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The Latino effect on the US coffee industry

From the October 2017 issue.

Latin America produces not only some of the world’s best coffee, but also an expanding group of discerning coffee drinkers in the United States.

Coffee farmer

When asked about the Latino coffee culture in Los Angeles, coffee shop owner Chuy Tovar speaks of a close-knit community of people who are proud of their heritage. While those traits also ring true in the greater Latino culture, they’re especially true when it comes to coffee.

“We try to help each other out as much as possible,” says Chuy, a tea-turned-coffee drinker who bought his coffee shop Primera Taza from a friend who was struggling to sell it. The small shop is located in the Boyle Heights neighborhood of East Los Angeles, where the local population is predominantly Hispanic.

Because he had only recently developed a love for good coffee, he relied on Primera Taza’s existing staff to show him how to use an espresso machine. From there, he relied on his 15 years in the food and beverage industry to recognise that the shop’s coffee needed improvement.

“I’m very particular with taste, so the first thing I did was switch out the coffee,” he tells Global Coffee Report. “I knew there had to be something better so I started to do some research into the areas that produced it.”

His search led him into the vast world that is coffee production, but ultimately he narrowed in on Mexico for its variety of regions and microclimates that produce different flavour profiles. Mexico is also where Tovar has his roots. His family is from a small town in the state of Jalisco.

Currently Tovar sources his coffee from a handful of regions in Mexico, but he hopes to eventually start sourcing from his family’s farm in Jalisco. “Two years ago they produced their first premium beans,” he says. “So in a couple more years, my customers might be able to taste some of my family’s coffee.” He’s working with Baristi Group out of Tijuana, Mexico, to get a project going in Jalisco.

Because of that aforementioned Latino affinity to heritage, “the community here started gravitating toward my coffee because of where it comes from”, explains Tovar. “A lot of the people in this community are from different states in Mexico, so they’re very interested in learning about where our coffee comes from. There’s a pride in it.”

Part of the culture
That tie to culture is one of the driving traits behind the steady increase in coffee consumption among Hispanic-Americans. Every year, the National Coffee Association releases its annual National Coffee Drinking Trends (NCDT) report, and every year, Hispanic-Americans are drinking significantly more coffee than all other ethnic demographics.

Of all participants surveyed for the 2016 report, 69 per cent reported drinking coffee in the past day, compared to 58 per cent, 51 per cent and 39 per cent among Caucasian-Americans, Asian-Americans and African-Americans respectively.

Although the latter three groups have indicated increased coffee consumption in the 2017 NCDT report, Hispanic-Americans are still in the lead for total coffee consumption.
Because Hispanic-Americans don’t make up the majority of the US population, the wide margins are attributable to their “higher incidence of coffee consumption”, explains Michael Edwards, founder and consultant at Dig Insights, the market research consultancy responsible for the NCDT report for the past 15 years. “Hispanic-Americans are more likely to have drank coffee in the past day – and at numerous times throughout the day.”

In addition to frequency of consumption, intercultural specialist and consultant Annalisa Fernandez also points to intensity. “It’s not only that they’re drinking more coffee each day, but also that they’re drinking stronger coffee,” she tells GCR. “Where [Caucasian-Americans] drink drip coffee, Hispanic-Americans drink espresso-strength coffees. They might not even own an espresso machine at home, but they’ll have different contraptions to help them make really strong coffee at home. They will find any way to make it stronger.”

This notion supports the NCDT research: Caucasian-Americans drink the most traditional coffee, with 47 per cent of respondents reporting they drank it in the past day. Meanwhile, Hispanic-Americans drink the most gourmet coffee beverages (48 per cent) and are second, behind Asian-Americans, for the most espresso-based beverages (28 per cent).
Again, Fernandez points to the culture: “In the United States you usually have to walk into an upscale restaurant to see an espresso machine, but you can walk into a hole-in-the-wall Cuban restaurant and see a massive six-spout Italian espresso machine.”

Starbucks steps in
Although coffee has long been a staple in Latin-American cultures, Tovar credits Starbucks for introducing the group to specialty coffee, especially among the younger Latino generations. “Starbucks opened up a whole different market to them,” he explains. “The Hispanic community is already known for putting a lot of milk and sugar and other [additives] into their coffee, so Starbucks lattes are a good entryway for them.”
Mitch Hale, co-founder of the Cafecito Organico chain of coffee shops throughout Los Angeles, also credits Starbucks: “They taught people how to pay a higher price for coffee.”

Although Cafecito Organico’s four locations are in areas with large Hispanic populations, Hale says most of their customers “are hipsters – the same people who go to Blue Bottle or Intelligentsia”. Still, he and partner Angel Orozco are very focused on the brand’s Latin roots and strive to keep that at the forefront of whatever they’re doing.

