Coffee drinkers are pretty passionate about their favorite brews. As freelance NYC writer Carol Vinzant recently wrote in an article: “After Starbucks proved that Americans were willing to spend more for a better–or at least fancier–cup of coffee, everyone wanted in on what is now an $8.4 billion retail coffee market. Dunkin’ Donuts showed that there was room for a high-quality cup of Joe from a place that is not so high falutin’. The rest of the fast food industry quickly piled on….”
My first Daily Fix post on this subject, back on November 14th detailed how Dunkin’ Donuts’ huge national expansion and its head-to-head competition with Starbucks, elicited some very strong responses. It was great to get all the feedback, as well as decidedly strong opinions on the topic.
Anyway, Ms. Vinzant makes a savvy point in her article: “As with all consumer choices, we’re influenced not only by the product itself, but by intangibles–what marketers call brand experience–ranging from what advertising makes us think and feel about buying the product, to in-store ambiance (or lack of it), to whether the staff is friendly or surly and finally, what treats you can eat there with your coffee.”
Let’s not forget these premium quality players in the coffee market: Peet’s, Caribou Coffee and New Orleans-based Café du Monde. All of these chains continue to expand and continue to be championed by avid fans, just as Starbucks or Dunkin’ Donuts are.
What I find most interesting about the article, though, is how multiple chains have invested in offering their customers a better cup of java. From McDonald’s, and its recent deal inked with Green Mountain Roasters, to Burger King’s premium coffees, to convenience store chains, every fast food retailer, it seems, has jumped on the bandwagon to offer patrons a moderately priced, decent cup of coffee. Everybody, it seems, wants a piece of the proverbial multi-billion dollar pie.
Panera, too, is making a run at this. Touting quality food to go or eat on site, and an environment many prefer to Starbucks for its inviting ambiance, Panera is rapidly growing. And its coffees are pretty good. Signs are abundant that there is:
a. plenty of room for growth
b. plenty of opportunity to take some business away from Starbucks
Not everybody is a Starbucks fan. As Ms. Vizant again points out in her article: “Starbucks has many detractors. Some purists claim it over-roasts, some message board users find it too dark, still others object to its world domination.”
So, stay tuned all. The coffee wars are expected to rage even hotter as vendors and their marketers go after the premium coffee market that Starbucks built.
I thought your readers would like to know that the original founders of Starbucks were trained at Peet’s. Sometimes we forget that Peet’s was the first specialty coffee company to introduce the U.S. to rich roasting and espresso for distribution beyond a single, inner-cty location.
Bring it on. Intense competition like this benefits the consumer. It’s a good thing for the specialty coffee businesses, too. Nothing like competition to keep everybody sharp and focused on pleasing the customer.
I don’t know that I agree that there is room for growth in this market. Perhaps that is because I hail from Seattle, where there are multiple Starbucks, Tully’s, Seattle’s Best Coffee, and “mom & pop” stands on every corner… As a self-proclaimed Starbucks-aholic, I couldn’t agree more that they could stand to have a little more competition, and that all of us will benefit! Bring it on!
In terms of “intangibles,” I sure wish Starbucks would take a page from Panera’s customer experience book and add free wi-fi. THAT would truly add some kick to their stores.
Ann,
I am surprised that the Boston Starbucks stores don’t have wi-fi (or do they have it and it isn’t free). I think many stores throughout the US do offer free wi-fi.
Starbucks offers T-mobile… but it’s not free. Panera offers free wi-fi. So do a bunch of other “third places” — including a little family-owned Indian restaurant I visit a few times a month. So what’s up with Starbucks…?
Thanks for some interesting input, all. As far as I know, Starbucks does not universally offer free wi-fi in all of its stores. At any rate, there’s no doubt that premium coffee competition is heating up for the consumer’s dollar. As the next generation matures, I think there is potential to expand the premium coffee market with more consumers. And, of course, existing coffee consumers may be successfully weaned away from some brands in favor of others over time. That’s what makes this so interesting.
There also isn’t any doubt that for some consumers, venue is important. If Panera muscles successfully into Starbucks’”Third Place” concept, this development could create an interesting shift in the market, for example.
As I always say, stay tuned.
It is a rich area, Ted… agreed.
One more thing I’ve love to see developed, however… perhaps a direct caffeine drip for the early-morning-challenged among us…. (LOL!!)
Although I respect Starbucks for what they’ve done with their brand and how they’ve moved into other areas like music and books, I’m not a big fan of their grossly overpriced coffee.
Just came back from Hawaii, where Kona coffee from the Big Island is the big thing. But I’m told that the “Garden Island” of Kauai now produces more coffee than the Big Island, and it’s actually pretty good. And it’s not outrageously priced. Wish I could get some here in New York, along with the sun and warmth.
