Not Your Average Cup of Joe
Royal Cup Coffee, serving coast-to-coast from four-star hotels to corner cafes, is a member of “a special and rarified group” — privately held companies still thriving after a century or more.
Coffee surrounds the Royal Cup sustainability leadership team, from left: Purchasing Manager Brittany Johnson, Senior Marketing Manager William Culpepper, CEO Bill Smith III and Kevin Boughner, vice president of operations.
Be it at The Ritz-Carlton or the Waffle House, any time you’re served coffee there’s a good chance it is Royal Cup, one of Alabama’s oldest businesses, which has remained privately held and family controlled for more than 100 years.
Founded in 1896, the Birmingham-based company is a leading coffee importer, roaster and distributor of premium coffee and tea serving the away-from-home market — fine and casual restaurants, hotels, resorts, clubs, offices and healthcare facilities.
Just how long ago is 1896? To put it in historical perspective, that year Utah became the 45th state, the Dow Jones Industrial Average was launched and Henry Ford unveiled his first automobile. Management expert Jim Collins, who studies corporate longevity, calls companies that survive 100 years or longer “a special and rarified group.”
At the helm is Bill Smith III, who took over as CEO from his uncle, Hatton C.V. Smith, in 2014, making him the fourth member of the Smith family to head Royal Cup Coffee. Smith held key positions for more than 20 years, including territory manager in Atlanta and most recently vice president of operations.
Before it became the company name, Royal Cup was the name of a brand of coffees and teas sold by the Batterton Coffee Co. with the slogan “Coffee fit for a king.” Though times have changed, the Royal Cup mission is essentially the same, which Smith says is to serve the best coffee and tea coast to coast.
During the past 10 years, Royal Cup has doubled its revenue from roughly $170 million a year to $349 million in 2014. Last year 58 million pounds of coffee were roasted by Royal Cup, which maintains about 100 facilities and employs approximately 800 workers, with about 300 of those in Birmingham.
Growth is due primarily to the increase in national accounts and geographic expansion. Growth also is in product development, capitalizing on the public’s desire for quality food and beverages and the popularity of epicurean experiences.
“We believe that coffee and tea are integral to both of these pursuits,” Smith says. New products include Rainforest Alliance certified coffees and flavored iced teas, and taking advantage of the trend toward single serve coffees by “introducing a wider variety of beverages one fresh cup at a time.”
Growth is in technology as well, such as investing in data measurement tools to improve supply management nationwide. New technologies also are part of the recent $30 million expansion in manufacturing and distribution at the Pinson headquarters, expected to reach full capacity by 2017.
The company moved to its current location in the 1970s, expanding over the years and acquiring adjacent property. Sustainable approaches with the latest expansion include managing the waste stream and energy use, and converting to LED lighting.
Royal Cup has long advocated purchasing sustainably certified coffees worldwide through the Rainforest Alliance, USDA Organic and Fair Trade organizations.
In recent years, the company has taken a more holistic approach to sustainable practices and measures success in three areas — social responsibility, environmental stewardship and economic prosperity.
Kevin Boughner, vice president of operations, established a committee in 2013 to monitor and regulate the company’s sustainability efforts. The committee consists of a cross section of Royal Cup employees who produce reports on the company’s sustainability, and measure its footprint through the Carbon Disclosure Project. CDP is an international, nonprofit agency that provides a system for companies and cities to measure, manage and share their environmental information.
“We recognized that we did a lot of sustainable things, but it wasn’t a systematic approach,” Boughner explains. “We’ve had tremendous success and a favorable response from our customers.”
Despite its privately held status, Royal Cup was invited to the New York Stock Exchange in recognition of its highly rated CDP report.
Sustainability extends to coffee growers. Says Senior Marketing Manager William Culpepper, “Our green coffee buyers have been actively traveling to the growing regions in Central and South America for many decades, visiting farms and making sure that our partners in the supply chain are fair and ethical.”
120 Years Mastering the Coffee Business
1896: The first coffee roaster in Alabama is founded by Henry T. Batterton in Birmingham and is named the Batterton Coffee Co.
1909: Batterton Coffee outgrows its original building and moves to First Avenue North and 24th Street in downtown Birmingham.
1929-1941: Business is unscathed by the Great Depression because consumers believe coffee is a necessary commodity.
1930: Batterton and his wife are killed in a car accident and the bank takes control of the company.
1941-1945: When coffee is rationed during World War II, the company sells coffee mainly to several large customers, hurting its ties to neighborhood grocers who are left without coffee.
