Business and Industry

Joseph Schumpeter Drinks Deep at Starbucks Coffee

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You know Starbucks had become gigantic when, several years ago, The Onion ran a story with a headline like, "Starbucks to Open in Men's Bathroom of Starbucks."

The AP reports on the company's missteps over the years, neatly underscoring how difficult it is to stay not just on top, but in business altogether:

Among the bigger ventures were attempts to open separate food-and-drink outlets: a full-service, sit-down restaurant called Cafe Starbucks, and a computer-friendly bar under the name Circadia.

Starbucks also partnered with a few Web portals and pushed further into merchandise and media, including a periodical called Joe Magazine and a line of journals and desk supplies.

None of those ideas lasted. But that spasm of unsuccessful brand expansion shows that Starbucks can become overheated about the world outside of coffee….

[Former Starbucks marketer John] Moore sees parallels in some of Starbucks' latest moves beyond coffee-related commerce—namely last year's marketing of "Akeelah and the Bee," a feature family film that was heavily promoted in stores but got a chilly reception at the box office.

"There was no linkage to coffee at all, nothing to the core of what the company was about," Moore said. "You start to realize, 'Wait a minute … they just want my eyeballs. They sold my eyeballs to someone.' "

Other skeptics question whether Starbucks' other recent media ventures, particularly its new Hear Music record label, are the type of moves that could distract Starbucks from its bread and butter: selling $4 coffees.

More here.

Years back, I wrote about the brewing anti-superstore movement. Part of the article looks at how past category-killers–A&P in supermarkets comes to mind–just finally faded from view.

When Starbucks across America are turned into tanning salons (or whatever), Joseph Schumpeter, the coiner of the term "creative destruction" and the subject of an excellent new bio, will have seen it coming.

NEXT: The Partial-Birth Abortion Challenge

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  1. A cup of coffee at Starbucks costs $1.75.

  2. Hey! You used Joseph Schumpeter just to get my eyeballs! I want my 2 seconds back!

  3. Starbucks (and Apple, for that matter), will never, ever face a consumer backlash. Mainly because:
    – their customers do not think they are “consumers”
    – po’ folks don’t shop there

  4. starbucks has been facing a consumer backlash for years i thought.

  5. If by “consumer backlash” you mean enormous success, then yes, goldfinger.

  6. Slightly OT:

    I am watching season 6 of the Sopranos on DVD, and I think the funniest scene ever was the two mobsters trying to shake down the manager of Starbucks for protection money.

  7. I’ve never understood the corporate impulse to ceaselessly expand. Commons sense would suggest that there is an upper limit to the amount of market penetration/number of outlets etc. that any one business can maintain. But it seems that many businesses are determined to find that limit by surpassing it and collapsing under their own weight.

    Ironchef-I am very definitely poor, but I still indulge in Starbucks when I get the chance.

  8. aaron: Basic Starbucks coffee is disgustingly bitter because it has to taste right when they mix it was sugar, syrup and crack. Starbucks won’t suffer a consumer backlash so much as it will struggle when it is seen as less than trendy. At some point, it will be embarassing for people to bring their Mac to Starbucks pretending to write a screenplay. I suspect the trend will get stronger before it weakens.

  9. Selling a few cents worth of a tasty, addictive drug for a few dollars is a good gimmick. I dunno why they want to get into the music publishing industry. There’s a dinosaur.

  10. I went into one of their music store/coffee shop hybrid and thought to myself “maybe they know something about making money that I don’t” That’s usually what I think to myself whenever a buisness makes either a really, really good decision or a really, really bad decision.

    Starbucks (and Apple, for that matter), will never, ever face a consumer backlash. Mainly because:
    – their customers do not think they are “consumers”
    – po’ folks don’t shop there

    Anarchists armed with trash cans (

  11. aaron made the initial point that I wanted to make whenever people look at you like you’re crazy for going to Starbucks.

    “Why would you pay $4 for a cup of coffee?”

    Yeah, because I’m going to Starbucks to get a cuppa joe – that’s it exactly.

