“I'm so spoiled - I must have a Starbucks vanilla latte every day.” – Katie Holmes

Starbucks is underrated.

I don’t necessarily mean that from the perspective of the population as a whole. After all, with over 13,000 stores worldwide, Starbucks is the largest and most financially successful chain of coffeehouses in the world. It’s difficult to argue that a company with such a huge customer base is underrated. But I’m talking to all you Starbucks haters out there. The ones who think that Starbucks is destroying our society, and those of other countries, one downtown city corner or suburban drive-through at a time. I’m kind of ashamed to admit, but I have probably spent an average of at least 15 hours a week in various coffeehouses for the last 6 years. Most of that time was not spent in a Starbucks. There are other places I prefer. Probably only between 5 and 10 percent of that time was spent in one Starbucks or another. But that means that I’ve spent somewhere between 234 and 468 hours of the last 6 years of my life in Starbucks. Over that time, despite my slight preference for some other coffeehouses, I have come to appreciate what Starbucks does have to offer.

Here’s the run-down.

Good points:

The aforementioned market test. Let’s face it. Starbucks has done pretty well.

Cleanliness. Definitely not a given among the many places that I’ve frequented in my life.

Decent coffee. Not amazing, but pretty good. Of course, as one poster mentioned in regards to my last blog, I may lack the ability to tell what is truly good coffee. Since I apparently lack the sophisticated tastes to determine what makes good bread, my palate certainly won’t be able to discern the subtle flavors of a good coffee roast. But despite one publicized blind taste test in which Starbucks coffee was beat out by McDonalds, there are as many taste tests where Starbucks is found to beat all the competition as there are to the contrary.

Labor practices – Starbucks gives their employees (full and part-time) an impressive benefits package (health, dental, and vision insurance, stock options, 401k with matching). It is the 16th best company to work for in the U.S., according to Fortune magazine. In his recent book, “How Starbucks Saved My Life: A Son of Privilege Learns to Live Like Everyone Else”, Michael Gill, who took a job as a Starbucks barista after being laid off from a lucrative advertising position (and also being diagnosed with a brain tumor and his wife leaving him), says, “I am happier than I have ever been.” He emphasizes the level of respect that Starbucks employees have for each other and their customers.

Local feel - Despite being an international chain, each Starbucks really does have a regular clientele. At least in Memphis, you are just as likely to see the same people over and over at a given Starbucks as you are at any other coffee shop. The employees call the customers by name and vice versa.

Don’t get me wrong. There are some things I dislike about Starbucks. The lack of free internet is one thing. How they call their sizes Tall, Grande, and – I can’t remember what the other size is called – really pisses the hell out of me. Actually, intentionally saying “small” does bring me some enjoyment, because undoubtedly they will repeat what I said, but switch the order of the words around and replace “small” with a slightly emphasized “tall”. The more they frown on my apparent lack of Starbucks ordering skills, the more it makes me smile.

The hours. If there is one way in which a local shop could differentiate itself and gain some business and converts, it would be to stay open late. What’s the deal? I know we’re not a college town, but for the love of God, can’t we support ONE late-night (or all night) coffee shop. (Don’t even try to bring up CK’s.)

The prices. They have always been a bit high, and recently they were raised even more. But the degree to which their prices exceed those of their competitors is overblown. People always say things like, “Why would you get a $4 cup of coffee at starbucks when you can go somewhere else and get one for a dollar?” Well, that’s just not true. Maybe the largest size of some specialty espresso drink is $4, but a regular cup of coffee is much cheaper. You have to compare apples to apples (or iced tall skinny vanilla lattes to iced tall skinny vanilla lattes). In fact, Starbucks prices may actually be lower than many of their competitors (http://starbucksgossip.typepad.com/_/2004/08/starbucks_price.html).

Their ability (and occasional practice of) buying out local competition doesn’t concern me so much. (After all, that is voluntary, and just means that they are better able to satisfy customer’s desires than the local store could). But their growing market power does make the economist in me squirm a little. At this point, however, they are by no means a monopoly. The cost of entry into the coffee shop market is relatively low. There will always be alternatives available.

The music isn’t always so great, but that varies greatly from store to store (and I know of at least one independent coffee shop that I think of burning down every time I hear them play that awful song by Fergie, or Rockstar by Nickelback, or Take It On the Run by REO Speedwagon….. okay I’ll admit I like that last one, but most of what they play is atrocious.

I do like Starbucks’ recent practice of giving away a new free song everyday on i-tunes. Oh, wait, I forgot. The large corporation is exploiting their substantial market power to shove certain artists down our throat, at the expense of other perfectly able artists out there. Well, in my opinion, free music is free music. As long as there aren’t subliminal messages hidden in the music, like “Drink more coffee!!!” I’m fine with it. Besides, I have to believe that Starbucks has done significant market research in determining what type of music their customers actually enjoy.

It may be argued that the problem with Starbucks (and large chains in general) is their lack of heterogeneity. Indeed, the incredible success that McDonald’s has enjoyed is derived from the fact that one can go into any McDonald’s in the country (and for the most part, the world) and get a cheeseburger and fries prepared exactly the same way as in any other McDonald’s. People value knowing what to expect. The same is true for Starbucks. Of course, if you’re a local and don’t eventually try the local coffee shops available to you, you’re an idiot. Despite Starbucks’ quality (as revealed by its incredible success and propagation), there are better options out there. Just no better options that have successfully integrated themselves into such a wide variety of markets and regions.


Next up: Kevin Costner