More than Coffee, a Way of Life; that’s how the folks who run Starbucks want it to be, anyway.
It is hard to talk about coffee and passion and integrity and, oh yes, art, all in the same breath and not get the sense that you’ve been swept into some caffeine dream, a double-tall, foamy latte land where you can rhapsodize about coffee all you want and there’s no small temptation to look up from your cup and exclaim, “Beans!”
But on a recent Monday afternoon, Jon Greenawalt, southwest regional marketing director for Starbucks Coffee Co., is wondering how this coffee-as-art stuff is going to play in West Los Angeles. The occasion--a meeting of Starbucks senior marketing managers at headquarters in downtown Seattle to lay out the sales emphasis for holiday 1996 and early 1997. Its mission--to decide how to get you to buy even more Starbucks coffee next year, even if you’re already holding out your designer tumbler for the java sacrament, as at least one-tenth of all Starbucks patrons do, twice a day.
“My overall message is Starbucks coffee is a passion and an art, and the umbrella message is coffee is an art form and coffee is an inspiration,” announces retail marketing director Julie Kouhia. “We’re looking at a focus on the art of whole bean coffee, the romance of espresso, artisans and inspiration.”
Kouhia waits for reaction from the four Starbucks executives--all of them women--gathered around the table, and two more who are connected by speakerphone from Starbucks’ far-flung empire. The room is quiet for several minutes while the concept seeps around the meeting table. Then marketing vice president Jennifer Tisdel steps in to paint the scene for those on the other end of the phone. “She’s looking toward the sky and gesturing with her hand,” she says, grinning at Kouhia. “She looks a little bit like Moses.”
Tentatively, almost apologetically, Greenawalt’s voice comes out of the speakerphone. Have they ever been to California, he wonders? Do they know what it’s like out there at the tough tables in Orange County, across the counter from the grim-faced commuters of the 405?
“As you get farther into San Francisco, that kind of message might have some kind of appeal,” Greenawalt begins. “But I drive up and down Santa Monica Boulevard, and I see folks hanging out, relish-
ing the cafe kind of experience. I just don’t see how those folks would relate to the kind of thing we’ve been talking about for the last 20 minutes.” He waits, and when no one steps in to yank his Starbucks Partner credential, he gets braver. “I have a huge fear of isolating people with a message that’s so highbrow. I worry about some of these music and art things, whether they’re going to have any appeal, especially in Southern California, where we’re all a bunch of shallow, hopeless individuals.”
There are chuckles around the room, but Tisdel, the Harvard MBA who is one of the aggressive new marketing strategists behind Starbucks’ stealthy incursion into coffee experiences across America, picks up the refrain. She twirls her pen over one of the many oversize organizers that cover the table. “Opera,” she says finally, opening a small window for negotiation. “Is that a foregone conclusion?”
lots of conversations like this one are playing out in starbucks’ airy, loft-like headquarters in a converted warehouse near the Seattle waterfront: What’s the Starbucks message? Just what are you supposed to think about its clean, high-tech coffee bars that have made you willing--no, proud--to pay $1.15 for a cup of coffee you could make at home for 25 cents?
Last year, Starbucks, the small, hip coffee bean microroaster that has exploded into more than 950 retail outlets--from downtown office buildings to suburban strip malls--opened stores at the rate of one every day. It expects to nearly double the number of its retail outlets during the next four years. In the blitz across Canada, five stores were launched in Toronto in a single day last January. In Tokyo, where Starbucks last month extended its first tentacle outside North America, 200 patrons at a time stood in lines to get in, and the company immediately announced plans to open in Singapore and Hawaii before the end of the year. Nor has Starbucks stopped at selling coffee, be it dripped, pressed, espressoed, latted, cappuccinoed or mochaed. Last year, the Redhook Ale Brewery began offering Double Black Stout beer, a dark, heavy brew spiked with Starbucks coffee; in June, Frappuccino, the milky, iced blender concoction that swept coffee bars last summer, debuted in a bottle on supermarket shelves and quickly oversold, leaving retailers anxiously phoning for more; Dreyer’s weighed in with five flavors of Starbucks ice cream, surpassing its previous non-Starbucks coffee entry to become the No. 1-selling premium coffee ice cream in the United States.
