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Starbucks: at the helm of Seattle's espresso adulation.

Starbucks: At the helm of Seattle's espresso adulation

As it celebrates its 20th year in the coffee business, Starbucks Coffee Co. of Seattle takes credit for lighting the fuse that led to the West Coast expresso explosion.

"With all due humility, there's no other way to characterize it," said Dave Olsen, the company's vice president for coffee.

In discussing their business, Starbucks officials can work themselves up to a near-religious intensity. They talk about their "passion" for coffee, the "art" of preparing coffee, and the need to do "missionary work" to educate the palates of coffee drinkers.

"What set Starbucks apart in the early days and today is a single-minded focus on the coffee as an end in itself," said company coffee specialist Kevin Knox. "That's so different from what you usually see in the coffee trade."

But that single-minded focus on coffee is also a hard-headed strategy for survival and growth in the increasingly-competitive specialty coffee business.

"We feel that there's going to be a continual sorting out of players," Knox said. "People are not going to go on paying twice the price of canned coffee if there isn't twice the pleasure in the cup."

Starbucks began with a single store selling whole-bean coffees in Seattle's Pike Place Market in 1971. When Olsen opened his Allegro coffee house in Seattle's university district four years later, offering espresso drinks made with Starbucks beans, there were two other espresso machines operating in a city that seems to have one on every corner today.

As recently as 1987, Starbucks consisted of nine outlets in the Seattle area, offering coffee by the cup and espresso drinks as well as coffee by the pound and home coffee brewing equipment.

Today, Starbucks president Howard Schultz said, Starbucks has mushroomed to a total of 85 company-owned stores in Washington, Oregon, Illinois, and British Columbia. The company has 1,200 employees, 150 of those in the company's 70,000-square-foot headquarters and production plant, where four or five million pounds of coffee will be roasted this year.

Schultz said the company plans to open another 50 outlets in 1991, including a move into the Los Angeles market. There is also a national mail-order coffee business, and a wholesale restaurant coffee supply business that has a 60% market share in the Seattle region, Schultz said. The company is now in the process of moving into the restaurant trade in Portland, Ore. and Chicago.

How did Starbucks do it? As Schultz tells it, the company owes its success partly to two ideas from Europe: the Italian espresso bar and the German concept of gestalt.

Another factor much on the lips of company officials is education--of both employees and coffee drinkers. The company also stresses vertical integration to maintain quality control of its product.

Schultz joined Starbucks in 1982 at a time when the company consisted of four small Seattle stores that sold coffee by the pound only. During a trip to Italy the following year, Schultz fell in love with the espresso bar, and got the idea of mating the concept to Starbucks' specialty coffee business. Not long after, the company opened its first espresso bar in downtown Seattle.

"Literally overnight, that store took on a whole new personality," Schultz said. It became a meeting place, and a place where passing office workers stopped for a cup of espresso or cafe latte to go. Schultz conjectures that the espresso bar provided an alternative to the traditional corner tavern for health-conscious Seattleites.

Schultz was so impressed with the coffee bar's success that he left Starbucks in 1985 to form his own coffee bar company, Il Giornale, along with fellow Seattle espresso pioneer Olsen. The two men had Starbucks as a partner.

In 1986, the first Il Giornale espresso bar opened, serving coffee beverages made with Starbucks coffee.

"It was a huge success, mammoth relative to our expectations," Schultz said.

A second Il Giornale quickly opened in Seattle, followed by a third in Vancouver, B.C. Sixteen months later, Schultz and Starbucks officials realized that the coffee bars were the best possible vehicle for selling Starbucks specialty coffees, and the two companies merged, dropping the Il Giornale name. by August 1987, there were nine Starbucks outlets, and all had espresso bars.

The fuse was lit. Schultz, Olsen and the rest of the Starbucks team set out to become what Schultz describes as "the premier purveyor of specialty coffee, and a national retail leader."

That's where the gestalt comes in.

"Gestalt," the German word for "configuration" or "pattern," is used to describe the concept of a whole that is greater than the sum of its parts. Schultz uses the word to describe his company's commitment to put quality before quantity.

"We won't grow at the expense of diluting what we have," Schultz said. "We're not only in the business of selling coffee. We're in the business of creating and sharing an experience with people. We don't need to be or desire to be the biggest. The most important thing is to maintain the standards we have set for ourselves."

The company pursues its vertical integration strategy as part of an effort to maintain standards. That means Starbucks won't sell franchises, even though the company gets about 100 inquiries a month from would-be franchise buyers, Schultz said. The obsession with central control extends even to the design of the Starbucks stores, which is handled by an in-house design staff. By keeping the stores tightly-controlled, the company is in a better position to enforce its quality standards, Schultz said.

