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Q&A: Mel Elias, president and CEO, Coffee Bean & Tea Leaf

Q&A: Mel Elias, president and CEO, Coffee Bean & Tea Leaf

After growing internationally, the West Coast-centered chain plans to focus on U.S. expansion

The 49-year-old Coffee Bean & Tea Leaf chain is broadening its scope to meet the ever-increasing global demand for premium coffee.

In recent years, Coffee Bean & Tea Leaf jumped from being a West Coast coffeehouse chain to an international brand. The chain has nearly 800 locations in 20 countries, but fewer than 300 in the U.S., which are mostly in the West.

Now Mel Elias, president and chief executive of the Los Angeles-based company, is looking to fill in a step the chain missed: becoming a nationally known brand.

The first New York unit opened last month, and the company aims to take the brand far beyond the seven states where it now operates.

Elias outlined the chain’s strategy for Nation’s Restaurant News on Wednesday.

What are Coffee Bean’s growth plans?

Our goal now is to expand from being a coffee roaster and retailer to being a coffee and tea brand. What that means is expanding into different formats and channels.

We want to go where people work, where they play and where they live. Customers have been loving our products in our stores for almost 50 years. We want to give them the same experience at their office or their home.

Where are you targeting growth in the United States?

We need to expand our footprint into foodservice and to expand our franchise development to be in more states. We have opened in Hawaii, Las Vegas, Arizona, Detroit, Miami and New York, and we have a number of deals in the pipeline.

Opening in New York was a historic moment for us. It signified the transferability of a West Coast brand to the East Coast.

In the U.S., we have about 100 franchise stores and less than 200 company owned.

Franchise growth will accelerate, but we’re still opening many company-owned stores as well.

Where are you looking to grow overseas?

We haven’t really broken into Europe, and that’s a focus for us next year, along with Central America and Mexico.

We’re opening about 15 stores this year in India, and we have about 29 stores in China. Those countries have experienced huge growth, but markets like Brazil and others are very exciting.

What is selling in markets like China is really the lifestyle. The Chinese market is taking to coffee brands like ours because it represents affluence and an affordable luxury.

Is Coffee Bean testing new food products?

We’re testing frozen yogurt in [28 locations]. We introduced what we are calling the Food Bar in some stores, where we have added things like hand-crafted oatmeal. It’s made-to-order with steel-cut oats — not putting hot water in a cup, or sitting in a bain-marie for hours — and you can order various toppings. We’re also doing fresh yogurt parfaits.

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How have same-store sales been trending?

For the past three years, same-store sales have been up about 5 percent each year, and we think we’ll end this year above 5 percent again. If you’re looking at traffic, we’ve had 70,000 more customers a month this year than last year in our corporate stores.

What’s the next step in expanding the retail side?

We just launched single-serve a few months ago. We created a sub brand called CBTL, and now it’s being compared with some of the players that have been in this space for years.

We have found that our customers end up waking up in morning and hitting the button, getting that quality cup in morning [with their single-cup brewers]. Then they’re still stopping at our stores on way to work. They’re consuming more coffee because of the easy format and quality.

What percentage of sales comes from the coffeehouses versus retail and grocery?

About 86 percent comes from the coffeehouses; that’s really our core business. The rest comes from new growth platforms, wholesale and foodservice. About 28 percent of sales comes from international, so we have a large international footprint compared to others in our space.

You introduced a new prototype last year. How is that different?

We actually have four new prototype designs. We’re planning to roll out all of them in company-owned stores this year. They each have different names: Original, Heritage, Tea Crate and the Lounge.

What customers may not realize is that we do all the traditional things to make espresso, from grinding the beans to tamping the coffee, or whisking the chai tea lattes. We want customers to see more of that. It’s part of the theater.

There has been a lot of talk about coffee commodity prices. Where do you see that going?

The middle-class in India and China are consuming more coffee and Brazil is becoming the no. 1 coffee-consuming nation, and the U.S. has increased its coffee consumption.

The health messaging around coffee has changed, and now it’s seen as a product with many positive qualities. The ease of use and availability has changed. There has been a real demand-and-supply shift.

We’ve seen coffee prices escalate to astronomical prices. I don’t know what the future will be, but I don’t think high prices of $3 per pound are sustainable.

Contact Lisa Jennings at [email protected].
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