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In a space dominated by bustling Dunkin’ shops and snaking drive-thru lines at Starbucks, Blue Bottle Coffee is hoping to find staying power in the quieter moments shared over a cup of joe.
Founded in 2002 by James Freeman, Blue Bottle is a premium coffee company known for its sleek cafes full of patrons in quiet conversation awaiting an order of the chain’s signature pour-over coffee.
Historically, the role of coffee has been to bring people together, said Blue Bottle CEO Karl Strovink, MBA ’01.
“Over coffee, you’re becoming energized and you’re becoming connected to one another,” he said. “Creating that experience … is part of what we’re into, and that touches different aspects of culture.”
In a recent webinar hosted by MIT Sloan Alumni Online, Strovink discussed Blue Bottle’s business strategy and its connection to innovation and described how the company gets stakeholder buy-in for some of its most risky ideas.
Coffee culture
When it comes to staying ahead of the innovation curve, Blue Bottle relies on two things: a “culture of yes” and “not being ashamed to stand on the shoulders of the giants,” Strovink said.
In 2017, Nestlé purchased a majority stake in Blue Bottle. It wasn’t the first time Strovink had worked at a company owned by a much larger corporation. Before leading the coffee brand, Strovink was a senior leader at Nike-owned Converse. He said it was hard to borrow from the athletic juggernaut’s innovation and apply it to the lower-tier shoe brand.
But within Nestlé’s $30 billion coffee enterprise, “we are the cherry atop the cake,” Strovink said.
“You have legions of PhDs and scientists and incredibly well-skilled folks across the globe for Nestlé that are just jumping at the chance to work with Blue Bottle,” he said.
Collaborating with the coffee company means supporting innovation through curiosity and exploration, Strovink explained.
“Our head of innovation — ironically, his name is Benjamin Brewer. He has informally formed a network of coffee experts across the company that jam together to create and express new ideas in coffee.”
Stakeholder buy-in for new products
Among those new ideas is Blue Bottle’s decision to make oat milk its default in all shops.
Blue Bottle noticed that in Los Angeles, about 50% of customers were already using oat milk. That trend, coupled with the fact that dairy farms are contribute to greenhouse gas emissions, Strovink said, led the company to launch a three-store pilot program in 2021 that offered customers oat milk as a substitute at no extra charge. In May 2022, Blue Bottle announced the companywide change.
“Right now, we’re seeing huge swings in the propensity of folks to accept oat milk,” Strovink said. “We’re now over 60% total oat milk, which is a 50% to 60% shift in the last year or two.”
Strovink said creamer is a key investment area for Blue Bottle, and the company is developing its own alternative milk so it can control what’s on the ingredient list.
Its willingness to take risks with alternative milk is part of its plan to continue innovating, which also includes its recently launched instant espresso for home use. Though Strovink called the product game-changing, he also acknowledged that it could have been “a ‘new Coke’ moment for Blue Bottle.”
The idea that the brand known for pour-over coffee was going to launch an instant version “was at some level jarring for us, and risky,” Strovink said.
To get buy-in from investors as well as employees, Blue Bottle used a “swarm approach.” Initial steps included ensuring that Freeman and Brewer had the freedom to perfect the new product without the pressure of timelines or delivery requirements. That was followed by building momentum at the barista level and working with Nestlé scientists and technicians to open a new manufacturing plant.
It was a leap of faith for Nestlé’s team, Strovink said, both from a research and development perspective and as an investment. But by positioning instant coffee as not just a product but a platform that could power a retail concept and offered sustainability advantages, he said, “we were able to get folks on board.”
