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LONDON - You will only ever see the rare white-winged fluff-tail on the highland marshes of Ethiopia. Except during migration season, when birdwatchers might catch a glimpse on the likes of the Nyika Plateau, Zambia.
When holding a joint interview with the Vice Chairman of Ogilvy UK, Rory Sutherland and YouTuber and Founder of Square Mile Coffee Roasters, James Hoffmann (who, for the most part, has been working in coffee since 2003), I felt quite like a twitcher in the presence of rarity.
In our exclusive interview, Rory meets his lockdown YouTube hero for the first time, and James helps us all understand what brands, agencies and businesses can learn from the weird and wonderful world of specialty coffee.
When I was speaking to Rory earlier in the year, he shed light on his fascination with the utter brilliance of Hoffmann's (as Rory affectionately refers to him) ability to powerfully engage and convince. Wouldn't it be incredible to get Rory and James both in the same room? I thought.
And so, with a blooming YouTube audience of 1.89 million (updated in November 2023) we set out to understand three things: 1) What is The Hoffmann Effect, 2) What does Rory think the marketing industry can learn from James and 3) What can all of us, working in brand or agency, apply from the above.
In the first few moments of meeting together, we all agreed that lockdown would have been much harder without James and his seemingly endless, and priceless, advice on coffee.
Rory: I went into lockdown as a perfectly sane middle-aged man and now I am importing Japanese coffee filters! James, it is a great honour to meet you.
James: Likewise. The feeling is mutual. It's a weird time to have experienced growth and success. There's a bit of guilt in that and a bit of confusion. Going into the pandemic, we all felt we'd all know when we'd come out. But I don't think we'll ever know when it finished, and that is the hardest thing for me to accept about all of this. We'll all one day go, 'oh yeah, that was that thing that was worse before and now it's not as bad. That has its consequences for business. Coffee has had a big shift in its consumption.
Jason: Before the pandemic, I hadn't watched any of your videos on YouTube, until Miguel introduced me, and somehow, now I'm applying mathematics and adjusting grind settings first thing. (Check out our perfect pour over method).
James: I think that's the nature of the platform. It's where the lion's share of the attention is. Coffee is great in that you get that light bulb moment, and go 'this is fun! It's delicious! My caffeination is now a more enjoyable experience.' It's not as pretentious as it came across maybe five or ten years ago when it tried to become a big thing.
Rory: There has been a general movement towards doing simple things really, really well. From an advertising standpoint, the seeds of solving overconsumption and moral degradation do not mean consuming worse or sparser but simply consuming less or better.
The marketing director at JDE argues that deep down, 'our purpose in life is to make the world demand a slightly better drink'. In other words, they don't want people to drink more; they simply want to raise the perception of and enjoyment of quality. The following is not a challenge; You change the taste of something by dint of the effort you put into its creation.
The famous case study in marketing was the campaign 'Just Add an Egg'. I think it was for a Sara Lee cake mix in the 60s. It was simply the case of 'add water, bang it in the oven, and produce a cake.' Nobody bought it. So they added, counterintuitively, a degree of 'difficulty' to the recipe. You had to 'add an egg'. And so people felt that they had made a personal contribution to this cake. Possibly the same way the sachet in the Pot Noodle probably adds about 70% to the pleasure.
It's the element that you feel you have created something yourself that changes the whole perception of the thing. It's fascinating because much of the enjoyment of wine is based on the psychological paraphernalia surrounding it. Wine tastes better if you pour it from a heavier bottle, and the differences between two labels on a bottle enable you to charge another 20% more.
These placebo effects are valid because if they increase the enjoyment of the coffee without necessarily changing the chemical constituents, it still counts.
I defend my Nespresso machine; I have three for one simple purpose: First thing in the morning, I am not in the mood to do anything complicated. I get a fast, effective caffeine hit in the same way that you [James] will occasionally prepare filter coffee overnight.
James: I am not going to argue against convenience. I seek it too. At 6:30 AM, I do not want to grind and weigh coffee; I just want hot coffee in hand immediately. I have a quality requirement, but that level is dipped all too often—Airports, etc. But there is always balance. I am not critical of Nespresso as a system or as a solution.
To make espresso at home is a lot. There's no other way to have that conveniently. Espresso at home is not as simple as you want it to be. I am very interested in the ‘simple’, and I am also very interested in getting to ‘delicious’. Hobbies are fun, developing a skill is satisfying and upgrading things is a journey - it's all fun. So, how do you then marry that with not building barriers against the thing of value?
