Stronger Than Ever

Chicago used to be known for having a tavern on every corner, but these days that corner spot is probably occupied by a coffee chain. Starbucks opened its first Chicago location in October 1987, and with Caribou Coffee and Seattle’s Best Coffee now vying for prime storefronts, the battle for the lucrative specialty coffee market is beginning to heat up. “This city is far from saturated when it comes to coffeehouses,” says Angela Krol, district sales manager for Seattle’s Best. In many instances the big three are increasing the size, or “footprint,” of their new outlets, adding more comfortable furniture, and broadening their menus to include food, exotic teas, and blended dairy beverages. In Naperville, Starbucks has unveiled its first drive-through operation in Illinois, and some Seattle’s Best locations have begun serving grilled-to-order panini, an Italian sandwich. Seattle’s Best isn’t as hell-bent on claiming the city as the other two; it’s privately held and generates a considerable chunk of its revenue from wholesaling to restaurants, grocery stores, and other businesses. But Starbucks is publicly traded, with new investors hoping for higher dividends, and Caribou’s owners are debating whether to go public in the near future.

In the end the coffeehouse war will probably be decided in terms of real estate. Starbucks has a huge head start, operating 107 shops in the city and suburbs; according to regional marketing manager Jim Morgan, it will open about ten new locations in the next year. Caribou, a Minneapolis-based chain that arrived in town only two years ago, already has 20 shops in the area and expects to add between five and fifteen in the next year, says Barry Judge, vice president for marketing. Seattle’s Best opened here in 1995 and has grown at a much slower pace: its sixth shop will debut this May inside the Stone Container Building at the corner of Randolph and Michigan. Todd Walker, district manager for the chain, says Seattle’s Best is interested only in high-visibility locations that can showcase its product. Because location and revenue are closely linked, the chains will actually shut down a coffeehouse in one storefront and move it to a better space nearby: in February, Seattle’s Best closed its shop at 2531 N. Clark–across the street from a large Starbucks and a block north of a Caribou–and reopened at Wells and Eugenie, just north of Second City.

Krol claims the relocation had less to do with Starbucks or Caribou than with the doubled floor space, which accommodates sofas, upholstered chairs, a fireplace, and more seats and tables. Caribou and Seattle’s Best have both opened numerous cafes with upholstered furniture, and now Starbucks seems to be mimicking them in many of its larger shops, forgoing its brittle espresso-bar ambience for more homey environments. According to Morgan, the company likes to refer to its larger shops as the third place in a consumer’s life, after home and work (presumably churches and schools would rank higher if they piped in smooth jazz). The same sort of marketing mantra characterizes the other two companies; Caribou calls a visit to one of its shops a “transformational experience.”

All three chains are eager to increase the amount of cash a patron spends during each visit by offering more food items. Seattle’s Best has added the panini and a small collection of prepackaged salads, and after test-marketing in Seattle and D.C., Starbucks will roll out a line of sandwiches and salads at its Chicago-area shops by mid-June. The strategy, they hope, will also draw more traffic during the slower lunch and dinner hours. “Right now most coffeehouses do about 70 percent of their business in the early morning,” says Walker of Seattle’s Best. Though Caribou has begun selling sandwiches in some shops, it’s less excited about the food idea. Charlie Utter, regional marketing manager for the company, thinks that introducing too many food items might confuse consumers and ultimately backfire: “The question becomes ‘When do we stop being a coffee bar and start being perceived as a restaurant?,’ which is something very different.”

Garthwatch ’99: Future Shock

Garth Drabinsky, the deposed CEO of bankrupt Livent Inc., may be long gone from the entertainment scene, but the aftershocks of his tenure continue. Last month Actors’ Equity members who’d been employed by Livent received a letter from Tom Stetina, senior business representative for the union: “We are writing to all actors who have ever been employed by Livent, both past and present, as Equity has learned that social security contributions may not have been properly credited.” Stetina encouraged members to obtain their salary records from the Social Security Administration and check their accuracy. “Failure to do so might result in a reduction of your social security benefits at the time of your retirement.”

Kathryn Lamkey, central regional director for the union, says such a directive is unusual but not unprecedented: “We have sent out similar letters to actors that have worked at theaters that have been in financial trouble or that have shut down.” The letter, she cautions, implies no financial impropriety on Livent’s part but rather a problem with the way it reported salary information to the Social Security Administration. Forensic accounting specialists for the U.S. Justice Department have been poring over Livent’s records and may have uncovered social security problems. However, if actors can produce records clearly showing their salaries, the Social Security Administration must credit them their benefits whether or not Livent actually paid the appropriate taxes.

Art accompanying story in printed newspaper (not available in this archive): illustration by Heather McAdams.