Uncommon Grounds: The History of Coffee and How It Transformed Our World

by Mark Pendergrast

  By 1986 most of the large coffee producers hung on simply from inertia. “We have no choice,” observed one grower. “We have a huge investment tied up in the trees and can’t leave them.” Yet they were losing money, able to continue only through bank loans. Many farmers simply practiced minimal maintenance and harvesting to avoid confiscation. “One day the bell tolls for my neighbor, the next day for me,” a farmer said fatalistically. “There isn’t any future for private producers in Nicaragua. We are just subsisting.”

  Fair Trade Coffee

  In April 1985 Paul Katzeff flew to Nicaragua at the invitation of UNAG, the pro-Sandinista coffee organization. For Katzeff, owner of Thanksgiving Coffee in Fort Bragg, California, the visit was a “life-changing event,” reconnecting him to his social worker roots. “I hung out with the Sandinistas in the mountains, where they were fighting the contras. I met with three commandantes of the Revolution. I was educated about the relationship between coffee and revolution.” Back in California, he changed the company slogan to “Not Just a Cup, But a Just Cup,” and he packaged the Nicaraguan beans he roasted as “Coffee for Peace,” donating 50 cents per pound to the Sandinistas.

  One month later, the Reagan administration banned the import of all Nicaraguan goods. The flamboyant Katzeff sued Ronald Reagan, and he got around the embargo by having his Nicaraguan beans shipped and roasted through Canada. That year, Katzeff was co-chair of the Specialty Coffee Association of America. Without consulting Dan Cox, his co-chair from Green Mountain Coffee, Katzeff invited a Sandinista and two other activists to take part in a panel on coffee and human rights. Cox was not happy. “I told Paul, ‘I like this country. I’m not against our government.’”

  Specialty coffee men had concentrated only on providing the “perfect cup.” Now they were challenged to consider the inequities built into the system of coffee cultivation, processing, and export. The beans that produced their high-priced cups were harvested by poverty-stricken campesinos. In 1986 three Massachusetts idealists who had worked in food co-ops formed Equal Exchange. “We aim to create a process,” wrote cofounder Jonathan Rosenthal in 1986, “that allows people to reconnect with the people who grow much of the food and with the ecology from which it comes.”

  With help from investors, Equal Exchange got off the ground, providing “fair trade” Cafe Nica, their Nicaraguan coffee, primarily to food cooperatives. Their goals were to pay a guaranteed minimum price, buy directly from democratically run cooperatives of smallholders, help with credit, and encourage ecological farming practices. In Canada, Bridgehead, founded in 1984, also sold Sandinista coffee.

  Around this time, two Dutchmen working in Latin America independently concluded that a better market mechanism was needed for fair trade coffee. In 1987 Franz van der Hoff, a priest who worked with UCIRI (a coffee cooperative in Oaxaca, Mexico), approached Solidaridad, a Dutch organization, asking for marketing help. At the same time, Bert Beekman, who had worked in Honduras and Nicaragua, returned to the Netherlands in frustration. “I concluded that over half of the development money was simply thrown away. There was no viable market for what these farmers had worked so hard to produce.”

  Supported by Solidaridad, Dutch churches, and the media, Beekman entered into a public debate with Douwe Egberts, the dominant Dutch roaster, owned since 1978 by the U.S. food firm Sara Lee. “They were quite open as long as it was just a debate,” Beekman recalled. “But when it came to results and agreements, they delayed and delayed.” The fair trade advocates decided to create their own collective brand. A survey revealed that 15 percent of the Dutch population would support a fair trade coffee mark. “In Holland, coffee is the center of social life,” Beekman observed, “so it was the perfect product.”

  Having raised $4 million, the fair trade groups were prepared to launch their own brand when a group of smaller roasters—competitors of Douwe Egberts—approached Beekman. “Why don’t we cut a deal? You create a certification label, and we will launch your coffee.” Beekman agreed, and in November 1988 Max Havelaar Quality Mark coffee was introduced, taking its name from the 1860 Dutch novel that protested the inhumane treatment of Javanese coffee growers. The fair trade coffee garnered enormous publicity and a 1.6 percent market share during its first year, subsequently achieving a steady 2.5 percent level. Within a few years, the Max Havelaar seal appeared in Switzerland, Belgium, Denmark, and France. In Germany and Austria, where the Dutch name did not resonate, it became Transfair Coffee, and Fair Trade became an officially certified trademark.

