COVER STORY : THE Java Jungle : In a market awash with coffeehouses, regular Joes are concerned about slugging it out with the industry's corporate behemoth. Owners hope that finding thei neighborhood niche will keep them afloat.


It's precisely the sort of business imbroglio that made Doreen Stur gis ditch corporate life in the first place. An MBA and former management consultant who opted out to open a neighborhood coffeehouse in Santa Monica, Sturgis now finds herself pitted against a company Fortune magazine named one of the fastest growing in America: Starbucks, which has just opened an outlet within a block of her and plans to open another within the next several months.

"We're the filling of a Starbucks sandwich," said Sturgis, who's puzzled and angry at the competition the Seattle-based corporation has brought to the Third Street Promenade in Santa Monica.

The company's franchise opened two weeks ago and already business at Sturgis' Congo Square Espresso and Tea House has taken a noticeable slide. "We've felt more effects since they've opened than we have in three years," she said. "We'd like to stay but . . . how are we going to handle competing against two?"

What a difference a new decade makes. Five years ago, when many believed the only decent cup of (American) coffee to be found on the Westside was at the Apple Pan on Pico Boulevard, and when many people assumed macchiatto was a new Italian sports car and espresso was how fast your pizza got delivered, coffeehouses were thought to exist only on cobbled European avenues or in the funkier stretches of San Francisco. Sitting over tiny white cups of dark, bitter brew was considered too languorous and "bohemian" for the muscular, upscale 1980s--at least in Los Angeles.

Today, of course, with Angelenos, and particularly Westsiders, embracing coffeehouses with the zeal of converts, it's hard to recall those pre-caffeinated times.

Of the more than 230 coffeehouses in Greater Los Angeles, nearly 100 are clustered on the Westside, according to "Caffe L.A.," a recently published comprehensive listing of cafes, coffeehouses and merchants. Many opened in the past three years.

With decor and ambience ranging from shabby to chic to shabby-chic, coffeehouses have become the perfect hangout for Generation X slackers long on time and short on prospects, the city's coterie of artists and those simply longing for a sense of community or a place to chat.

"There are more coffeehouses than mini-malls at the current moment," quipped Toby Berlin, who, as executive director of the Learning Annex in West Los Angeles, is in a unique position to analyze the area's social and cultural Zeitgeist. Four months ago, the Learning Annex began offering a three-hour, $49 course on how to open a coffeehouse.

Taught once monthly the popular course typically has an enrollment of more than 70 students. "It doesn't look to be a trend that's maxed-out," Berlin said.

Given the multitude of activities available for Angelenos, why are coffeehouses, the symbol of laid-back introspection, suddenly flourishing?

Giovanni Natale, 45, who has patronized the Novel Cafe in Santa Monica about five times a week since it opened four years ago, has a ready answer: "In a city where you just see people from the shoulders up in their cars, people need to feel like they're part of a community."

Added Natale, a schoolteacher and massage therapist: "This is my extended living room."

"They're the new social watering holes," concurred Ted Lingle of the Specialty Coffee Assn. of America, a Long Beach-based organization of coffee exporters, roasters and producers, which estimates that by 1999, there will be 10,000 coffeehouses nationwide, grossing $1.5 billion in sales. In 1989, the latest figures available from the organization, there were 200 with $70 million in sales.

Cynics say that most of those will likely be Starbucks, a jest that to some has an uncomfortable ring of truth to it. Indeed, since opening its first Southern California store near the Beverly Center in August, 1991, the corporation has made an assault on the Southland, introducing 35 coffeehouses in Los Angeles and Orange counties. Nine of those franchises are on the Westside, including four in Santa Monica, and more are on the way. Nationally, Starbucks has 304 locations, and opens about two stores per week.

Such expansion has earned the company and its coffee a considerable amount of derision from independent coffeehouse proprietors as well as the dismissive sobriquet "McCoffee."

"It's like the McDonald's of coffeehouses," said Anastasia Israel, owner of Anastasia's Asylum in Santa Monica. "They have it down to a science. They're stark, they're sterile, there's no fear."

Agreed Sturgis: "They appeal to people who want a safe product, . . . something dependable."

More upsetting to independent owners, however, is the manner in which the corporation has spread throughout the Westside.

