'Back to Square One'

Martin Diedrich celebrates the death of his familys coffee chain

Last month's sale of 40 Diedrich Coffee houses to the Seattle-based coffee conglomerate Starbucks marks the death of Martin Diedrich's once-grand ambition to create a sophisticated and intimate café culture in Orange County. But Diedrich says he couldn't be happier to see what's left of his family's business headed for the ashbin of history. "Personally I'm glad to see it happen," he says. "I'm glad to be closing the book on that chapter of my life. Now, I'm pretty much back to square one."

"Square One" is Kéan Coffee, the café Diedrich opened last December and named after his seven-year-old son. ("I can no longer use my family's name, so I figured I'd name it after my son," he explains.) Diedrich's business day begins early—starting at 5 a.m., he roasts coffee for four hours, then drives to the Port of Los Angeles to pick up fresh beans from around the world, hauling 174-pound bags to his warehouse. By the afternoon, he's at the cafe, working the espresso machine and talking to customers, many of whom are his neighbors.

Kéan Coffee is located across the street from the strip mall where in 1972 his father, Carl Diedrich, a German immigrant, began roasting coffee that he grew on a 40-acre plantation in Antigua, Guatemala, where Martin Diedrich grew up. A few blocks away is the original Diedrich Coffee House on 17th Street in Costa Mesa that opened in 1983, a year after the family gave up its plantation during the bloodiest year of Guatemala's civil war.

Diedrich: "You can't mass produce quality." Photo by Jennie Warren
Diedrich: "You can't mass produce quality." Photo by Jennie Warren

Under Martin Diedrich's stewardship, Diedrich Coffee had expanded to a dozen Orange County locations by 1996, attracting the attention of Wall Street investors and fast food executives. Two years later, Diedrich took the company public and with investments from Taco Bell Corp. announced plans to add dozens of stores in several states. But in the process, Diedrich lost control over the company and was relegated to figurehead with the symbolic title "chief coffee officer."

Although he had no control over financial decisions, the company continued to milk Diedrich's reputation as a master roaster. To this day, every Diedrich Coffee outlet is decorated with a framed photograph of him posing with a coffee plant and a caption that assures customers that Diedrich oversees every aspect of the company's commitment to serving the perfect cup of coffee.

"Pure and simple, that's a false message," Diedrich says. "More than that, it's fraudulent. When I created that company, I thought that is what I would do for the rest of my life. I didn't leave altogether voluntarily. The misperception is I sold the company. Far from it. In the end, I got little to nothing for it financially and I had to start from scratch with little more than the relationships and reputation I've developed for about 25 years of working in this business."

This time around, Diedrich says he's learned from his mistakes. He has no plans to expand Kéan Coffee beyond three or four outlets in Orange County—just enough to stay in business. "The margins in this business are really skinny," he says. "I don't want to grow just for the sake of growing. I've been there, done that. When Diedrich Coffee became a public company, it was just about making money. For Starbucks, the acquisition [of Diedrich's] is just a real estate transaction. They need real estate to keep their projections on target—they need to open new outlets all the time. The more the fast food coffee chains do what they do, the easier it is for me to distinguish myself."

When Diedrich uses the phrase "fast food coffee chains," he knows what he's talking about. "I call them that because I've been on the inside of these companies and they change their menus to achieve speed of service," he says. "They spend money to study what a product and recipe does to speed of service. If there is a menu item that causes a customer to wait two minutes, they're going to remove it from the menu because they multiply that two minutes by 15,000 outlets."

At Kéan Coffee, Diedrich serves espresso in the classic Italian style, which takes more time than the corporate executives at Starbucks or Diedrich Coffee would permit. The finely ground beans are tamped down by hand with exactly 40 pounds per square inch of pressure using a counter-top scale for accuracy, and if the shot doesn't drip out in between 20 and 25 seconds to achieve a multi-hued, quarter-inch thick crema, it's thrown out. Baristas are trained in latte art, so customers who drink their cappuccino or latte in the cafe can gaze at beautiful designs in their froth-laden drinks before imbibing.

Yet, amazingly, the prices are on par with those at the much larger chains. "Our 12 ounce latte has two shots of espresso, because we use the classic Italian cappuccino recipe of one ounce of espresso for five ounces of milk," Diedrich says. "At Starbucks, you're only getting one shot of espresso unless you pay extra, so you're getting a better value for a cup of coffee that doesn't taste like carbon and charcoal."

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