    My favorite thing about Starbucks is their tendency to reuse existing buildings. I don’t think I’ve ever seen a new-construction stand-alone Starbucks. Not saying they don’t exist, but I’ve never seen one.

  12. Lamar:

    Basic (as in “brewed”) Starbucks coffee is not mixed into any of their mocha/latte/frappacino drinks, it’s espresso that goes into those. I find the plain espresso at Starbucks to be unremarkable, but the brewed coffee is fine. Not spectacular, but almost never bad. And knowing it’s not going to be bitter, cold, burnt or stale is a real plus when on the road, as nothing sucks worse than bad coffee.

    Aaron: the $1.85 venti I used to buy in the States costs about twice as much here in the UAE.

  13. So there’s no excuse for the disgusting, bitter coffee they sell? my oh my.

  14. Anyhow, drink your hipster coffee, defend it as excellent quality, do whatever you need to do to make yourself happy. Starbucks has done a good job of keying into your demographic.

  15. But it seems that many businesses are determined to find that limit by surpassing it and collapsing under their own weight.

    How else does anything find its limit?

  16. I don’t like coffee in the first place, and I still don’t understand why people pay so much for the Starbucks’ variety. However, I suspect that a major reason is to buy a milkshake in the guise of a cup of coffee.

    I went to the original Starbucks when I was working on a six-week project in Seattle. Except for the outside, it doesn’t look much different than any other location. I’d rather watch people throw fish around, if I’m going to hang out at Pike Place Market.

  17. See? Even Starbucks can’t save the bees! It must be cell phones/GM crops/Libertarians’ body odor!

  18. What about Burt’s Bees? Aren’t Starbucks people equally enamored with all the pseudo-folk remedy BS?

  19. Starbucks (and Apple, for that matter), will never, ever face a consumer backlash. Mainly because:
    – their customers do not think they are “consumers”

    Anyhow, drink your hipster coffee, defend it as excellent quality, do whatever you need to do to make yourself happy. Starbucks has done a good job of keying into your demographic.

    er, what year are you two living in? 1992? while hipsters do drink a lot of coffee, they tend to avoid starbucks at all costs. if you ever go to a starbucks, you’ll see that it’s full of fairly consumer-ish yuppies, not the skinny-jeans and thrift-store sweater set.

  20. dunkin donuts is starting to make inroads against starbucks in nyc (where there are literally hundreds of starbucks in all sorts of nooks and crannies) by coming up with flavored and sweetened coffee-based drinks but shaving a buck or two off the price.

  21. Dunkin’ Donuts will crush Starbucks when it realizes that it has two great tastes that taste great together and introduces Glazed Coffee to the world.

  22. starbucks has been facing a consumer backlash for years i thought.

    The key is that they have only had this “backlash” among people who aren’t actually regular customers. The segments of people who will actually bother to express hostility to Starbucks largely boil down to

    1) Whiny kids who hate corporations
    2) People who prefer to pay somewhat less for the even worse coffee at any given gas station
    3) People snobby about their coffee.

    None of these people would have gone to Starbucks anyway, so it’s no loss to them.

    (Now, I won’t deny that regular Starbucks coffee is downright burnt (and the nice Keurig machine in my office produces very nice stuff), but then, I go for their espresso-based lattes on the occasions I go there.)

  23. Well, some of us go to Starbucks because you can buy food and coffee in a warm room at 6:07 am on the way to work. Or even use their drive-thru.

    Perhaps hipsters don’t work office hours with long commutes.

  24. And knowing it’s not going to be bitter, cold, burnt or stale is a real plus when on the road, as nothing sucks worse than bad coffee.

    I’ve ordered regular coffee at Starbucks a few times and it’s always bitter and burnt. Their cheapest tolerable coffee is the “Americano” at around $2, and it isn’t half bad.

  25. er, what year are you two living in? 1992? while hipsters do drink a lot of coffee, they tend to avoid starbucks at all costs. if you ever go to a starbucks, you’ll see that it’s full of fairly consumer-ish yuppies, not the skinny-jeans and thrift-store sweater set.

    Yup, it’s middle-class folks and bobos all the way. Folks who want a sweet coffee and happen to like the atmosphere – and who don’t cringe at the prices.

