Why Starbucks actually helps mom and pop coffeehouses (2007)
slate.com
slate.com
> Hyman received the expected news that the company was opening up next to one of his stores. But instead of panicking, he decided to call his friend Jim Stewart, founder of the Seattle's Best Coffee chain, to find out what really happens when a Starbucks opens nearby. "You're going to love it," Stewart reported. "They'll do all of your marketing for you, and your sales will soar." The prediction came true: Each new Starbucks store created a local buzz, drawing new converts to the latte-drinking fold. When the lines at Starbucks grew beyond the point of reason, these converts started venturing out—and, Look! There was another coffeehouse right next-door! Hyman's new neighbor boosted his sales so much that he decided to turn the tactic around and start targeting Starbucks. "We bought a Chinese restaurant right next to one of their stores and converted it, and by God, it was doing $1 million a year right away," he said.
The article was written in 2007. The closing sentences seem a bit prophetic:
> "You can't do better than a cup of coffee for profit. It's insanity. A cup of coffee costs 16 cents. Once you add in labor and overhead, you're still charging a 400 percent markup—not bad! Where else can you do that?" Until Americans decide they need to pay four bucks a pop every morning for a custom-baked, designer-toast experience, probably nowhere.
Lo and behold, $4 toast is a thing:
http://www.psmag.com/health-and-behavior/toast-story-latest-...
Similar to many other categories, the bottled water industry is experiencing a transition into automated manufacturing. This is putting a ton of the mom and pop bottling businesses out. Its become too difficult for them to compete against 24/7 automated production lines that the big dogs are running. The margins continue to be driven further and further into bare minimum/cost threshold by the buyers as they leverage it to drive in customers(door busters). There is a ton of pressure here and its not letting up. The smaller guys can't afford to put the cash up to secure the new hardware and are closing up shop left and right.
Costco sells bottled water at near break even as a door buster. This strategy is very similar to what you see in traditional grocery stores where Arrowhead or semi-generic brand is selling for $3.50 a case of 24 bottles.
Don't get me wrong - folks like Nestle, Fiji, Smart Water etc. all do well but there is serious cash invested in those efforts. The small and mid size players basically struggle to carve out an existence.
(Says a habitual coffee drinker who came to the habit late in life, and who is very happy he's moderately dependent on a substance which is highly unlikely to kill him, as opposed to being more-than-moderately dependent on any of the number of substances which would stand substantial risk of killing him.)
Coffee will do more than not kill you; it was recently found to confer a "reduced risk of dying from heart disease and certain other causes"!
<< Compared with abstainers, nonsmokers who drank a cup of coffee a day had a 6 percent reduced risk of death, one to three cups an 8 percent reduced risk, three to five cups a 15 percent reduced risk, and more than five cups a 12 percent reduced risk. There was little difference whether they drank caffeinated or decaffeinated coffee. The association persisted after controlling for age, alcohol consumption, B.M.I. and other health and diet factors. >>
http://well.blogs.nytimes.com/2015/11/18/coffee-tied-to-lowe...
It was frikkin delicious. Swedish toast, with some nordic cheese and jam. Garlic cream cheese with fresh cherry tomatoes. Avocado.
But it doesn't scale. The long queue and wait time deterred customers, with the over flow going to other cafes.
The owners tried all sorts of gear to make toast reliably, consistently, and faster rate. (I have no idea why that's a hard problem.) They finally ran out of energy (will to live) and closed shop.
[1] http://www.businessinsider.com/movie-theater-concession-pric...
wow
If there were more price transparency in the whole situation, it wouldn't be a flat $3 for a basic cuppa. It'd be more like $1 for a to-go coffee and $5 for sitting in. Or maybe a flat low price for the coffee plus an hourly charge for a chair.
Starbucks bulk-roasts their coffee, and they use darker roasts than most independent roasters (ensuring consistency across locations), which allows their beans to have a much lower per-unit cost.
I was meaning it more as opposed to places that more-or-less just serve coffee out of a window.
My most recent coffee purchase was for 400g and was ~$14 (so not a super expensive brand). I use ~20g per serving, so my bag of beans gets me ~20 servings. That works out to $0.70/serving in coffee.
To be fair, I drink black coffee, with no steamed milk. It's more fair to compare my at home coffee to a regular, $2.00 cup of Starbucks coffee (which is vastly inferior to my at home coffee in quality).
Thank you for the laugh. I never thought of it quite that way, but it's true if one considers it and the alternatives.
To have "local culture" you need to get people out of their cars, houses, offices. Tellingly, the best cafe I found was next to a church and affiliated somehow.
> you'll never see discounts or punch cards at Starbucks
It's a proven health issue, even if the smoke is inhaled second-hand. I'd say it's more of a responsibility for smokers in general: if you want to smoke, I won't judge, but please respect me in turn and understand that you may be near people who would like not to be getting the smoke second-hand.
Again, not sure what the issue is.
http://www.cbc.ca/news/canada/british-columbia/kitty-corner-...