Think you've got it tough? Try making money in a market where the raw material prices have held steady or fallen over the past seven years.

That is exactly the type of market David Williamson faces at Glasgow-based coffee merchant Matthew Algie and in which his company is increasingly grinding out promising results.

The key to that success is innovation, with Williamson having grown the business organically by adding and evolving subtler ways of serving the marketplace.

The latest new venture for the company is its tie-up with Oxfam to launch a chain of high street fair trade coffee shops called Progreso.

Through its new chain, Algie will aim to showcase the quality of fairly traded coffees and operate a new kind of business that closes the gap between coffee growers in the developing world and coffee lovers in the first. In other words, it will pay a fairer price to the coffee growers rather than siphoning off all the profit at the retail end of the industry.

The new chain's espresso will be a premium quality blend of coffee beans sourced by Matthew Algie from three co-operatives in Honduras, Ethiopia and Indonesia.

Fair trade business is an increasingly important one for Matthew Algie (although the company did not face protests over its treatment of developing country employees as we wrongly reported last week - that was Glasgow-based tea company Findlays).

Williamson says he has entered into the arrangement with Oxfam both because he believes in it and because it will add to his business. That is why he has invested £50,000 in getting the initiative off the ground.

It is the latest move by Williamson in developing business opportunities for espresso. Go back nine years and espresso accounted for just 1% of Matthew Algie's £8 million sales, now it is just over 60% of the company's £19m turnover, and growing.

Williamson says that espresso will make an increasing contribution to the business. With the new platforms he has put in place for growth, he aims to take turnover to £40m in the next five years.

Matthew Algie now has about 15% of the UK coffee market and, if Williamson has his way, it will soak up a much bigger share in the near future.

The key for Williamson is the freshness of the product.

"Instead of roasting the coffee then selling it and shipping it, we now sell the coffee first and then roast it," Williamson explains.

The difference in the taste of the coffee - particularly if it sits on a retailer's shelves for a while - is substantial, according to Williamson.

A real coffee enthusiast, Williamson says that it is one of the best businesses in the world to be in - and he really means it. It is a product that everyone wants and that can be grown and traded in a sustainable way.

It is also probably the largest industry in the world with 30 million people being employed in it.

Williamson says that he has met with people involved in the trade all over the world who share his belief in the business. He now owns 95% of Matthew Algie with his father owning the remaining 5%. The ownership position was settled two years ago when the 46% stake then held by the Grieve family was bought out.

Williamson says that the coffee business is really serving three different markets: the "20 minutes of your time" business where people are more interested in taking a break rather than focusing on refreshments; then there is the "coffee to go" market where people who have perhaps missed a meal are looking for a quick bit of sustenance; and finally there is the real coffee drinkers market.

This last slice of the territory, Williamson says, is in reality very small.

But the number of people who really know and love their coffee will grow - at least it will if Williamson has anything to do with it. Fresher, better tasting coffee in the market provided by a certain Glasgow coffee company will fuel a growing number of connoisseurs, he believes.

The coffee business is unusual in that it has both a proud tradition - stretching back more than 130 years in the case of Matthew Algie and as far back as the 16th century for most European capitals - and is also one that has become very trendy since the onset of the modern coffee culture that started in Seattle.

Williamson has done a lot to capitalise on the new interest in coffee, but he says he would be unconcerned if the "coffee culture" tailed off, leaving the market to the traditionalists.

"We will twist and weave in a different way if that happens," he says.

Sunday Herald, 23 May 2004, by Ken Symon