Starbucks remakes its future with an eye on beer and wine

http://www.usatoday.com/money/industries/food/2010-10-18-starbucks18_CV_N.htm

Starbucks remakes its future with an eye on beer and wine
10-18-10
Bruce Horovitz, USA TODAY

SEATTLE — The Starbucks of the future arrived today.

If Starbucks (SBUX) executives have it figured out right, this could be the prototype for the next generation of stores for one of the world's most influential brands.

A very different kind of Starbucks is on tap. It will serve regional wine and beer. It offers an expansive plate of locally made cheeses — served on china. The barista bar is rebuilt to seat customers up close to the coffee.

Most conspicuously, the place looks less like a Starbucks and more like a cafe that's been part of the neighborhood for years — yet that's "green" in design and decor. This is the calling card of independent java joints that have been eating and sipping away at Starbucks' evening business for decades. U.S. Starbucks stores get 70% of business before 2 p.m.

The corporate eyes of Starbucks — and the nation's ultracompetitive, $15 billion chain coffee business — are laser-focused on this Starbucks store on Olive Way in Seattle's bustling Capitol Hill area. The 10-year-old location was closed for three months to be revamped into a Starbucks that may not look or sound like any Starbucks you know. But if this location is a hit, some version of it may eventually come to a Starbucks near you.

Starbucks, which turns 40 next year, is entering middle age with a keen desire to improve the way that its customers — and its stockholders — respond to the brand. For customers, the company wants to make the stores seem friendlier and more a part of the neighborhood. For stockholders, the company wants stores to be more profitable by targeting greater evening use.

Even then, the company is aware of the footprint it leaves no matter what it does. The 16,000-unit chain ranks among the world's most widely copied brands. When Starbucks sneezes, global pop culture feels the draft.

USA TODAY spent a day behind the scenes on an exclusive tour of the renovated store in the midst of last-minute construction activity before its big reopening.

Inside, the floor is stripped to highly polished concrete. Some of the chairs were salvaged from the University of Washington campus. Empty burlap sacks — once used to transport Starbucks coffee beans — hang from the walls. And an oversized table — designed for customers to share — is made from flooring salvaged from a local high school.

Until now, two local cafes owned by Starbucks have been used as "living labs" to test the new look and ambience of future stores, but without the Starbucks name. Instead, these two locations were named simply by their street locations. Very subtle "inspired by Starbucks" signs are etched on their doors.

But this one most assuredly is a Starbucks. A sign hoisted above the store — designed to mimic the antiquated sign above Seattle's famous Pike Place Market — can be seen from blocks away.

A striking move

Starbucks is not standing still. With competition from McDonald's and Dunkin' Donuts at a feverish pitch — even as Starbucks recovers from the aftershocks of the recession — this ranks among the most striking moves Starbucks has made in decades.

"It's the biggest undertaking of design of any retailer in the world," says Arthur Rubinfeld, global development chief at Starbucks. Each new company-owned store will be LEED certified, meaning it jumps through lots of "green" hoops to meet tough sustainability standards. Call it environmentally responsible design that relies on energy efficiency and the reuse of old things to make new things.

But it doesn't come without risks. For one, the new store doesn't instantly look like Starbucks. The colors are muted. The lighting, particularly in the evenings, is dimmed. The whole design tenor is low key, as if trying to look like it's been part of the neighborhood for decades. It simply doesn't scream Starbucks when you walk in the door.

That's a serious gamble for a chain that's spent four decades and billions of dollars establishing a highly recognized brand.

It doesn't come cheap. If this new design is a hit, Starbucks could ultimately expand pieces of it to as many as half of its stores globally. A minor redesign can cost $25,000, while a new construction can exceed $400,000, Rubinfeld says.

He won't speculate what the new design could cost if it expands worldwide. But just based on the sheer number of Starbucks stores, it could conceivably cost hundreds of millions of dollars.

"This is the natural evolution of the brand," Rubinfeld says. "This is all about elevating the brand's position worldwide."

Or is it? Some skeptics say Starbucks is too familiar to be hip.

