sdbj.com SAN DIEGO BUSINESS JOURNAL

Volume 37, Number 33 THE COMMUNITY OF BUSINESSTM August 15-21, 2016 $2.00

Acquisition Teens Targeted With Subscription Skincare RETAIL: E-Commerce Tactics To Open Up Market for Adigica ■ By BRITTANY MEILING Naveen Rao, founder and CEO of Nervana Systems, a One of the biggest deep-learning startup, names in local biotech, has sold his company David Hale, is joining to Intel Corp. Intel forces with an e-com- says the deal is part of the plan to boost merce expert to bring the its AI portfolio through Jamie Scott Lytle sale of skincare products acquisitions. into the digital age. Page 3 Laurie Britton, owner The fi rm, called Adigica of Café Virtuoso, said when is Health, is a bit of a hybrid done right, “you can between a tech startup David Hale Startup enjoy it black.” and a cosmetics company. It’s starting out with a skincare treatment for teenagers dealing with acne. Skincare is an area of familiarity for Hale, as he served as chairman of SkinMedica for over a decade until it was sold to Allergan ROAST Adigica page 55 Bradon Young and Garrett Mincks Partners Take Holistic have bootstrapped their company, YouBackpacking. The Approach to M&A entrepreneurs are MASTERS looking to capture FINANCE: New Investment the adventuresome BEVERAGE: S.D. travelers among the Bank Won’t Parcel Out Process millennial crowd. Advances To the Next Level Page 8 ■ By SARAH DE CRESCENZO ■ By BRITTANY MEILING An investment banker and the head of mar- The Lists San Diego’s craft beer brew- and craftsmanship. keting operations for a division of the nation’s Retail Centers 20 ers — with their sophisticated The craft coffee scene is big largest energy retailer have teamed up to open Office Parks 22 palates and purist culture — in San Francisco, Seattle and a Del Mar-based investment bank focused on Commercial Real may be priming the region New York, and San Diego’s mergers and acquisitions. 26 Estate Brokers for another kind of brew own coffee culture is growing Ashish Jariwala and Zaheer Dhruv , who met 32 Industrial Parks business: artisan coffee. up fast. about 10 years ago, recently launched PierCap “The craft beer industry Earlier this year, San Diego Partners LLC, the name a reference to the ar- has educated San Diegans was named the sixth best coffee chitectural element that manages the stresses about micro-regional artisans,” said city in the U.S. by data-driven fi ntech company between a bridge and the piers that support it. Chuck Patton , owner of Bird Rock Coffee SmartAsset — trailing the above mentioned The founding partners, also the firm’s Roasters , a popular local bean roaster on coffee hubs, along with Portland and managing directors, said they intend to the coast. Oakland. limit the number of transactions to ensure Now, he says, people are practiced in SmartAsset collected data on the 100 they both are involved from start to fi nish. buying local, and more tuned in to quality Coffee page 44 PierCap page 46 Special Report: Hotels Get In-Room Help Saving Energy Commercial Real Estate POWER: Co.’s System Adjusts “Hotels are one of the few businesses open 24 hours a day, 365 days a year,” said Industry experts Phillip Kopp , founder and CEO of Conectric Environment in Empty Rooms forecast that high Networks LLC . “The problem is that they’re ■ demand and low By BRITTANY MEILING actually unoccupied most of the time. Unless vacancy will fuel guests are sleeping, these rooms are empty.” the local market Hotels waste a lot of energy when they heat At the same time, hotels can’t exactly force for the next and cool the booked — yet empty — rooms customers to be environmental stewards and couple of years. of travelers. And those sky-high utility bills turn off air conditioning when they leave the Page 15 end up taking a sizable chunk from the hotel’s room. Forward-thinking hotels are in quite the bottom line. Conectric page 45 44 SAN DIEGO BUSINESS JOURNAL Local breaking news: www.sdbj.com AUGUST 15, 2016 f S Bonsall r o an D 76 be i eg um o Coffee: 2 2 N VISTA from page 1 OCEANSIDE Valley Center largest cities in the country, and looked at Vista Oceanside 2 things such as the total number of coffee 5 CARLSBAD shops in the city, Yelp ratings, the total 78 number of coffee and tea manufacturers, Roasters and Google search traffi c for coffee in San Marcos the area.