  Blood in the Salvadoran Cups?

  In the United States late in 1989, concern over coffee and human rights shifted to El Salvador, where Robbie Gamble (great-great-grandson of the founder of Procter & Gamble) had lived for two years. Deeply disturbed by the violence there, he felt personally implicated because Folgers purchased coffee beans from El Salvador. In protest, he gave away his inheritance. Then, in November 1989, six Jesuit priests and two female workers were slain by death squads in El Salvador. Neighbor to Neighbor, a San Francisco-based activist group, immediately launched its long-planned boycott. Nestlé, which had endured a lengthy boycott because of its controversial infant formula sales in developing countries, quickly announced temporary suspension of purchases from the troubled Central American country. Robbie Gamble’s younger brother, Jamie, announced his support of the boycott, and Neighbor to Neighbor narrowed its focus to Procter & Gamble.

  When Procter & Gamble CEO Ed Artzt refused to meet with the activists, they sponsored an inflammatory television spot. “Boycott Folgers Coffee,” actor Ed Asner ordered viewers in May 1990. “What it brews is misery and death.” As he spoke, blood oozed from under an inverted coffee cup. When a Boston station aired the spot, Procter & Gamble yanked its advertising, worth $1 million a year to the station, restoring it only when the station declined to run the activists’ spot again, saying that it made “unsubstantiated claims.”

  By this time the Specialty Coffee Association of America had come of age. Ted Lingle had become its full-time executive director in Long Beach, California, and the SCAA was holding its second independent convention at the Claremont Hotel in Oakland. Neighbor to Neighbor protested the convention, even though few specialty roasters bought the mediocre Salvadoran coffee. Paul Katzeff led a march through the meeting with banging drums before dumping buckets of red-stained water on the steps.

  Neighbor to Neighbor formed an alliance with the International Longshoremen’s and Warehousemen’s Union (ILWU), whose dockworkers refused to unload Salvadoran coffee from a freighter when it docked in San Francisco, then Vancouver, Seattle, and Long Beach. Tipped off by the dockworkers, Neighbor to Neighbor organized impressive picket lines with signs denouncing “Death Squad Coffee.” The freighter eventually turned back to El Salvador. Under intense pressure, Red Apple, New York City’s largest supermarket chain, temporarily agreed to suspend Folgers purchases and then to display Neighbor to Neighbor literature. Pizzeria Uno stopped using Folgers. The Evangelical Lutheran Church and the Commission on Social Action for Reform Judaism supported the boycott.

  The campaign, waged by an underfunded grassroots organization, garnered huge media coverage. El Salvador’s President Alfredo Cristiani, himself a coffee grower, called Neighbor to Neighbor a Communist organization. The CEOs for the major coffee roasters—Procter & Gamble, Nestlé, and Philip Morris (which had bought General Foods in 1985)—met with U.S. State Department officials, begging them to facilitate the Salvadoran peace process that the Bush administration had subverted. The U.S. coffee companies took out ads in Salvadoran papers favoring a negotiated settlement. Negotiations for a peace settlement began in New York in September 1991. Soon afterward, early in 1992, the twelve-year civil war that had killed 80,000 people and sent over a million into exile finally ended. As part of the settlement, about 20 percent of El Salvador’s coffee lands were given to campesinos in areas already controlled by the guerrillas anyway, providing at least a modicum of hope and reform.

 
The violence, social inequities, and land distribution problems of Central America were far from over, but at least for the time being, the worst of the atrocities had stopped. Coffee growers now could worry primarily about such mundane matters as producing quality beans and securing a decent price for them.

  The Big Boys Try to Get Hip

  In 1984 General Foods introduced the Swedish whole-bean Gevalia Kaffee to the United States through an ingenious direct-mail program. The company had bought Victor Theodor Engwall & Company, which produced Gevalia, still the dominant Swedish coffee, in 1970. General Foods executive Art Trotman, with the help of direct-mail guru Lester Wunderman, supervised a marketing effort modeled after record clubs in which members were induced to join with a hefty premium gift, then automatically received new products on a regular basis. “The plan relies on people’s basic inertia,” Trotman observed. At first, Gevalia customers received a free canister. Then, in 1987, new members got an automatic electric drip coffeemaker. “That’s when sales doubled in two years,” Trotman recalled.

