At 9 a.m on a Thursday, the new Starbucks at the corner of 900 East and 900 South is catering to a lively crowd. Six people are in line, and another dozen are chatting around the small establishment's cozy tables.
Situated diagonally across the street from the newly arrived corporate giant, the 4-year-old locally owned and operated Coffee Garden hosts its own loyal clientele - 24 patrons at this particular moment in time.The mid-morning snapshot - in addition to reflecting a market deeply divided - embodies a retail coffee war being fought almost overnight now in Salt Lake, latecomer to a conflict occurring in at least 24 other states across the country.
Starbucks has come to town at last, quietly opening five Utah stores in less than a year and boasting of hopes for further local expansion. The Seattle-based company is on fire, blazing its way along an astounding growth trajectory that has seen its stock increase nearly 600 percent in five years and its number of U.S. outlets grow from 165 in 1992 to almost 1,300 today. Starbucks has said openly it hopes to have 2,000 coffee houses by the turn of the century.
It counts 4 million customers a week at its company-owned stores (Starbucks does not sell franchises) and is by far the biggest coffee retailer in the world, reaching recently into Canada and Asia, where it has a presence now in Singapore and where it opened six stores in one day in Tokyo. This year, Starbucks is on track to add 350 more outlets, most of them in the United States, where it does business in 25 states.
With success has come derision, however.
Starbucks is the Goliath of coffee-by-the-cup, say critics, the bane of mom-and-pop java houses everywhere.
Though Coffee Garden proprietor Alan Hebertson said he is holding his own against Starbucks, he dislikes the company nonetheless because of its "predatory" approach to marketing, a common and widespread criticism of Star-bucks.
"Until they saw there was a market they didn't bother with it," said Hebertson, who in 1993 approached the company with a query about whether he might help them get started in Salt Lake City.
"The man I was put in touch with (at Starbucks' corporate offices in Seattle) literally laughed at me," Hebertson said. "He said they had no plans on selling coffee in Utah."
That was then, this is now.
In the spring of 1996 - after Hebertson's Coffee Garden was thriving - Starbucks called to ask what it might take to buy out his lease. The corporation wanted to gain a Utah toehold at Hebertson's location, which anchors a small but bustling neighborhood commercial center.
Hebertson named his price (he declined to reveal the figure for print).
Starbucks countered with a $110,000 offer.
Hebertson stuck by his original amount.
Starbucks sweetened the deal by enlisting the support of Hebertson's landlord, who added to the offer, bringing it to $150,000.
Hebertson turned that down, too, and Starbucks told him they would just set up shop across the street, no hard feelings.
"They said they didn't want to look like the big bad wolf, and I'm sure that's exactly how they view their growth," Hebertson said. "The big bad wolf doesn't think it's bad to go out and kill sheep."
"We didn't come into the market gunning for anyone," insisted Ed Beazer, Starbucks' district manager for Salt Lake City. "I don't know of any market where we focus on competitors and go after them."
The official company line - invoked in every city where Starbucks makes an entrance - is that there is plenty of room for competitors to survive and that Starbucks even helps its rivals.
"What happens when Starbucks appears is that the awareness of specialty coffee tends to increase," explained Erica Shubin, a Starbucks spokeswoman who works for the company's Salt Lake public-relations firm Scopes Garcia Carlisle Advertising Inc.
Shubin's argument is even embraced by some competitors.
"There's some truth to that," concedes John Bolton, the dean of gourmet coffee in Utah and owner of the venerable Salt Lake Roasting Co., which dates from 1981.
"Their whole take on it is that they're going to increase the (coffee) knowledge of the average consumer in the marketplace," said Bolton, though he was quick to suggest that Starbucks' product is inferior to his line of locally roasted beans and that the Seattle corporation relies more on image than quality.
"In our world today, marketing is everything and substance takes a second seat . . . if you present yourself in a high-glitz fashion like they do than a great percentage of the buying public will purchase from you on the basis of your presentation."
Such is the case in Park City, argues Dave Schaffner, owner of La Niche, a 12-year-old "gourmet gift store" and coffee- and espresso-seller since 1989, the year such drinks became available by the cup on Main Street.
Starbucks earlier this year hung its shingle across the way, and Schaffner said the competition has severely affected his coffee revenues, though his distaste for Starbucks is rooted more deeply in a disdain for the Wall Street culture it brings.
"My main concern is the corporatization of Main Street, which will have an effect on the uniqueness of the town," Schaff-ner said. "It's not necessary to have them here. There was plenty of coffee before they arrived."
Indeed, the company's strategy smacks of coattailing on others' work. Just as Starbucks put down roots near the Coffee Garden and La Niche, it raised its visage in the east Sugar House area of 1500 East and 1500 South, a tiny cluster of businesses where Einstein Bros. Bagels had long provided a popular venue for coffee connoisseurs.
"They've discovered our little secret here," said A.J. Workman, the local marketing manager for Einstein Bros., which traces its roots to a modest, one-store debut in 1989 that led to its own remarkable growth and a series of mergers and acquisitions that translates today to 500 stores in four states.
Still, Einstein Bros., despite its success, is no corporate match for Starbucks, which opened its first Utah store with little fanfare at Foothill Village in Sugar House on Dec. 7 (a date some coffee-war watchers wryly note coincides with the anniversary of the Japanese sneak attack on Pearl Harbor).
Beazer, the district manager, said the company has no precise goal in mind for Utah but said his personal ambition is to add another half-dozen Starbucks along the Wasatch Front.
He said Starbucks has recently explored locations in downtown Salt Lake, on South Temple east of State Street, in Sandy, West Valley City and at Fort Union.
"We want to build as many stores as the market demands," Beazer said, hinting that Starbucks thinks there's still room in Salt Lake for more coffee merchants.
Broad statistics support the hunch as the modern fashion for coffee continues. According to the National Coffee Association, the number of coffee houses nationally has increased from 200 in 1989 to about 8,000 today. Consumption, in the meantime, has leveled off at about 1.7 cups per day after a generation-long slide dating from the 1970s.
Such statistics are diluted locally, however, by the predominant religion. Practicing members of The Church of Jesus Christ of Latter-day Saints eschew coffee, a fact that makes Utah's marketplace distinct from the rest of the nation.
"I think there's only a limited number of people drinking coffee from here," said Bolton, the Salt Lake Roasting Co. proprietor. "How much is fad and how much is real growth is anybody's guess."
Starbucks' entrance portends a shakeout in the marketplace, predicted Steve Brewster, co-owner of Millcreek Roasters, who said the new corporate presence will stiffen competition and demand coffee retailers meet certain standards.
"Starbucks is the McDonald's of the coffee world. Their strong suit is consistency. You will always get the same cup of coffee wherever you see them.
"But I'm not afraid of them," added Brewster, who sells at three retail outlets and caters to numerous restaurants.
"Our coffee's better than theirs," he said.
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ADDITIONAL INFORMATION
Starbucks Coffee
Starbucks' short history
Founded with one outlet in 1971 in Seattle by two small-business men; named after the coffee-swilling first mate in "Moby Dick."
Stock value
1992 fourth quarter - $7.62 per share
Last week - $41.62 per share
Number of stores
1987 17
1990 80
1992 165
1994 425
1997 approaching 1,300
Utah presence
Opened first store last year in Foothill Village; has two other outlets now in Sugar House, one in Holladay and one store in Park City. Licenses three kiosks at Salt Lake International Airport and one at a local Barnes and Noble bookstore.
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