  26. Well, some of us go to Starbucks because you can buy food and coffee in a warm room at 6:07 am on the way to work. Or even use their drive-thru.

    That’s always nice, to.

  27. introduces Glazed Coffee to the world

    I thought they already used glazing in their coffee & that is why it smells and tastes like donuts. It’s the most disgusting coffee I’ve ever had, and now people drink that crap on the subway all the time & the smell of it makes my stomach turn over.

  28. Rhywun,

    It’s still in the experimental stage and not safe for human consumption.

    Next, the chocolate ?clair coffee!

  29. “Yup, it’s middle-class folks and bobos all the way.”

    Starbucks is most certainly hipster coffee, and not because hipsters drink it. It makes boring yuppies feel young, hip and trendy.


  30. not the skinny-jeans and thrift-store sweater set.

    That would be Filter, right Mr. Steven Crane?

    -Fellow Chicagoan

  31. yes, herr totale, but filter (and swank frank) are scheduled to be displaced by a bank of america branch.

    i would also posit intelligentsia and metropolis as places where the people who don’t think they’re consumers consume coffee.

  32. Starbucks is most certainly hipster coffee, and not because hipsters drink it. It makes boring yuppies feel young, hip and trendy.

    okay, so where are the real cool kids getting their coffee?

    most people i see in there are in suits because it’s the biggest and, more importantly, the fastest coffee shop in the cbd.

  33. “Basic Starbucks coffee is disgustingly bitter because it has to taste right when they mix it was sugar, syrup and crack.”

    I think we have a winner…

    Anyone try the Newman’s Own coffee at Mickey Dees?

  34. here’s a hint: if you’re the sort of person who styles yourself anti-consumerist, you don’t buy your coffee from a chain that over-markets and attempts saturation. if you’re in chicago and buying coffee, say, you’ll go to filter or intelligentsia or metropolis or uncommon ground – locally-owned joints in your hipster-y neighborhood.

    on the other hand, american apparel marketing themselves as “unbranded” is a stroke of genius.

  35. “so where are the real cool kids getting their coffee?”

    There are no cool kids — only perceptions thereof. But if there were, it wouldn’t be somebody so sold on a brand name that they delude themselves into thinking burnt, acidic coffee is good.

    I just peeked in the Starbucks downstairs (NYC) and the line is huge. However, I will concede your point that suits go to Starbucks during the day, but usually aren’t lounging around.

  36. downstater,

    While the yuppies are wearing black turtlenecks and drinking Starbucks to make them feel like hipsters, the hipsters and drinking Dunkin Donuts and wearing trucker hats to make them feels like workers. Meanwhile, the workers brew their Mr. Coffees in travel mugs so they can feel like yuppies.


  37. yes, herr totale, but filter (and swank frank) are scheduled to be displaced by a bank of america branch.

    damn, i knew swank frank closed down but hadn’t heard about the bank of america business. i had high hopes for that corner. like a gap or something.

  38. “While the yuppies are wearing black turtlenecks and drinking Starbucks to make them feel like hipsters, the hipsters and drinking Dunkin Donuts and wearing trucker hats to make them feel like workers. Meanwhile, the workers brew their Mr. Coffees in travel mugs so they can feel like yuppies.”

    Brilliant. I can’t beat this.

  39. Yeah, they aren’t cool and the product is so-so (but consistent). The biggest reason for their success is that they train the staff to be friendly. They make a tiny mistake — here’s a card for free coffee.

  40. If nothing else, Starbucks is consistant. That’s why it works … I think.

    I live in Mexico and surprisingly, I see no shortage of people willing to part with 45 pesos for a Caramel Frappuccino. (The daily minimum wage is about the same.)

  41. Anyhow, drink your hipster coffee, defend it as excellent quality, do whatever you need to do to make yourself happy. Starbucks has done a good job of keying into your demographic.

    Nah, it couldn’t possibly be that some people like the taste of their coffee and it’s convenient to their travels.

    Since when has buying at the largest anything been the surest sign of hippsterism? Usually doofism is hallmarked by snobish sniffing of anyone daring to be so booj.