  The advertisements for Gevalia, placed in upscale venues such as Vogue and Bon Appetit, emphasized the coffee’s Swedish heritage, “the magnificent obsession that produced coffee favored by kings,” and its preparation by a master roaster. Customers had no idea that they were buying a General Foods product, since that fact was carefully obscured. The all-arabica blend was roasted in Sweden, hand-packed in one-way valve bags, shipped to a fulfillment service in the United States, and mailed out. General Foods never touched it, other than to take a sweet profit.

  In 1985 General Foods decided to launch gourmet whole beans in U.S. supermarkets. Mary Seggerman put together a five-person “entrepreneurial attack team” that developed a line of seven whole-bean and ground coffees, including Kenya AA, Colombian, Breakfast Blend, French Roast, and several others. They wanted to set up kiosks in airports to sell espressos and cappuccinos, but that plan got nixed. Instead, they settled for gourmet beans sold in selected upscale supermarkets in one-way valve bags.

  In the 1985-1986 Evanston, Indiana, test market, they named it the Maxwell House Master Collection and aired a television pitch featuring classical music and references to Bach’s Coffee Cantata, asserting that this was “coffee even finer than that which inspired Bach.” Focus groups showed that consumers confused it with Maxwell House Master Blend, the cheap, high-yield coffee. So they renamed it Maxwell House Private Collection and launched in high-income areas around the United States. The end-aisle display units featured shelves and a grinder.

  Seggerman planned to have specialty food distributors deliver and supervise the beans. Just before the launch, however, General Foods hired an outside consultant, who concluded they should use “direct distribution”—that is, the packaged beans would go to a supermarket chain’s warehouse, where they would be treated like any other product.

  “It was a big mistake,” Seggerman lamented. The French Roast and Colombian beans moved better than the Kenyan AA, which meant that grocers simply dropped the Kenyan product. With no one supervising the shelf space, it looked disheveled. Worse, local specialty roasters—who distributed their own products—placed their beans on the empty shelves, right next to the Maxwell House Private Collection.

  Even so, the program was a moderate success, grossing $45 million the first full year in 1986. “But that wasn’t enough for General Foods,” Seggerman said. “Unless a new product garnered at least $200 million annually by the third year, they considered it too small to worry about.” After three years, General Foods killed Private Collection. Seggerman transferred out of coffee in 1989 and left the company the following year. “If they had only let me do it properly, I really believe I could have saved the Maxwell House Coffee Company, which is deader than a doornail today,” she said. Others think that the name, not the distribution system, was the kiss of death. Few consumers believed that a true gourmet coffee product would have a “Maxwell House” preface.

  The A & P was more successful in introducing its Eight O’Clock Royale Gourmet Bean Coffee in one-way valve bags. While in London, Paul Gallant, who headed Compass Foods, an A & P subsidiary, dropped in on H. R. Higgins Ltd., British coffee purveyors to the royalty. Entranced with the snob appeal, Gallant copied Higgins’s elegant script, cribbed Loewenbrau Beer’s lions, and produced a stunning product in a gold one-way valve bag. “I only steal from the best,” Gallant explained. The A & P specialty product took off.

  In line with its strategy of extension-by-acquisition, in 1987 Nestlé purchased California-based Sark’s Gourmet Coffee and slowly began to expand that brand’s whole-bean supermarket coverage.

  Procter & Gamble ignored the upscale market while making other changes. Procter & Gamble mounted one of its most effective lifestyle image campaigns, with the tagline “The Best Part of Waking Up Is Folgers in Your Cup.” The ads, which ran from 5:00 A.M. until noon, targeted both men and women.115 Procter & Gamble finally brought out Folgers Decaffeinated Instant Coffee, a long-overdue brand extension that quickly overtook its High Point Decaf.

  As the specialty market swelled, Folgers played both ends of the quality spectrum. Procter & Gamble didn’t go for whole beans, opting instead for Folgers Colombian Supreme, later changed to Folgers Gourmet Supreme. At the same time, however, it rolled out Folgers Special Roast Flaked Coffee, a new high-yield version that used even less coffee in an 11.5-ounce can claiming to match a regular pound’s brewing capacity. The company also came out with Folgers Singles, “freeze concentrated” coffee in a bag, ready to brew in microwave ovens or boiling water in one minute, though marketers insisted it was not instant coffee.

