Shop Talk

Coffee’s third wave

Intelligentsia Coffee & Tea founder Doug Zell is part of an independent third wave of upscale coffee houses taking advantage of America’s growing thirst for the premium coffees that Starbucks helped introduced to the masses. ( Click here to see today’s special report on Starbucks on Reuters.com, or read the report in PDF format.)

“It’s moving from a commodity to a culinary ingredient,” said Zell, whose buyers scour the globe for the best beans and increasingly are focused on treating coffee like a seasonal item — meaning the time from harvest to cup is no more than six months.

Coffee has come a long way in the last few decades. While our parents’ generation grew up on grocery store brands like Folgers or Sanka instant coffee, today’s kids are coming of age at a time when higher-quality espresso drinks like lattes are the norm.

“The consumer is becoming more sophisticated. I still think there is a long way to go,” said Zell, who recently opened Intelligentsia’s ninth location in Venice, California’s offbeat Abbot Kinney section. A tenth spot, which will be a cafe and roasting plant, is in the works in San Francisco.

While Zell wants Intelligentsia to expand, he said maintaining quality is his top priority.

“We want to grow, but we need to do it very carefully,” said Zell, who cut his teeth at Peet’s Coffee & Tea and the now-defunct Spinelli Coffee and still favors a well-brewed cup of black coffee over all other java drinks.

“The specialty coffee industry owes a great debt to Starbucks,” said “Retail Doctor” Bob Phibbs, a consultant who was chief marketing officer at the It’s A Grind coffee chain for nearly a decade.

Starbucks adds spice to Via

Starbucks is expanding its Via instant coffee line this autumn with cinnamon spice, vanilla, mocha and caramel flavors.

The move comes on the heels of the Seattle company’s rollout of Natural Fusions, a line of flavored ground coffees, at U.S. grocery stores this summer.

Starbucks for years avoided selling flavored brews, leaving the niche to its more mainstream Seattle’s Best Coffee brand. But it changed that high-brow stance when the U.S. economy hit the skids and consumers started saving money by drinking more home-brewed java.

The world’s biggest coffee chain is focused on growth following a restructuring that slashed costs and shuttered hundreds of mostly new, but poorly performing stores. It hopes to boost profits by introducing products — like flavored coffee — that appeal to a broader range of consumers and expanding its reach beyond its cafe walls by selling more products at grocery stores and other retail outlets.

Flavored Via and Natural Fusions are key to making those strategies work.

“We know 60 percent of our customers drink coffee with flavor, and now they will have access to high-quality arabica coffees with natural flavors as only Starbucks can deliver,” Annie Young-Scrivner, Starbucks chief marketing officer said in a statement. 

What do you think of Starbucks move into flavored  coffee?

Starbucks drive thru menu getting makeover

Starbucks’ drive thru menus are getting a facelift — as the cafe chain takes a page from the fast-food industry’s playbook.

At the end of August, the menu boards at Starbucks’ 2,600-plus drive thrus in the United States and Canada will have more pictures and fewer words. Fast-food chains like McDonald’s, which has been going after the Seattle coffee company’s core business with espresso drinks, frappes and smoothies,  commonly use simple, photo-based menus to tempt diners.

“People eat with their eyes,” said Clarice Turner, Starbucks’ senior vice president in charge of the menu makeover.

To make room for the additional photos and larger print, the number of items featured on the new menus will be cut from about 75 to around 25. Despite that, everything available inside the cafe will still be available in the drive thru lane, Turner said.

Starbucks has turned the spotlight on quality and its premium market position since the U.S. economy went south and McDonald’s and other chains jumped into coffee and beverage business with me-too products.

To that end, it is planning an autumn launch for Starbucks Reserve – a line of “ultra-premium”, single-orgin coffees that will be sold in its top U.S. coffee markets.

While coffee costs have been soaring, Starbucks told Reuters that price hikes currently are not on the menu. Picture that.

Check Out Line: Bring a mug, get free Starbucks java, save the world

Check out how Starbucks is working to persuade you to help save the planet by using fewer of its iconic paper cups.

On Thursday the company, which hands out about 4.75 million cups a day, is giving away free coffee to everyone who brings in a reusable mug or travel tumbler.

This latest promotion from the world’s biggest coffee chain comes as it works to hit its goal of serving one-fourth of its beverages in reusable cups by 2015.

The ubiquity of Starbucks coffee cups make them a powerful advertising vehicle. But the company’s popularity also has a dark side — discarded Starbucks cups contribute to pollution by creating tons of trash.

“Changing a habit is hard,” Cliff Burrows, president of Starbucks’ U.S. business, told Reuters at the Fortune Brainstorm Green conference in Southern California this week. “We can’t incentivize it more than free.”

Ben Packard, Starbucks’ vice president of global responsibility, said the company is taking a page from the grocery industry’s sustainability playbook.

“We want to do for the coffee cup what happened with the grocery bag,” Packard said, referring to the supermarkets industry success convincing many consumers to bring in their own shopping bags, rather than taking a new plastic bag with each visit.