According to some independent proprietors, Starbucks not only has blanketed the area with stores, but has situated them near already-existing coffeehouses to siphon off customers. "They're fairly predatory in their locations," said Richard Karno, owner of the Novel Cafe, which is two blocks from the Starbucks on Main Street. "They pick the area that's already been paved by a couple of coffeehouses and take over the most expensive corner."

Starbucks officials deny that the company intentionally locates near established coffeehouses, saying that a variety of factors determine where the corporation opens franchises.

They don't deny, however, that a certain amount of uniformity goes into every brewed cup, a tactic essential to the appeal of Starbucks, which last year grossed $93 million in sales.

"You can expect a consistent level of quality in every Starbucks that you walk into throughout the country," said Starbucks spokeswoman Laura Moix, who defines the company's mission as "offering a convenient, easily accessible store located in a downtown area or a neighborhood."

Not all independents resent Starbucks. Noting that the company has helped create a market for gourmet coffee, some endorse Starbucks' presence in the hope that as consumers' tastes become more sophisticated, they will eventually seek out smaller, even higher-quality roasters. At any rate, some independents say, the more gourmet coffee that is being brewed, the better it is for the overall market.

"Starbucks does marketing for all of us," said Tom Kaplan, co-owner of Highland Grounds in Hollywood, who says that prior to Starbucks' entry into Southern California, he had spent 14 years promulgating gourmet coffee.

"They helped me tremendously," he said. "They did more in a few months than I ever could on my own. I was looking forward to them coming to town."

Kristie Martin, manager of Westwood's Coffee Bean & Tea Leaf--itself a chain--said: "There's room for everyone. Any coffeehouse that moves in next to us brings more business in the long run."

The short run, however, is a different matter. While the average percentage of profit in a two-ounce shot of espresso is 1,463%, according to the Specialty Coffee Assn., proprietors say coffeehouses need a constant turnover of customers to make money, and high turnover goes against the nature of such establishments, in which customers like to linger.

"People think it's really easy but the bottom line is that it's a tough business," said Kaplan. "You can put together a coffeehouse fairly cheaply but how do you keep it open? How many places can sell 300 to 400 cappuccinos a day? Because that's what it takes to break even."

Indeed, Karno of the Novel Cafe says he receives calls every week from proprietors wanting to unload their cafes. "It's getting tough out there," he said. "A lot of people who opened didn't have the success they thought they would have and now they're getting out."

In the face of such competition, independent proprietors are putting greater emphasis on carving a niche. In contrast to the "gulp-and-go" aesthetic of Starbucks, which some see as the antithesis of a coffeehouse, cafes are increasingly beefing up menus beyond the typical biscotti and muffins with such items as soups and sandwiches. And they are relying more and more on live entertainment.

Open-mike poetry readings, plays and music ranging from folk to grunge are now de rigueur at many coffeehouses. Some of the trendiest places for new bands to play are in the intimate settings of cafes, instead of the usual Hollywood club circuit.

"The bulk of our people are in for the environment, not just to get a quick cup of coffee," said Israel of Anastasia's Asylum. "It's a place where you come to hang out."

Whether that will be enough to make coffeehouses a permanent part of the cityscape, or simply a fad, is still open to debate.

While Kaplan says that Angelenos' taste for gourmet coffee has been irrevocably changed--"I don't see how people can go back to drink supermarket coffee after they've been exposed to this stuff"--he anticipates that only about 20% of the existing coffeehouses will eventually survive. Kaplan hastens to add, though, that many of the cafes that will close are likely run by inexperienced owners who "know nothing about coffee and (who) buy a cappuccino machine and take coffee out of the can."

For her part, Sturgis foresees troublesome times. Like Karno, she is regularly approached by other coffeehouse owners wanting to sell their operations to her and leave the business.

Because of the abundance of coffeehouses, Sturgis predicts that within the next year the industry may be headed for a mini shakeout, or at least a "fundamental shift" in how coffeehouses and cafes operate.

And she and other owners are ever-mindful of the notion of Los Angeles as a city that seemingly celebrates and discards its trends within the same day. Already, the faddishness of coffee has been parodied, most famously in a scene from "L.A. Story" with Steve Martin in which a group of diners besiege a waiter with demands for complicated concoctions.

"I come from Berkeley, where the coffeehouses last forever," said Sturgis. "I was hoping that here, coffeehouses wouldn't be like the latest club and just a passing fancy. It's a lot more competitive but I'm hoping that they can stay around."

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