Ask HN: Why doesn't Starbucks beat local coffee shops?
Majority of coffee fans say their local coffee shops make better coffee than starbucks. If that's so, why doesn't starbucks, with all it's money and resources become better than local coffee shops. What is it missing? Starbucks aren't trying to "beat" specialty espresso places. They aren't even in competition with them really. https://www.fastcompany.com/887990/starbucks-third-place-and... "Starbucks goal is to become the Third Place in our daily lives. (i.e. Home, Work and Starbucks) “We want to provide all the comforts of your home and office. You can sit in a nice chair, talk on your phone, look out the window, surf the web… oh, and drink coffee too,” said Kelly. (Notice she put “drink coffee” last???)" A friend of mine was high up in marketing at Starbucks in NY ~15-20 years ago, and her explanation to me back then was "What we supply to people is a comfortable and familiar place to sit and meet up with people. 'Coffee' is just the way we take money off people for that." This was an extremely valuable thing in NY specifically, where lots of even otherwise "wealthy" people lived in small and/or shared places - where inviting people into their homes socially or for small/contracting type business was way less attractive than meeting people at Starbucks, and a welcoming and familiar place to sit for an hour or two with your laptop or notepad is a really nice break from your tiny little NY apartment. "Better coffee" does not make that more valuable. Ubiquity and standardisation makes that more valuable. The coffee only needs to be "good enough" that people wont choose other, less familiar and potentially less welcoming feeling places to do an hour or two's work or meet up with people. Spot on. Starbucks in any country feels radically differently designed compared to a local cafe, where you feel the pressure to drink your cup promptly and rotate out (how intensely you feel that pressure depends on the owner and your own perceptiveness). This also means in places where quality local coffeeshops start to become alternatives for “hangout spaces”, Starbucks may offer more intricate coffee options and reluctantly compete on that front. However, that’s rare. Some of the true equivalents are chain coffeeshops of South Korea. They serve equivalently average-to-bad coffee. Of note, during recent lockdown measures in Seoul, these franchised coffeeshops (including Starbucks) were singled out among all food and drink establishments as the only ones forbidden from letting customers sit in at all. I suspect it’s because they are effectively the “third place” for many people, so the government considered them a major vector. Some branches more or less shut down as a result, since take-outs are just not worth it with that quality of coffee. While this IS true, i also find in my part of the world that the brewed coffee and beans from Starbucks is significantly and consistently superior to most things i am able to conveniently find. Now I've been to SF and Peet's was excellent and there are similarly excellent coffee shops in many city centers. But where i live and work, Starbucks tends to be pretty much a cut above much else conveniently available Oh sure. "Good enough". Because "most things" are crap. But you're prioritising "conveniently find" way over "coffee quality". I'll go an hour out of my way to find great coffee. Even when I travel I'll spend significant time researching the best coffee in the places I'm going. If you're not plugged into the specialty coffee world, you'll think places like Peets are "excellent". Next time you go to SF, try Ritual and Blue Bottle and Sightglass (and my last visit there was 5-ish years back, so I'm certainly out of date with newer recommendations, and I seem to recall Blue Bottle "sold out" and may not be genuinely specialty grade coffee any more...) 25-30% of my rss feed is coffee-related, probably 20% of my Youtube subscriptions are coffee-related. The far end of the excellent coffee bell curve isn't _that_ hard to find, but here in Sydney, for example, many of the top 10-20 places are good enough that they're coffee destinations in their own right, and are not paying for high foot traffic locations in city centers. I've got four great roasters fairly nearby, all pretty much in the middle of light industrial hell. They're in between nondescript warehouses and bearing shops and panel beaters and down the street from new loft conversions selling the "hipster scene" they've partly created (along with the breweries and live music venue and motorcycle workshops nearby). People get in their cars or get a cab/Uber to go there because Hazel and Claire roast there, or because Dan is the head barista, or because Sasa trains everyone personally, or because Reuben sources all the green beans himself. Go find _those_ places in your city, then tell us what you think of Peets and Starbucks... And maybe you won't care. Not eveybody does, and that's fine. Maybe it'll ruin you for life, and you'll never be able to drink mediocre coffee again - and you might think that's wonderful of you might hate me for it... But go find out... Blue Bottle is majority owned by Nestle and seems OK but not particularly special. That's sad. I hope some people got rich selling to Nestle - that place was _amazing_ 20 years ago. They're not just "OK." Their coffee is phenomenal today (although I can't speak to relativity from its 20 years' past self). They have absolutely EXPLODED in number of locations in CA since acquisition though, so they're not really my first search if I'm in the center of a Metropolis. > Now I've been to SF and Peet's was excellent http://www.daleisphere.com/the-intertwined-history-of-peets-... "To this day Peet’s remains a largely a regional player though it has expanded to a few other U.S. states. It still makes the best chain-store coffee I’ve ever had – far surpassing the coffee made available at Starbucks" This seems like something of an exaggeration. Peet's seems marginally better than Starbucks. Maybe. Putting aside the shared space aspect, I would argue that Starbucks does not really even trade primarily in coffee, but milk drinks. Starbucks is a "milk bar" (and lots of other local coffee shops could be described in the same way). This is a great response, you also have to think that Starbucks are "convenient" when you cannot get the specialty espresso places. For example on my way home to see family I pass about four drive through Starbucks. This seems to be an incomplete logical deduction. Premise:
A) many people prefer other coffee
B) Starbucks has the resources to make high quality coffee Assumption: Starbucks values high quality coffee as it's own end or needs to have good coffee too compete in the marketplace Reality : Starbucks does not care about coffee quality as it's own end, only about profits, and they judge their current quality level to be the correct tradeoff for maximizing profits. When you think an entity that is extremely successful at something is failing to understand their core competency, it is usually you who is failing to understand their goals or incentives. People fall into this trap with their understanding of the motivations of politicians as well as businesses all the time. > Reality : Starbucks does not care about coffee quality Perhaps even deeper. Starbucks knows it's customers do not care much about coffee quality. Similar to Apple. Apple know it's customers don't care much about being able to pick and choose the graphics cards or ram modules in their computers, and they don't care much about removable batteries or microSD cards or headphone jacks on their phones. iPhones have "good enough" battery life/internal storage/headphone options, and Apple are totally happy to walk away from the small demographic of potential customers for who those things are showstoppers. I am not a Starbucks customer. I know by first name the people who roasted the beans for pretty much all the coffee I've drunk in the last decade or more. I have 5-6 local roaster I buy from and I almost totally avoid cafes that aren't theirs (or who buy beans from one of them). My most regular "cafe" sells no food at all (Coffee Alchemy in Marrickville, for any Sydneysiders...) - only espresso based and pourover brewed coffee. (Until a few years back your only option was full cream cows milk or black.) When traveling I'll go and say Hi to people like Eileen at Ritual or Jeremy at Four Barrel (back before he turned out to be a creep). When I first visited Portland, I had a list of 5-6 places I wanted to visit based on recommendations and reviews, which grew to 12-15 places as I chatted with the baristas at the first few places. On the third day there I was at Coava for the first time, and when I ordered the girl behind the machine said "Oh, you're the crazy Australian with 'the list'!" The baristas there all drink together and talk about the customers :-) That was a super fun trip. If _I_ were to start a food/beverage business, I'd be insane to target _me_, when the demographic of "people who are OK so long as the coffee isn't awful", and who might choose to spend money at my cafes for other reasons (like I've got one on 3 out of every 4 street corners in Manhattan, for example, or because I've got comfortable chairs and putlets to keep laptops charged) is so many orders of magnitude bigger. Or to look at the same idea from another angle: Starbucks recognise that it's fashionable to say you're fussy about your coffee (and some small percentage of people actually do care a lot about their coffee), but the majority of their customers don't really care that much. The greatest strength of Starbucks is also its greatest weakness: scale. Because Starbucks is everywhere, it has to be the same everywhere. Maybe the best coffee in West Hollywood is not the same as the best coffee in Midtown Manhattan, but Starbucks buys in bulk to optimize for what is best across all locations. The local coffee shop can optimize for what is best on a hyperlocal level, while Starbucks cannot. In what market? They've seriously struggled in Australia-there's a few stores here and there-mostly confined to large shopping centres, but they're not popular and I believe they were down to single-digit number of stores a few years ago. When I lived in Melbourne I was blown away by the coffee culture there. They took it damn seriously, and the local places were amazing. Even the random dudes in vans with an expresso machine in the back that were parked outside of parks/venues/busy areas were slinging primo stuff. Hands-down best coffee I had in the Oz, though, was in Perth (Northbridge area). There was a tiny hole in the wall coffee shop next to a spice market that was amazing. If the rest of the Oz is like either of those 2 locales, I can see why S-bux would fail. You would be hard pressed to find a coffee shop brewing worse coffee than Starbucks in Australia. From your local Gloria Jean or Coffee Club to ones with competition awarded baristas. But Starbucks has its place. I stopped at a few in Japan to give the family a chance to sit down and not feel rushed to keep moving. You can charge your phone or your laptop and relax. They failed miserably in Israel. Opened recently in Italy and cater almost exclusively to tourists. The only place with good coffee where they are doing okayish that I'm aware of is Sweden. They also do rather well in Turkey among hipsters, tourists and rich local college kids. Yet, it's limited to Istanbul Starbucks is not limited to İstanbul, they are in every major metro. I've been in Starbucks in İzmir, Ankara, and Kayseri, and I try to avoid Starbucks. And if crowds are any thing to go by, they are doing quite well for a very expensive place