Why haven't Starbuck's competitors done more damage?

[CorpRaider]

I doubt Baskin Robbins will be partnering with SBUX for so long as they are owned by DNKN. 

[Parsad]

Were there other chains other than Sammy's?

 

Yes, very good ones, including one called JJ Beans.  Many argued they had/have the best coffee in town.  But again, they could not take away any market share.  They survived and continue to maintain many of their locations, but have not really expanded.  Whereas, almost every new development in every city centre around Vancouver has not only one new Starbucks, but usually multiple.  There is one small mall in Burnaby that has two...and no other coffee shops other than a McDonalds!  Metrotown, which is the largest mall outside of the Mall of America and Edmonton's Mall, has four Starbucks and one other coffee chain, as well as a McDonalds.  No competition. 

 

Starbucks actually entered the Toronto market en masse much later than Vancouver's.  Already they are the dominant chain, with several going out of business or acquired by Starbucks.  But they did elevate the coffee culture there.  I remember going to Toronto eight years ago, and going what is this shit?!  You couldn't get a decent mocha anywhere.  Today, you have some very good cafes in Toronto, albeit, they are mostly independents and stand alones, not chains.  Cheers!

 

Were this chains multi city? Why did they not expand?

 

Yes, multi-city around Vancouver.  Key locations were taken by Starbucks faster than they could expand into burgeoning markets.  Their average income per store was a lot less than Starbucks. 

 

Actually, the one chain that has actually done reasonably well, was the smallest one 10 years ago...Waves Coffee.  Their schtick was free-wifi well before Starbucks offered free wifi.  Their coffee is pretty good...not nearly as good as Artigiano, JJ Bean or Starbucks, but they catered to the wireless, mobile office warrior or students early on, and they have been doing pretty good. 

 

Still not significant relative to Starbuck's market share, but they have been the one chain to actually thrive in the last few years with all of the competition from Starbucks.  So, the only way to compete with Starbucks is not head-on...find a niche.  Cheers!

[rkbabang]

As a real coffee geek I buy my own beans from a local roaster who roasts them in small batches and delivers them personally to my door within 24 hours. I grind them right before brewing them myself (sometimes I use my drip machine and sometimes espresso).  The only time I buy coffee already prepared is when traveling, and yes I will choose Starbucks. Not because it is the best by any means, but because it is consistently okay. Unknown local shops are very hit and miss in my experience, with Starbucks you know what you will get. Dunkin' Donuts is okay as well. I couldn't imagine drinking that stuff everyday though.

[Parsad]

As a real coffee geek I buy my own beans from a local roaster who roasts them in small batches and delivers them personally to my door within 24 hours. I grind them right before brewing them myself (sometimes I use my drip machine and sometimes espresso).  The only time I buy coffee already prepared is when traveling, and yes I will choose Starbucks. Not because it is the best by any means, but because it is consistently okay. Unknown local shops are very hit and miss in my experience, with Starbucks you know what you will get. Dunkin' Donuts is okay as well. I couldn't imagine drinking that stuff everyday though.

 

I do the same thing.  Although, rather than keeping a whole bag of espresso beans at home, I just bought a Nespresso machine.  Very good, and forms a really nice crema on the espresso.  Their coffee is good as well...vacuum sealed fresh, so the taste isn't any different than grinding the beans and brewing it from a bag that same morning.  I'm a value investor, so I waited till one of the old Nespresso models was on sale...got a brand new machine for $65...regular $190!  I also set up a really nice home office in my new home, so I work from home 2-3 days a week, and don't get that chance to get my coffee at the Starbucks in my downtown office building...thus the Nespresso!  Cheers! 

[krazeenyc]

 

Why oh why didn't I hold onto my SBUX?

 

Tell me about it.  Bought it at a little over $7 during the credit crisis for my own portfolio.  Sold out at $20 a couple of years later!  :'(  Cheers!

 

 

 

We all have similar stores -- I bought WFMI $10 pre split - sold at $45 (pre-split) it's at like $120 or whatever right now?

It is amazing the bargains available when everyone thinks the world is ending.

[Pauly]

SBUX is also very good at training their employees. They tend to be really chipper and genuinely seem to enjoy working there, which makes for a more pleasant consumer experience.

They have good quality cups and lids (unlike Tim Horton's where I resign myself to the fact that I'm going to burn myself when their cheapo lid malfunctions), and, as everyone else has said, the coffee may not be the best, but it definitely won't be the worst. And when you're craving a coffee there's nothing more disappointing than a hot cup of dishwater.

[roundball100]

Most Tim's will now give you a raised lid (the type they use for their fancier drinks) if you ask for one with your regular drip coffee.  I guess the regular flat lids save them money. 

[CorpRaider]

 

Why oh why didn't I hold onto my SBUX?

 

Tell me about it.  Bought it at a little over $7 during the credit crisis for my own portfolio.  Sold out at $20 a couple of years later!  :'(  Cheers!

