November 2008

Monthly Archive

All Starbucks UK coffee to be Fairtrade, or: when you can’t beat ’em, guilt ’em

Posted by on 26 Nov 2008 | Filed under: Beans, Fair Trade, Starbucks

As Starbucks‘ future looks ever bleaker and bleaker, CEO Howard Schultz continues his maniacal lever-pulling atop Starbucks’ runaway corporate bulldozer. After shedding themselves of music, movies, and books, they’ve tried everything from an online suggestion box and free coffee promotions to membership cards to less expensive (“daily”) roasts and smoothies. Mr. Schultz’s latest lever pull du jour seems to be coffee ethics, as this week Starbucks announced plans to source Fair Trade beans for all the espresso drinks they serve in the UK by the end of 2009: All Starbucks’ coffee to be Fairtrade – News, Food & Drink – The Independent.

This is hardly a new angle. Nearly two years ago, we wrote about McDonald’s announcement that they would source Rainforest Alliance coffee in the UK to ethically one-up Starbucks. But it was only less than a month ago that Starbucks announced that they were committed to doubling their sourcing of Fair Trade beans — albeit from less than 4% of their total coffee purchases to a whopping 6%. That makes this week’s announcement for the UK market appear to be a rapid escalation in retail coffee’s ethics wars.

The British already appear to be viewing Starbucks’ “100% Fair Trade” announcement with a surprising degree of suspicion and cynicism. And although Starbucks stated that they ultimately want to switch to 100% Fair Trade beans around the world, they would be far from the first of the major chains to do so in America. Tully’s Coffee, for example, switched to 100% Fair Trade beans over a year ago. Looking at Tully’s recent earnings statements, the move clearly hasn’t hurt Tully’s growth. But it’s hard to say if such a strategy will help pull Starbucks out of their retail funk, given that Tully’s is far from the only major coffee chain that is profiting this year while Starbucks ails.

The bigger question for us, as always, regards the legitimacy of Fair Trade and what Starbucks’ actions do to its public perception. Despite intentions, Fair Trade falls short of its goals on many levels — many of them publicized by Intelligentsia‘s rather public break-up with TransFair USA in 2006. An even bigger concern is how Fair Trade is being given an undeserved monopoly status on ethical sourcing. This issue was recently best described by Sam Mogannam, a good-friend-of-a-good-friend and owner of the Mission‘s Bi-Rite Market, at August’s “Building a Slow Food Nation” panel discussion (which was held at the the Commonwealth Club for Slow Food Nation ’08):

Anya [to Anya Fernald, Executive Director of Slow Food Nation ’08], you were talking about labels: fair-trade, organic. As important as they are, those labels were designed for the big box stores — so when you walk into a supermarket and you see an organic or a fair-trade label, you have some sense of provenance, some sense of pedigree, for those products. But there are many products that don’t have a certified organic label on them that go way beyond what an organic grower does.


Across France, Cafe Owners Are Suffering

Posted by on 24 Nov 2008 | Filed under: Café Society, Consumer Trends, Foreign Brew

Yesterday’s New York Times published an article on the accelerating demise of the neighborhood French café: Across France, Cafe Owners Are Suffering –

This time last year, we scoffed at the suggestion that France’s then-impending smoking ban would trigger the collapse of French café society. But sure enough, that collapse appears to be in progress no matter. Since 1960, France has seen the number of its cafés decline almost 80%. And, as noted in the article, many of these remaining cafés are operating empty and facing bankruptcy. (This is obviously much bigger than where you can smoke your Gitanes.)

So what happened? The article cites a harsher economic climate. But that’s both limited in scope and far from permanent, particularly given the café’s demise over generations. The greatest alarm concerns the changing social customs in France — major changes to the French way of life — that are contributing heavily to the erosion of the “third place” in French society.

French café society now comes in the convenience of aluminum cans!

Now we’ve always felt that the last reason to go to a café in France was for the coffee — particularly given the atrocities the French have committed against good coffee. But the article notes that the drink of choice among today’s French youth is “Coca Light” — or Diet Coke. That France’s youth prefers soft drinks over coffee mirrors some of the same major problems the American coffee industry faced in the 1980s — resulting in such famous marketing gimmickry as the Coffee Achievers ads and flavored coffees.

Is the French café in need of an American-style coffee renaissance to improve the coffee standards there? It wouldn’t be the first time that Americans co-opted “culture” from abroad, repackaged it here for the locals, and then exported it overseas to sell it back to its origins — albeit in a mutated form.