In the 25 years since the first Starbucks opened in Seattle, and especially in the nine years since CEO Howard Schultz propelled the company on its round-the-globe expansion, Starbucks has grabbed a lead in the specialty coffee industry that hardly anyone is even trying to narrow. Though there are strong competitors in regional markets--Second Cup in Canada (which recently expanded into the U.S. mall market when it bought Gloria Jean’s), the Coffee Bean & Tea Leaf in Southern California, Peet’s Coffee & Tea in the Bay Area, Seattle’s Best Coffee in the Northwest--there is no visible challenger on the national horizon, no Burger King to Starbucks’ McDonald’s. “It’s a foregone conclusion that Starbucks owns the specialty coffee market nationally,” said Wayne Daniels, research analyst at Schroder Wertheim & Co., an investment banking firm in New York. “No one wants to take them head on.”
Starbucks has transformed the way Americans think about coffee and attempted to establish itself as more than just the friendly, well-lighted coffee bar on every street corner. Schultz, the former marketing and retail operations director who bought out Starbucks’ more bohemian founders and catapulted the company into a $465-million-a-year corporation, set out to build Starbucks into a kind of “third place” for America, a European cafe-like gathering point of community and ideas that would be something apart from both work and home. He declared that Starbucks would be about not just coffee, but also about things like environmental stewardship, employer responsibility, “authenticity,” “passion” and “integrity”; that Starbucks would come to represent the romance of exquisite arabica coffees, painstakingly brewed and knowledgeably served, pouring no less than the finest cup of coffee on earth.
Starbucks has become some of those things, but it’s also become a lot of things it would rather not talk about. For example, the company that built its original reputation for deeply roasted, carefully selected gourmet coffee beans now does just 18% of its business selling whole beans; the bulk of what Starbucks sells is steamed or blended milk with coffee, and a pastry to go with it. Huge roasting plants have opened in Kent, Wash., and York, Penn., and the coffee that used to be rushed fresh out of the roaster down to the original store at Seattle’s Pike Place Market is still called “fresh roasted,” but it’s actually packaged in high-tech vacuum-sealed bags and loaded on trucks and shipped around the world for brewing, sometimes months later.
The overstuffed easy chairs in the open “Commons” area at company headquarters aren’t cradling coffee roasters in aprons anymore. These days, you’re more likely to run into a marketing expert from a shoe company, or a chemical engineer from Kraft Foods, or one of the ubiquitous PepsiCo bottling company consultants who have found, in the wake of a landmark joint venture with Starbucks this year for bottling and distribution of Frappuccino, a sweet home away from home.
“It’s not the company that it was. It’s not the company that I fell in love with and worked for. And it’s why I left,” says Kevin Knox, a former Starbucks coffee specialist who was part of an exodus of hard-core coffee aficionados in the early 1990s. Today he works for a competitor in Boulder, Colo., Allegro Coffee Co., and remains a leading presence in the specialty coffee industry.
“Starbucks originally was a product-driven company. Today it’s a market-driven company,” Knox says. “It’s still very good, for what they’re trying to do, but you can’t be the biggest and the best. They are the biggest. And they are not the best.”
Starbucks would disagree, of course, but it’s no surprise that a lot of people in Seattle are starting to wonder if maybe everything didn’t all happen too fast. What was originally just coffee became Frappuccino and then “Blue Note” CDs, Valentine chocolates, art shows and the benefit projects, such as Kenny G concerts for CARE, the international aid group that counts Starbucks as its largest corporate donor in North America. They wonder if perhaps somebody could start talking about coffee again and not just concept--or if you’re going to talk about concept, figure out what concept you’re going to talk about and what it’s got to do with coffee.
