As Starbucks’ expansion loses steam, independent coffee shops reveal the subtle ways they compete with the coffee powerhouse
by
Ricky McRoskey
In July 2004, Kinley Pon was throwing his annual block party at his
El Paso (Tex.) coffee shop, Kinley’s House, on the same day that a
Starbucks (SBUX)
across the street was having its grand opening. Pon, 51, says he had
planned the party for months—a day-long event with musicians, belly
dancers, and local law enforcement intended both to promote his
business and to raise awareness about drunk driving. Pon was surprised
when an employee from the new Starbucks store walked across the street
and started passing out Starbucks promotional cards to customers—on
Pon’s own patio. A spokesperson for Starbucks couldn’t cite a specific
policy regarding the distribution of promotions on a competitor’s
premises. “They did it for a week,” says Pon. “But I allowed it to
occur, because my reasoning was that they were going to pass them out
anyways.”
There’s a love-hate relationship between Starbucks and the thousands
of independent coffee shop owners in the U.S. For years, the
Seattle-based chain has brought coffee drinking into the mainstream and
revitalized the business of java, yet its ubiquity has also made
survival more difficult for mom-and-pop coffee houses. In 2007, there
were roughly 26,300 coffee cafés, kiosks, and carts across the U.S.,
and about 60% of those were independent, according to Mike Ferguson,
the marketing communications director at the Specialty Coffee
Association of America. On July 1, Starbucks announced it would be shuttering 600 locations (BusinessWeek.com, 7/1/08). On July 17, it listed the names and locations of the 600 specific stores it was planning to close
of its roughly 11,000 U.S. stores. The closures prompted the question:
What have independent coffee shops been doing to compete with the $9.4
billion company, the largest coffee retailer in the world?
Many cafes have survived by serving coffee differently from
Starbucks. Skip DuCharme, who has run his 27-employee Lakota Coffee Co.
in Missouri since 1992, says that the store’s most popular drink is a
latte served in a signature large green bowl that requires two hands to
hold. A Starbucks opened down the street from DuCharme’s place in
January 2006, and since then, DuCharme says, his tactics have helped
his business create a more at-home atmosphere than his competitor’s.
“In Starbucks, everything is based on ‘to-go,'” he says. “We give [our customers] real latte mugs.”
Power of Freebies
Other stores give customers free refills on coffee—a strategy
Starbucks tested in select stores in January. “A free cup of coffee
goes a long way,” says Theresa Tocio, co-owner of Tocio’s Sundance Café
in Naples, Fla., that offers customers unlimited refills for the $1.50
they pay for a 12-ounce coffee. When a Starbucks opened inside a Target
(TGT) next to her shop, Tocio and her husband offered free coffees to Target employees on break…
