1- PAST AND FUTURE
There is a nice expression in French which, to my knowledge, doesn’t have a literal equivalent in English: Reculer pour mieux sauter. That is what we ought to do, at times: step back from the present in order to leap safely forward, into the future. This also applies to coffee and its technology: it may be helpful to look back in order to learn from our past, and use it as a guide.
If we go back and look at the period of time passed since the “invention of coffee”, we notice that coffee history “as we know it” is incredibly short. If we take one metre to represent the time elapsed since the genetic birth of coffea arabica (apparently born as a variation of canephora, one million years ago), coffee’s influence on human life is a period of time equivalent to the last couple of millimetres: in fact, we are led to believe that coffee drinking started (roughly? probably?) around the Christian year zero, somewhere down in Ethiopia.
Following this train of thought, from a Western perspective the linear equivalent of coffee history is a mere four tenths of a millimetre: 400 years have passed from that fateful day in which Clement VIII baptised coffee (the very year in which that same Pope let Giordano Bruno die on the stake), while only 300 years have elapsed since the Amsterdam stock exchange started trading non-Yemenite coffee (it was Indonesian, from Dutch Batavia), and a mere 200 years ago or so Camille Desmoulins (in le Café de Foy in Paris) allegedly yelled “Aux armes!”, thus triggering the start of the French Revolution - but more importantly for us this officially endorsed Coffee-Houses as places in which public opinion moved on from idle gossip to active politics.
In fact, if we think about coffee technology per se, we are faced with even shorter time-spans. In 2006 we celebrated the first centenary of the first public exhibition of espresso machines, at the Universal Expo in Milan. And even if we look at earlier pressurised (or at least moderately pressurised) methods of preparing coffee, we find Angelo Moriondo in the 1880’s and Loysiel in the 1860’s – all in all a mere 150 years ago.
Lastly, when we look at the history of knowledge in the field of aromas (possibly the most stunning characteristic of coffee) we discover that coffee-science made a major breakthrough with the invention of gas-chromatography in the 1950s. In fact the identification of aromatic coffee compounds took a quantum leap in the decade between 1968 (approx. 180 aromas known) and 1978 (approx. 580 aromas known). In those years we hardly knew anything about coffee aromas even though cars, telephones, computers and the Beatles had already all been invented.
How much do we know about coffee, today?
2- PATENTING (&) COFFEE INNOVATION
Talking of innovation in broad terms, the most prudent way for innovation-oriented companies to protect their findings is through patenting. Patents protect R&D investments against “easy-riders”: companies willing to copy at the innovators’ expenses, effortlessly getting hold of technology by using knowledge that others took months or years to develop. This is the case in the Senseo system by Douwe Egberts/Philips: the patents filed did not hold and the market was awash with (cheaper) me-too’s. In fact, should we look at it in a different way, patent protection is a legal limitation of competition – which is the reason why patents have time limits and cost money.
It is known that smaller companies have more adaptable, flexible and reactive environments in which to nurture innovative thinking. Small companies, with their short lines of command, are better suited to risk-taking ventures, such as the ones needed to face the unpredictable nature of true innovation. Nevertheless, once technologies become less fluid, smaller innovations may be easily devised and patented en masse by large companies, which then use Intellectual Property rights with extensive and defensive patenting programs to maintain or progressively increase their market shares. In other words, the more an industry tends to maturity, the more the economic power of each competitor really matters, also dealing with innovation. This is true in the automotive, oil, or IT industries, and in the world of consumer electronics. See for instance these data:
COMPANY NO. OF PATENTS Growth
(E.P.O. Data-Base) 9/2009-2/2010
PHILIPS > 100.000 NA
SAMSUNG > 100.000 NA
SONY > 100.000 NA
SHELL 81.240 + 0,8%
EXXON 50.246 NA
MICROSOFT 47.670 + 7,05%
NESTLE 19.091 + 0,21%
PEUGEOT 18.758 NA
FIAT 14.463 + 0,51%
MERCEDES 7.966 + 0,21%
APPLE 7.898 + 9,05%
GOOGLE 2.508 + 16,65%
AMAZON 570 + 12,42%
(Source: the EPO on-line database, consulted on Feb. 8th 2010; growth data are obtained as a ratio between data retrieved on Feb. 8th 2010 and on Sept. 17th, 2009, same data-base)
If we compare EPO’s Feb. 2010 data with similar data researched in Sept. 2009, we can argue that, regardless to the maturity of a certain industry, patents remain good indicators for the technological “vivacity” of that industry. In roughly five months only IT companies show two-digit growth and (even in absolute terms) rank at the top of the list, in terms of number of new patents filed. Statistics confirm our gut feeling: the newer the technology, the faster the rate of new patents filed. Does coffee technology support this observation?
