TCB Q&A: Caribou Coffee President and CEO John Butcher
Headquarters: Brooklyn Center
Ownership: Luxembourg-based JAB Holdings Co. Employees: More than 6,000
Stores: 300 company-owned locations, 120 domestic license locations in 22 states, more than 270 international franchise stores in 11 countries
Distribution: Caribou products are also sold through grocery stores and mass retailers, food service providers, hotels, entertainment venues, and online
“Hi, what are you having? I’ll get your coffee,” John Butcher says to the woman in line behind him at Caribou Coffee in Edina. She raises an eyebrow at the unexpected generosity of a stranger and takes a suspicious step back. “No, no,” she protests. When he offers again, she inquires, “Do you work here?” The president and CEO of Caribou Coffee is enthusiastically vague. “Oh yeah,” he says, “I work at the home office. I just always like to get the next person in line.”
Since he added the CEO job title earlier this year to his position as president of the nation’s second-largest premium coffee chain, Butcher, 44, is going to great lengths to be “guest-focused.” That includes bringing back doughnuts, because customers said they loved them, and adding fresh sandwiches to the menu, because customers asked for lunch. Caribou will open 15 new stores this year, and like the new one on Vernon Avenue in Edina (across the street from a Starbucks), they are a brighter and more modern take on cabin styling with a variety of seating areas to, as Butcher describes, “encourage lingering.” But not all guests want to stick around, so for commuters on the go, especially from outlying areas like Jordan, this fall Caribou will begin testing the “Caribou Cabin”—a smaller, drive-through-only footprint.
Stores are the fastest-growing segment of Caribou’s business, says Butcher, who declines to release sales figures for the privately held company. But sales of its packaged coffee in grocery stores are growing as well, he says, and Amazon sales are “thriving.” Caribou sells its beans in all 50 states, and the top five markets include California, where Caribou does not have a large store presence, and Texas and Florida, where the Midwestern coffee company has no stores at all. “We know the brand has power outside of our home market,” Butcher says. “We want to focus first and foremost on the home market, but we will continue to expand over time.”
To that end, Caribou is testing canned cold-brew coffee at its stores and plans to broaden distribution next year. The motivation, Butcher says, is younger consumers who say they want cold beverages on the go.
“It’s fun for us to think about how we’re going to combat someone that’s 100 times our size,” Butcher says, without uttering the S-word. JAB Holdings Co. acquired Caribou in 2013 for $340 million. The Luxembourg-based conglomerate’s extensive portfolio also includes Peet’s Coffee, Intelligentsia, Panera, Einstein Bros. Bagels, and Bruegger’s Bagels. Caribou continues to operate as an independent company based in Brooklyn Center, where all of its beans are roasted.
You can smell the work in progress even before you pull into the headquarters parking lot off of Highway 100. The corporate lobby is decorated in Caribou’s signature northwoods lodge style. A photo of Caribou founders John and Kim Puckett hangs on the wall. Butcher radiates that same hometown pride, from handshakes and high-fives with regulars who recognize him at the Caribou shop on the corporate campus down to his custom print socks, which feature photos of his executive team members. An Indianapolis native who spent 20 years in merchandising and marketing with Target Corp. before he got recruited by Caribou in 2017, Butcher says his true hometown is Chanhassen. “It’s hard for me to think of myself as anything but Minnesotan.”
Over a nitro cold press—one of several new drinks he pushed to add to the menu—Butcher talked about how he is positioning Caribou to compete in an increasingly competitive and segmented coffee market.
Q | You joined Caribou as president and took on the additional role of CEO in January. What’s the biggest difference?
A | What changed the most was this feeling that we have absolutely no barrier to be the best coffee house in country. We have a very healthy business, amazing team members, and great guests. There are moments where we’re sitting around the table as a team saying we wish we could do XYZ, and then we look at each other and say, what would prevent us? Nothing! We can just go do that. It’s very liberating. It’s so fun to be part of a brand that has the potential to be whatever our guests think that it should be and whatever our team can imagine it to be.
Q | What did you know about coffee before joining Caribou?
