Beverage supplier brews expansion

Baltimore Coffee & Tea starts with Annapolis shop today

August 16, 2007|By Andrea K. Walker | Andrea K. Walker,SUN REPORTER

The Baltimore Coffee & Tea Co. has created a successful wholesale business selling its specialty drinks to the likes of Wegmans Food Markets Inc. and Dean and DeLuca gourmet food stores.

The 15-year-old company, known for its flavored coffees and more than 1,000 varieties of tea, is hoping to become just as popular for its coffee shops.

The coffee company is expanding its retail business, with plans to open 10 coffee shops in the next five years. The first opens today across the street from the Westfield Annapolis Mall. It plans to open future shops in Columbia, Rockville, Frederick, Washington, Northern Virginia and Richmond, Va.

Until now the company has only dabbled in the coffee shop business. It has a small coffeehouse attached to its headquarters and roasting plant in Timonium.

Owners Stanley Constantine and Norman Loverde said they have considered opening more shops for years, but only recently found the right partners and financing for the deals. The coffee shops are being financed entirely by private investors, they said.

"We were never serious enough to take the full plunge, but finally the pieces fell together," Constantine said this week at an outdoor table at the new Annapolis shop.

Baltimore Coffee & Tea enters the market at a time when the coffee business is more competitive then ever, with shops seemingly on every corner. There were 23,900 coffee shops, carts, kiosks and other retailers in the United States last year generating $12.27 billion in sales, according to the Specialty Coffee Association. That's up from 13,800 stores generating $8.3 billion in sales in 2001.

In the Baltimore area, largely ignored for years by coffee shops, Starbucks and Caribou Coffee have been opening more stores. Dunkin' Donuts, which has added specialty coffee to its menu, has also targeted Baltimore as a place for expansion. McDonald's, Burger King and Subway have also introduced gourmet brews in recent years.

But analysts and industry experts said that despite all the competition, just about everyone is doing well in the market and there's no indication that it has become too crowded.

"Everybody is pouring into the market," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York retail consulting and brokerage firm. "You would logically think by looking at this we're in saturation. But I haven't seen that yet."

The Specialty Coffee Association of America said the number of coffee shops has been rising for the past 15 years with no sign of letting up. The rise has been helped as the variety of coffee drinks has increased over the years and people drink coffee throughout the day rather than just at breakfast.

Much of the growth has been driven by higher-end coffee shops that create drinks people can't replicate at home. The afternoon coffee break has also become more common among workers.

"There is room for competition going head-to-head with Starbucks, as people are looking for alternatives," said Nicholas Cho, a Washington coffee store owner and a member of the specialty coffee association board.

The owners of Baltimore Coffee & Tea said they're not worried about competition.

"There is no competition," Constantine said.

They said they will distinguish themselves with the quality and variety of coffee. Its exotic tea offerings include a rare variety from Israel. The company sells flavored coffees. It uses a natural decaffeination process rather than chemicals.

The company also plans to focus on customer service, modeling itself after department store chain Nordstrom. Nordstrom Inc. is known for putting the customer first and doing things such as taking returned merchandise without receipts or tags. In similar fashion, Baltimore Coffee will remake a drink that a customer isn't happy with.

"We want them to be happy and to come back," Loverde said.

The owners also say they have a large following of customers who have asked over the years whether they planned to open shops.

Constantine and Loverde started the coffee business more than 15 years ago after working other jobs in the information technology, electric and advertising businesses for many years. Constantine knew the ins and outs of the coffee industry from his family, which has owned coffee shops and wholesale coffee companies throughout the Mid-Atlantic for 85 years.

Business was slow at first. Constantine and Loverde kept their full-time jobs during the day and filled orders in the evenings. Starbucks was a fairly new concept at the time and the men's families thought they were nuts for entering the business.

"People have always asked, `Why do we need another coffee shop?'" Constantine said. "Our vision has always been vast variety and extremely high quality. We're obsessed with quality and freshness."

They got their first big break in 1996 when Dean and DeLuca decided to use their products after tasting them at a trade show. Baltimore Coffee & Tea was also one of the early Internet marketers.

Earlier this week they prepared for the opening of the Annapolis store. Employees stacked boxes of tea on shelves and cleaned counters. The deliveryman brought in gelato. The shop will also carry sandwiches, salads and gift items, such as teapots.

Eager customers walked up to the store thinking it was already open. They were welcomed in for a tour and a free coffee drink or cup of tea.

Philip Wagener, 44 and from Centreville, was one of the early birds. He has been to the Timonium store when visiting relatives and welcomed a closer location. He's a fan of the pumpkin spice coffee.

"I like a good, flavored coffee and they've got good flavor," Wagener said. "It's smooth and doesn't have a bitter, burnt taste."

andrea.walker@baltsun.com

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