I agree that the competition is heating up in the gourmet and premium coffee marketplace. Caribou Coffee has established themselves as a strong #2 player in this category with their unique in-store environment, secure wi-fi and Consumer Reports gave the only excellent rating to Caribou Coffee out of 42 other brands. (they weren’t included in the last taste test which McDonalds won.) Whoever provides that continued customer experience with quality beverages will see continued success.
Thanks, David and Ryan, for weighing in with some solid comments. Strong brands, coffee brands among them, offer their customer base something more than price, quality, flavorful blends and the other tangibles we can name.
What ties the consumer most to these brands are the intangibles, and those are the factors that are emotive. Those factors can include offering customers a perceived sense of well-being, a lifestyle fit, or even a sense of status. These considerations often outweigh the tangibles with consumers. That’s why fans of particular coffee brands are so passionate about their favorite brews.
Ann,
I like the way you think. The first major coffee brand that develops a take to the home or office direct coffee drip will probably kill all of its competition. . .speaking for the northeast, anyway. I say this as I savor my dark chocolate coated coffee beans–one of my Valentine’s Day goodies from my husband!
One of my gripes about Starbucks is their apparent quest for world domination. I have a favorite mom/pop coffee house and although there is a Starbucks a few blocks away, they are putting in one a few doors down from my neighborhood hangout in what appears to be an attempt to drive competition from the field.
Free wi-fi would be nice. I took a trip and bought the requisite T-Mobile membership which I hoped would allow me to range across the Northwest and yet stay in touch, thinking that in this case world domination served my interests, but no such luck. In several places the local Starbucks didn’t have it after all. Back to the mom/pop!
For the record, I rarely patronize large chains if I can help it, preferring to spend my money lower on the food chain.
Jim
You got it, Ted. There’s plenty of room for growth in this arena. Including some more for our Jolly Green friends.
A study by The National Coffee Association showed that the percent of U.S. consumers who drink coffee went from 49% in 2004, to 53% in 2005 to 56% in 2006. Give Starbucks some credit for that.
Unless you have a massive distribution system like McDonalds, smaller coffee chains must carve out their own unique identity and not try to “be” Starbucks. They shouldn’t go down the path of Tully’s Coffee in Seattle who decided to name their new blended coffee ’slurpy’ beverage an oh-so-Starbuckian “Bellaccino.” Tully’s is now wondering why sales declined.
Instead, they should follow the example of Dunkin’ Donuts. In defining their own identity, DD became the anti-Starbucks by tapping into those customers who think Starbuck’s is too pretentious. They don’t want to speak ‘Fretalian’ and neither do their customers.
There’s plenty of coffee drinkers out there – each with their own identity. And, plenty of ways to tap into those segments.
Hi Jim,
Yes, many people have taken exception to Starbucks and its quest for domination. Whether the issue for some is the squeezing out of local competitors, or the chain’s approach to its growers in Ethiopia, http://www.addisvoice.com/news/coffee.htm, these concerns are raising red flags for some. It will be interesting to see how Starbucks responds, in actions not only in words, about these issues. Thanks for weighing in, Jim.
Good points.
Aha! Another discussion in which Panera seems to garner all the positive attention.
I must say, though, Starbucks has really made the coffee market boom. I believe “Starbucks” will, or at least has the potential to, become synonymous with “coffee,” like Xerox with copiers or a more recent example, Google with web search. I think this may already be happening in those groups that love Starbucks, and those groups that could care less as long as the coffee joint is nearby. I know that when someone says to me, “let’s get together and grab some Starbucks,” I don’t necessarily assume we will be getting coffee AT a Starbucks, just that we will be getting coffee.
So in the near future, when Panera begins its rise to the top (inevitable because of free wifi, great food, inviting atmosphere and great coffee), we may just say, “let’s go to Panera to get some Starbucks.”
Who knows?…
Thanks for your input, David and Daniel.
I agree with you, David, there’s plenty of room for growth in this category, and many others. The key, as you so astutely pointed out, is for various coffee brands to find and maintain their own unique brand identities and positioning in order to carve out their own niches. Nobody out there should think they can out-Starbucks Starbucks or emulate their brand model as a short means to success. That just isn’t going to happen.
As to the idea of “Starbucks” becoming synonymous with coffee, Daniel, that may be true for the brand’s legions of fans, but I’m not sure it will ever be for the public at large. People tend to be very passionate about their favorite coffee brands. If I were to say “coffee” to family and friends, I would get many different responses from them as to the brands they consider synonymous with it.
And on the subject of Panera: I quite agree with you. This is a business model and brand to watch. Thanks for your keen observations on Panera.
Ted, I meant that Starbucks would mean “coffee” to those who don’t have a favorite coffee brand (like me). I can get any cup of coffee tasting great with the right amount of sugar! But I know what you mean about true coffee connoisseurs, they will always refer to their brand by name. And I might possibly become one of those connoisseurs at some point, when I find a brand I truly love.