    The biggest reason for their success is that they train the staff to be friendly. They make a tiny mistake — here’s a card for free coffee.

    Potbelly is the same way. They continue to get my business.

  42. JW: you are hereby found guilty of not reading the posts above. First, I said to make yourself happy, go to Starbucks if you like burnt, acidic coffee. The very statement means that some people actually like the poor quality coffee. Kudos to them. Second, you apparently missed the discussion on hipsterdom. Joe clearly had the best take on it.

  43. I did read the posts and you pretty much just continued to piss on anyone buying Starbucks from a perspective of anyone patronizing them did so trying to inlfate one’s own ego or status.

    Starbucks won’t suffer a consumer backlash so much as it will struggle when it is seen as less than trendy.

    Anyhow, drink your hipster coffee…

    Aren’t Starbucks people equally enamored with all the pseudo-folk remedy BS?

    Starbucks is most certainly hipster coffee, and not because hipsters drink it. It makes boring yuppies feel young, hip and trendy.

    Did I miss something?

  44. FWIW, the only people in Starbucks ’round my parts are housewives, immigrants, high school students, govt workers and work-a-day types.

    I can’t recall the last hispter type I saw in there, unless you count the ones using Macbooks.

  45. Well, I don’t find Starbucks to be disgustingly bitter, but since it’s obviously a matter of personal taste, we’ll have to agree to disagree on that. However, I don’t think my patronizing Starbucks says anything about me other than I need coffee in the morning to function.

    Joe,
    I had heard good things about the Newmans at McDonalds, but wasn’t that impressed when I tried it. Certainly a league above what they used to serve, though.

  46. Steven Crane –

    not 1992, but I’m in Columbia, SC. Around 5 years ago we got our first Starbucks here that wasn’t in a B&N. I think there are about 5 stand a-lone locations now. (in a Southern capital city & college town of about 100k)

    So excuuuuuse us for being so behind the times 🙂 It’s very much the trendy coffee-haus place to be.

  47. FWIW, the only people in Starbucks ’round my parts are housewives, immigrants, high school students, govt workers and work-a-day types.

    My experience, too.

  48. if you ever go to a starbucks, you’ll see that it’s full of fairly consumer-ish yuppies, not the skinny-jeans and thrift-store sweater set.

    A while back, we went to see Henry Rollins, who did a hilarious rant about Wal-Mart. The difference between Rollins and other people who rag on Wal-Mart: he actually sets foot in the place all the time while he’s on the road. He has a love/hate relationship with them.

    I came away realizing that only a person who is actually familiar with something can effectively skewer that thing.

    (Egads! I just admitted to going to Starbucks and name dropped Henry Rollins. I’m sure that consigns me to a deeper level of hell than bobos.)

  49. The amazing thing to me about Starbucks is their success albeit virtually ZERO advertising.

    I’d say their ubiquitousness may serve as their own advertisement. However, there’s a McDonald’s every 5 friggin feet too but only one of those two companies is constantly pimping their coffee on tv/billboards.

    Maybe they do advertise and I just haven’t seen them because I don’t even own a television. Have I mentioned that? That’s also why I, and everyone else, gets their coffee there. 😉

  50. JW: Yes, I pissed on people who like Starbucks coffee because it is well documented to be over-roasted crap. That said, one of the beauties of this world is that you are different than I am. If Starbucks makes you happy, then go for it. Why should you worry about what people knowledgeable in coffee think? It’s the same with music and any other topic of taste. While I laugh at your taste in coffee, I applaud Starbucks for finding a way to sell shit to the masses. However, when that shit stops being trendy, Starbucks will lose marketshare. That’s my opinion, and it will always be my opinion that quality wins over flash.

    Perhaps I ascribe too much motivation or thought to somebody paying $2 for throwaway coffee.

  51. Good god, how status-obsessed must one be to speculate (out of one’s ass) about the motivations for buying coffee at a particular location?

  52. I am currently finishing a cup of coffee that cost me $4.04. I know this because I try to always pay with exact change + $1, and give the $1 as a tip.