I can't be overly angry at the solution Nespresso has, which I can't meaningfully compete with: their audience and that moment of caffeination at the start of the day.
Rory: It is interesting to hear genuinely impartial expertise on this, James. You combine excellent unintentional salesmanship with entertainment and information, which I am in awe of, and as an advertising guy, admire.
James: Thank you, that's kind of you.
Miguel: James. You reviewed the Hairo Switch, and then it sold out for months. How did you go from World Champion Barista to, as Rory previously put it, an 'unintentional salesman?'
James: How much of a salesman I am intentionally is up for debate. I am not afraid of it. The only people not offended by the term salesman are salespeople.
Rory: I'll defend it: Thomas Edison, Elon Musk, Steve Jobs. We like to dignify them with the title of an inventor, and that is true, but your inventions are meaningless unless you can persuade someone to adopt them.
I like the adverts from 1915 where they say "USE ELECTRICITY". It seems absurd to us now, but there was a 30/40 year period where you had to convince people to move over to electricity as a step up. Electricity required salesmanship every bit as much as it required supply.
[Speaking of James] Salesmanship means you have the transformative effect of describing what you believe and getting other people to follow along.
James: It is a profession that can be abusive, and it can also be very positive in a transformative way. I started in coffee in 2003 in a sales role, and I moved into training and education. This was good for me to learn the value of presentation and connection. Then I got into barista competitions, and it proved helpful that I was a comfortable presenter. Still, winning was a surprise to everyone, especially me—[Hoffmann first came to prominence after winning the World Barista Championship in 2007]. It was derailing because I had planned to open a café, and then in 2008, the world broke.
We had signed to rent a property in Shoreditch and walked away from the exchange. In the early 2000s, not too many people cared deeply about coffee in London; but on the internet, some people cared. So, my learning method was to 1) learn about something, 2) write it up and 3) share it. Then, by 2016 I accepted that people had stopped reading on the internet; people were watching videos on YouTube.
Video was where people's attention was now, which was the currency that I had to buy into. So, eight months in, I wrote an article and posted a video on takeaway cups simultaneously. The views for the article were decent, and the time people spent on my site was reasonable. But then I looked at the video stats, and it had as many if not more views which were 6-8 minutes long. That was the return on my investment in time, connection, community and relationship building. So the answer was video.
Many people think, 'I will make a load of videos and then get a big audience, and that will be great. YouTube is a terrible place to start. It is awful and miserably difficult to grow. And a lot of people drop off. TikTok is a great place to start, and Instagram is a 'medium' place.
By 2019, 100K YouTube subscribers was the first milestone that made me feel like I must be doing something right. Then the pandemic hit, and that was transformative. I like to tell myself that it was going that direction anyway, but there was a flight to the internet of people who wanted to know how to make coffee at home.
The tricky bit was that I saw the flight, and I wanted to meet those people, but every single coffee company dumped 'how to make coffee at home' all at once. I wanted to do something different. Something that is going to engage people.
My goals are 1) to entertain you and 2) to build your trust. I need to entertain you so that you will watch a second, a third one, and hopefully, by then, I've built trust. Then long-term, I can take you on a journey through the world of coffee. But I don't need to start with all the finicky ways you can make coffee; I just need to make it fun and engaging. And help you get a good return on your investment of time or money or whatever resource you have to invest in coffee. That's the premise I need to deliver on. Then I can make you weird about coffee, and hopefully, coffee becomes a more valuable part of your life, and you'll understand the value of spending a little more on coffee.
Because it's quite an abusive system for how it is sourced and produced, but if people are willing to spend a little more, that's a net win that lifts the ceiling and gives us a bit more space not to be such a terrible industry.
Jason: How do you think agencies can replicate what James has done, Rory?
Rory: James, I think your instincts are incredibly good by differentiating yourself from everyone else. And your levels of trust are assiduous in mentioning if you have an interest in a company. Also, clear passion and enthusiasm shine through, which is just extraordinarily potent... Somebody finally did a video where they put a camera inside the dishwasher to show you how it works. And it's that symbiotic relationship between the globally curious and the niche obsessive. Progress is largely made by those who pay attention to things, including the small things, more than most people think is warranted. And so that mutually beneficial relationship between those two groups of people is fascinating.
Jason: So true. Strong business development is underpinned by attention to the small things. Now, Rory, I know you have a burning question for James.