1950: A group of investors led by William E. Smith of Birmingham purchase the company from Henry Batterton’s estate and rename it Royal Cup Inc., working to rebuild ties with neighborhood grocers lost during the war years.
1954: First hotel and restaurant coffee sales
1968: First office sales route begins.
1972: In collaboration with industry friends, establishes the business cooperative Dine Mor Foods, allowing Royal Cup to serve customer locations throughout the United States.
1973: Royal Cup invites Dine Mor licensees in adjoining markets to organize Consumers Choice Coffee, which covers the Ohio Valley, Louisville and Cincinnati markets.
1975: With other licensees, Royal Cup starts Sunshine Coffee in Orlando serving the Florida market.
1976: Royal Cup moves to its present location just north of Birmingham in the Pinson area.
1982: Expands to the Dallas, Fort Worth
1989: Hatton C.V. Smith becomes president and his brother, Willliam E. Smith Jr., becomes chairman.
1996: Royal Cup celebrates its 100th anniversary.
1998: A new office facility opens, bringing the Royal Cup corporate campus to its current state.
2007: Continues expanding its west coast route delivery operations.
2012: Acquires Consumer Choice Coffee and begins independent operations in the Kentucky and Ohio Valley markets.
2013: Purchases adjacent 153,000-square-foot plant and announces a $30 million expansion to Pinson headquarters.
2014: Bill Smith III becomes president and CEO succeeding his uncle, Hatton Smith.
Culpepper says sustainably certified coffees represent just 3 percent of the world coffee supply. At Royal Cup, sustainably certified coffees represent about 12 to 15 percent of its total volume, and the percentage is increasing yearly.
Sustainable coffees generally carry a third-party certification. Farms that are certified by organizations such as the Rainforest Alliance or Fair Trade must invest heavily in the infrastructure on their farms.
Culpepper says certified farms often must provide housing for the pickers and their families, healthcare clinics, schools and clean drinking water. Farms that comply are rewarded by being able to charge a premium for their coffees.
Each sustainable certification is different, he explains. Coffee grown on Rainforest Alliance certified farms is sustainably grown to benefit farm families, wildlife and the environment. Fair Trade allows small farm cooperatives to join together and guarantees a minimum selling price for their coffee. Premiums are also paid to Fair Trade, which are reinvested in those communities. Organic coffee is grown and processed without pesticides or other chemicals.
“Many consumers, especially millennials, will make purchasing decisions based on products that they can feel good about,” Culpepper observes, “and sustainably certified coffees definitely provide that feel-good story.”
While many of the coffees Royal Cup sources do not carry third-party certifications, Culpepper says the company has complete transparency in its supply chain. To improve conditions in the growing regions and ensure a healthy supply chain, Royal Cup partners with organizations such as World Coffee Research and the Coffee Quality Institute.
When Hatton C.V. Smith started working for the company 41 years ago, the term sustainability was uncommon, let alone a buzz word.
“The company has always been one that has given back, so sustainability was natural,” Hatton says. “But the newer generation was more sensitive to it.”
Hatton points out that Royal Cup was one of the first companies to market sustainable coffee. In 2003, Royal Cup added sustainable coffee to its Villa Rey product line, served at The Breakers in Palm Beach, making it the first hotel to serve Rainforest Alliance-certified coffee to its customers.
Hatton’s father, William E. Smith, purchased the company in 1950 with no prior experience in the coffee business, but as Hatton notes, he “quickly got up to speed.” Hatton became CEO in 1996, a position he held until his nephew took over last year. He still works for the company as head of national accounts.
“Chances are, if you stay at any hotel anywhere you are drinking Royal Cup,” Hatton notes. “There’s a sense of pride that it is Alabama-based.”
Royal Cup’s success is based on many factors, and sustainability is all well and good. But success for a coffee purveyor all boils down to taste.
Royal Cup meets the high standards of nationally acclaimed executive chef and cookbook author Frank Stitt, owner of several Birmingham restaurants including Highlands Bar & Grill, who has served Royal Cup coffee to his patrons for decades.
Stitt worked with the company to create a house blend he says had the “depth of flavor, brightness and length” he was looking for.
“Royal Cup exhibits the best business practices, and their service is remarkably efficient, personal and gracious,” Stitt says. “They are certainly one of the great family-owned companies in Alabama, if not the country.”
Jessica Armstrong and Cary Norton are freelance contributors to Business Alabama. She is based in Auburn and he in Birmingham.