Coffee? More expensive coffee? I was shocked to hear that Starbucks is contemplating a new high-end coffee venture. This, to me, seemed like a bad idea. I will go into it once I explain what exactly they have planned.
Starbucks is planning to launch Starbucks Reserve Roastery and Tasting Room, the flagship of a planned chain of 100 high-end coffee stores. They are so determined to separate this new venture completely from its popular Starbucks chain that they have completely changed even the logo. The new logo will be a Red R on top of a star. The idea is that they will be selling the coffee at $4-$7 per cup. Their flagship is basically a page taken out of Willy Wonka, as it will essentially be an awesome factory style store where people literally see the beans being roasted by these machines. So then what has prompted Starbucks, which just enjoyed highest gross sales in its history, to open this new line?
Well, believe it or not, it seems to have been in the plans for nearly a decade now. At least, that is what Starbucks CEO Howard Schultz claims. Still it is a bit odd. Starbucks, while a lot more expensive than the coffee I drank at the local coffee truck, has hardly been considered a high-end coffee distributor. They, as one friend recently put it, sell the ambiance, not the coffee. So, why now? The answer is business is slowing down. Starbucks understands that the middle-class coffee world is getting more and more competitive, but the demand is not. So it is gearing up to try to overpower the upper end of the coffee world.
Will this plan work? Probably… no. There were some in this NYT article that claim it won’t work because Starbucks has not developed the personal relationships with these high-end coffee suppliers that these small shops have. That is wrong. Money talks, and everyone else listens. Starbucks has already bought off a high-end coffee producing hacienda in Costa Rica to provide only Starbucks their beans. And, I am pretty sure Starbucks won’t stop there. They will continue to buy up suppliers. So why won’t it work? It is because it is entering too fast into a coffee world that it does not understand.
While suppliers may be possible to buy off, customers’ perspectives will not be so easy. Unless Starbucks is prepared to sell off this high-end coffee at dirt cheap prices in order to entice new clientele (a method used by them when they first started with their main line of stores), they will have an extremely tough time building the reputation required to enter any higher-end spectrum of any business. Think about it. Why do people continue to buy lacoste when there are better shirts at much lower costs? Because Lacoste has established its reputation and fan base. People are willing to pay for that. Starbucks has made its name by being the best “McDonalds of Coffee.” Does anyone think it will be easy for them to just shake that reputation? Will it be possible for them to do it fast enough for 100 chain stores to open immediately? No, it will take time, rebranding, PR, and a lot of goodwill. I think it could work (Toyota has done it with Lexus), but it will take a lot of time. That is Starbucks’ mistake here: it will fail because it is rushing too much into it.