A | I was definitely not a coffee connoisseur. I loved Caribou, so I was a Caribou Coffee connoisseur. I drank regular coffee. Every once in a while, I went out and experimented with a seasonal coffee. I had K-Cups for the office.
Q | So how’d you learn?
A | My first six months [after joining as president in 2017] were all about learning, starting with the store teams. Ask them—I’m sure they’ll tell you I’m not the best barista. Then I came back and did the same sort of fact-finding with the home team. I went down to the roastery. All Caribou Coffee comes from Brooklyn Center—I was blown away by it. It’s a best-kept secret. We have people come from all around the world who want to learn to roast because we have a pretty unique process. There’s a cupping lab, and every day at 10 a.m. and 2 p.m. the experts cup coffee they’ve roasted to decide if it’s acceptable. It’s like wine tasting. I was able to go down and pretend that what I’d learned about the wine industry could apply to coffee. That helped to be dialed in, understand all the different varietals.
Q | Where did you see room for improvement?
A | The company was focusing on core business metrics, not people. That’s super boring. I want the team focused on making people’s day better—being a day brightener, a force of good. And that’s not what we were doing. I asked [employees]: What’s important around here? What would you do if you were president for a day? What’s one thing you love and one thing your customers are asking for? Most didn’t have that many complaints, but they had this desire to make things better for guests—a product, pricing. They felt a lack of empowerment, and headquarters wasn’t giving them a modern suite of tools.
We intentionally created empathy by asking every support center team member to go work shifts in stores. I did mine in July 2017 and I got to see the best and worst of Caribou. It’s so fun to watch the impact we have when we have an experience that’s working properly. We are day-makers for people. I worked the drive-through, and 29 cars in a row paid for the person behind them! I was so mad when the 30th didn’t do it—I was like, come on, keep it going! I was just the guy slowing down service in the drive-through lane, but the team says [paying for the next guest] happens almost every Friday at Caribou. It speaks to who the guests are that we attract and how the team interacts with people.
Q | Your home office is here, Caribou’s roots are here, but ownership is overseas. Is that limiting?
A | Being part of JAB is a huge blessing for us. We are a Minnesota company, but it gives us access and visibility to trends around the world. This new Edina store, for example—the design partner was Espresso House, one of our Swedish brands. We felt like the Scandinavian influence was a good fit.
Q | Is there pressure from ownership to meet certain metrics or change your focus?
A | There’s no mandate. Our primary objective is “How are we going to do what we do better?” We’re not focused on being the biggest. We just want to be the best. That’s really our primary objective.
Caribou CEO John Butcher’s Daily Drink Order
First cup of the day:
Hot- or cold-brewed coffee (favorites include single-origin Brazil, Obsidian, and Mahogany), brewed at home or picked up at Caribou on the way to the office.
9 a.m. jolt:
Crafted press, “moosed” with a shot of espresso
“This is when I’m a little more adventurous. Sometimes I get a nitro or a seasonal drink, and sometimes I sneak into our innovation lab and try a drink that’s still under development to be released.”
Average night’s sleep:
6-7 hours. “Caffeine doesn’t seem to impact my sleep at all.”
Q | How do you quantify “best?”
A | We recently rewrote our mission statement. Previously, the mission was: Be the community place I love. Well, what if you’re not loving it every day and you can’t articulate why? We wanted to make more impact. Make people’s days. The new mission is: Create day-making experiences that spark a chain of good.
Q | Can you give an example?
A | We relaunched our Perks program. We had rolled out Perks in 2014 because that’s what every company was doing at the time, loyalty programs. But we weren’t asking people if they liked it or how we could improve it. Originally, it was a surprise and delight program, so if you’re a latte drinker and we gave you a reward for a mocha, you might not use it. People were confused as to why and how they were being rewarded. They said, “Give me points and let me decide how I use them.” So we did; we designed and executed the entire program in three months. Membership is up 25 percent in the last six months. This won’t be where we end. It’s been very successful; it’s driving traffic. But it could get better. And it’s giving us access to information about our guests. What we know: The guests now enrolling in Perks are 11 years younger than the guests already enrolled.
Q | So how young is that, exactly? I think of Caribou as the “family” coffee house—more suburban and somewhat older than some of your newer urban competitors. Who is your core customer?