"We actually use methods that some might argue are foolish," Olsen said. Some examples:

* Beans are roasted to no more than three to five days ahead of shipment to stores.

* The beans are shipped to the stores in packages that are guaranteed by the manufacturer to provide a one-year shelf life, even though the beans will remain in those packages for no more than a few weeks.

* Beans must be ground no more than 60 minutes before brewing at the company's espresso bars.

* Coffee that stays on the shelf for more than a week is donated to charity.

"We look at it as more of a fresh produce business," Knox said. "We want people to see coffee as a living thing, more like fresh-baked bread."

The stores also sell coffee-brewing equipment that the company has tested for the quality of coffee they produce. Reliable equipment is necessary if the customer is going to be satisfied with the pound of coffee he or she took home.

"We sell raw materials," Olsen said. Our produce isn't in a bottle like beer or wine." "Coffee making at this level is a form of cooking," Knox added.

Knox--and Starbucks' retail staff--tout the virtues of the "French press" or plunger pot method of coffee brewing This system leaves a fine sediment of coffee grounds in the cup which might be disconcerting to people accustomed to filtered brews. But for Knox, that sediment is the whole idea.

"It has a tremendous amount of additional flavor and body," he said. "We generally recommend methods that put you in direct contact with the coffee. You want to use a CD, instead of a phonograph."

Keeping so many outlets stocked, but not overstocked, with fresh-roasted beans is a formidable task. Schultz said the company is setting up a new computer system to manage orders and supplies. But in some ways, the company's size is actually making it easier to offer customers top-quality coffees, Olsen said. That's because the company now has the buying power to outbid rivals for unique coffee varieties.

As an example, Olsen mentions Narino Supremo of Colombia, a variety that once was monopolized by European firms. Olsen said Starbucks now is big enough to outbid European competitors and obtain an exclusive supply of the beans in the U.S.

Starbucks relies heavily on employees to help get the consumer used to the idea of paying extra for rare coffee varieties. "We spend more on employee training than we do on advertising," Schultz said. On a recent visit to the Seattle headquarters, employee training session were under way in several different rooms.

But employee training is only the first step in the educational mission, as the Starbucks people see it. The employees, in turn, must train the customers and elevate their standards. The sales staff at Starbucks stores can provide customers with descriptions of the subtle difference in tastes between the different varieties and blends, much as the proprietor of a wine shop might discuss different vintages of chardonnay.

The importance of standards of taste was brought home to Starbucks in January, when a Consumer Reports magazine tasting panel gave Starbucks coffees a vigorous thumbs-down:

"All the Starbucks coffees were severely overroasted. They had a bitter, charred taste that's more appropriate for espresso," Consumer Reports said--an especially unkind cut for a coffee company that touts the virtues of longer roasting to bring out the beans' full flavor.

Knox said the Consumer Reports review was typical of the uneducated coffee drinker with "the preconception that there is one and only one ideal coffee flavor." "Starbucks Coffee is not for everyone," Schultz said. "It's dark, full bodied, very rich and very flavorful." He added that the Consumer Reports comments "illustrate to us the importance of Starbucks being the educator as well as the purveyor."

"Eighty percent of the coffee sold in America is sold in supermarkets, and half of that is stale," Schultz said. "We have a tremendous amount of missionary work to do."

Schultz said he isn't concerned about the critique's potential impact on sales. "300,000 customers came through our stores last week," he said. "Most of those people are coming back next week."

Schultz also said he doesn't see any major new shifts or trends on the specialty coffee horizon. To some extent, people seem to be buying more beans and ground coffees to take home, as part of a nationwide trend toward enjoying gourmet pleasures at home while spending more time with family. But that trend poses no problems for a company whose outlets offer both beans and brews by the cup.

Flavored coffee is the fastest-growing segment of the specialty coffee business, Schultz said, but Starbucks has no plans for involvement in what Schultz sees as a fad that is incompatible with the Starbucks gestalt. He contemptuously dismisses the flavored beverages as "a masking of inferior coffee."

"It's not for us. It never will be," he said.

PHOTO : Starbucks President Howard Schultz and company employee Lillian Stuart watch roasted beans coming out of the Probat roaster.

PHOTO : Dave Olsen, Starbucks vice president for coffee, prepares to taste brews from different varieties of Costa Rican beans that the company is considering for purchase.

John Stark is a freelance writer based in Bellingham, Washington, and regularly imbibes quality coffee.
COPYRIGHT 1991 Lockwood Trade Journal Co., Inc.
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Title Annotation:Starbucks Coffee Co.'s role in popularizing espresso
Author:Stark, John
Publication:Tea & Coffee Trade Journal
Date:Apr 1, 1991
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