Oddly enough, it seems that very thing — the influence of American culture on French society — is already at work and at least partially behind the erosion of the French café. Once the French could not believe that American workers ate lunch at their desks and sipped their coffee “to-go” out of paper cups. But, as the article suggests, these worst of Anglo-Saxon habits are becoming the norm among the former Normans.

In France, Jean-Luc is apparently being replaced by vending machines dispensing Diet Coke.


Rumors of the death of the $4 latte have been greatly exaggerated

Posted by on 17 Nov 2008 | Filed under: Consumer Trends, Home Brew, Quality Issues, Starbucks

Not a day goes without us coming across a story about how the sky is falling on retail quality coffee. For example, ABC News laments, “How do you save on coffee in tough times?” Today the Chicago Tribune ran a semi-humorous column titled “Brother, can you spare (buying) a double latte?”

Each one of these stories reference both the tougher economic times and Starbucks‘ 97% decline in their most recent quarterly profits. Posters invariably comment on these articles, claiming that pricey coffee was just a faddish aberration akin to the Dutch tulip mania of the 1600s. All of which leaves us with the impression that the era of quality coffee is over now that we’re eating canned cat food. Right?

Except that this story is a load of crap. In fact, this is precisely what Starbucks’ PR team wants us all to believe: that “it’s the economy, stupid,” and that Starbucks’ problems are all external and not internal to the company.

The truth is far different from that. Starbucks is now paying the price for selling out its soul a decade ago — by making more automated, mass-produced, and ubiquitous coffee to meet its insatiable desires to grow as gargantuan as possible, as quickly as possible. But to believe Starbucks’ version of events, we need to conveniently ignore that rival Peet’s Coffee & Tea continues to grow — and that many other Starbucks competitors, such as Café Bustelo and Lavazza (both cited in today’s news), continue to expand their operations in this economic climate. And today, the future of quality coffee has less to do with Starbucks than ever.

And please — don’t get us started on the media myth that home espresso is the way for consumers to both have great coffee and save a lot of money. At least without spending a lot of time on it. We do propose that home espresso is about better quality, saving money, or saving time. However, consumers can choose at most two of the three — and quite often they can choose only one.

UPDATE: Feb. 12, 2009
Sure enough, the day after Starbucks announced thousands of additional job cuts in the face of mounting losses, Peet’s Coffee & Tea reported a 21 percent jump in quarterly profits. And while Peet’s has stuck to their upscale espresso beverage formula, Starbucks continues to bleed as it announces more downscale plans to offer fast food value meals and instant coffee.

Talk about a Dickensian Tale of Two Coffee Fortunes…

UPDATE: Feb. 15, 2009
Apparently it’s not just competitive chains that haven’t chucked their quality standards (such as Peet’s Coffee & Tea) that are growing while Starbucks falters. According to an article from the Associated Press yesterday, many higher-end, neighborhood cafés are also enjoying double-digit profits, baffling many economists: Many small cafes holding their own in recession | Business | – Houston Chronicle.

One theory is that this represents more of a consumer backlash against large corporations — and that consumers are more judiciously spending their dollars on what they perceive to be higher-quality coffee beverages made by the neighborhood café’s well-trained barista. Given our longtime comparison between Starbucks and Mikhail Gorbachev’s rule of the Soviet Union, could the quality revolution among mainstream coffee consumers finally have reached a Boris Yeltsin phase?


Trying to teach “old” coffee new marketing tricks

Posted by on 10 Nov 2008 | Filed under: Consumer Trends, Starbucks

We have to admit: marketers of whole foods and commodities don’t have it easy. Product marketing is so much easier when you can reformulate and industrially process something with a bogus health claim and slap a “New!” logo on the packaging. It gets even easier when you can inject exotic substances with a “newly discovered” miracle mystique, likening them to modern day versions of Ponce de León’s Fountain of Youth: things such as yerba maté, açaí berry, etc.

Given that coffee has pretty much been a known commodity for a millennium, how can you desperately try to rise above the crowd noise to garner attention? Two recent examples come to mind in the world of coffee marketing gimmickry: Starbucks‘ cynical commercial co-opting of the electoral process, and a small-time coffee company that exhumed a failed, two-year-old idea with a veneer of “Web 2.0” newness.