Rory: Yes! When I go to America, I love Half and Half, yet nobody manufactures cream in a format designed to pour-over coffee. Why has cream fallen out of favour so much as a coffee compliment?
James: I don't know the history of it. I don't know why they have it in America, and I don't know why we don't have it here. I genuinely don't know the answer - and that is interesting to me.
Jason: How did your partnership with Rebel Kitchen come about, James?
James: Rebel Kitchen has been making a plant-based alternative for a while but not necessarily designed for coffee. They initially reached out to me to be a consultant. They said, 'We want to do this, but we want to get it right because the market is highly competitive. Please work with the product; give us feedback; work with the food science team to make it better, and help them recipe select and iterate.'
Then the conversation became more about: How do we communicate this to people? If it's as good as we think it is, how do we get that across to people? Then it became more of a partnership and a deeper, wider involvement.
This was an interesting opportunity for me. I am not a dairy drinker, and as a market, it has been fascinating to watch the shift towards plant-based foods. We talked about bringing this to market, and I need to do that transparently because of the whole trust piece. I need to tell you the story of why I like the product and the relationship and all those kinds of things. It was a great launch, and they sold out on the first day, which took us a little bit by surprise.
I don't think many brands necessarily understand the creator economy. It's hard to shape expectations around who can move an audience, who can't and what kind of audience does move.
I still think it's incredibly early days. Rebel Kitchen is passionate about what they do, so I am comfortable and excited to work with them. Sometimes it's easier to work with creators who haven't spent time on the other side of the table, and I hope I bring some empathy to the conversation in my approach.
Jason: Rory, what can brands learn from this formation of the partnership?
Rory: Is there brand congruence and fit? Then there is a significant opportunity for genuine complementarity. Mark Ritson makes this point: "There tends to be a weird phrase that partnerships dilute brands."
But my view has always been that instinctively that's nonsense. Mark's view, based on objective evidence, is also that it is nonsense. It's like saying that having friends dilutes your personality. It’s fundamentally untrue. I am hugely in favour of these things and these brand partnerships that benefit both parties.
The other thing is that commodification of anything is horrible. Having anything traded as a commodity generally means that it becomes a race to the bottom between the grower and the manufacturer. The value, broadly speaking, to the grower is destroyed because of the price, and there are no rewards for innovation. Why bother when your product is mixed in with everyone else's product? Wine is geocentric where the grapes are grown. This is happening in coffee which is great and will encourage innovation and differentiation. Consumers pay a premium for known provenance.
If you put Pembrokeshire Potatoes on a menu instead of just potatoes - people will pay more. You are telling the consumer, 'Our chef buys the food, not our procurement department.' We are buying food for what it is, not for what we can get. Economists love commodification because, in the short term, it makes markets look efficient.
You can't buy Fair Trade petrol; I can't pay more money to buy Fair Trade Petrol because it is commodified.
Pure economists will be scandalised by the fact that I will buy coffee from Curve Roasters in Margate simply because they have coffee from a grower in Columbia, and his name is Elvis.
I hold the belief that anyone called Elvis cannot be that bad. So I gave his coffee a try. Consumer whimsy in aggregate leads to far better markets.
Rory: Because if consumers all bought cars to the same formula, cars would be absolutely wonderful according to the five points that consumers factored in but dreadful according to every other aspect. Consumer whimsy contributes to quality and variety in markets. James, your partnership with Rebel Kitchen is decisive.
You have a huge amount of reputational skill in the game, which is your entire business reputation depending upon the reputation of probity. It's probably impossible for a purely commercial entity of an international kind to achieve that kind of trust.
Two parties together can create something that no one party can do on their own.
Miguel: How would you illustrate this?
Rory: Key figures would single out Jeremy Clarkson, and they are missing the point. If you want to convert people to electric cars - he is the one you want to sell it to them. Because when Clarkson says, "electric cars are better", it has an exceptionally high level of conviction.
Signalling your devotion to a cause by abusing people who disagree with you may make you feel good, but it is very limited as a form of persuasion.
No chant from a football ground ever put me on the opposition's benches. A Clarkson co-brand electric car? You can't ignore that.
Jason: James, do you think brands understand the difference between audience reach and genuine partnerships?
James: Many brands want to buy assets. Audiences and some attention from those audiences. Which is not a partnership; it is a transaction and very transparent to the audiences. And does not work.
Many brands fall when they want to form a genuine partnership but create a totemic ambassadorial acquisition of someone and their brand.
