Atomo beanless coffee makes UK debut at high-end coffee house, but firm will ‘not be profitable on the back of small coffee shops,’ says CEO

[Disclosure: AgFunder, parent company to AgFunderNews, is an investor in Atomo.]

Atomo—maker of the ‘world’s first beanless espresso’—has made its UK debut at Hagen’s espresso bar in Mayfair, London, taking its bean-free coffee to 73 cafés worldwide. Profitable growth, however, will come from partnerships with coffee companies looking to blend Atomo’s coffee with regular coffee to save money and cut emissions, says Atomo cofounder and CEO Andy Kleitsch.

“Launching at outlets such as Hagen’s provides us with a great way to showcase our product. But we will not go profitable as a company on the back of [selling to] small coffee shops,” acknowledged Kleitsch, who opened a roastery in Seattle capable of producing 4mlbs of ground ‘coffee’ a year from upcycled date pits last year.

“We have a product that you can blend with coffee and you literally can’t tell the difference. And now the cost of our coffee is on par with or less than conventional coffee,” added Kleitsch, who was speaking to AgFunderNews after raising $7.8 million from existing investors S2G Ventures and Horizons Ventures, taking its cumulative funding to $58 million.

“So we’ve finally hit the trifecta. We taste as good as coffee, we’re better for the planet, and with the launch of our new factory and a new formulation, we’re less expensive, and that has just happened in the last few months.”

Put simply, he said, the business case for partnering with Atomo is now a lot more compelling that it was when the company launched, as coffee prices continue to rise and available growing regions shrink due to climate change.

Coffee under threat?

In part due to climate change, the amount of land that can sustain coffee is dropping, while Arabica—the favored species— has weak genetic diversity and only grows at certain temperatures, which means moving to higher altitudes as temperatures rise.

By 2050, according to one recent analysis, the land suitable for growing Arabica could be reduced by 50%, which means we’re going to see a significant reduction in production, while demand for coffee is also rising, particularly in large markets such as China and India.

As for pricing, harvests can vary wildly from year to year making the coffee market notoriously volatile, says Kleitsch. But if you normalize the curve, especially for premium-grade coffee, prices are only going in one direction: up.

‘The future of coffee is blended’

While most coffee drinkers are blissfully unaware that their cup of Morning Joe is under threat, all of the leading coffee companies are acutely aware of the problem, said Kleitsch.

“The coffee industry has historically blended high-end Arabica beans with lower-cost Robusta beans to lower costs. We’re offering a product they can use to blend with Arabica that doesn’t come with off notes that you can get with Robusta.”

He added: “To have a product that’s interesting for the coffee industry, you have to solve one of their top three problems: availability, quality, and price, and we are now talking to every large coffee company about addressing all three. The future of coffee is blended.

“Our goal is to help the coffee industry adapt to what is happening in the market. So for example Postcoffee out of Japan did a blend with us that was 30% Atomo and they sold out immediately.”

‘We want to make it as easy as possible for people to continue with existing habits’

While some consumers enjoy the ritual of grinding coffee beans to make hot coffee every morning, meanwhile, younger consumers are more interested in coffee experiences that are not connected to the bean per se, said Kleitsch.

Indeed for the vast majority of usage occasions, blending in Atomo’s product with regular coffee can be done seamlessly, he claimed.

“A lot of people now start their day with cold brew or iced coffee, while the two fastest growing segments of coffee are single serve pods and ready-to-drink products. In those segments, the bean is completely removed. We want to make it as easy as possible for people to continue with existing habits, whether they buy packaged coffee, K-cups, pods, capsules, ready-to-drink coffee, or espresso.”

While some firms blending with Atomo coffee may highlight Atomo’s contribution prominently, others may take more of a “stealth” approach, he said.

A smoother, less bitter cup

Using date seeds, ramon seeds, green banana, sunflower seed extract, carob, fructose, strawberry fiber, carrot, potato fiber, pea protein, black aronia berry, defatted fenugreek seeds, and caffeine from green tea, Atomo delivers a smoother cup you don’t need to load with cream and sugar for taste, claims Kleitsch.

“We have created something that’s less bitter [than regular coffee] with more chocolate, dried fruit and graham cracker notes. And you can dial up or down the caffeine.”

To make it, he said, “We take date pits that would otherwise be burned or thrown away from farmers in Coachella Valley, and put them through a series of cleaning, washing, drying and granulation steps to get them prepared for use in our Seattle roastery.

“Date pits by themselves don’t taste like coffee, but we infuse them in a marinade and add heat to create what we call the cross Maillard reaction to generate the coffee compounds we’re searching for.”