 

 

 

We all have similar stores -- I bought WFMI $10 pre split - sold at $45 (pre-split) it's at like $120 or whatever right now?

It is amazing the bargains available when everyone thinks the world is ending.

 

I did roughly the same thing with WFMI.  Oh well.

[fareastwarriors]

http://www.nytimes.com/2013/10/09/business/a-juice-and-croissant-with-that-starbucks-latte.html?pagewanted=1&ref=business

 

Starbucks Aims to Move Beyond Beans

[valueinvesting101]

Any listed play for Starbucks in emerging market? I know they have partnered with Tata for India entry but that is not pure-play on Starbucks as it also includes Tea and other beverages. Has anyone explored this option of targeting well known brands entering into new markets via listed companies?

Arcos Dorados Holding Inc comes to my mind. Also remember Coke subsidiary in Greece discussed on the board.

[crackspread]

mindshare, high prices/high margins, and good employees. the other coffee chains flat out do not offer that. i do think mcdonalds will own more market share in the next 5 years however.

[gary17]

Interest discussion. 

 

I happen to have glimpsed at the first third or so of his book "Onward".  In addition to coffee, he talks about creating an environment just for people to hang out, the "Starbucks Experience".  So for example, he took out the breakfast sandwich when he came back as the CEO, and that's just when McDonald was starting to serve coffee, at the time perceived as a big threat.  The reason is he thought the smell of burnt cheese detracted from the smell of coffee, integral to the coffee experience.  Does the smell of cheese really cheapen the experience?  I don't know.  But one thing is for sure.  When my friend and I meet up at some random place, it's invariably a Starbucks, not McDonald or Dunking Doughnut.  Those guys can have their customers, and Starbucks will have theirs.  Stuff like free wifi, when he first started it, all are integral to the experience.

 

Incidentally, I also happen to catch Danny Meyers, the restauranteur on Bloomberg TV once, talking about the tremendous success of "Shake Shack", the New York burger hang out when he first created it at Madison Square Park.  It was literally just a shack in the park.  In the summer, people line up for hours.  He mentioned that return on investment wise, it's the single best investment across anything he's done, and that's from a guy who created some of the most premium fine dining experience in the world.  And the secret?  He thinks people are there just to hang out and watch other people while enjoying a burger under the sun.

 

When you think about it, coffee shop is the one place people (who drink coffee) go to pretty much every day, order more or less the same thing.  How much of that is habit and how much is conscious choice?

 

I wouldn't call  "Onward" the greatest business book you'll read, and a lot of it is wishy washy stuff, but for guys who build brands for a living, there are lots of interesting nuggets.

 

This is in my book as a type of business that Guy Described as "providing intangible benefit at a low cost to the customers" and combined with the ability to raise prices to combat inflation... If it wasn't 70bux I would love to load up.  Should have during the recession.  I can buy Starbucks and go away for ten years knowing it will be fine.

 

Wish there were more like this.

 

 

 

[yadayada]

one reason they opened so many stores on every street corner is so competition wouldnt be able to do so. They simply picked up all the good spots.

 

Second reason is that those stores basicly functioned as billboards as well. Get into people's subconscious.

 

Third reason is ofcourse scale.

 

And like mentioned, they do a good job on the quality and ambiance. But those are not the main reasons imo.

[JSArbitrage]

Not because it is the best by any means, but because it is consistently okay. Unknown local shops are very hit and miss in my experience, with Starbucks you know what you will get.

 

I think this is an important point.  I think businesses have to solve different problems at different stages of growth.  I really have never liked the idea that some people promote that these business were basically destined to success from the start.  I think large chain restaurants, in order to be successful, have to be really really good at consistency.  I did SBUX every day and it's not because it's the greatest cup of coffee in the world.  It's because it's plus or minus exactly the same every time.  I tried my local hippy place and hated it because the drink always tasted different. 

 

When I travel internationally, I always seek out SBUX because it know exactly what I am going to get.  And when you are craving a caffeine kick, you don't want to play Russian roulette with your barista output. 

[Guest valueInv]

one reason they opened so many stores on every street corner is so competition wouldnt be able to do so. They simply picked up all the good spots.

 

Second reason is that those stores basicly functioned as billboards as well. Get into people's subconscious.

 

Third reason is ofcourse scale.

 

And like mentioned, they do a good job on the quality and ambiance. But those are not the main reasons imo.

 

Watch these guys:

 

http://venturebeat.com/2014/01/29/blue-bottle-jolts-up-with-26m-to-get-more-americans-hooked-on-fancy-hipster-coffee/

http://techcrunch.com/2013/05/01/philz-coffee-raises-eight-figure-round-from-summit-angels-as-specialty-coffee-market-heats-up/

 

[PlanMaestro]

Any listed play for Starbucks in emerging market? I know they have partnered with Tata for India entry but that is not pure-play on Starbucks as it also includes Tea and other beverages. Has anyone explored this option of targeting well known brands entering into new markets via listed companies?