Probably yes, in the sense that most patents are filed with regard to the newest fields of coffee research. In the case of the “world’s most popular beverage” we know that this is the single-serve market. It is so because until recent times coffee suffered from one major handicap: it needs to be brewed. As opposed to wine, where only a cork separates the manufactured product from the experience, coffee depended upon the skills of the person in charge of its preparation. (At best upon the skills of the coffee machine manufacturer.)
Until very recently, the most popular exception to this rule was instant coffee – one of the reasons why, despite its theoretical inferiority, dehydrated coffee is both extremely popular and the object of continuing innovative patents, especially by leaders such as Nestlé and Kraft/Jacobs. From this point of view, innovation in the automotive and coffee industries reveals identical traits: it is a fine-tuning job mainly developed by market leaders.
If we exclude instant coffee (and let’s include in this group its inferior sibling: liquid coffee) little progress in coffee preparation, - or, better, execution – has been made for a long time. I am referring to when the French started using socks (the chaussette: not exactly rocket science) to filter the coffee grounds, and a German housewife (Melitta Bentz) refined the French idea by “inventing” a conical paper filter. Finally, all this was revolutionized by the Italians, who came up with a completely different way to the pleasures of caffeine and started brewing at high-pressure, thereby inventing espresso making. But after Cremonese and Gaggia, that is WWII, it seemed as if - for a long time - coffee technologists thought that “everything had been told”, as folksinger Nick Drake once sang: few dared to change the set of known rules.
This is why the recent trend towards “ready to brew” packaging has been matched by an equally impressive high number of new patents filed in this particularly tiny field of coffee research. And among these many are filed by smaller companies. Indeed, while in industries such car making or oil the number of patents filed by a certain company tend to be a Xerox copy of its respective market-share, this is not so in the single-portion coffee market. See it by yourself:
Contains the Applicant Total no.
word “COFFEE” of patents
in the abstract
329 NESTEC 5.578
286 KRAFT 10.140
79 UCC 233
43 DOUWE EGBERTS 463
38 TCHIBO 123
99 ILLYCAFFE 297
6 KEURIG 122
2 TUTTOESPRESSO 93
5 LAVAZZA 55
(Source: the EPO on-line database, Feb. 8th 2010)
3 – SMALL IS BEAUTIFUL
At first sight, the formidable number of patents on coffee filed between the Nineties and today would lead us to consider that patented innovation in the coffee industry has played a similar role to the one it has played in many mature industries. Two distinctive arguments confirm and yet limit the validity of this statement and allow us to further focus our view on coffee innovation.
Firstly, it is true: the innovation embedded in many of these patents is not of a groundbreaking type. These are often residual, defensive patents, not comparable to the ones that Cremonese in 1938 and - later - barista extraordinaire Achille Gaggia (copying Cremonese, to a certain degree) filed and embedded in their apparatuses.
Only the newest brewing technologies appear to be fairly novel. As mentioned, they are geared to closed-systems such as Nespresso and Monodor (mainly filed between the Eighties and the Nineties) or Illy’s HyperEspresso and - my and - Tuttoespresso’s MaxEx (filed between 2003 and 2006).
No doubt: surprisingly, or intuitively - depending on your point of view - single-portion systems have been the most obvious way to improve brewing quality and patenting on coffee innovation. I say intuitively because single-portion systems represent, to date, the least expensive way to add a notion of high-quality repeatability in coffee making. I say surprisingly because the MaxEx or HyperEspresso products ensure a total quantity of coffee extracts higher than that usually obtained with commonly available standards.
