WHAT'S THE BUZZ

Starbucks was going to open 1,000 high-end cafés. Now it will open 10

A sign for coffee.
A sign for coffee.
Image: REUTERS/Mario Anzuoni/File Photo
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It was an aggressive plan from the get-go.

Starbucks said it wanted to open about 1,000 high-end Reserve cafés and 30 of its sprawling, 23,000-sq-ft Roastery stores as part of a long-term strategy to widen its consumer base. Now, just a year and a half into his tenure as the company’s top executive, Kevin Johnson is reining in the plans set forth by his predecessor, Howard Schultz. Instead of 1,000 fancy Reserve cafés, the chain expects to launch between just six and 10, a massive aspirational downshift for the company.

The Reserve locations are designed to appeal to consumers willing to pay a premium for craft coffee. But whether more customers are willing to ditch their Frappuccinos for expensive, high-end drinks remains a question for the chain as it considers its tiny line of Reserve shops. Johnson did not comment on the future of its larger Roastery-model location-expansion plans.

The decision comes as the competition for a quick cup of coffee has intensified. Dunkin’ Donuts recently rebranded to “Dunkin’” and doubled down on making higher-quality espresso drinks. And McDonald’s has also made moves to encroach on the Seattle-based chain’s space, both in its individual restaurants and by selling more coffee goods in retail outlets “so a person is reminded to come into a McDonald’s restaurant,” said CEO Don Thompson.

There are signs that Starbucks is starting to feel the bite from its competitors’ strategic maneuvering. According to the Wall Street Journal, foot traffic in the company’s coffee shops fell the last two quarters, and down overall in 2018 compared to the prior year. For that reason, Johnson has said he wants to take a more conservative approach to growth, making sure the Reserve stores can deliver a return on investment before going all-in on the concept.

The company finds itself in an interesting position. While Johnson works to stop ceding market share to giant rivals such as McDonald’s and Dunkin’, he also has to be mindful of the impact made by popular independent shops and smaller premium chains such as Blue Bottle. Indeed, around the world—in cities such as Mumbai, São Paulo, Seoul, Paris, London, Kuala Lumpur, Lagos, and beyond—more and more coffee shops are starting to look like the type one might find in Brooklyn, New York, styled with Edison bulbs, reclaimed wood, potted plants, exposed brick, and an impressive selection of high-end beans. For Starbucks, finding a happy Grande—er, medium—is the challenge.