For a company whose brand recognition is nearly universal despite having spent less than $10 million on advertising in 25 years, Starbucks is preparing to roll out a major new campaign through Goodby, Silverstein & Partners, the award-winning San Francisco advertising firm that masterminded the “Got Milk?” and Polaroid “Dog & Cat” portfolios. The campaign will represent, once and for all, what the Starbucks brand stands for. Posters in the stores next year will be about--you guessed it--coffee. Not latte, necessarily, though that will surely come up. Not double-tall mocha with mint and whip. And not ice cream or beer, either. Whole bean coffee. The kind that grows on high mountain plateaus in Ethiopia and Guatemala and Indonesia and gets lovingly roasted till it’s plump and oily black and almost ready to explode and then sniffed and probed and brewed and sipped until it settles on the side of the tongue with a sharp, sweet bite. The dark-roasted beans that made some people derisively call Starbucks “Charbucks.” The beans that made lots of people need them.
To frame the Starbucks message, schultz knew the person he hired to oversee the creative effort from within the company would be performing its single most important task. “We wanted to go out and hire the world’s best marketer,” he says simply. “But in doing so, [also] find someone who had great sensitivity to the responsibility that we feel to the people who’ve come before us at Starbucks. We didn’t want to create a national advertising campaign for the sake of creating ads. We want to create thoughtful, not sophisticated, but relevant advertising. And however we do that, the brand personality of the company will be unveiled.”
The guy Schultz chose was unemployed at the time. Scott Bedbury had helped fashion Nike’s “Just Do It” campaign, helping to create a brand identity for a shoe that had as much to do with personal empowerment as it did with arch supports, a promotion that tapped into the dreams of inner-city youths who wanted to be like Michael Jordan at the same time it conveyed the longings of their sisters and mothers against an overlay of subtle fitness images. Bedbury was burned out on Nike’s hard-driving work schedules. He’d taken a temporary leave when, sitting one afternoon in a Seattle Starbucks outlet, he decided not to go back at all. Some time later, Schultz scooped him up, and Bedbury set out to do for coffee what he’d done for shoes.
To the task, Bedbury brings a marketing philosophy outlined in a book he is writing, “Herding Cats, Loose Briefs and Beer: Unlocking the Creative Process Within Brands.”
“Loose briefs has to do with pretty much disregarding traditional research,” he says. “We never pretested anything we did at Nike, none of the ads. Wieden [Dan Wieden of Portland’s Wieden & Kennedy, who coined the “Just Do It” phrase] and I had an agreement that as long as our hearts beat, we would never pretest a word of copy. It makes you dull. It makes you predictable. It makes you safe. And most important, it makes you accountable. You can’t blame a research deck when it falls apart. You can’t blame a three-ring binder or a focus group. It was your fault. And not only does it make you accountable, you make very smart decisions.”
The 1997 campaign is still under lock and key, but Bedbury’s hand is already visible in the Starbucks 25th Anniversary celebration debuting this month in stores across the country. It harks back to the year 1971, when Starbucks opened near the Seattle waterfront under the stewardship of its three co-founders, Jerry Baldwin, Gordon Bowker and Zev Siegl. (Each man pitched in $1,350 and borrowed another $5,000 from the bank, naming their coffee enterprise after the God-fearing ship’s mate of “Moby-Dick” and adopting a bare-bosomed siren--since toned down, with hair cascading over her breasts--as the company logo.)
For the CD to accompany an “Anniversary Blend” concocted for the occasion, Bedbury bought the rights to use John Lennon’s “Instant Karma,” and Starbucks music director Tim Jones negotiated a dozen other standards evoking the era. Employees will be wearing tie-dye T-shirts, and buttons and posters will sport mottoes like “Keep on Roastin’,” “Make Latte, Not War,” “Today Is the First Latte of the Rest of Your Life,” the peace symbol with the words “Give Beans a Chance,” a smiley face that says, “Have a Nice Grande.”
“I think what Starbucks has to recognize, and we have as a company, is that product is not just that which resides within the cup,” Bedbury says. “The product is the store, the product is the music within the store, it’s the fact the store’s clean, the service is friendly, that we care about the coffee. The intent of the campaign is not to put Starbucks coffee on a pedestal and create a lot of select demand for Starbucks. I think it’ll be simply to throw the door open and let people understand the values, the heart and personality of the Starbucks brand.”