At the end of the day, “coffee systems” today guarantee consumers coffee of a quality unobtainable - ceteris paribus – with traditional (and much more expensive) professional machines: they offer a more pleasurable “coffee experience”, or – more technically – they enhance the hedonic sensorial profile. All things considered, Nespresso may be marketed as an upscale luxury, but (even more so with “second-generation” espresso capsules such as Illy’s Hyperespresso or the Kimbo MaxEx) it is not an expensive way to get a good espresso.
Which brings us back to our second line of thought: the amount of patents filed by coffee technologists does not reflect their respective market share; and this is contrary to what we would expect in mature industries - such as the coffee industry is usually considered to be.
The Kraft and Nestec (Nestlé’s R&D company) data quoted above are too spurious to be considered indicative: their total number of patents include several fields of research beyond coffee; besides, using the word “coffee” in the abstract as an indicator of coffee-related technology is not sufficient, as we would need to include several other words such as “container”, “capsule”, “beverage”, “dispenser” etc. But by observing the remaining companies (all of which are mainly involved in coffee and vary greatly in size) we can conclude that there is no direct correlation between financial mass and the number of patents filed. The reason underlying this missing correlation is that coffee technology, and particularly coffee brewing technology, is (paradoxically) still in a fluid phase and some of these systems are sketching out “the shape of the coffee experiences to come”.
Many of these systems have come from relatively small companies. Indeed, when seeking the “ultimate extraction method”, Illy developed Hyperespresso possibly inspired by a capsule system by a small, start-up company called Itaca, set up by one of the two gentlemen behind UnoPer. And as history tends to repeat itself, while Unoper was bought out by Lavazza 20 years ago (and used to build the winning Espresso Point system) Itaca is now 50% owned by Illy. Same happened with Lavazza Blue (created upon license rights negotiated with an ex-Nestec employee) and even the originator of them all, Cyrus Melikian with his paper pods in the 1950s, started as a small entrepreneur.
4- VALUE CHAINS and the iPHONE
In order to acquire a more meaningful perspective, though, our observations need to be used in conjunction with the business theories that have been developed to explain globalisation in its end-of-the-XX Century version. We mean words such as global value chain and oligopsonist, concepts that serve a simple purpose: to identify the global player who controls the value generation of its own industry. In case of coffee, oligopsonists are living proof of the fact that these concepts are not cosmetic jargon used by business-school students to get their degree: they are conceptual models intended to explain razor-sharp realities and why – be it be Romania, Brazil or the Philippines – it is difficult to find a coffee market where one of the coffee oligopsonists does not lead the way.
Viral marketing, 360° co-marketing concepts, redundant and ubiquitous brand promotion are the oligopsonist’s most visible features. Underneath this colourful window dressing lies an excruciating financial mass and relative or absolute control of the distribution channels, critical features for anybody willing to succeed in mass seduction. These corporations can adapt their language to every single level of socio-political spheres, shaping the normative ambient and imaging their own future as much as they tend to sell us our own.
Seen through the filter of such analyses, R&D creates a steep hurdle for smaller players, when oligopsonists pour hundreds of patents on the market. Yet we saw that R&D may be an opportunity for small companies: because innovation is a job better suited for small teams than it is for slow, hierarchy-rich, bureaucratic corporations. Indeed, whenever technology is still fluid, innovation tools lie within the reach of small players and these last become extremely challenging or tempting (depending always on your point of view) for larger players: they represent a shortcut to competitive advantage.
This is why, if we take an example from the portable phone business, Apple acquired FingerWorks, a smaller company that had developed some of the touchscreen technology the iPhone is praised for. Apple, now, owns interely those delightful (and patented) features: this means that for a long time, up to twenty years, Apple will most likely prevent those features from appearing in any similar mobile phone. No wonder that when you search “iPhone” on Google it gives 454 million hits while “God” makes just 372 million. I had tried the same search in September 2009 and it was different: “God” racked up 381 million hits, while the iPhone had “only” 372 million. I guess that - in the last five months - something must have been brewing up there, in heaven.