A | She’s a female in her 20s and 30s. That’s who we design a lot of our products for. Not to say that guys aren’t important—obviously we want as many guys here as possible. But we’re a brand that, over time, has continued to skew younger and more premium.
Q | Is that what’s driving the introduction of trendy drinks like nitro coffee and infused cold press?
A | It’s a coffee-obsessed culture. We look at trends in the marketplace. We knew that cold coffee was really the growing segment. Cold is easier to consume throughout the day. It’s more portable. You can have a little more fun with cold—it can be colorful, it’s easier to infuse. It’s the whole experience. I looked at what 20-somethings were drinking, and they had cans of coffee and bottles of coffee and they were asking for a nitro coffee. [“Nitro”—short for nitrogen—is an odorless, colorless gas that creates small bubbles that make coffee frothier and give a perception of added flavor without adding calories.] Our own guest research really matched the observations that many on our product development and research and development teams had. We just said, “How can we be unique?” We don’t want to be a “me too”—our brand is too special for that. So we started to lay out a multiyear innovation pipeline based on cold coffee.
Q | What sort of innovation is required, and where do you begin?
A | A lot of nitro equipment requires tanks, which you have to switch out. Ours pulls natural nitrogen from the air and infuses drinks. It’s safer for team members. Nitro is currently in 150 stores and we’ll be adding more this fall. We want to make sure the home market has the best innovation and then take it to the coasts.
Q | The lid on your nitro coffee cup curves up and doesn’t require a straw. Was that an environmental decision?
A | Our straws have been recyclable for years, long before I came to the company. But the innovation really came through nitro coffee. You don’t want to drink nitro through a straw. You want to experience—this is going to sound gross—the mouthfeel of nitro. It’s so creamy, you don’t want to suck it up through a straw. We started to think about how to create the best nitrogenated coffee experience and we realized if you’re going to have an iced latte, you could probably have the exact same packaging.
Q | Food seems to be taking on more importance at Caribou. You used to have joint stores with Bruegger’s; now you’re serving Einstein bagels, but it’s all the same company. What’s the strategy?
A | Right, we’re all the same family. But we are a coffee company. What we were finding [with the full bagel menu] is sometimes the wait times were too long. A fully customizable food menu and a fully customizable handcrafted beverage menu was just too much. You can’t be all things to all people. What we realized is guests want a limited assortment of bagels. And they also want croissants, focaccia, other bread carriers. They want really good egg sandwiches, something good for lunch, and a snack in the afternoon. There’s a balance between what our store teams can execute versus what all our product team can imagine. We just have to keep walking the fine line of making sure the ultimate experience for the guest is exactly what they want: fast, efficient, and premium. You can’t do that if the menu is the wrong size. We’re always looking at what needs to go away, what we should have seasonally, and what new things customers are asking for that we can fulfill better than the competition.
Q | Is price a factor?
A | Guests are asking for more innovation. That’s going to cost more. You can go a lot of places to get an egg sandwich for a couple of bucks. We introduced cage-free eggs and [we] raised prices. We sold more, and people are happier.
Q | Do customers come back for the coffee, the service, or the environment?
A | We need to be really good on all three. You have to have a superior product that’s delivered in a way that’s unique and differentiated, convenient and frictionless. Only when you get it right on all three of those primary objectives will you actually win repeat business. The coffee space is overloaded. You can get coffee anywhere; you can’t get great coffee anywhere. It’s a matter of “Are you a force of good and are you actually designing a cool experience?”
Q | Did your years at Target influence the way you lead at Caribou?
A | What I got to learn quickly at Target was how important it is to have a mission and a vision that’s bigger than just making money. How important it is to do the right thing for your community and your team, and how important it is to be guest-focused. I loved Target. I never could have imagined leaving. Now, I could never imagine myself not being part of Caribou.
Q | Now how are you going to kick Starbucks out of Target stores to make room for Caribou counters?
A | That’s a great question. Will you talk to [chairman and CEO] Brian Cornell for me? Luckily, we see lots of Caribou cups around Target stores, and that’s equally satisfying. It means those people went out of their way to get their ’Bou before going to Target.
Allison Kaplan is TCB’s editor in chief.