Mad Money

Bluestone Lane CEO and key investor explain how Australian coffee chain is taking on Starbucks

Key Points
  • Starbucks coffee is losing its "premium" flair, RSE Ventures CEO Matt Higgins, whose firm is invested in Bluestone Lane, tells CNBC's Jim Cramer.
  • Cramer sits down with Higgins and Bluestone Lane CEO Nick Stone to find out what's next for the Australian-born coffeehouse.
How Australian coffee chain is taking on Starbucks

With over 24,000 locations worldwide, Starbucks is starting to lose its "premium" flair when it comes to coffee, RSE Ventures CEO Matt Higgins argued on Wednesday.

Higgins, whose firm recently took a minority stake in competing coffeehouse Bluestone Lane, told CNBC that while Starbucks may have coined the concept of premium brews, the globally recognized chain may be losing some of its touch.

"It’s definitely scaled and it’s definitely successful, but it’s not premium. When you look at the coffee space, people are looking for that escape, but it’s not really defined," Higgins told "Mad Money" host Jim Cramer.

That's where Bluestone Lane comes in, Higgins said in an exclusive interview with Cramer and Bluestone's CEO, Nick Stone.

What struck Higgins and his billionaire-backed fund about Stone was his background in finance, his focus on building out stores on a dime (personally taking his team to The Home Depot for supplies) his grassroots marketing methods and, most importantly, his concept.

"Customers are looking for something different, particularly younger ones, and they’re looking for healthier food, better quality service, better quality coffee and tea product," Stone, also the founder of Bluestone, told Cramer. "They’re looking for more curated environments, places where they can escape. And that’s what Bluestone’s about."

And while Stone praised Starbucks for being "the greatest hospitality company that’s ever been created," he, too, argued that his 30-store chain would eventually be a formidable challenger.

"It’s about providing ability for someone to disconnect in this rapidly increasing digital world and we want to be that social community connection," Stone said. "That’s the way it is in Australia. Starbucks failed in Australia. It’s the land of independence and we want to bring more of that to the U.S. and beyond."

Having raised $20 million for Bluestone, Stone's next mission will be to build out his privately-held company's store base to 100 stores over the next three years.

The Melbourne, Australia native told Cramer that RSE's investment will "supercharge" Bluestone's growth and enable the company to continue investing in its packaged products and bringing "Melbourne coffee culture" to the United States.

"We’ve got through that little hump where it’s still quite embryonic and risky, and I think with a partner and the validation that Matt and RSE bring, we can now grow, we can attract talent that wants to incubate and grow this thing to 100, 200 units and that’s really, really exciting," Stone said. "We’ve got more controls, we can govern the brand in a more prescriptive way and we can ensure that that uniformity of product quality and taste is delivered to all stores, but most importantly, the service proposition’s on point.”

Watch Nick Stone and Matt Higgins' full interview here:

Bluestone Lane CEO and key investor explain how Australian coffee chain is taking on Starbucks
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