  Coffee and Cigarettes

  In fall 1985, Philip Morris, the multinational cigarette manufacturer, bought General Foods. By that time, it was clear that the U.S. tobacco business, while incredibly profitable, was a chancy proposition. The cigarette executives knew that their products contributed to lung cancer. Buying General Foods for $5.8 billion allowed Philip Morris to diversify while establishing itself as the largest U.S. consumer products company. The savvy tobacco executives soon became disenchanted with General Foods, however—especially the Maxwell House division, which accounted for a third of General Foods sales. The General Foods managers were “dead from their ankles up,” complained a Philip Morris man. “Their arrogance was exceeded only by their sloth.”

  Shortly after the purchase, Philip Morris CEO Hamish Maxwell visited the Maxwell House wing of General Foods, in White Plains, New York, and asked for a cup of coffee. Certainly. Did he want Gevalia or Yuban? No, he wanted a cup of Maxwell House. Since no one drank the stuff, none was brewed. It took some time for someone to find a can opener and make a cup. “That was his first clue that there was a problem,” Seggerman recalled.

  Philip Morris was unhappy with its 1986 results, in which General Foods accounted for 40 percent of the corporation’s gross sales but only 20 percent of the profits. With Folgers eating into Maxwell House market share with its “Wake Up” campaign, weren’t they just pouring money down the drain with a $70 million annual coffee advertising budget? In April 1987 General Foods announced a 25 percent ad budget cut, lopping $17.5 million, then cut even more by year’s end, putting more money into trade discounts and coupons than advertising. Bob Seelert, appointed senior vice president in charge of coffee and food service, focused strictly on the Maxwell House name, marketing all coffees as a brand extension. He saw no future in the whole-bean Private Collection.116

  The slashed Maxwell House ad budget was a sure sign of troubled business in an era when the U.S. economy in general suffered from stagflation, soon to be followed by a recession and widespread unemployment. Maxwell House had to beat retail prices in 1988 when it restored its ad budget but still lost $440 million that year. Folgers countered by entirely replacing its regular pound cans with a thirteen-ounce “fast roast,” insisting that it was not a high-yield coffee. “The one-pound coffee container,” one journalist noted, “is going the way of the Edsel.�
� By 1989 Procter & Gamble’s regular ground coffees had overtaken General Foods to claim the number-one spot.117

  In 1988, Phillip Morris anted up $13.1 billion for Kraft Inc., an Illinois food conglomerate with a sterling record, and folded its two acquisitions into one unit called Kraft General Foods, placing Kraft executive Michael Miles in charge.

  As the decade drew to a close, Maxwell House was clearly flailing to find direction. In a last-ditch effort, Ogilvy & Mather hired former TV news anchor Linda Ellerbee and TV weatherman Willard Scott to shill for Maxwell House. “In a national test, people said they liked Maxwell House better than Folgers Coffee,” Ellerbee intoned at her news desk, then turned it over to Scott in the field, where a fireman told him he preferred Maxwell House for its “rich taste.” In a scathing review, journalist Bob Garfield dismissed the ever-cheerful Willard Scott as a “human squirting-boutonniere” and lambasted Ellerbee for disguising advertising as real news. “It is misleading. It is cheap. It is wrong.”

  The jinxed ad aired during a controversial NBC drama, Roe vs. Wade, about the landmark court decision to legalize abortions. As a result, antiabortion advocates threatened to boycott Maxwell House. A few days later, Maxwell House dumped Ogilvy & Mather in favor of D’Arcy Masius Benton & Bowles—the descendant of the firm that had created the enormously successful radio show Maxwell House Show Boat during the Depression.

  The Collapse of the ICA

  In fall 1985, prices rose dramatically with news of a Brazilian drought that would affect the 1986 crop. Volatility was exacerbated by the growth of hedge funds that traded in commodity futures and options. Managers dramatically affected prices when buying or selling thousands of contracts. As green bean prices reached $2.30 a pound, Brazilian thieves began to hijack coffee trucks rather than robbing banks.