    Near my office (in the Queen Anne neighborhood of Seattle) there are easily 10 coffee shops, or coffee + something hybrids.

    I get coffee exclusively from a little non-chain place called El Diablo. And I happily pay $5.04 for their coffee. Because, one, it’s good. Cafe con leche is the best drink ever invented, and unavailable at your typical chain coffee shop. Two, because when I walk in the door, they start making my coffee before I’ve even ordered. Three, because they are always pleasant, funny, and friendly.

    So I’m basically paying a premium to be treated nicely by the staff. I avoid Starbucks because their coffee is mediocre, and their staff turns over so fast that it’s impossible to have any kind of personal relationshop with them.

    It seems like a good deal to me. If that makes me a ‘hipster’, someone mail me my turtleneck and decoder ring.

  53. Perhaps I ascribe too much motivation or thought to somebody paying $2 for throwaway coffee.

    I think we agree there.

    That’s my opinion, and it will always be my opinion that quality wins over flash.

    I really could give a rat’s about what a critic or a roaster thinks of Starbucks coffee. Don’t like it? Don’t buy it. I know I don’t go there for “flash”, whatever that is. I go there for a number of reasons, but cache` ain’t one of them.

    I like their darker roasts, but then I don’t drink my coffee black. Maybe that is the difference. I buy the whole beans and have them grind it more than I get it already brewed. It’s only a couple bucks more than the supermarket stuff and light-years better. YMMV.

  54. “Good god, how status-obsessed must one be to speculate (out of one’s ass) about the motivations for buying coffee at a particular location?”

    We’re talking about the business model of Starbucks which has sustained itself long past the time when one would think expensive, yet low-quality, coffee would continue to be profitable. Some, as I have, ascribe this to social phenomena such as the desire to be seen as X. This isn’t status-obsession, it’s just addressing the issue posed by the article.

  55. We’re talking about the business model of Starbucks which has sustained itself long past the time when one would think expensive, yet low-quality, coffee would continue to be profitable.

    This same business has sustained MickyDees for some time now. No sign of it giving out any time soon. It isn’t high quality food and no one expects it to be. It is what it is.

    Now, you think Starbucks is low-grade stuff. OK, I won’t quibble with that. But, they make a decent product, that IMO is far better than you will get at someplace like McDonalds. When you go in to a Starbucks, you know what to expect product-wise and the quality is consistent across the company. That counts for a lot.

    Make any joke of that however you like.

    I know a lot of people that go gaga over Trader Joes. To me, they’re just OK, nothing special. Joes has a couple of items that I buy regularly and their Clif bars are a bargain. But I couldn’t do my entire grocery shopping there. It’s a convenience store to me.

  56. past the time when one would think expensive, yet low-quality, coffee would continue to be profitable

    That was my original point – it’s not expensive. Unless you’re buying a frappachino or whatever, and then who cares how high quality the coffee is.

  57. Dunkin’ Donuts will crush Starbucks when it realizes that it has two great tastes that taste great together and introduces Glazed Coffee to the world.

    They would be afew years late, Krispy Kreme has been serving glazed flavored Lattes for a while now.

  58. there’s a dunkin donuts in bay ridge, on 5th ave, that makes super duper bangin coffee. (pronounced caw-fee)

    just fyi. 5th and 91st or something like that. not far from the schnitzel haus.

  59. I would prefer Starbucks stick to coffee — and the side business they perform in Idiocracy.

  60. aaron: Nobody is buying your whole ‘Starbucks isn’t expensive’ schtick. A cup of coffee costs 75 cents at a deli or bodega (which is, admittedly, hit and miss). Starbucks sells their rookie brew to you for more than twice that amount.

  61. Fine, Lamar. You’re a superior being because you sneer at Starbucks. You win the thread. Congrats.

  62. Thanks, Number 6. There may be some hope for you yet….except, if I’m not mistaken, declaring a thread winner is a drinking event, no? 8)

  63. That “A new Starbucks will open… inside an already exisiting Starbucks!” joke was from the “In the year 2000” series on Conan O’Brien. Possibly it was also in the Onion… in retrospect it seems pretty obvious (but still funny).

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