Key Takeaway
Blue Bottle’s customer satisfaction has been steadily tanking since it was announced that Nestlé purchased 68% of its shares. An Outside Insight report reveals the extent of the reaction and the difficulty Blue Bottle may face by association with Nestlé, known for poor social responsibility reputation that positions it at odds with the artisanal brand’s core values. What clues can competitors find in the wake of public response?
If you want the ultimate hipster San Francisco experience, a visit to one of the prime Blue Bottle coffee shops is a must. The coffee brand known for its quality $4 lattes has flourished in San Francisco, New York and LA coffee scenes, and it looks set to do the same in Tokyo.
It’s no surprise, then, that Nestlé’s acquisition of a 68% stake for a reported $500 million has caused outrage amongst loyal fans of its artisanal coffee. Considering its decidedly un-hipster reputation, Nestlé certainly consider this a smart move – the artisanal coffee market accounts for 15-20% of coffee consumed in the United States according to the Specialty Coffee Association.
Blue Bottle stormed San Francisco’s coffee scene in 2002, part of the ‘third wave’ coffee movement – think high quality rather than fast turnaround – and quickly became a local favourite. It has benefited massively from prime location, with a number of its fan club coming from the Silicon Valley community and pitching in happily to its various rounds of funding. As Mashable put it: ‘a who’s who of prominent venture capitalists decided that since they were pouring money into everything else, they might as well fund their preferred baristas too.’
Once a fan favorite, what exactly went wrong? Outside Insight data paints a worrying picture of Blue Bottle’s customer satisfaction following the Nestlé announcement.
Customers react to acquisition on social
Outside Insight’s customer report showed that while Brand Net Reach (net positive media mentions) soared following the announcement, customer satisfaction painted a decidedly different picture, dropping 38.7% in September. As a consumer-facing brand, these numbers should be raising flags.
Two main concerns are trending:
1 . Artisanal vs corporate
Third wave coffee is all about experience, appreciation and quality. It also values the supply chain process, particularly more direct trade and sustainability. It is the antithesis of Starbucks or at-home instant coffee brews. Nestlé own a number of such ‘fast’ products, including Nescafé and Coffee-mate. Online customer feedback shows that customers find it a stretch to believe their favorite artisanal coffee brand will remain untouched by the influence of the corporate machine.
Can Blue Bottle remain a third wave brand in the face of a fast, mass-produced owner? CEO Bryan Meehan believes it can: “I don’t report in to anyone [at Nestlé]”, Meehan told Independent.ie. “They’ve literally left us alone to get on with it.” With positive themes for Blue Bottle including keywords such as ‘coffee’ ‘great coffee’ and ‘good coffee’, there is clearly still a lot of love for the product Blue Bottle creates.
If the product remains untouched, or is improved upon in the original Blue Bottle style with help from Nestlé funds, there’s a good chance customers can be brought back or retained despite Nestlé’s involvement. What stands out here is the emphasis on quality coffee.
2 . Nestlé’s brand reputation
From Nestlé’s point of view the acquisition is a smart one. As the New York Times highlights, it grants access to the right kind of market for Nestlé: “a flourishing new industry with a highly dedicated consumer base (read: millennials).”
However for Blue Bottle, association with Nestlé in particular has become a customer issue. The brand has a long history of controversies; the Africa baby formula scandalin 90s, their demand that drought-stricken Ethiopia pay back huge debts; their controversial bottled water practises; and last year’s discovery that their Maggi noodles in India had dangerously high levels of lead. Adding a small, ethically-minded company to the mix might seem a conflict of interest for CEO Bryan Meehan.
Do past scandals matter to customers? With access to details around the scandals available in a quick search, the data shows the sort of impact it can have. In the Outside Insight Report, ‘water’ is highlighted as a top negative associated with Blue Bottle, even before the word ‘Nestlé’ itself.
As recently as spring this year, Nestlé were accused of draining water from California (currently suffering a long term drought) for its bottled water business. With California being the spiritual home of Blue Bottle – founded in Oakland, an integral part of the coffee scene in San Francisco, and a favourite of Silicon Valley – there’s a particularly local grievance over Nestlé’s acquisition to add to the past international scandals.
Does customer satisfaction matter?
After the announcement, Blue Bottle’s CEO Bryan Meehan confidently said: “You can’t run your business by worrying what people will think. You have to run your business by believing in what you do. And, I know how things will be in the future — our customers don’t.”
Whilst it’s certainly true that customers can’t know the ins and outs of Blue Bottle’s long term strategy, customer satisfaction levels paint a worrying picture. Whether they continue to be dissatisfied, and whether that online expression of views translates into reduced sales, remains to be seen.
The Outside Insight Report shows that in terms of customer satisfaction, Blue Bottle was outperformed by Philz Coffee and Coffee Culture in the month of September, pointing to an opportunity for those Bay Area-based competitors to emphasize their own commitment to the values their customers demonstrably desire. If Philz Coffee, Coffee Culture and other third wave coffee brands are able to remain true to their core customers and expand in a way that satisfies the customers, they may gain the edge over Blue Bottle despite its new backing.
