Blake Mycoskie is the founder and CEO of TOMS -- which is confusing because it seems like it would hav been founded by Tom. Anyway, Mycoskie announced at South by Southwest that TOMS was going to enter a new venture -- coffee. Right now, the company focuses on giving away shoes or glasses or sight-correcting surgery to developing nations when people in developed nations buy shoes or sunglasses. Mycoskie has noted that the number one ingredient in making coffee is water, so for each bag of coffee purchased, TOMS will donate a week's worth of clean water for one person.
How water is used in coffee production
It's pretty clear that with coffee, the final product -- the one you chug on the way to that meeting about 'wait where are my notes and why is the CFO here' -- is mainly water. What you might not know is that the processing of coffee fruit into coffee beans also requires a great deal of the clear stuff.
First, coffee cherries are picked off the coffee trees. At this point, they resemble normal cherries more than anything else. For the highest-quality coffee, the cherries are picked at the peak of ripeness, often by hand so that no excess, overly green cherries are taken.
Next, the processors need to get to the bean inside the cherry. The most popular method of removing the pulpy fruit is to crush the cherries slightly, breaking them open and loosening the fruit. Then the pulp is washed off, leaving the green coffee bean behind. After the bean is exposed, the coffee is fermented in order to remove the final layer of protective coating covering the bean. TOMS is hoping to offset some of that water consumption by providing drinkable water off the back of sales.
The water will be provided by non-profit Water for People, which will use the money from TOMS to build rainwater collectors, pipes, or other systems that help get water to those with a need.
TOMS enters the coffee world
In order for the plan to work, TOMS needs to sell a lot of coffee. According to a University of North Carolina at Chapel Hill report, 1.8 billion people around the world don't have access to safe, clean water. TOMS' plan is to find a niche for its coffee and chip away at that seemingly insurmountable problem.
According to Fortune, TOMS isn't going to try and fight the giants like Starbucks . Instead, it's decided to try and work the niche market that's developed across the U.S. over the past decade. Companies like Blue Bottle Coffee in Oakland, Intelligentsia Coffee in Chicago, and Counter Culture Coffee in Durham have all formed a new culture of coffee in the U.S. Companies differentiate themselves based on sourcing, roasting, and brewing methods.
These smaller players are driving a resurgence in local coffee scenes from Atlanta to Brooklyn, San Francisco to Portland. TOMS is reaching out to that audience by selling its beans in Whole Foods as well as starting its own cafes.
The next steps for TOMS
While TOMS has succeeded with shoes and eyewear, coffee is a different beast. The drinkers of high-end coffee often look for more than a free trade label or an appealing bag design. To kick start its program, TOMS has started direct trade with its suppliers, giving the company more insight into the operations and compensation of the growers .
Even with a solid foundation, breaking into the market may not be easy. TOMS' ace in the hole will be its strong brand recognition, and the association with giving that consumers already have with the company. To leverage that association, TOMS also announced that coffee is just the next step in its long road. The company plans on developing a new "One for One" product every year from here on out. In the meantime, keep an eye out for bags of TOMS at your local Whole Foods.
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John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Starbucks and Whole Foods Market. The Motley Fool owns shares of Starbucks and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.