"People don't go to Starbucks to be cool or to show off," says Bryant Simon, a Temple University professor and author of Everything but the Coffee: Learning about America from Starbucks. "They go for a predictably good cup of coffee and a place that's predictably clean and safe."

Others find the new concept to be a bit too savvy.

"The idea of serving coffee all day to hype up consumers and alcohol at night to calm them down sounds like a perpetual motion machine," says Robert Thompson, pop-culture professor at Syracuse University.

But brand guru Scott Bedbury, who was marketing chief for both Starbucks and Nike back in the 1990s, says the evolution is critical for Starbucks and notes that wine sales could bring in "latte-like" profits.

"Brands have to evolve or die," he says. "It's a tall order. But if anyone can pull it off, it will be Starbucks."

A sense of mission

On a tour of the Olive Way store, just five days before its reopening, the sense of mission is palpable. So is the nervousness.

A painter finesses a final coat of lacquer on a remodeled doorway entrance. A worker climbs a ladder to install energy-efficient lighting. A store manager gathers a group of a dozen uniformed baristas in the area where beer and wine will be poured.

The baristas seem slightly excited — if not nervous — about selling beer and wine to the very same customers to whom they've served coffee and cappuccino for years.

A barista asks about the difference between selling a customer a glass of wine or a cup of coffee.

"Just treat them like they're regular customers," a training manager responds.

At this location — and for Starbucks as a company — much of this change is about goosing evening business. While some locations do brisk night business, many sit nearly empty. It's a lot cheaper for Starbucks to drive more evening traffic into stores it already owns than to build more.

At this particular location, most of the business has historically been morning commuters. "We had not built a night business," says Kris Engskov, regional vice president. But before renovating, the company sat down with store customers and asked them what it could do to get them to come more often — including in the evening.

They asked for an outdoor deck. An indoor-outdoor fireplace. Sustainable furniture. And expanded menus. This store now has all of that. And a barista bar runs through the center, with tables on either side and seats at the bar itself. The purpose is to help customers feel closer to the coffee — and to the baristas.

Starbucks learned this from one of its "living labs." At its Roy Street Coffee & Tea, also in Seattle's Capitol Hill area, folks can sit at the barista bar and make friends with the barista — almost like a bartender. The barista also pours beer and wine.

Eric Banks, a music professor at a local college, is a regular customer. He usually gets a hot beverage, but this day he's sipping on a $7 glass of wine.

"It's not just the wine. It's the unwind," he says. "The atmosphere here is all part of the experience." And independent coffeehouses don't have the deep pockets to pay for this kind of design upgrade, he says.

In here, the tomato bisque is made by a popular, local chef. Cold drinks are sold from an old steel tub filled with ice. Fresh tulips sit in a glass vase. But one thing that Starbucks officials hoped would be a hit at this living lab was a bomb: ice cream. The store tried to sell Starbucks ice cream by the scoop, but it was a total disconnect with customers. So it won't be tried — at least for now — at its other stores.

Whitney Queral, a student from Olympia, recognizes that many women feel "safe" in Starbucks because it doesn't sell alcohol. It's a place where women don't have to worry about pickup lines from drunk guys.

Even then, she says, while sitting with a girlfriend at the Roy Street store, she'd certainly feel comfortable buying a glass of wine in a Starbucks.

Starbucks is dead serious about its new, friendlier face. It's about Starbucks looking and acting as though it's always been in the neighborhood and is ultrahip to sustainability. It's about Starbucks as a place that even wants you to stop by in the evening and perhaps stick around for a glass of wine or beer while listening to a local singer or stand-up comic.

The wake-up-in-the-morning company that invented the $4 cup of coffee is trying to reinvent itself as the hang-out-in-the-evening company, too, with mood lighting, heritage furnishings and wine at up to $9 a glass.

After two years of non-stop experimenting, the first of the new Starbucks-branded stores is here.

"It's like opening a Broadway play," Rubinfeld says.

Starbucks officials, awaiting consumer reviews, really want to know just one thing: Will this store be toasted — or roasted?