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Rachel D’Oro

(c) ANCHORAGE DAILY NEWS

12/28/98

   The entrepreneurial urge followed Bob and Diane Lewis like a delicious dream just beyond their reach. They always yearned to start their own business but didn't know where to begin, or even what to sell.

   So Diane Lewis, an Anchorage banker, pored over library books to learn how others did it. One theme struck deep: Get into something you like. Well, she had always loved gourmet coffee.

   Thus was Coffee Cats born six years ago at Independence Park Shopping Village on the lower Hillside.

   Diane Lewis, who prided herself as an original Starbucks fan, was managing Key Bank's main branch in November 1991 when she told her husband she wanted to open up a little coffee shop. He sold Procter & Gamble products, including Folgers coffee, but that was the extent of his caffeine savvy.

   ''I didn't even know what a latte was,'' Bob Lewis, the shop's master roaster, said during a recent interview at the couple's cozy shop at 2101 Abbott Road.

   Lewis cheered his wife's idea nonetheless. The couple, married 20 years, had made a pact long before to support whoever first came up with that elusive perfect business. So Diane Lewis worked on a business plan as the couple looked for a good location. And looked. And looked.

   The following spring, Diane Lewis left banking just before they found their site, which was occupied by a cleaners business in the throes of bankruptcy. Draining her retirement savings, Diane Lewis sank $30,000 to start. She hired a lawyer, accountant, interior designer and other experts. She bought chairs, coffee makers, and six used tables, covering them with blackberry-colored tops.

   But the Lewises blanked out on a name -- until inspiration struck during a night of brainstorming accompanied by a bottle of wine and their cats, ''Misty'' and ''Mister.'' After rejecting about 500 names, Bob Lewis made some coffee. As he returned from the kitchen, Misty crossed his path. ''I've got it,'' Diane Lewis said. ''Coffee Cats!''

   That fall, the city Health Department gave her the go-ahead to open. Stunned to pass approval the first time around, Diane didn't have such basics as coffee, cream, pastries and a business sign. And their marketing at that point was zilch. Bob rushed out and bought the necessary goods anyway.

   By 3:30 that afternoon, they tore down the newspaper covering the windows, unlocked the front door and hung up a bright red ''Open'' sign. Curious passersby wandered in. Several hours later, they had made $31.50. The next day, they made more than $100.

   ''I could pay every single bill from the moment we opened the door,'' said Diane Lewis, 44. ''I felt really lucky.''

   Business grew steadily with locals providing the clientele and Kaladi Brothers supplying the coffee. They staffed the store themselves at first. Today, four employees help out.

   In 1994, Bob Lewis retired after 25 years with Procter & Gamble to take on the couple's new challenge: roasting their own coffee. They bought and installed window-front equipment that roasts eight-pound batches, and extended the shop's counter, using more than $100,000 from his retirement savings.

   Since then, they've added restaurants and mail-order accounts to their shop clientele. Anchorage eateries that feature their beans include Gesine's At Four Corners, Humpy's Great Alaskan Alehouse and Moose's Tooth Pub and Pizzeria.

   To walk-in customers, the Lewises offer 14 kinds of beans and 17 blends, including the ones offered at the restaurants. They also sell Italian sodas, muffins, scones, egg-white quiche and baseball caps bearing their double-cat logo.

   Kay Howitt, who lives two miles away, is among the regulars who discovered the shop when she drove by in the early days. Like many people who go there, she knows the Lewises by name. Howitt said she goes there at least three times a week to relax with a steaming cup and mull over newspaper crossword puzzles or bump into friends and neighbors.

   ''It's homey and friendly here,'' she said. ''I like the welcoming atmosphere and the convenience. They also have the best lattes and chai tea.''

   The Lewises won't disclose their annual sales. But they say they've gone from selling 3,600 pounds of coffee beans that first year as roasters to 24,000 pounds in the past year. Their roasted beans initially accounted for 5 percent of their sales; now it makes up for 25 percent, they said.

   Sales lag far behind Alaska coffee leaders like Cafe Del Mundo and Kaladi Brothers. Kaladi vice president Tim Gravel, however, considers them in the same league although he stopped short of calling them contenders in an ever-crowded local market of at least half a dozen roasters.

   ''We're both going after the same customers,'' Gravel said. ''But we see see local roasters as colleagues more than competitors. We say the more the merrier because it educates the public about the specialty-coffee industry.''

   Despite the long hours and competition, the Lewises say they've never looked back.

   ''Corporate life was great while it lasted but we were ready to move on,'' Bob Lewis said.

   Last week, the couple shared some of the tactics they've learned as first-time business owners:

   * Leverage your expertise. As a banker, Diane Lewis saw many small businesses go under. People would let their accounts receivable pile up; Coffee Cat wholesale customers must pay up front. Many business owners don't have a full picture of their finances. But they should know their numbers even if someone else does the bookkeeping.

   ''If something is going wrong, you'll see it earlier,'' Diane Lewis said.

   * Learn from your mistakes. Don't overcomplicate your product line. During its first month, their shop menu listed 250 drinks, overwhelming customers with choices. The shop still offers the same selection. But the Lewises simplified the list by featuring 24 drinks like lattes, mochas and cappuccinos. They separately list 47 flavored syrups that customers can put in their drinks in any combination.

   * Conventional advertising might not work. Some marketing approaches might not work for neighborhood businesses. Mass media can be expensive and get the message out to many people who never will become customers. The Lewises found that out the hard way. For Coffee Cats, mass media advertising might work if the Lewises had multiple locations or their beans were sold at many outlets citywide, they said.

   They get more mileage by investing in expensive teal paper cups with the shop logo, they said. Their many take-out customers carry out the distinctive cups, which end up all over town. At the beginning, they also spread their name by donating week-old coffee to non-profit groups like Bean's Cafe and Abused Women's Aid in Crisis.

   ''Word-of-mouth advertising continues to be our best vehicle,'' Bob Lewis said.

   * Debt is not necessarily bad. If they had to do it over again, they would fund some of their venture with a loan. Tapping so much of their savings cost them 50 cents on the dollar because of taxes and penalties for dipping into the retirement funds early.

   * Small maintains control of the product. There are disadvantages to being such a small business, like huge freight bills for lighter shipments of coffee beans. But the Lewises said they like the intimacy they have with customers and employees. They haven't ruled out expansion, even opening a second shop some day. They're not actively pursuing it, though, they said.

   ''The desire to grow and make more money is always there,'' Bob said. ''But f you double your size, you should double your profits. And a lot of expansions end up just doubling your overhead.''

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