For Bedbury, that means focusing on Starbucks as a clean, well-lighted place as well as the coffee itself. Well, more than that. Drawing the connection between a good cup of coffee and the many reasons why you sit down to drink it.
“We need to help people appreciate at a higher level why that coffee break feels the way it does, why it’s worth the time to prepare a good cup of coffee,” he suggests. “I like to think that Starbucks is not so much food for thought, but brewed for thought. Coffee has for centuries been for thought. I don’t know about you, but I have sometimes thought to myself, ‘Get up out of this chair.’ You hit a wall. It’s that private six minutes for me between 2 and 3 when I walk down to the Commons area here and make myself an Americano and think something through.
“We’re all so time-starved that I think maybe that’s what Starbucks has to offer people: that safe harbor, that place to kind of make sense of the world.”
That was part of what Schultz had in mind when he bought the 11-store bean company from its founders for a reported $4 million in 1987, merging it with his own Il Giornale chain and eventually taking it public in 1992 in one of the most successful stock offerings the specialized coffee industry has ever seen. (Sales were up 63% last fiscal year alone; earnings grew 10 times over 1991, though the rise has slowed in the first half of this year.)
Schultz was working for Starbucks, marketing its delicious whole beans, when he took a business trip to Italy in 1983 and experienced his first Italian coffee bar.
“In Italy, the coffee bar culture is in many ways an extension of people’s front porch. There’s such a strong sense of community in those coffee bars, in which neighbors and people come together every single day, and in many cases they don’t even know each other’s names. Coffee is the conduit to the social experience,” he says.
“When I saw that, I recognized that up until then, Starbucks had really kind of missed the opportunity in a major way because we were only selling coffee by the pound and coffee makers in Seattle. What I wanted to try and do was re-create that kind of intimacy, and in a way the third place, in a way that would be compatible with America’s lifestyle and culture. But it had to start with making sure the coffee quality and integrity of the beverage was better than anything else anyone had ever tasted.”
Hence, the now-famous Starbucks standards, instilled in every “partner” via guidebooks and 24-hour training sessions upon hiring: coffee beans that are roasted to within half an inch of their lives; espresso that is brewed precisely 18 to 23 seconds, no more, no less, and used within 10 seconds or tossed out; coffee beans donated to charity seven days after they come out of the vacuum pack; drip coffee thrown out after an hour.
For Schultz, it was also about making sure the people on the other side of the counter seemed happy to be there, cared whether they were making a great espresso or simply a good one, and could tell you the difference between Costa Rica Tres Rios and Sulawesi by how it slid over the tongue.
That meant taking the unique step within the retail industry of offering full health-care benefits and stock options to all employees, even 20-hour-a-week workers, a move that has helped reduce attrition to levels less than 60%, compared to a costly quick-service restaurant industry average of 150% to 200% during the past 10 years.
“I’ve used a metaphor that whenever we finish the race, whenever that is, I did not want a select group of white-collar workers to finish the race and leave all the other people behind,” says Schultz, 42, who often relates the story of his own childhood when trying to explain this. It has to do with growing up in a federal housing project in Brooklyn, watching his father work every day of his life at a blue-collar job until he died, leaving nothing behind.
“I saw my father’s [lack of] self-esteem and bitterness develop as a middle-aged man in the workplace, and the final chapter of that is when he died, he passed away in debt. There was no pension, no life insurance. Health insurance was a problem. I wanted to rewrite that story, if I was ever in a position to change it for others.”
That story often draws wry grimaces within the Starbucks ranks, which are generally enthusiastic about benefits and the company product but less pleased with the relatively low wages for nonmanagement workers (still above minimum wage in all markets) and crippling hours expected of up-and-coming managers.
