1999* 1,100 1,400

*Projection * Source: Specialty Coffee Assn. of America; Researched by JANICE L. JONES / Los Angeles Times