Going back to Clarkson, having him partner with an electric car company is one thing. Clarkson being involved from start to finish and saying this is the electric car for people like me who don't like them? It is a different product with a different audience and a different capacity for success than signing off , "Yes, this is good, I endorse it, I'll do an advert for it."
Rory: There is a vast difference between a testament and a testimonial. There are partnerships, which are genuine proof points. I will buy a £700 grinder on James' recommendation after negotiating side space in the kitchen with my wife.
And that's a testament. Whereas a testimonial is simply a bought association; treated very differently. Jeremy Bullmore said: "If you look at discounting. To an economist, there is no distinction between a bonus and a bribe. But the human brain does make that distinction. 30% extra free is psychologically different to 30% of ." Although economically, they are the same, the nuance gets lost.
Jason: Like Rebel Kitchen costing less if you scan your Clubcard.
Rory: Yes, which is clever because it comes across as a bonus exclusive to me - not to say that Clubcard is massively exclusive - But it's a benefit to me personally, which is perceived fundamentally differently.
In behavioural science, idiosyncratic fit heuristic people judge discounts partly based on how idiosyncratic they can benefit from them.
If BMW gave 25% off to all ginger haired people, you would get far more ginger-haired people taking up the offer than you would have if you had said: "25% off to everyone", which people would regard as essentially meaningless.
Economists want to treat price as a numerical utility. But actually, price is a tool of perception to a large degree.
Nespresso sold in a jar would make people gawk at the price. However, as they are sold in individual pods, people can compare it to Starbucks, seeing it as a money-saving. How does the price of ground coffee compare to a Nespresso when compared to instant coffee? I have no idea, so I use heuristics rather than absolutes.
James: It's a good benchmark to use to get where you want to go. Everyone is looking for a shortcut. What is a cup of coffee in this mug worth to me? 50p or £3. I'm buying the experience. That doesn't mean that you can't leverage the price per kilo, which you can in retail settings, which could be an experiment for us in the café. I agree that I need to think of coffee, not the price per kilo but the price per cup. Otherwise, my brain can't work it out. So instant vs ground, no, I can't. We don't make comparisons that way. When you make these comparisons, behaviour looks weird.
Rory: There is a wonderful interview between Damien Hurst and Mark Carney. Damien is talking about pictorial art, and he says, "It is a peculiar thing. If I make a skull out of crystal glass or wood, everyone wants to know the value of the material. And they will compare the value of the materials to the cost of the finished product." When he paints something, no one cares that the paint and the canvas cost £250, and he's asking for a million. It's extraordinary.
You don't pay a premium for architecture. Frank Lloyd Wright Houses are no more expensive than a home built by an indifferent architect in the same location. Damien Hurst noticed the same thing when he produced a crystal skull. People are asking what the crystal is actually worth, so I am not getting ripped off. Bang a bit of oil on some canvas, and nobody cares.
People prefer spirits and cocktails to wine in restaurants. But the restaurants have a massive interest in selling wine because you can mark it up. People roughly know how much a bottle of Johnnie Walker costs, so there is a limit to how far you can mark that up before people get angry. But wine has the property of pictorial art.
No one cares how much the canvas costs and nobody cares how much the grapes cost. They don't know how much 'Chateau De Obscure 2018' costs for a crate (probably five euros and sold at the restaurant for £25), and no one ever complains.
So the spirits market faces unfair competition. You get handed the wine menu, not the drinks menu.
Miguel: James, What will the next coffee wave look like? Do you think it will mimic what's happening with wine? Coffee tasting holidays?
James: No, I don't think so. We are still very much in that third wave piece, and when you look at the time frames involved, the first wave lasted 100s of years, the second wave is 80 plus years and is still going on.
We are 20 years into the third wave, so I think it's far too early to say. Everyone is constantly looking for the next new thing. I am looking for something contradictory to the tenets of coffee: high traceability, taste and price correlation defines third wave coffee.
Traceability and provenance are maintained and cherished. Plus, premiumisation is around provenance and flavour, which have defined third wave coffee. I don't think we have seen anything that goes against that yet.
Rory: It's completely free of modification from who grows it and how it's roasted to how it's ground.
James: There have been attempts. People thought that it would be a brand-driven market. It wasn't the story of how it got there, how it was roasted; all you were told was the brand. That hasn't succeeded or landed the way we thought it would. There will be an interesting period of five-ten years where habits are going to change and shift. Historically, coffee at home never cannibalised coffee out of the home. They meet different needs, and coffee at home is as competitive as coffee out of the home.