This presidential election is brought to you by… Frappuccino®

After running aground on a growth-at-all-costs strategy, Starbucks has been desperately trying to find ways to become socially relevant again. While they still provide some lip service to the notion that quality is still tantamount at the corporation, it’s painfully obvious that, over the past decade, Starbucks completely lost their superior quality claim to more nimble and far better competitors. Far too massive, industrialized, and automated to compete with microroasters and award-winning baristas, today Starbucks is merely fighting a sheer numbers battle against other mass-market, fast food competitors.

One of Starbucks’ moves to enable their loyal customers to help lead them out of the desert was last year’s launch of My Starbucks Idea — which is essentially an online suggestion box that Starbucks positioned as forward-thinking, “Web 2.0” customer engagement technology. One of the customer suggestions submitted and vetted through the site was to offer free coffee for voters in the recent presidential election. (And major props to fellow Chicago South Sider and 44th U.S. president, Barack Obama.)

Starbucks' TV ad wants to buy your vote for the price of a cup of coffee So a week ago, Starbucks pulled out a wordy (and expensive) national television commercial, telling America that they would offer us a free cup of brewed coffee if we could prove to them that we voted.

How’s that for a feel-good promotion, brimming with civic responsibility? Well, it was illegal, for one. This promotional idea made it through Starbucks’ marketing and legal departments about as vetted as our Republican Vice Presidential candidate. Word quickly got out that the promotion violated California Elections Code section 18521 (b), in addition to related federal laws, which essentially prohibit bribing people to vote or not based on the promise of goods or services. Oops.

Starbucks quickly altered the program to comply with election laws, saying the coffee was free just for the asking. So to keep them honest, we took advantage of the offer at the Starbucks on 8th & Townsend Sts.. Sure enough, you had to explicitly ask that you expected the coffee for free.

So who can complain about free stuff, right? But just as we’ve given up the Christmas holiday to crass commercialism, there’s something intrinsically sad about seeing the same happening to our electoral process. We know that in this economy, promotions have to extend well before Christmas. But do we want to live in a society where we encourage voters to participate primarily for the free coffee? And if we’re going to sell out our vote, couldn’t we take a lesson from Sen. Ted Stevens and at least hold out for a Viking gas grill?

Marla of 'Fight Club' says of voting: 'It's cheaper than a movie, and there's free coffee.'

Meanwhile, Starbucks is hoping this promotional event provides a “Look, there goes Elvis!” distraction to investors, as today they announced that quarterly profits have declined 97%. As much as Starbucks wants to scapegoat the economy, their arguments seem all the more hollow while competitors such as Peet’s Coffee & Tea continue to post growth every quarter: Coffee Yes, Starbucks No –

If you haven’t seen it, it’s new to you

We’ve spoken before about the futility of trying to reinvent good coffee. Joffrey’s Coffee & Tea Company not only failed to heed these lessons when they recently launched “Coffee 2.0” (we are not making this up), but they also copied a promotional campaign that spectacularly failed with a whimper two years ago: marketing coffee by and for bloggers.

Free promotional 'coffee for bloggers' -- and it tastes worth every penny!Coffee for bloggers? Now where have we heard that before? Quoting their March 21, 2006 press release, Boca Java’s identical efforts to “directly target this [online] community as a consumer demographic and enable bloggers to purchase, create and name new coffee blends in the product line” failed so completely that today their promotional Web site for blogger coffee simply redirects you to their main storefront — without so much as a mention of their failed “coffee for bloggers” experiment.

Oblivious to Boca Java’s spectacular failure two years prior, a few “bloggers-rule-the-universe” types quickly applauded Joffrey’s Coffee 2.0 effort as a shining, innovative example of how to leverage the blogosphere (gag, hack, spew) as a modern marketing marvel. (And if you’re keeping score on said innovative “Web 2.0” marketing tactics, do note that Starbucks’ efforts to launch coffee podcasts simply blew up on the launchpad two years ago as well.)

Joffrey’s writes of Coffee 2.0: “a new flavor based specifically on the feedback of the beta testers, with ‘upgraded flavor and taste featuring smooth caramel and smoky overtones’ and ‘increased focus power for less distraction.'” So we got ourselves a sample of Coffee 2.0 from its promoters.

How did it taste? Brewed in a French press, the resulting cup was a combination of wet and grainy and little inbetween — unlike the foamy, breathing, emulsion-like substance you get from fresh coffee. Hardly surprising given the dry, hard look of its stale, pre-ground coffee. The same goes for its flat, lifeless flavor. If we are to believe Coffee 2.0 and its beta testers, the future of coffee is basically Folgers.