Arcos Dorados Holding Inc comes to my mind. Also remember Coke subsidiary in Greece discussed on the board.

 

Alsea

[Orange]

Here's a new Starbucks competitor that will more than likely do a great deal of damage:

 

[mcliu]

Here's a new Starbucks competitor that will more than likely do a great deal of damage:

 

 

LOL, this can't be legal.  :o

[Guest 50centdollars]

Here's a new Starbucks competitor that will more than likely do a great deal of damage:

 

 

LOL, this can't be legal.  :o

 

Its actually a spoof for comedy central

[tengen]

Lots of companies may nibble around the edges but I just don't see anyone doing serious damage to SBUX (unless it is self-inflicted).

 

One tiny company ($30 million CDN market cap) I've been following for a few years is a specialist coffee roaster call Ten Peaks (TPK on the TSX). They have the exclusive rights to the "Swiss water method" to decaffeinate coffee beans. The Swiss water method's claim to fame is that it is "chemical free". One could argue that the CO2 method produces better tasting coffee and that CO2 is just as benign as water (in this context) but "CO2 method" just doesn't sound as nice as "Swiss water method".

 

TPK are a bit at the mercy of global coffee futures and they really suffered when the price of unroasted beans spiked a few years ago. Since the price of beans has returned to normal, they've done pretty well and generating a nice cash flow. I don't own any shares and the price has been on a strong upward trend while I've been dithering.

[Guest 50centdollars]

Lots of companies may nibble around the edges but I just don't see anyone doing serious damage to SBUX (unless it is self-inflicted).

 

One tiny company ($30 million CDN market cap) I've been following for a few years is a specialist coffee roaster call Ten Peaks (TPK on the TSX). They have the exclusive rights to the "Swiss water method" to decaffeinate coffee beans. The Swiss water method's claim to fame is that it is "chemical free". One could argue that the CO2 method produces better tasting coffee and that CO2 is just as benign as water (in this context) but "CO2 method" just doesn't sound as nice as "Swiss water method".

 

TPK are a bit at the mercy of global coffee futures and they really suffered when the price of unroasted beans spiked a few years ago. Since the price of beans has returned to normal, they've done pretty well and generating a nice cash flow. I don't own any shares and the price has been on a strong upward trend while I've been dithering.

 

I have also been watching TPK the last few years. Never bought any tho. Tim McElvaine is a major shareholder of the company.

[beerbaron]

Lots of companies may nibble around the edges but I just don't see anyone doing serious damage to SBUX (unless it is self-inflicted).

 

One tiny company ($30 million CDN market cap) I've been following for a few years is a specialist coffee roaster call Ten Peaks (TPK on the TSX). They have the exclusive rights to the "Swiss water method" to decaffeinate coffee beans. The Swiss water method's claim to fame is that it is "chemical free". One could argue that the CO2 method produces better tasting coffee and that CO2 is just as benign as water (in this context) but "CO2 method" just doesn't sound as nice as "Swiss water method".

 

TPK are a bit at the mercy of global coffee futures and they really suffered when the price of unroasted beans spiked a few years ago. Since the price of beans has returned to normal, they've done pretty well and generating a nice cash flow. I don't own any shares and the price has been on a strong upward trend while I've been dithering.

 

I remember looking at this thing when it was a net net. You are bringing back memories.

 

I also remember that the process they use to remove caffeine from the beans is pretty long and could not be scaled at a low cap-ex (They put the bean in water, remove the caffeine from the water, put the beans back into water and let dry). I passed because I tough it was going to be a high cap-ex business against competitors with much lower cap-ex.

 

BeerBaron

[Orange]

Here's a new Starbucks competitor that will more than likely do a great deal of damage:

 

 

LOL, this can't be legal.  :o

 

Its actually a spoof for comedy central

 

It's real insofar as the store actually exists, although they just got shut down because they were serving food without a health permit. The guy behind it, nathan fielder, has one of the best shows on Comedy Central IMO. The style is business mocumentary, very funny and original show.

 

http://www.comedycentral.com/shows/nathan-for-you

[bookie71]

Actually I have never met anyone who liked their coffee.  Years ago I remember an article about chains which said that it wasn't the taste of the food that was important, but the consistency of the food.  It used McDonald's  as an example.  Their hamburgers may taste like cardboard, but you know what to expect and that all of their hamburgers will be the same no matter where you are, Phoenix, Tokyo, Frankfurt, etc.

When our oldest daughter came back from her year in India, the first thing she did at the stopover in Germany was buy a McDonald's hamburger.  She normally would avoid the place.

 

[gary17]

I love Starbucks Coffee.

 

Great taste. Just like coke. Addictive.

 

And free soy milk is wonderful too. 

 

They did a nice job upgrading their interior to be more rustic. And they seem to get all the airport spaces too - never seen second cup or blenz or other brands.