in a land of endless tea and coffee shops. It's amazing, given how great Turkish coffee and tea is. Yet, Starbucks' core business is not serving good coffee > If that's so, why doesn't starbucks, with all it's money and resources become better than local coffee shops A local coffee shop optimises along a very parameters (let's say taste only) at the expense of scale, cost and other parameters. A Starbucks has to optimise quite a few other parameters but each of these parameters won't be at the levels that local coffee shops do. Remember, another thing a listed company like SBUX has to optimise is shareholder wealth so that constraint drives the rest of the optimisations. On a related note, refer this[0] article by Joel on quality and scale. Here's a sampler: "That’s because McDonald’s real secret sauce is its huge operations manual, describing in stunning detail the exact procedure that every franchisee must follow in creating a Big Mac. If a Big Mac hamburger is fried for 37 seconds in Anchorage, Alaska, it will be fried for 37 seconds in Singapore – not 36, not 38. To make a Big Mac you just follow the damn rules." [0] https://www.joelonsoftware.com/2001/01/18/big-macs-vs-the-na... Part of the challenge is that most people won't like coffee's actual taste. Good coffee is best drank black. Once you start adding milk and sweetener the coffee taste itself goes to the background. People do a similar thing with tea. In the US tea is mostly drank iced with a crap load of sugar. So if you're trying to sell as much coffee as possible, you'll be serving it mostly with cream and tons of sweetener anyways so its pointless to worry so much about quality coffee. With volume you also have to worry about getting people in an out as quickly as possible. Most of the boutique coffee shops will be making single pour brews that take forever to make. You simply can't dedicate that much time per cup if you have a line of people inside and a drive thru to manage. When you get a coffee-based drink at Starbucks, you can get that same exact drink anywhere on the planet at Starbucks and it will be nearly the same. They've applied the fast food business concepts to coffee. There is no need to improve the product at all, its not going to increase sales. Also, "better" coffee is subjective. Buy local and shunning big corporations probably impact people's attitudes more about local coffee shops than the flavor of the coffee. When you get a coffee-based drink at Starbucks, you can get that same exact drink anywhere on the planet at Starbucks and it will be nearly the same. And that factor is important to many people. Maybe surprisingly so to people who don't get that particular aspect. Example: a few years ago I was a consultant for a while, and I traveled a lot for work. Lots of time on airplanes and in airports and a lot of dragging myself off of airplanes late at night, jonesing for a cup of coffee, or dragging myself into the airport late, jonesing for coffee. And then exploring a new city on the first day, after dragging myself out of bed, jonesing for a cup of coffee. In all three cases, I knew that if I saw a Starbucks I could walk in and have a perfectly predictable experience. And on those occasions that was exactly what I wanted. I didn't care about finding the "best cup of coffee in Portland" or "the best coffee shop in Chicago", etc. And I didn't have time to run around sampling all these little boutique places, hoping for some spiritual / transcendent experience. Sure, the hardcore coffee snobs are gritting their teeth right now, and that's OK. What I want from a coffee shop (at times) and what you want are two different things. And that's OK. That's not to say that there isn't a place for wandering around, exploring all the unique local coffee shops in whatever town/city you happen to be in. The point is just that the ubiquity and predictability of Starbucks is objectively a Good Thing to a certain group of people. They are fundamentally different philosophies to coffee. Starbucks, as a large business, needs to worry about creating a consistent product which appeals to a wide range of consumers which have an expectation of what their coffee will taste like from week to week. Smaller shops often cater to subcultures looking for ‘interesting’ coffee, so they often source characterful single-origin coffees and don’t worry about their week-to-week consistency so much, since their customer base will often accept this inconsistency in exchange for the extra character they’ll get. I’d thus also argue that Starbucks coffee isn’t necessarily worse (even though I count among the independent-coffee shop fans), but that it is a different drink altogether. Coffee is not unique in this kind of specialty fragmentation. It exists in craft beer, single malt whiskies etc. > their customer base will often accept this inconsistency in exchange for the extra character they’ll get. I'd argue the inconsistency is Part of the character Completely agreed. Getting a different experience each time is a big part of what makes a return trip to a good coffee shop fresh and interesting. > Majority of coffee fans say their local coffee shops make better coffee than starbucks. They are wrong. Are there any blind taste tests? It's harder than wine to test, but should be possible. But the premise is incorrect anyway. Enjoyment of food and drink is tied to way more than taste. History matters. Sight matters. The story matters. Variety matters. Routine matters. The people matter. The trick is to get the coffee backhouse, without suspicion or losing all the extra things that matter and then use pods - 30% of Michelin-starred restaurants choose Nespresso machines
https://www.grubstreet.com/2013/03/nespresso-sold-at-micheli... Interesting. I didn't know about this. Wow! Most conclusions from the comments seem to be that 1. Sourcing quality beans is costly.
