Brewing the right mix: Duncan Coffee Co. has gone through the grinder
If Hershel Mills Duncan IV had to pick his favorite drink, coffee would win -- hands down.
It's not because he smells it every day as owner of Duncan Coffee Co., it's because he has it in his blood.
Duncan, known as "Mills" to his friends, has grown up around the bean. His family's history is tied in closely with the history of Duncan Coffee, which reaches back to the early days of Houston.
From the beginning, the company has undergone many changes, transitioning from a small company to being part of The Coca-Cola Co., and then back into a family business.
These days, with some of the best restaurants in the city as clients, Duncan Coffee is expanding into another avenue -- the catering business. The company has been brewing up success in all four areas of operation: restaurants, retail coffee bars, whole-bean sales and the new coffee catering venture.
Duncan Coffee operates three retail coffee houses in Houston, where customers are often asked to serve as guinea pigs to test the company's latest flavors.
"They help develop better blends of coffee," Duncan says.
The company currently offers more than 130 blends and flavors of coffee.
GETTING STARTED
Duncan Coffee started with the first Hershel Mills Duncan. A native of Kentucky, Duncan came to Houston to visit his uncle, J.W. Neal, who was a partner in Cheek Neal Coffee Co. What started as a visit ended up a career move for Duncan. After a couple of years working for his uncle, Duncan became superintendent of the plant.
A couple of years later, Duncan started his own plant, cranking out several different roasts.
The company passed through the family until it was eventually bought by The Coca Cola Co., which discontinued operations of Duncan Coffee the same year that Hershel Mills Duncan IV was born. Years later, Duncan IV would revive the family business and get back to making brew.
Even when Mills Duncan IV became a commercial real estate broker, he knew it would only be a matter of time before he would go into the family business.
"When I was a kid, I knew that I would one day start Duncan over," he says. "I used to tell my friends all the time. I really knew that I would do it when I got out of college and was working in the real estate business."
When an opportunity came for Duncan to make his move, he approached Procter & Gamble Co., which now owned the brand and the 160,000-square-foot coffee plant on Old Katy Road.
"I heard that it was for sale, so I contacted P&G," Duncan recalls. "They laughed and would not respond. I finally got a-hold of someone and they said I needed a $2 million letter of credit. I wrote `$2 million' on a piece of yellow paper and sent it to them. The president of P&G called later and laughed, telling me he was proud to see that I was trying to revive the family name.
Despite the setback, Duncan made enough money working for Partners Commercial Real Estate to buy back the business from Procter & Gamble. The money he made as a broker was reinvested in the coffee business, and small luxuries such as eating out became a question of business vs. pleasure.
"If I took money out of the company, I couldn't use the money to grow my company," Duncan remembers.
A NEW BEAN
Duncan restarted Duncan Coffee as a sole proprietorship, bringing in $150,000 the first year. Now, with seven full-time employees and one part-time employee, the company is nearing $1.7 million in revenue.
The new Duncan Coffee Co.'s first customer was Bering's, an upscale hardware and gift store with a few locations around Houston. The coffee was an instant hit.
That's when Duncan learned a valuable lesson that has served him well over the years.
"The best customers want the best quality merchandise," he says.
Indeed, Duncan Coffee's customers know a thing or two about quality. For example, Cafe Annie, one of the most upscale restaurants in the city, serves Duncan coffee.
Robert Del Grande of Cafe Annie says Duncan is "enthusiastic and energetic. We like to buy things from people that believe in what they are doing. I think that is the way the consumer ends up with great coffee."
Duncan says landing Cafe Annie as a client was a struggle. Each day, Duncan would try to sell his product to the restaurant. Finally, his tenacity paid off.
Del Grande says Duncan's pride in his coffee is what sold him.
"I could see how passionate he was about it," says Del Grande, whose company also owns Cafe Express and Taco Milagro. "He has pride invested in it. I admire people who have that conviction about what they are doing."
In addition to coffee, Cafe Express' popular black currant tea is blended by Duncan Coffee. The River Oaks Country Club, which once had Starbucks on its menu, now serves blends from Duncan Coffee.
College Station also has a touch of Duncan, which has just bought the rights to produce Texas A&M University coffee in different "Aggie" blends. The company started serving its coffee at Texas A&M's five campus coffee shops this fall.
SPILLING THE BEANS
Duncan is proud to say he spent thousands of dollars creating his logo. The logo is the brainchild of CMA Designs, a New Jersey-based firm which also designs logos for large companies, including The Coca-Cola Co.
Although he counts his pennies on business purchases, paying a little bit more for the logo was an investment in the company's future, says Duncan.
"It is extremely important to have a striking logo when you are trying to establish your brand and prove yourself as a legitimate company," he says.
Still, Duncan doesn't rest on his laurels. Like in many small businesses, the challenges that face Duncan Coffee are constant and unrelenting.
"Every day is a new challenge because you can't be comfortable about what you're doing," he says. "It's a huge responsibility that every day we give clients products to help run their businesses."
Indeed, many of Houston's restaurants rely on Duncan's coffee to keep their own customers coming back.
"This is a tough business," Duncan says. "We provide the substance for people to make a living."