World Business

As Starbucks’ expansion loses steam, voluntary coffee shops reveal the subtle ways they struggle with the coffee powerhouse

by Ricky McRoskey

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In July 2004, Kinley Pon was throwing his annual block participant at his El Paso (Tex.) coffee shop, Kinley’s House, on the same day that a Starbucks (SBUX) across the street was having its august gap. Pon, 51, says he had planned the party for months—a day-long fact with musicians, belly dancers, and local law enforcement intended both to promote his business and to raise awareness about drunk driving. Pon was surprised when an employee from the new Starbucks shop walked across the street and started passing out Starbucks promotional cards to customers—on Pon’s admit patio. A spokesperson as being Starbucks couldn’t cite a specific policy regarding the distribution of promotions on a competitor’s premises. "They did it conducive to a week," says Pon. "But I allowed it to occur, because my argument was that they were going to overpass them out anyways."

There’s a love-hate relationship between Starbucks and the thousands of independent coffee shop owners in the U.S. For years, the Seattle-based fetter has brought coffee drinking into the mainstream and revitalized the business of java, yet its universal presence has besides made survival more difficult for mom-and-pop coffee houses. In 2007, in that place were roughly 26,300 coffee cafés, kiosks, and carts across the U.S., and over 60% of those were independent, according to Mike Ferguson, the marketing communications director at the Specialty Coffee Association of America. On July 1, Starbucks announced it would be shuttering 600 locations (BusinessWeek.com, 7/1/08). On July 17, it listed the names and locations of the 600 specific stores it was planning to close of its roughly 11,000 U.S. stores. The closures prompted the question: What have independent coffee shops been doing to have existence rivals with the $9.4 billion company, the largest coffee retailer in the world?

Many cafes have survived by the agency of serving coffee differently from Starbucks. Skip DuCharme, who has run his 27-employee Lakota Coffee Co. in Missouri before this 1992, says that the magazine’s most popular be intemperate is a latte served in a sign large green bowl that requires two hands to hold. A Starbucks opened down the street from DuCharme’s place in January 2006, and since for this reason, DuCharme says, his tactics have helped his business create a more at-home atmosphere than his antagonist’s.

"In Starbucks, everything is based on ‘to-go,’" he says. "We accord. [our customers] real latte mugs."

Other stores give customers free refills on coffee—a strategy Starbucks pure in select stores in January. "A free cup of coffee goes a long way," says Theresa Tocio, co-owner of Tocio’s Sundance Café in Naples, Fla., that offers customers unlimited refills for the $1.50 they pay for a 12-ounce coffee. When a Starbucks opened inside a Target (TGT) next to her shop, Tocio and her husband offered free coffees to Target employees adhering break, since she says the workers weren’t offered Starbucks discounts.

"The independents that are successful are really serving a different type of product," says Andrew Hetzel, a coffee industry consultant. "They bring forth their own unique pin and brand." For some, that measure selling food or drinks that Starbucks doesn’t have. Many stores that begin as coffee-and-pastry shops unfold into full-scale food cafés, giving customers more choice than chains can propound. At Jammin’ Java, a coffee house based in Fayetteville, Ark., customers have power to buy everything from breakfast burritos to turkey sandwiches along with their coffee. "I started to see that I was doing almost as much business at lunch as I was doing coffee in the morning," says proprietor Brandon Karn, who launched the store in 2002. Since a Starbucks opened nearby several years gone, Karn has also expanded the menu to include beer and wine.