Jessica Percifi eld, founder and CEO Escondido 78 of the San Diego Coffee Network , said the county has something like 430 coffee 5 ENCINITAS 1 houses, over 30 local roasters, and enthu- 78 siasts and business owners are starting to Leucadia RANCHO15 BERNARDO assemble, mingle and compete in local Rancho competitions. The latest -art throw- Bernardo down put on by the San Diego Coffee Jamie Scott Lytle 67 Network brought in from as far Greg Luli, general manager of Café Virtuoso, 2 as Seattle. mixes beans, above, and then roasts them, Solana 5 POWAY below. Beach Refi ning Tastes 56 Poway It makes sense that San Diego’s craft Carmel beer scene has primed artisan coffee to Valley fl ourish, said Café Virtuoso owner Laurie Britton , as it takes continuous exposure 67 Scripps to artisan products before consumers Ranch realize their options. 15 “They just need to know that there’s 805 more to coffee than a dark, poorly-roast- 1 163 Santee ed drink that you have to put cream and BIRD ROCK 1 52 1 sugar in to make it bearable,” Britton MISSION BEACH said. “If it’s done right, you can enjoy 1 EL CAJON 125 it black.” LA MESA 1 805 15 El Cajon The rise of coffee culture came in OCEAN BEACH 5 stages, roasters say, and most in the BARRIO LOGAN 3 La Mesa 8 business agree on three precise waves. 13 DOWNTOWN 1 Lemon GASLAMP 1 Grove SAN DIEGO 94 The fi rst wave came from the major coffee HILLCREST 1 corporations of the mid-1800s through 1 LITTLE ITALY 1 MISSION VALLEY 1 the ’60s: , , and POINT LOMA NORTH PARK 5 Source: the creation of the infamous home drip San Diego 54 Coffee Coronado 125 coffee maker. The second wave was ba- National City Network sically (enough said). Most in 805 the industry agree we’re currently in the Bonita third wave of coffee culture, in which it’s all about the origin of the bean, quality, and craftsmanship. “Third wave treats coffee like wine,” Patton said. “It’s a very elevated coffee experience.” Here, in the third wave, is where San Diego excels.

Consumer Support San Diego is a mecca for conscious, in choosing their coffee farmers abroad, quality-driven consumers: people who traveling all around the world to visit value things like farm-to-table restau- their partner farms in person to form rants, organic groceries, and ethically direct trade relationships. And Café sourced products. It’s sort of a coastal Virtuoso is in high demand, with nearly thing, according to market research. 100 wholesale contracts, for choosing to The farm-to-table movement has been buy only organic and fair trade beans. particularly represented in San Diego, “San Diego’s coffee culture has been Jamie Scott Lytle with restaurants like George’s at the Cove slow to rise, but careful and conscien- Laurie Britton owns Café Virtuoso said San Diegans are warming to the artisan coffee and Farmer’s Bottega prepping trendy tious,” Percifi eld said. “If you talk to movement. menus with locally-grown food. Knowing many local roaster and café owners that the farmer helps chefs and owners guar- serve specialty coffee, they really care antee that they’re buying from people about how coffee is sourced, being so- whose methods match consumer values, cially responsible and ethical. It’s all part whether that means organic, sustainable, of the hard work that goes into being a BILLION-DOLLAR BREW non-GMO, or fair trade. purveyor of specialty coffee.” It’s the same in the coffee business, The conscious consumer and “loca- Over the past several decades, specialty or “third wave” coffee said John Vallas , owner of Swell Coffee vore” movements, in combination with has grown from a niche market into a multibillion-dollar industry. Co. People appreciate knowing that the high tourism and the maturing craft According to a study by The Fletcher School of Law and coffee at Swell is a high quality and eth- beer industry, have set San Diego up for Diplomacy at Tufts University, specialty coffee industry sales ically sourced. growth. The biggest obstacle facing the grew from $8 billion to $18 billion between 2001 and 2012. “Different industries are responding burgeoning local coffee scene is getting The Specialty Coffee Association of to the younger generation, who is asking, the word out amongst consumers, restau- ‘where is my food coming from?’” Vallas rants, and retailers. America pegs the number somewhat said. “And that’s kicking off a number of “It will be great when all the farm- higher. It estimates that the retail value of things. It’s part of why the local craft beer to-table restaurants that San Diego is the U.S. coffee market is $46 billion and industry is thriving, because people love known for — ones that make responsible that while specialty coffee represents 51 the craft, and they want to know where sourcing part of their practice — begin percent of the volume, it accounts for 55 their food, wine, and beer is coming from. applying this principle to coffee as well,” And coffee is riding that wave, too. The Percifi eld said. “When coffee is no lon- percent of the dollar value. cool thing is, people are now open and ger an afterthought, but treated as an Specialty coffee consumption rose three- responding to it.” equal part of a rounded culinary expe- fold between 2000 and 2015, according to rience, specialty coffee will have fi nally the National Coffee Association . World Cups earned its place at the table with other Vallas and Patton both take great care craft beverages.