So much Starbucks coffee to taste (250,000 cups), so little time

Think you drink a lot of java? Think again.      Starbucks’ stable of 20 coffee tasters collectively sample 250,000 cups of coffee every year, Scott McMartin, Starbucks’ director of global coffee advocacy told Reuters during a recent visit to the cafe chain’s Seattle headquarters.      Those tasters — who sample the brews sold at Starbucks and the company’s Seattle’s Best Coffee brand — are based in Seattle, Switzerland and in farmer support centers in Costa Rica and Rwanda.      McMartin, who spoke as he slurped a variety of coffees, says great tasters have a mix of natural skill and commitment to craft. (Tasters make a slurping sound as they practically inhale the hot brew — a process that mixes the  liquid with air to help the tongue detect different flavors. Then they swish and spit.)       Top tasters, like athletes and artists, know that practice makes perfect, said McMartin, who is also a sommelier.    “It’s a repetitive thing. Your tongue is a muscle,” he said      Starbucks tasters make copious notes and occasionally check that they are in sync with regard to what they’re tasting in the cup. The latter process helps Starbucks make sure there are no “rogue tasters” in the mix, McMartin said.

(Reuters photos)

Too much turkey to fell Americans: Dunkin’ Donuts

Heaps of turkey, stuffing and cranberry sauce will induce a collective food coma on Thanksgiving, sending a majority Americans to their beds for a much-needed nap, if one is to believe a survey released on Thursday by coffee and doughnut chain Dunkin’ Donuts.

About 58 percent of the 500 Americans Dunkin’ Donuts surveyed this week predicted they would succumb to sleep during the holiday next week, according to the chain. Overeating will do that to you.

Unsurprisingly, more men than women are expected to nap, and the number of people jealous of those napping will overwhelmingly be women. But perhaps the fellas, exhausted from carving the turkey, just need to rest before settling in for all that football watching.

Helpfully, Dunkin’ Donuts stores will be open until 2:00pm on Thanksgiving, selling coffee to caffeinate the masses, and maybe keep some of the guys out of the doghouse during the year’s biggest holiday.

(PHOTO: Reuters)

Starbucks: Decaf Via coming soon

Starbucks says it will start selling a decaf version of its Via instant coffee in the United States on Nov 17.

The coffee chain, which in the middle of a corporate turnaround, hopes that Via will help it grab a big piece the $21 billion instant coffee market from established players like Nestle’s Nescafe and Kraft Foods Inc’s Sanka.

Borrowing from the old Pepsi vs. Coke taste challenges, Starbucks baristas for four days invited customers to do side-by-side comparisons of Via and its regular brew.

Starbucks says early indicators show that Via is exceeding expectations with regard to sales and customer and employee response.

How did Via fare versus your own expectations?

(Photo/Starbucks)

Thrifty tips from Starbucks

In its battle to end the myth of the $4 Starbucks coffee — the world’s biggest cafe chain is offering tips on how to save money in its cafes, which are lowering prices on some beverages as they battle market newcomer McDonald’s.

Here are some tips from Susan Nodilo, manager of a popular Starbucks in West Hollywood.

1. Bring your own cup and save 10 cents — and the environment.

2. Order a smaller, unadvertised “Short” (8-ounce) espresso drink, which costs less than a “Tall” 12-ounce drinks, but contains the same amount of espresso.

3. Short on cash, but in love with lattes? Substituting brewed coffee for espresso saves an average of 85 cents per drink.

4. Try a French press. Coffee served in a press costs around $3. Each press yields four 8-oz cups and costs less than two 16-ounce “Grande” drip coffees.

5. Finally, she said, Starbucks’ food and beverage prices include California taxes — so those drinks from competitors may be pricier than you think.

Is your Starbucks saved from the hit list?

Starbucks Chief Financial Officer Troy Alstead earlier this week had some good news for its fans in places like Baton Rouge, Louisiana, Mobile, Alabama, and El Segundo, California.

Alstead said Starbucks removed 30 stores from its hit list of store closures, saying that each of the saved stores had improved profitability to a point where it made sense to keep them open.

Here’s the full list.

Alstead’s full comments are here. (Reuters photo of Southern California store targeted for closure)

On the front lines of the coffee war

By Laura Isensee

On her way to work in downtown Los Angeles, banker Teresa Roman recently picked up a large iced vanilla coffee. Her cup had no green mermaid, the iconic Starbucks symbol. Instead, it displayed McDonald’s famed golden arches.

Roman switched from Starbucks iced coffee to McDonald’s when the fast-food giant started selling lattes, mochas and cappuccinos as part of its McCafe beverage expansion that launched officially earlier this year.

One would think the move from McDonald’s would be disasterious for Starbucks, which already had been slashing costs and closing stores after overbuilding during the real estate boom. But for all the angst over McDonald’s noisy entry into Starbucks territory, it doesn’t seem like Roman’s behavior is the norm.

Information from coffee drinkers, analysts and data suggest that McDonald’s and Starbucks are appealing to very different customers.

As part of our reporting, we talked with caffeine-starved workers in downtown Los Angeles. They said they chose their joe based on a variety of factors ranging from convenience and price to taste. 

“It’s not about saving money. It’s about an alternative taste,” said Stova Wong, who picked up a medium regular coffee – three creams, one sugar – at McDonald’s before heading to work in the IT department at a law firm. He now splits his coffee habit evenly between Starbucks, McDonald’s and mom and pop shops.