A New Brew For Latte Lovers -- Seattle Entrepreneurs Find Niche In Special Bean-Roasting Techniques

MAGNOLIA

Two years ago, Phil Sancken and Tucker McHugh made the kind of career switch most people only dream about: They quit their executive jobs, exchanged their suits and ties for khakis and polo shirts, and started a coffee company.

By day, they brewed lattes in the cafe they opened in an old shoe-repair shop a few blocks from their Magnolia homes.

By night, they roasted coffee beans in a 35-year-old German roaster they had found in the back of a pickup in California.

Forget the fact that Seattle already was home to several established gourmet-coffee roasters with scores of loyal customers, hundreds of wholesale accounts and well-known brand names such as Starbucks and Torrefazione.

For Sancken, former managing director of capital markets in the Pacific Northwest for Piper Jaffray Inc., and McHugh, who spent 20 years in the publishing business, most recently with Alaska Airlines Magazine, trying to make and sell yet another gourmet coffee in Seattle made perfect business sense.

Coffee is a "proven product," after all, said Sancken. "We weren't in the position of having to educate the market on the benefits of superior coffee."

Their challenge was to find a niche that wasn't already filled by a competitor.

The answer lay partly in marketing and partly in the product: Caffe Appassionato would be marketed as a "high-end" coffee low in acidity. That was achieved by roasting the beans longer and at a lower temperature, a process that takes two to three times longer than normal.

To justify the cost and the higher prices they would have to charge, Sancken and McHugh targeted upscale wholesale accounts such as the Seattle Tennis Club, the Broadmoor Golf Club and Anthony's Restaurants, where customers might be willing to pay more for a better brew.

The strategy apparently worked. Today the two partners have 21 employees, including a full-time salesman to handle a growing wholesale business that includes 65 accounts.

After putting in 16-hour days roasting and delivering coffee in their station wagons on Saturday nights, Sancken, 40, and McHugh, 44, recently started giving themselves two consecutive days off every two weeks.

Caffe Appassionato is Italian for "coffee with a passion." The name was adapted from Sancken's favorite piano piece, "Appassionata," a sonata written by Beethoven, who allegedly loved coffee.

The company now includes a budding private-label business and retail outlets at Southcenter, Bellevue Square and Magnolia. A franchised store is scheduled to open soon in Boston. Five Made In Washington stores in the Puget Sound area sell Caffe Appassionato under the "Made In Washington" brand name.

Gillian Mathews, Made In Washington manager, said Caffe Appassionato met her company's request for two-ounce bags that sell for $2.95.

"We saw a need for a one-pot bag, and the nice thing about working with a new company is that they are willing to try different things," Mathews said.

Sometime this year, Caffe Appassionato expects to reach $1 million in sales. Although Starbucks generates 13 times that amount in just five weeks, Sancken and McHugh are not complaining.

The business plan they wrote for a $200,000 loan guaranteed by the Small Business Administration called for sales of only about $650,000. Sancken says the company was "profitable from day one" and now plans call for annual sales of $7 million in the next five years.

At Piper Jaffray, Sancken studied emerging industries, and he had often thought about starting his own business.

"At some point I wanted to identify an industry that would expand into something bigger, and coffee certainly had the potential to do that," he said.

He shared his idea with his neighbor McHugh, the brother of Seattle restaurateur Mick McHugh. The two studied roasting techniques in California for almost a year before starting their business. Sancken's wife, Barbara, took charge of administrative tasks; Mimi McHugh, married to Tucker, handles food products.

As the partners find themselves racing past preset benchmarks faster than they expected, they are in the enviable position of trying to keep pace with expansion in a market for a product where overall consumption is flattening.

"People are drinking less coffee," Sancken says. "But when they do, they are demanding better coffee. "

Although franchising always was a part of their business plan, they expected to sell franchises locally before going out of state. That it happened the other way around fits Sancken's view of the real future for gourmet coffee.

"This is sort of the Napa Valley of coffee," he says. "The real growth is going to be outside Seattle."