Blue Bottle Coffee Buys Coding Talent for Next-Level Delivery

The Bay Area's Blue Bottle Coffee and the Internet's Tonx, an online subscription coffee service, are about to blend.
Image Tonx
Image: Tonx

The Bay Area's Blue Bottle Coffee and the internet's Tonx, an online subscription coffee service, are about to blend. It means an ambitious coffee player just scored a great internet service that can help it expand its reach far beyond its retail store front presences. It's a great fit, but also the end of an era; a signal that high-end specialty coffee is entering a new phase -- one where it has to reach out to far more people if it wants to grow.

"The big picture is that we have this round of investment and money buys stuff," says Blue Bottle founder and CEO James Freeman. Blue Bottle just raised nearly $26 million from venture capitalists and tech industry investors who normally are more focused on technology investments. The fundraising round raised a lot of questions (and eyebrows) as to why a coffee roaster would need that kind of money. Today's news begin to answer those.

According to both Blue Bottle and Tonx, much of the deal is to get Tonx's people and tech capabilities and use them to build a better online and cafe experience. For Tonx subscribers, nothing is going to change immediately, but within a matter of months it will be completely subsumed into Blue Bottle.

"From a service perspective everything will stay the same--the Tonx product will persist but we’ll be maintaining one brand," says Tonx cofounder Nik Bauman. "So eventually [Tonx] will become Blue Bottle, and we’ll become the ecommerce arm of Blue Bottle."

The San Francisco Bay Area-based Blue Bottle, along with other formerly regional roasters like Portland's Stumptown, Chicago's Intelligentsia, and North Carolina's Counter Culture helped kick off a brewed coffee movement in the United States. And while all have grown beyond their original city limits, none have really threatened to become the next Starbucks, or even Chipotle. Given its recent investment round, however, along with its purchase of Handsome Roasters in Los Angeles, Blue Bottle is clearly looking to get big. Tonx immediately gives Blue Bottle a much better Web and app capability than it now has.

It's also a good deal for Tonx, which was attempting to raise more money to purchase its own coffee roaster (it currently has a contract deal where it rents one on the weekends) and open a store front. While neither announced a price, Tonx did abandon a $4 million fundraising round it had been pursuing recently. Presumably, the deal would be on par with that. It's a big win for the three year-old roaster that's based in Los Angeles, but lives all over the internet.

"Tony and I were still bagging and boxing the coffee ourselves last year, spending all day just listening to podcasts" recalled Bauman. "Tony would go in and sometimes would take eight hours or so of just stamping bags. We'd go and just stamp and listen to [John Gruber's] The Talk Show or This American Life."

Over time, they built a ground-up internet business that happened to sell coffee.

"We do good software development. We wanted to make sure from the get go we have a flexible system that we could adapt to our customers needs," says Bauman. "A lot of times you buy something off the shelf and then have to write software around it. We knew exactly what we wanted to build and it ties directly into our fulfillment system--including our green supply. The typical way someone sets up ecommerce for a non-digital brand is they have 15 different processes -- we try to automate everything our customer service has to do more than once. We record a lot of data--every shipment everyone has received is at our fingertips. Those are the things that make us efficient fast and fun."

One of Tonx great strengths has been its ability to connect with customers. Its informal and loose language and coffee preparation tutorials are non-threatening and even inviting in an industry largely equated with snobbery. Specialty coffee is intimidating, but Tonx cast all that aside. Tonx messaging from the beginning has been an appeal not to become overly hung up in the details of making a perfect cup of coffee--instead, just enjoy these freshly roasted, well-sourced beans, delivered to you in seamless, timely fashion. It has a subscription model, but you can have extra bags sent your way. It's easy to get your Tonx subscription to follow you on vacations, or pause when you travel. The website is cute without being twee. It accepted Starbucks cards, and would credit your account with their balance. It even had some pretty great videos.

It's always a little concerning when something small and independent that you love gets eaten up by a bigger and more ambitious competitor--and not without reason. (Just ask any fan of Ecco Caffe, a longtime and even legendary coffee roaster which sold to Intelligenstia and was subsequently killed off.) Even if the bigger business doesn't kill it, will they destroy everything you love about it? This is likely why when Eater broke the news of the Handsome acquisition on Monday, its headline described Blue Bottle as "seizing" Handsome and called it "a sad ending for Handsome."

The team at both Blue Bottle and Tonx claim they are committed to keeping Tonx doing what it's good at, and more of it, although under a different banner. And ultimately, Tonx is going away.

"Our expectation is that the product will continue, and when we roll it over into the Blue Bottle brand it will be an upgrade to the experience," Tonx cofounder Tony Konecny told Wired. "Within a fairly short amount of time we'll start putting in letters from Blue Bottle staff, you might see Blue Bottle stickers, but the service will remain the same."

While Tonx gets Blue Bottle's sourcing and roasting, and the ability to do more online and in store, it's surrendering control to do that. "We are going to work with them to make sure they maintain the profile of coffee we've worked on," said Konecny, "but it will be a Blue Bottle sourced and roasted product."

And while they're vague, both parties are insistent that this is also about making the online and in-store experience smarter and more pleasant -- and to make both of those things work together.

"It would be foolish to ask them to come along and not learn from them, so I want them to be the experts," says Freeman. "This is the team we've been wanting to hire for a long time. I'm expecting them to do something totally new, and to continue to be great in ways I cannot predict or command."

Freeman says he's fantasized about ways online customers could have a new experience when they walk into Blue Bottle stores, in ways that are customized to the individual, but aren't "creepy." Tonx' Bauman says they are already thinking about ways to make this happen.

"Using Bluetooth LE and running experiments is going to be fun. If you're not gearing up for the iBeacon thing you're going to get left behind," says Bauman, referring to the new functionality of apps to look for and interact with little Bluetooth transmitters that can do things like know when you walk into a store, or which part of the store you're in, even.

"They're just good," says Freeman. "I can dream a little bit with Nik and be pleasantly surprised at what happens."