While Hale’s coffee roots are in Seattle – he hails as one of the original baristas at Espresso Vivace under professional barista David Schomer’s tutelage – Orozco’s coffee roots are in Latin America. He is originally from Guatemala and has a lot of family in the coffee business there.

Naturally Orozco went the route of coffee and taught himself how to roast it. He built a name and following for himself at farmers markets in Los Angeles, which is how he and Hale connected.
Cafecito Organico and Primera Taza are only two of a handful of coffee shops that have opened in the past 10 years as part of a surge of premium Latino coffeehouses in Los Angeles. Another major player is Tierra Mía, an expanding chain with about 10 shops in predominantly Hispanic neighbourhoods.

“Coffeehouses in general have always been like a town square, a natural place for people of similar backgrounds to meet and feel at home,” says Daniel Levine, trends expert and director at global consumer trends consultancy The Avant-Guide Institute. “So for a place like Los Angeles, where there’s a large Latino population, the prevalence of Latino coffeehouses makes sense.”
Hale and Tovar also point to this trend in Latin American countries.

“If you got to Central America and even Mexico, you’ll see a lot of high-end coffee shops popping up,” Hale says. “When we first started going to Latin America, you couldn’t get a good cup of coffee anywhere. Traditionally, those countries export every decent bean, and so all the crap goes to local consumption. But the next thing you know, there are barista champions coming out of Honduras.”

Tovar echoes his sentiments: “There are a lot of amazing coffee bars in Mexico, whereas there never used to be. The coffee game there is still in its infancy, though, so they’re only just scratching the surface. But with the investment they’re putting into coffee programs and the infrastructure they’re putting into place, there is so much more potential. I don’t see it slowing down.”

Coffee farmers

A target market
At the same time that Hispanic-Americans have been embracing premium coffee, their spending power has also been increasing as a group – in general and on coffee.

“They have more disposable income than in the past, so we’re seeing them spend more money on premium items, including coffee,” explains Levine. “There’s an aspirational component to it as well, with a mindset of ‘I might not be able to afford the nicest car, butI can drink the same coffee as millionaires’.”

Meanwhile, the ethnic demographic is simply growing as a whole. Although annual growth has slowed in recent years, Hispanics have long been the US’ fastest-growing population. According to the US Census Bureau, the group totalled 56.6 million in 2015 and represented nearly half of the country’s population growth from 2014 to 2015, adding 1.2 million members. By 2060, the Census Bureau estimates that the Hispanic population will constitute nearly 30 per cent of the total US population.

Naturally, this expanding consumer group is contributing to growth in various industries, including coffee.

“A lot of what’s driving coffee consumption – and really growth in many consumer markets – is the growing number of Hispanics in the United States,” says Fernandez, specifying that the growth is rooted in stateside births rather than immigration into the US.

So what does growth mean for the greater coffee industry?

Most experts see this expanding consumer market, one that has an increasing interest in specialty coffee, as a huge opportunity for coffee brands, especially those already in the market.

“Any company that is already present in the Hispanic-American market has it made,” says Fernandez, adding that the brands not already in the space may face challenges tapping this market. “Those without a presence will have to figure out how to make their brand accessible to this market and create a bridge between the two.”

Adds Edwards, “Marketing to this group has been more of an afterthought, such as simply translating the packaging, so there’s a real opportunity to speak to this market directly.”

So for the coffee companies looking to target the flourishing Hispanic-American market, it’s important to understand what kind of coffee drinkers they are.

“Traditionally in Latin cultures, coffee has been a drink as opposed to a beverage,” says Levine. “The differentiation is that a drink is meant to be consumed sitting, but a beverage is meant to be carried away. Latin America is a drink culture, whereas the US is a beverage culture.”

It all comes down to what the coffee drinker is looking to get out of the drink... or beverage.

“[Caucasian-Americans] drink coffee more for the caffeine aspect, whereas Hispanic-Americans don’t even think about the fact that coffee has caffeine,” explains Fernandez. “So if you’re marketing to Hispanics, it’s not just adults having coffee on the go in the morning to get their caffeine fix. Rather, it’s more of a cultural experience, so you’ll see the family sitting around, drinking coffee together.”

Meanwhile, companies already serving the ethnic demographic, like Primera Taza and Cafecito Organico, are pursuing other ways to serve this community-centric group of coffee drinkers.
Tovar is currently working on his project in Jalisco and hopes to eventually source green beans through that project to do his own roasting. He has also been working with a local LA brewery to create a coffee stout with beans from a woman-owned farm in Chacón, Mexico; the brew was released in September.

Cafecito Organico continues to focus on its mission of “enhancing and protecting livelihoods and biodiversity” by working with smallholder farmers on sustainability.
“It’s amazing how many people it takes to get this cup of coffee to me every morning – all the way down to the people who pick the cherries,” admits Hale. “We know how many people’s lives depend on this product, so we want to support their livelihoods if we can. It’s all really rewarding, and at the end of the day, it’s why I’m in coffee.” GCR

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