“People had an almost religious level of devotion. People were working like that because they loved the product. And those people who were there purely for love of product were exploited, burned and turned,” says Knox, the former Starbucks coffee specialist. “People were poorly paid, the stress, the broken marriages, people working 100 hours a week for years on end. One investor said Starbucks is kind of a cross between Microsoft and the Roman Catholic Church. I said, ‘Yeah, it’s like Microsoft in that you can work any 60 hours a week that you want, and it’s like the church in that you do it for nothing.’ ”
“What’s hard to understand,” Knox continues, “is that the passion for product quality was really all-consuming. We could always say, ‘We’ve got a lot of people issues that aren’t perfect; wages aren’t the best, but damn it, we’ve got the best coffee in the universe.’ The love of coffee, the single-minded devotion to coffee, was something that you had to see to believe.”
It was that kind of passion that marketing strategist Tisdel was looking for when she left Harvard. She already had an avocation for specialty foods--she’d dropped away from academia for a time to study cooking in Paris. More than that, she grew up on Starbucks coffee in the Northwest. And Starbucks, she believed, was a place where she could apply what she’d learned about marketing in a new way.
“They were a brand leader, and if I could find something that was creating an industry, that would be excellent,” Tisdel says. “Everyone I met had a very clear focus. They were very passionate. Howard believes so strongly in his dreams. I believe he created a company and believed that by doing that, he would be able to make people’s lives better. This was an approach to business I had never seen before.”
It is 8 in the morning at the Seattle headquarters, and everyone is in a condition generally known here as “pre-caffeinated.” Soon that will change. Secretaries stroll up to the espresso machine and expertly pull out shots of strong coffee. The milk steamers foam and slurp. In the tasting room, coffee specialists Scott McMartin and Tim Kern assemble a team to make their way through the day’s arrivals, a collection of 21 coffees that have been bought, shipped, delivered and are ready for roasting should the assembled team this morning accept them. (If it doesn’t, back they go.)
The unroasted beans are laid out in sample trays for inspection, each small tray representing 40,000 pounds of green coffee. Small quantities of each have been roasted in the mini-roaster, then seeped in cups of hot water, which are laid out in rows across the length of the room for “cupping.” First, McMartin and his team sniff down the rows, hands behind their backs, to take in the bouquet. Next, they break through the crust that has formed on the top of each cup to sample the aroma of the coffee. Only after waiting another five to 10 minutes do they finally taste each cup, noisily slurping a sample from a spoon, then unceremoniously spitting it out again. It sounds like a room full of people with bad colds.
“That’s kind of yucky. It has a little bit of oniony flavor in the background. See what I mean? It’s like that French onion soup thing,” McMartin says, scrunching his nose over a Guatemalan varietal. “It’s kind of like being a film critic,” he explains as an aside. “There’s always going to be something you like about ‘em, but then in some ways, they may fall short.”
“So you just put ‘em with a good supporting cast,” offers Heidi McNamee, representing the research and development department.
“Kind of like the Westminster Dog Show. Best of show, best of class, the old poodle cup,” adds Eric Chastain, who runs the tasting room.
Once accepted in the tasting room, the beans are poured into mammoth roasters at Starbucks’ two roasting plants in the Seattle area or one in York, Penn., where they are transformed into Starbucks’ trademark deep, tarry roast.
Like popping corn, the beans swell up to twice their size, losing 20% of their weight in the process, lead roaster Tom Walters tells a class of new company hires in a training video. “For most companies, that’s where the roast ends. For Starbucks, that’s where the fun begins. The perfect, magic Starbucks moment occurs between 11 and 15 minutes. I lead the coffee up to the edge of the cliff and let it look over the edge, and at the right moment, I grab it by the shirt and pull it back.”
The aroma is critical, not only because you evaluate a good coffee in much the way you do a good wine, but because the aromatic connection has proved through research to be one of the most important connections to coffee.
“Smell is the strongest memory cue for humans,” Kern says. “When you go on the road and do presentations to groups of store managers, it’s amazing how people connect back to their childhood--memories about sitting on their grandpa’s lap while he was drinking a cup of coffee, or going to the A & P when the coffee was being ground.
“It tends to broaden your view of what Starbucks can be. I think in some ways, Starbucks can be almost anything we want it to be. I mean, Starbucks could be an entertainment company, or a media company. If Starbucks in the morning is a bustling, busy place where people are lined up to the door waiting to get a cup of coffee, it can be a place in the evening where people can be sitting with a rich chocolate dessert listening to a guitar.
