Montana Coffee Traders, Inc.

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Montana Coffee Traders, Inc.

5810 Highway 93 South
Whitefish, Montana 59937
U.S.A.
Telephone: (406) 862-7633
Fax: (406) 862-7680
Web site: http://www.coffeetraders.com

Private Company
Incorporated: 1982
Employees: 75
Sales: $25 million (2002 est.)
NAIC: 311920 Coffee and Tea Manufacturing; 722213 Snack and Nonalcoholic Beverage Bars; 445299 All Other Specialty Food Stores; 423990 All Other Durable Goods Merchant Wholesale; 722211 Limited-Service Restaurants.

Montana Coffee Traders, Inc. (MCT), a roaster and seller of high-quality, specialty coffee, is headquartered in a small resort town in the northwest corner of the state not far from Glacier National Park. In addition to great coffee, the company promotes positive working conditions, as well as a concern for the community and the environment. MCT has quietly spread into various markets for its coffee, in the process establishing a coffee-shipping service, three businesses in Montana, one in Texas, and a venture in Russia.

Early Years in Montana

Montana Coffee Traders was founded by R.C. Beall, who came up with the idea of roasting and selling his own beans after drinking a terrible cup of coffee in a late-night café in 1981. For years, Beall—a former logger, back-country guide, and golf course manager from Texas—had been trying to figure out how to make a living in Montana. Perhaps, he thought, coffee could be the answer.

Beall began conducting research on coffee and on Montana. He learned that coffee was the second-most important trading commodity—oil was first—and accounted for a third of all beverages sold in the world. As for Montana, the state had no coffee roasters at the time, meaning no competition. Then again, Montana was a poor state with a small population base. Nevertheless, Beall decided to pursue the idea, teaming up with Whitefish, Montana, artist Scott Brandt to conduct further research. As a result of many hours in the local library and on the phone, they discovered there was a ten-pound coffee roaster, a grinder, and five bags of green coffee beans in a local barn.

Beall sought to purchase the barn, but banks were reluctant to lend him the money. They could not imagine that gourmet coffee would sell in Whitefish. Eventually, First National Bank in Whitefish loaned Beall $4,000, which he used to purchase the barn and its contents. Immediately, Beall began roasting coffee, with some assistance from Michael Sivetz, who owned an airbed roaster business. Using trial and error, Beall attempted to bring out the different characteristics in each bean, recording the results in spiral notebooks. In the process, Beall learned how difficult and exacting it was to roast coffee. For instance, the temperature and time in the roasters had to be precise.

After a lot of practice, Beall became satisfied with the coffee he roasted. In 1982, he opened his coffee-roasting business in a restored old farmhouse in Whitefish, just 25 miles from Glacier National Park. Beall felt confident that he had a great product, but business was slow in starting. A year after opening, Beall sold his Houston golf course to keep the coffee business afloat. It took five years, said Beall, to get the business going. Gourmet coffee, after all, was a hard sell to Montanans, who were used to commercial coffees such as Maxwell House and Folgers. Beall heavily promoted his product in his community, mostly through serving coffee at community events. This, he believed, was the best way to sell people on MCT. He was convinced that once consumers tried one of his freshly roasted and ground coffees, they would agree that the tinned-can brands were under-roasted and stale. Eventually, when consumers did start to agree and MCT moved forward, Beall's motto became: "If you can do it in Whitefish, you can do it anywhere."

MCT Treks to Costa Rica and Russia: Late 1980s and Early 1990s

In 1989, Beall traveled to Costa Rica in search of high-quality coffee beans. He visited a number of cooperatives in the country, hoping to find one that shared MCT's values—community mindedness and concern for the environment—as well as having great beans. When he met with Guillermo Vargas, then the manager of the Santa Elena farm cooperative, Beall saw an opportunity. The coop, located near the renowned Monteverde Cloud Forest Preserve, was at the perfect altitude for growing coffee. In addition, like Whitefish, Santa Elena was being threatened by rapid development. Beall thought if Santa Elena could earn a living growing coffee, its rain forest might be protected.

Ironically, the Santa Elena community—which had never before tasted roasted coffee nor even seen a roaster—did not realize the high quality of their beans. Beall, however, did. Having brought a small roaster with him, Beall allowed them to taste their coffee for the first time. In later negotiations, he agreed to pay a premium price—one of the highest prices given to a Costa Rican coffee grower—in exchange for exclusive North American rights.

Once negotiations were complete, MCT's first "Coffee with a Cause," Café Monteverde, was created. As part of their agreement, MCT committed to donating one dollar per bag sold to special projects for the coop. Such projects included reforestation, educating young Costa Ricans about their environment, and developing organic agricultural practices. Meanwhile, from its new profits, the coop opened a small roasting facility in 1990, finally making it possible to offer home-grown coffee to locals and tourists.

In 1992, Beall set out for another part of the globe: Moscow. Forming a partnership with Russian-born Whitefish residents Aleksandr and Laulette Malchik, MCT-Vostok (meaning MCT-East) was created. The Malchiks had convinced Beall to expand into Russia, claiming that its coffee was terrible. While the market did prove lucrative, and even became self-sustaining within a year, there were problems at the start. It was difficult to find adequate space in the overcrowded city of nine million, the company had no telephone service for months and no supplier for basic office equipment, and they had to bribe local officials at every turn, beginning with their attempt to get the coffee roaster into the country. Fortunately, officials accepted coffee as a bribe. There were also major difficulties with the country's unstable ruble. Because of this, the business largely marketed their product to the city's 100,000 or so foreigners.

