Not content with Frappucino obsessives alone, Starbucks is going after intense coffee snobs in Seattle and East Coasters who want a cheap cup of Joe in a New York minute.
The chain is rolling out two very different new store formats. ”Starbucks Reserve” stores will focus on small batch coffees from a flagship high-end Seattle roastery and tasting room. And in New York City, the chain is trying out a rapid-service, limited-menu “Starbucks Express” concept.
Starbucks—which has managed to present itself as both mass-market and high-end—is trying to steal customers at both ends, from fancy boutique roasters and from cheaper options such as Dunkin’ Donuts.
Starbucks is responding to two recent trends. The first is the rapid rise of specialty coffee roasters, most notably Stumptown, Intelligentsia, Counter Culture and Blue Bottle. These are what are known as “third wave” roasters, who focus intensely on the careful roasting and labor-intensive brewing of coffee, often sourced from a single farm. The language and culture of this world is more akin to that of wine than of commodity farming.
With roots in the food-focused US cities Portland, Chicago, Durham, and San Francisco, these roasters are getting very ambitious. Stumptown has powerful private equity backing, and Blue Bottle raised $45 million in venture capital at a valuation more commonly associated with rapidly growing tech startups. They’re opening cafes around the United States, delivering high end beans via mail, getting into tech offices, distributing to independent stores, and looking to disrupt Starbucks’ bottled coffee business.
To compete with these upstarts, Starbucks Reserve’s dedicated roastery, retail store, and tasting room in Seattle seeks to increase the chain’s ability to roast premium coffee in small batches. The company plans to open 100 new Starbucks Reserve stores around the world over the next five years.
It remains to be seen whether the sorts of customers that pay up for third-wave coffee will go to Starbucks for a pour-over. Speciality roasters often define themselves in opposition to Starbucks, and their devotees criticize its ubiquitous coffee as bitter and acrid, due to the pressures of high-volume and a perceived tendency to overroast the beans for consistency’s sake.
The second challenge for Starbucks comes from fast food competitors improving their coffee options. As anyone who’s tried to pick up a Starbucks pumpkin spice latte on the way to work knows, lines can build up during peak morning hours. Dunkin’ Donuts, McDonald’s, and other downmarket chains serve increasingly good coffee very rapidly and inexpensively, due in large part to a much more limited and less labor-intensive menu. They’ve settled squarely into the big market that exists between the corner deli and the upmarket cafe, and they’re looking to expand their reach.
Starbucks is aping their approach, in New York City at least, with Starbucks Express stores that will offer a more limited menu in order to better accomodate rushed commuters. The stores will open in early 2015, according to the company.