“The connections are just so many when you get people to talk about what coffee is to them. Some people will say, ‘This coffee’s like a nice, soft cotton, and this one’s like a rich velvet.’ Of course, some people here just scratch their heads--I mean, it’s coffee! At first I thought it could all be evaluated technically, that you could understand everything there was to know about coffee and make sense of it. Then I realized it was something just to enjoy.”
As purists left, Kern watched as the company began offering nonfat milk--eschewed in the past as detrimental to coffee flavor and not as foamable--and then, one by one, flavored syrups, earning knocks from coffee fanatics. Starbucks, though, has steadfastly held the line against introducing flavored coffees, the fastest-growing segment of the specialty coffee industry.
“In the old days, we treated coffee better than we treated people. Then Howard Behar [currently heading the company’s international expansion] got here and he said, ‘You people are out of your minds to tell your customers you won’t do what they want.’ I remember as a store manager, the nonfat milk thing bothered me. I thought we were going to put a drink over the counter that was less than as good as it could be. But once they give you the money, it’s their coffee, right?”
But the shift has gone both ways. Starbucks has adjusted the way it serves coffee to fit its customers. And its customers have transformed the way they drink coffee, thanks largely to Starbucks and to other small specialty brewers across the country that make up the fastest-growing segment of the $13-billion-a-year coffee market.
“I believe that what substantially has been done is Americans have traded one kind of coffee, buying it in one kind of place, for another,” says Baldwin, one of the Starbucks founders who now runs Peet’s Coffee & Tea in the Bay Area--the dark roast company that provided the original inspiration for Starbucks’ distinctive roast.
“If you ever worked in a downtown office building in the old days, there was a guy who had a candy stand and a pot of coffee on a burner under the stairs. It was cheap. It was burned. There used to be diners and drive-ins, doughnut shops and pie shops where you could go in and get a doughnut and a cup of coffee and go to work. All those have gradually disappeared, and Starbucks and its imitators have accelerated the decline of those kinds of businesses,” Baldwin says.
The genius that Schultz brought to the enterprise was the “idea of espresso and drinks, and featuring the espresso machine in the store. The stores were designed to focus on the espresso machine and maybe even add what might be thought of as theater,” Baldwin says. “Howard liked merchandising and marketing and kind of sees the world through that lens. Their focus on the beverage, together with the unseen, at least by me and others, demand for this kind of stuff, collided in this big opportunity that they were smart enough to exploit.”
Baldwin has been the target of the other long arm of the Starbucks machine, the massive real estate department that has landed a store in most of the best locations across America--often in a spot a competitor had hoped to rent, or right across the street from the competitor.
“The typical approach has been, why don’t you sell out to us, or we’ll crush you,” Baldwin says, recalling Starbucks’ movement into San Francisco, Oakland and Berkeley, Peet’s own backyard, as soon as the non-compete agreement the former partners signed had expired.
“I knew they were coming. When I sold the company, I knew they would be here. Our strategy was to elevate the competition by focusing on coffee quality and knowledgeability and service levels of our staff,” Baldwin says. “We have built up incredible loyalty, and I knew that for Starbucks to get customers, they would have to take them one at a time.”
One of the first opening salvos was fired in 1992 on Chestnut Street in San Francisco, four doors down from Peet’s. Schultz began by sending a letter, offering to buy Peet’s out. “It was, ‘Do you want to talk about it?’ Some of the people who read the letter were just infuriated by its threatening tone. The implied threat was, ‘We’ll crush you,’ ” Baldwin says.
According to Baldwin, Peet’s lost as much as 12% of its beverage business to Starbucks but he says they have not lost a single coffee bean sale, the heart of Peet’s empire, to the guys from Seattle. And it has returned the favor, opening a new Peet’s across from a Starbucks store in San Francisco.
