Starbucks created an industry

In an interesting (and old) post on McDonalds and soft power, John Quiggin discusses large global chains and he states:

The effects on American consumers are ambiguous, but arguably negative on balance. Although they benefit from having films and chain restaurants tailored precisely to their tastes, they have far fewer alternatives than before the rise of the chains, particularly if their tastes differ a bit from the mean.

With regard to the specifics of coffee that statement is simply not accurate and would demonstrate -- should it be made specifically -- rather blissful ignorance of the USA. There are more alternatives now with regard to coffee than before Starbucks. (I'd say food in general, but that is a larger debate.) There were virtually NO independent coffee shops before Starbucks. Period. QED. You can go ahead and cite (as actually, I am as able as anyone) a few places in Greenwhich Village in the 1950s and 60s. But they were indeed exceptions. The coffee house did not exist widely, much less as a mass phenomenon in virtually every shopping center. When I moved to Seattle in 1967 it had just about one coffee house, complete with Go board and black turtlenecks.

Starbucks created an industry in the USA. That is not a disputable fact. There were virtually no coffee houses -- third places -- where one could hang out before Starbucks. (In fact Starbucks itself simply stumbled on the business -- the very first Starbucks in Seattle had no place to sit.) It has of course vastly taken the lead but it has also -- to continue with the analogy -- broken ground for literally tens of thousand and thousands of independent coffee houses of various stripes. Now you can go into a small town in the far reaches of British Columbia and find a pretty nice place to hang -- and it may very well have WiFi, too.

American culture has grown enormously richer because of Starbucks though I realize that the pretentiously fashionable thing to do is to scorn it for being successful, an example of mass culture etc etc.

More interesting comments on this topic at Crooked Timber.

Comments

[Dave Adams]

You make it sound like Go is as bad as black turtlenecks! I must protest!

Just teasing. Great point. I wholeheartedly agree. My middle-sized city has a preponderance of indie coffee houses that came along thanks to Starbucks' cachet and prospered before Starbucks deigned to open up shop here. Still to be seen how Starbucks' presence affects the established joints. I'm optimistic, though.

[John Quiggin]

David, I considered (but didn't answer) the point you raise, in this older piece, where I asked

Is Starbucks to coffee as Oprah Winfrey is to literature, a potential bridge from instant to the real thing. Or is Starbucks to coffee as Microsoft is to software, a 'good enough' monopolist that kills the competition and closes off the chance of anthing better?

In view of the huge growth of cafe culture in Australia, which is usually about a decade ahead of the US and UK in such things, I think the cafe sector was bound to expand. The scale economies in the US favoured a chain-based expansion and gave advantages to an aggressive first-mover.

[i've also posted this at CT]

[Francis Morrone]

Excellent point, David. In my gentrified Brooklyn neighborhood, there was once strong resistance to Starbucks, for all the p.c. reasons. Starbucks had plans to open here, then held back. Soon, several independent cafes opened. Then Starbucks finally moved in--two of them. What happened? More independent cafes opened.

Similarly, since a big Barnes & Noble opened, there are more, not fewer, independent bookstores in the neighborhood.

I'll admit that the Barnes & Noble case is probably unique, unlike the Starbucks case. But I would love to see a truly independent-minded study (can anyone point me to one?) on the effects of different chains on local commerce in city neighborhoods. Most of the facts and figures people quote at me on the subject come from studies that set out to prove the baleful effects of chains, and--big surprise--do so.

I'm no chain-store booster, not by a long shot, but I do wonder if there are other instances of the Starbucks phenomenon, where chains have created whole new markets that have stimulated, rather than depressed, mom-and-pop commerce.

Another interesting thing to observe will be the effect of Starbucks on Paris, which always has had a thriving cafe culture. I spoke not long ago with two French friends who said they and everyone they know in Paris prefers Starbucks to the traditional Paris cafes because, they said, the Starbucks stores were cleaner and "more artistic."

[The Bellman]

To amplify Professor Quiggin's point, in America there was a huge dropoff in the 70s and 80s of bars as places to just hang out. I'm not saying that bars declined, I'm just saying that bars used to be hubs for all sorts of activities that coffee shops took over. Some of this might have to do with Starbucks, but some of it had to do with the raising of the legal drinking age, women wanting to hang out as well (but not in seedy bars), and a meteoric rise in Alcoholics Anonymous membership.