By 1993, MCT-Vostok was selling 150 to 200 pounds of coffee a day. At the same time, they began selling grinders, plunge-style pots, and espresso machines. MCT later pulled out of its association with the Russian shop, handing ownership to a Russian resident. No sale was negotiated in the process, as MCT never owned the company. Instead, MCT's role in its "partnership" with the Malchiks was to get the business going. Still, MCT continued to provide assistance to the Russian coffee shop as needed.

MCT Grows Locally in the 1990s

Locally, MCT was growing. In 1992, the coffee roaster opened a shop in nearby Kalispell, Montana. The business, a limited-service restaurant that served specialty foods, snacks, and nonalcoholic beverages (including, of course, coffee), had sales between $500,000 to $1 million within ten years.

By 1993, Montana Coffee Traders had created 150 flavors of coffee, of which they had already sold 175,000 pounds, or fifteen million cups. Beall obtained his green beans through brokers in New Orleans, New York, and San Francisco (as well as Costa Rica), which he would then package and distribute throughout Montana, Idaho, and Washington. One of his most important business strategies simply involved doing the homework—including research and practice—required to achieve a great product.

Beall was also concerned with creating an appealing environment for his customers and set up his Whitefish log cabin/store with this in mind. He placed a covered wagon directly outside the store, while inside the shop was filled with espresso machines, coffee grinders, teapots and kettles, coffee cups, homemade jelly, and chocolate. Upstairs, customers could buy items made by local artists, including hand-woven rugs, baskets, wooden cabinets, and chairs. Pleasant music played in the background. To further enhance a customer's visit to his shop, Beall offered tours of the business. On a typical tour, customers were urged to smell just-roasted coffee beans to distinguish among the different regions from which coffee originated—including Indonesia, Central America, South America, and Africa—and were shown large bags of green beans and coffee roasters that were capable of roasting up to 150 pounds per hour.

To a large extent, Beall depended on his employees to sell his products. Conscious of this fact on both a personal and professional level, he was committed to treating his employees well. MCT paid good wages and provided health insurance for both full-time and part-time workers.

One business tactic Beall did not strongly pursue was advertising. Realizing he could not compete with the advertising campaigns of large companies such as Folgers—which spent millions of dollars a year on advertising—Beall preferred to advertise locally, mostly by providing coffee at community events. Still, convincing both local and out-of-town restaurants to buy MCT coffee—which cost about one or two cents more a cup than commercial coffees—proved challenging. However, when the company discovered that United Parcel Service would ship coffee anywhere in Montana in one day, the business reached a major turning point.

Restaurants and individual consumers were pleased to learn that they could receive MCT's coffee quickly and be billed for it later. The good-faith gesture, as well as the speedy delivery, proved to be effective sales tactics, as did MCT's guarantee of selling only freshly roasted coffee. To do this, MCT used a system of taking orders early in the morning, then roasting no more than the amount needed for the day.

Company Perspectives:

Montana Coffee Traders is dedicated to roasting and selling fresh coffee in a manner that respects, supports, and profits people, the community, and the land that sustains us.

Financial Growth and Community Commitment: Mid-1990s and Beyond

In 1994, Beall traveled to Austin, Texas, to open Texas Coffee Traders. The new location not only returned him to his home state, but it also provided a good location from which to ship fresh coffee to accounts that were too far from Montana to ensure fresh delivery. It was at that time Beall married; his wife, Beth Beall, became president of Texas Coffee Traders. At TCT, the goals remained the same as in Montana: to sell the best coffee available and to have fun doing it, to treat employees well, and to contribute positively to the community and to the environment.

In its commitment to community and environment, MCT set up programs that contributed part of its sales to various organizations. The company continued its program with Santa Elena, as well as beginning a whole line of Special Project Coffees, all of which donated one dollar for each bag sold. Grizzly Blend provided money for the preservation of grizzly habitat, Four Directions Blend contributed to the Native Families Empowerment program, Abbie Blend furthered the Advocacy for People cause, and Wild Rockies Blend supported wild land protection. MCT has also been committed to fair-trade practices and to buying shade-grown coffee. Growing coffee in the sun, while yielding larger crops, came at a price, including soil degradation, water pollution, worker health risks, and a dependence of the farmer on chemical supplies. Furthermore, cutting down the trees normally associated with coffee plantations has threatened animal habitat.

Other community projects in which MCT has been involved include local land conservation. In 1991, when Beall heard rumors that a substantial piece of land along Whitefish Lake was to be sold, he reacted quickly. With a group of locals, he arranged for a public meeting before the city council, where they convinced council members not to sell the land. Later, the non-profit group convinced Fish, Wildlife, and Parks to lease the land to the group, which created a public park with 400 feet of gravel beach. In another project, Beall organized various fund-raisers (for which he provided the coffee) to bring National Public Radio to the Whitefish listening area.

Meanwhile, in 2000, MCT opened a new store in Whitefish, Montana, bringing its total Montana business to three shops. By 2003, with sales looming between $5 million and $10 million and 75 employees, Montana Coffee Traders had come a long way from its "beans in a barn" origins.

Key Dates:

1982:: R.C. Beall starts Montana Coffee Traders (MCT).
1989:: MCT works out a deal with Santa Elena coffee cooperative in Costa Rica.
1992:: MCT helps to jumpstart a coffee shop in Moscow, Russia; the company opens a new coffee shop/restaurant in Kalispell, Montana.
1994:: The company starts Texas Coffee Traders, a subsidiary of MCT.
2000:: The company opens a new coffee shop in Whitefish, Montana.