Roger Scheumann, Baldwin’s stepson and owner of the Maryland-based Quartermaine Coffee Roasters, remembers trying to open a store in 1993 on Bethesda Avenue, widely regarded as the best suburban shopping street in the greater Washington, D.C., area. Quartermaine had recently debuted with its first store in Washington’s Cleveland Park neighborhood. Starbucks had countered by opening directly across the street. Now Quartermaine had a handshake deal with a landlord to open on Bethesda Avenue near a chicken takeout, photo store, video store, huge supermarket and bagel shop--the kind of location Starbucks loves for its weary shoppers who like to take a break before heading home.
“While we were negotiating, Starbucks contacted the landlord and tried to negotiate a higher [lease] price,” Scheumann recalls. “When that wasn’t successful, they tried to buy the building. But we had a deal in principle, and the landlord said no. They opened a store a block away.”
Starbucks officials scoff at the idea of taking business away from anyone. Instead, they say, and most competitors don’t disagree, overall specialty coffee business tends to increase in markets to which Starbucks expands, while only those companies selling coffee perceived by customers to be inferior drop by the wayside. This has happened as the specialty coffee market has grown 25% a year in recent years, even as overall coffee consumption has flattened or even declined during the past several decades. (Slightly more than half of all Americans still drink coffee.) And there is a feeling at Starbucks that even hitting the company’s goal of 2,000 stores by the year 2000 will only be the beginning.
Starbucks looks at the supermarket shelves, where the majority of coffee consumed in the country is sold. Until now, the company has eschewed the grocery store, which has no delivery system that allows the sale of truly fresh coffee. But what if a better delivery system could be devised? Starbucks stuck a toe in this summer, opening for the first time in a grocery store--QFC in Seattle--a location that’s not managed by Starbucks. Company executives aren’t ruling out the possibility that breakthroughs in maintaining product freshness may even allow them to do what the company has said it would never do: sell coffee on the supermarket shelves.
The opening in Japan provided the seeds of another idea. Starbucks pioneers arrived and found a huge demand in Japan--the world’s third-largest coffee market, $1 billion worth of it consumed in what Americans would consider as undrinkable, pre-brewed bottled or canned beverages. With coffee extract refined to serve as a base for ice cream and beer, what’s to stop Starbucks from developing a superior canned coffee, featuring an array of coffee varietals, for massive marketing throughout Asia or anywhere else, for that matter?
“The bigger vision is creating building blocks for a variety of new products, of which the extract is the first step of many to come,” says research and development vice president Don Valencia, a cell biologist who managed a biomedical company for 13 years before joining Starbucks three years ago. Now Valencia runs Starbucks’ multimillion-dollar Technology Resource and Applications Center, a long hallway of high-tech laboratories dedicated to extracting, refining, stabilizing and preserving the unique taste of Starbucks coffee and, in the process, transforming the notion of how coffee and coffee products are conceived, manufactured and sold. Further down the line, the company expects to make a technological investment in coffee-growing countries, looking at how to improve the yield and quality of crops, studying whether genetic engineering can be used to decaffeinate coffee at the source and whether micronutrients might improve coffee flavor.
“I think the future of the company is that we want to again seek out ways in which we can bring to our customers the highest quality products that relate to coffee, but it will be in unconventional forms,” Schultz says. “Who thought two years ago we’d be in ice cream? And bottled Frappuccino, we literally can’t make it fast enough right now. I can tell you that over the last year or so, we have turned down hundreds of inquiries from major, major companies, domestic and international, to leverage the equity of Starbucks’ brand in products that never make it past a telephone conversation.”
Coffee perfume was one pitch that got the quick deep six. So did coffee candles. A coffee liqueur was toyed with, then put on a back burner.
So Starbucks, for the moment, contents itself with opening shop downstairs from your office, next door to your grocery store, across from your local bakery, to establishing a caffeine beachhead in that marginal-but-improving neighborhood where you thought you might buy a condo in a few years. It set its sights on expanding in North America and opening in Japan and Singapore this year, perhaps Hong Kong, Indonesia, Taiwan and Australia next year--drip-brewing on the heels of the sun itself, a double-tall, siren-songed wake-up call to the world.