[David Sucher]

I would suggest to John that there is a third alternative: Starbucks is to coffee as Starbucks is to coffee. I mean that Starbucks does a very fine job and sets a reasonable standard. Some people claim to favor certain smaller chains -- Peets in the Bay Area, for instance -- or individual roasters and scorn Starbucks. I don't believe it. I think that Starbucks coffee is more than just good enough (the Microsoft model) nor is it simply a bridge to something finer (the Oprah model.) I think it stands fine on its own.

As to design quality of the outlets themselves, Starbucks should be acknowledged for helping to raise design sensibility. The Starbucks will have far and away the nicest interior in any typical strip mall or shopping center. They provide a real bit of urbanity even in the deadliest environments. I guess I just can't see much compromise, once one recognizes that it is a chain of thousands of stores and that any individual outlet will not/can not have the idiosyncracy available to a one-off. So while Starbucks is not perfect -- I'd prefer that they all had a "put-and-take" book-shelf, for instance, I think they do a pretty fine job and put in historical perspective, have a lasting & positive significance in terms of our American culture.

[Rich Beaubien]

David

First let me say that I like Starbucks and as part of the US urban environment I sometimes look for Starbucks when I’m in a strange place because I find reliability in the product and a comfortable place to hang out. But I first try to discover the local hideout if that fails then I’m hunting for the Starbucks. Most of us have the same attitude of settling for Starbucks when we could go out and find the neighborhood location. I think it’s just convenient to bash them.

I do agree with you when you say Starbucks created the coffee house industry we see in the US today. But to say "There were virtually no coffee houses -- third places -- where one could hang out before Starbucks" is a not true. Starbucks first opened in 1971 after the original founders were working at Peets, where the idea of opening their own shop germinated. In 1982 Howard Schultz joined Starbucks as director of retail operations and marketing. It is at this time that Starbucks begin to expand by offering coffee to restaurants and other espresso bars. Schultz starts his own company that buys out Starbucks in 1987. At that point there are only 17 Starbucks locations. By 1992 there were less than 200 Starbucks in the US. Acquisition was the name of the game after that.

The first espresso machine was installed in the United States in 1927 at Regio's in New York and their "La Pavoni" machine is still on display there today. There's definitely a good case for San Francisco as being the birthplace where the modern European-style cafe society was born in the United States. 1950s North Beach had a number of these cafes. In the early 70's a small-scale revolution began to take place in America. In larger cities like New York, Chicago, San Francisco, Boston, and Seattle. My experience has been in the Boston area where George Howell launched the Coffee Connection chain in 1974 which he later (1994) sold to Starbucks for $23 million. In Boston, this chain now stretches along the eastern seaboard, there’s always the blue-collar roadside styled Dunkin’ Doughnuts. Dunkin’ Doughnuts, founded in 1950, aggressively markets products in direct competition with Starbucks. They were around here long The Coffee Beanery opened its first stores in the Midwest in 1976. Today there is quite a sizable chain.

My point is that in the early 1990's there were many coffee bars in competition. Most felt compelled to give up as the juggernaut of Starbucks rolled over the US (much like Barnes & Noble and Wal-Mart). But many smaller independents still thrive and are making inroads because of Starbucks selective site selection process. I definitely do not scorn them for providing a competitive environment people like to pick on them because they are number one but they are very much unlike some other leading retail competitors who thrive on squashing competition. So the urban environment has gained from there presence.

Rich Beaubien
architecture.squarespace.com

[Brian Miller]

Re: The Barnes and Nobles point above. I asked the store manager at long-time independent Bonanza Street Books in downtown Walnut Creek, CA (an affluent, but chain store dominated suburb of SF) how the huge new Barnes and Nobles affected their business. He replied "positively, because people who buy new books have to sell the unwanted volumes somewhere, and some people prefer buying used books for less money."

[JRoth]

My experience (and what I've heard from retail and economic development professionals) is that national chains follow urban development; they do not spur it. This is not exactly a ground-breaking position. Starbucks can afford the higher rents that a successful retail district will charge, but needs an assurance that it will get a good return; the existence of currently successful businesses (especially local coffeehouses) acts as assurance.

That said, chains can be pioneers, especially in crossing arbitrary neighborhood boundaries (there's a fabulously successful Whole Foods located in a Pittsburgh neighborhood that has long had a false rep for crime, really opening peoples' eyes to the possibilities).

Based, again, on Pittsburgh experience, Starbucks definitely drove a couple (quite good) local coffeeshops out of business, but they have not monopolized any neighborhood that I have seen, and I think they also have led, nationally, to the development of Panera-type coffehouse/bakeries that expand on the cafe lifestyle model in ways that have often never existed in US cities.

