The Java Jive
With the arrival of Seattle’s Best Coffee, there may be trouble brewing for Starbucks, which has had great success in Chicago since opening its first store here in 1987. Seattle’s Best and Starbucks were both started 25 years ago in Seattle, the bean town of the Pacific Northwest, and each has closely studied the other’s approach to peddling java. In recent years Starbucks has expanded across the country with virtually no competition.
That may be about to change. Two years ago, a consortium of investors bought out Seattle’s Best, and the group is committed to funding a nationwide expansion that includes Chicago as one of its principal targets. “We’re interested in markets that have a higher capacity for coffee consumption,” says Seattle’s Best retail marketing manager Charlie Severn.
Seattle’s Best has a long way to go to catch up to Starbucks, which has more than 880 cafes across the country and has reaped an estimated $465 million in revenue in fiscal 1995. But growth has carried a tremendous price tag: of that $465 million, only $26 million was profit. Still, last year Starbucks’s profits were $3 million higher than Seattle’s Best’s total revenue.
Seattle’s Best has only 38 outlets nationwide, according to Severn, but that number is expected to grow to 50 by year’s end. There are 5,000 coffee shops nationwide, but Severn’s market research suggests that consumers could support more than 10,000 cafes by the year 2000.
Starbucks, however, has already moved beyond its cafe business, providing coffee to many restaurants as well as on all United Airlines flights. And it’s expanding into other products, including a line of coffee-flavored ice creams.
As of last week, Seattle’s Best had only 4 cafes in Chicago, compared to the 72 outlets that Starbucks currently operates in the city and suburbs. And Starbucks hopes to have 84 stores by the end of this year. Two of Seattle’s Best’s four cafes were previously run by Gourmet Cup Coffee, one of several short-lived Starbucks competitors. Severn believes other coffee shops have failed to mount viable challenges to Starbucks because their “product wasn’t that good, and the stores weren’t clean, and the atmosphere wasn’t that appealing.”
Severn says his firm’s Chicago game plan calls for opening as many as 50 Seattle’s Best stores here in the next two to three years. The exact number will depend on how successful the company is at negotiating leases in high-traffic locations. Despite the large number of Starbucks outlets in Chicago, Seattle’s Best executives maintain there’s room for more coffee shops. “We don’t think the market is very saturated,” says Andy Warren, Chicago district manager.
Severn says Starbucks has already done the difficult job of getting more people interested in coffee. Now Seattle’s Best believes those consumers are ready to experiment with other options. Severn says Seattle’s Best’s brew is “bolder and smoother” than the Starbucks roast, which has a sharp-edged flavor instantly recognizable to anyone who’s had a cup.
Once Seattle’s Best opens more stores, it intends to step up its marketing and promotion activities. Starbucks is an aggressive sponsor of many charities, and Seattle’s Best plans to be visible in that arena also, says Severn. Seattle’s Best is using other tactics to steal customers: when it opened its newest store at 2951 N. Broadway, the first 100 customers got a free coffee mug, a coupon for a free coffee drink, and a card redeemable for another free coffee after a specified number of purchases.
It remains to be seen whether Seattle’s Best can come close to matching what Starbucks has achieved here. A Starbucks spokeswoman took the high road when asked about Seattle’s Best’s chances in Chicago. She said Starbucks prefers to work hard at running its own business and not commenting on the activities of competitors. But Rick Fradin, a stock analyst at William Blair & Company, believes it will be tough for Seattle’s Best to topple Starbucks. “To date, Starbucks has had a lot of competition, but none of them ever managed to make much of an inroad.”
A success in its debut last fall, the festival of dance at the Athenaeum Theatre will return under the banner Dance Chicago ’96 and run from October 16 through December 1. The brainchild of Athenaeum general manager Fred Solari and festival codirector John Schmitz, the event will showcase a wide range of small and medium-sized dance companies that have traditionally been ignored during the annual spring dance festival, which was held this year at the Shubert and other downtown venues. Many of the companies that appeared in last fall’s Athenaeum festival–including the River North Dance Company and the Ballet Theatre of Chicago–will return this year. But Solari is expanding the lineup to include such cutting-edge companies as the Xsight! troupe. Dance Chicago ’96 will also offer a performance-art series.
Solari and Schmitz had hoped to include new dance pieces choreographed by members of the Joffrey Ballet, but that plan was dropped when Joffrey artistic director Gerald Arpino refused to release his dancers and choreographers from their contracts. Still, two Joffrey employees–Tyler Walters and Meredith Benson–will be involved in Dance Chicago ’96. Benson, who’s also an associate director of the Ballet Theatre of Chicago, will perform in that group’s program, and Walters will create a piece for Benson’s troupe. Dance Chicago ’96 is budgeted at approximately $220,000, up from $185,000 last year.
Art accompanying story in printed newspaper (not available in this archive): Photo of coffee shop by J.B. Spector.