Miguel: Do you think the role of baristas will change? How can the discerning consumer of coffee be attracted?
James: The ones who will suffer are the functional coffee sellers. You can bypass these by making your coffee at home and taking it with you on the train. It's cheaper, I enjoy it, I get to pick the beans, I don't have to queue, and it's fun.
Good cafés are still about more. They are about meetings, escaping your office environment, time with friends, time by yourself, a place to work or not to work. They fulfil that, and people will want to go there as long as they continue to be safe places to do those things.
We have seen cafés in residential areas of London and out of the city experience huge growth during the pandemic because people still want cafés. People still want something a bit premium. But there will be a tough time in the middle of the market.
People who want cheap will always want cheap, and they are a separate market. Pre-pandemic, the average coffee out of home had risen above the average coffee in the home. The average coffee in the home had been Nescafé instant for most people because there was only a functional requirement. Or you just go pick one up.
Coffee at home has now risen above the floor of coffee in the marketplace in the wider experiential thing.
Jason: Specialty coffee is for a specific demographic. Could we see Square Mile in Waitrose one day?
James: In its current setup, probably not but in a different format, maybe yes. I think demographics have broadened; Now, more people are open to the idea of enjoying coffee more.
Jason: So specialty will become mainstream?
James: Aspects will. It's hard when you want something to become accessible and not gate kept. There will always be an element on how wide you can spread the top part of the pyramid. It will affect the floor of things.
But the specialty of itself will remain niche by definition; It is the best of the best.
Miguel: To the degree of buying a high end coffee machine from Decent in person?
James: These kinds of products are more suited to online retail rather than physical primarily because of building a long-term relationship with customers. The brand experience needs to be tightly controlled from the moment you decide to buy.
I started selling domestic coffee machines in House of Fraser, so I'm aware of the challenges of putting middlemen in there for relationships. When people go out to try to find these machines, I might be able to say, "this £3500 grinder is amazingly good" that may be the icing on the cake that might push them over the edge to buy it.
But, that buyer will have been sold to from the community that they are investigating online. We are now used to that being a factor in our shopping process.
Once you are into something and are looking for the best of the best, you spend time with those communities online. You are looking for the best of the best.
Some brands have been very good at building active communities—Decent Espresso built one of the most influential espresso machines of the century.
Rory: One crucial thing you have done is that we get a natural mental hierarchy with you. You are restoring a healthier repertoire between filter coffee, Aeropress and everything else, which is extremely important for coffee growers and producers that benefit from different preparations.
This is the thing that I am optimistic about because consumers tend to say the 'proper thing' is the machine, and the filter is a compromise. So I am very grateful for you bringing balance here and encouraging people to have various ways to enjoy the drink. Other than seeing everything that has not been created by pressure as something less than.
James: I think we can thank Pret for that. They were the first to say espresso is £1.20, filter coffee is 99p, and they used the same beans for both. You are telling a story that isn't necessarily true with a short-term gain.
You might be paying slightly more for the espresso, but it's a frustrating message to put out, but it's also because of the machine and our love of Italian culture.
I am interested in enjoyment and delight and espresso can be that. But it can also be one of the most frustrating, messy, expensive and counter consuming things you can put in your kitchen. It's great as a hobby that you enjoy, but it is a lot. So a big part of the messaging is you can have a great drink with less time and investment.
Rory: This has been a hugely enjoyable conversation.
James: My takeaway is the phrase "consumer whimsy". I could spend an hour just talking about consumer whimsy.
Rory: The narcissism of small differences.
James: I will keep "consumer whimsy". It is the perfect phrase. Specialty coffee has no idea why people buy the coffee they buy. We sell it a certain way, and we use language that we do not use when we buy it ourselves. We do not understand why they are making the decision-making process they make.
We do not take into account, consider nor understand consumer whimsy, and that has been a fundamental mistake and one of the great failures. But defining it as such is incredibly instructive regarding how you communicate and the opportunities you leave on the table.
As mentioned at the outset, the rare white-winged fluff-tail is an enigmatic bird.
Seasoned twitchers seek out new territories to catch a glimpse. James is a twitcher of sorts. Along with the coffee-obsessed, he's unearthed the reserved, secret coffee lovers of the world, like me. Forming beneficial partnerships to help us out.
Rory, likewise, is searching out the enigmatic in the name of behavioural science.
My question is, how will you apply what they've taught us?