I'm much more dubious of the claims for B&N - they're not called "category killers" for nothing. Pgh has not a single substantial independent bookstore since the arrival of B&N (and, in the suburbs, Borders). Certainly there are small used bookstores in the university neighborhoods, but nothing that a typical book shopper will ever set foot in. Affluent suburbs of extraordinarily affluent, literate cities may not be very good models for how B&N will impact the market.

[Francis Morrone]

Just want to point out, re JRoth's comment, that I made no "claim" for B&N. Rather, I just said what happened in my neighborhood. I've certainly heard stories about how B&N pushes indies out. Yet, in some places, obviously, that doesn't happen.

I just wonder why.

[Dave Adams]

Again, my perspective growing up in a small city (Hot Springs, Arkansas) and living now in a middle-sized one (Springfield, Missouri): as far as new bookstores, the best we had going back 20 years until B&N (and the like, Borders, Books-a-Million) showed up was Waldenbooks and B. Dalton. Used bookstores have always been around, and in Springfield they are doing really well, it seems. But as far as a source of new books? B&N is a huge improvement. Is it preventing some indie operator from launching a similar store? I dunno. But as a book consumer, before the Internet came on strong, B&N was a huge boon.

[clew]

I thought both the Allegro and the Last Exit off Brooklyn predated Starbucks; and if you knew of one, it seems unlikely you couldn't find the other.

The point about bars having been 'third places' is good. Really, anything people did in groups for fun before Bowling Alone took over would serve some of the purpose of a neighborhood hangout.

[David Sucher]

Oh Clew, you couldn't be old enough to remember. But yes you are right. Both the Last Exit and the Allego long-predated Starbucks, as did The Surrogate Hostess and the Honey Bear in the 80s.

And certainly there were 'third places' before Starbucks. But not the espresso bar now virtually ubiquitous in North America. I think it can be fairly said that Starbucks recognized isolated successes and made them into a repeatable business model.

[BK Miller]

I concur with David Adams' later comment as well. Few places are Berkeley or Portland or Denver, with a strong tradition of locally-owned independent bookstores. The smaller towns, suburbs, and the like are vastly improved by the growth of B&N. Heck, I know the suburb where I work benefits a lot from B&N. (Fairfield, CA)

[Greg Fischer]

I'm a native Californian who's lived both in Northern California as well as Los Angeles and in Seattle during a period I'll always treasure: 1985-1990. A good friend introduced me to decent coffee and espresso at the long-defunct Cause Celebre on 15th Avenue in Capitol Hill. I moved from Seattle back to the Bay Area at the beginning of '90 for a job and remember the hullaballo in the East Bay in the mid-90s when Starbucks moved onto Peet's turf in various places, including Solano Avenue in Berkeley. Turns out, it made no difference, both do quite well. Fast forward to 2004. Peet's returns the favor by opening in Alameda, on the corner opposite from an existing Starbucks. Seems the chains - large and small - can co-exist. Where I live now - Chico, California - Starbucks (several company owned locations plus Safeway, et al), one Peet's and many independents seem to do just fine. Given a choice in a city I don't know well, I'd take a local place (provided the coffee is drinkable - too many have really awful swill) but lacking that I'll take a Starbucks any day with reliably decent coffee as a "third place" that I can hang out at and feel comfortable.

[jim glang]

this is rather interesting to me... i guess i should have all the reasons to hate starbucks that most pedestrians(!) have...i kinda go back in the industry to the jerry baldwin days ( founder ) - not the 70's but called on jerry in 1985, when they had 3 ( i think) stores

my "take" is though...that folks hate starbucks because they are successfull - for sure the coffee quality is mundane, but the atmosphere is attractive,

we have a cousin in paris and i remember visiting her 10 years ago and telling her that starbucks would be coming to france..."impossible!" of course was her reply ...

i do feel that the coarsening of the standard for lattes is a negative though ( thru the automatics) ...but i am glad that starbucks is in our world; it is easier to travel; you can get a decent cup of coffee and the NYT anywhere..

so..thats my take from an espresso "purist"

jim

[Homemaker Barbi (Danelle Ice)]

One has to wonder if Starbucks' vision when starting the business was really the birth of a new industry. It is exciting as an entrepreneur to see how easily that can happen with a clever idea and a standout marketing campaign!

Homemaker Barbi (Danelle Ice)