2. Majority of the people don't care. For 1 - For a single coffee shop, quality of beans is not the most significant part of price. They can increase ~10c per cup and get much better quality of coffee[0]. However, this might be tough as Starbucks need to source same beans across the world. For 2 - Following 1, if you only need to increase 10c, and get significantly better coffee, why won't you do it? You're already the leader in 3rd spaces, why not be a leader in coffee too, for a much better moat? > What is it missing? When I go to my local coffee shop, I feel a sense of warmth and community. A bit of the same sense I get, when I travel to my mother's house for Christmas. No amount of money and resources can buy that. Probably because for whatever reason it is not costing them revenue to not have the best coffee. I imagine because there are other benefit so starbucks, such as I am guessing familiarity, brand, has a nice "living room" feel about it, etc. If they made their coffee better, would they do better? I think in Australia they have upped their game on the coffee front to survive (many Starbucks closed here years ago), but at the same time it is probably easier to hire baristas due to the coffee culture. They are not the best but I think a Starbucks in Australia would be a lot better than a UK one for example in terms of the coffee quality. Starbucks coffee sucks and it's overpriced. As someone who patronises it, I go for cheapest brew, Americano Starbucks does not compete with local coffee shops, neither with premium chains. They target different markets, serve different needs and got different business models When do I patronise Starbucks? When I get tired of working from wherever I happen to work from and while on the road. Also I use it as a hangout spots for social and business purposes Where they have to compete as a proper coffeeshop, they fail miserably (Israel) or struggle big time (Australia) I think Starbucks works for the same reason McDonalds works. Their logo is a seal of okayness that works across the globe. No matter where I am driving in Europe, I know I can step off the highway and find a McDonalds with air conditioning, food, ice cream and Wi-Fi. I know I can use their touch screen terminals and pay with my card, regardless of the local language or currency. It's a meal for when you don't want to think about having a meal. It's logistically convenient. I suspect Starbucks is the same. Agreed, the Americano is the only “normal” coffee item which is a decent value and quality. Their drip is distinctively horrible. It’s not only about the coffee. How would they find good quality pastries and bread for 15000 stores? How would they create a unique and cozy atmosphere? Food doesn’t scale like that. It’s the same with restaurants. PS. At least high quality food doesn’t scale like that. Why not? Why can't high quality food scale? Starbucks excels where the local coffee shops are really bad or are non existent. In these cases a Starbucks can be like an oasis. These are my experiences from around the world. Starbucks' goal, like all chains, is not quality per se, but consistency. The coffee at one Starbucks should taste the same as at any other, whether it's in Tokyo or Times Square. To achieve that consistency, they tend to over-roast their beans -- to the everlasting chagrin of coffee lovers everywhere. How does over-roasting help with consistency? On a similar note, dunkin serves light roasts. I'd presume they also want consistency? It’s my understanding that Starbucks universally over-roasts their coffee to keep it consistent. Normally the roast time would depend on each individual batch. Presumably they over-roast it because the most popular drinks have a lot of sugars and creams (Frappuccinos, etc.) so the coffee needs to be stronger. So, it’s not the over-roasting that makes it consistent, but the fact that every branch roasts it the same way. Dunkin on the other hand seems to make a serious portion of their income from those boxes and their light roast black coffee, so they maintain consistency with a shorter roast time. Of course most coffee places have various beans these days and this doesn’t always apply. Same reason that McDonald's loses ground to high-end burger joints -- they're about broad, consistent mid-level quality. If you want something fancy, specialized, or something that isn't designed to appeal to the lowest common denominator, then you go to a specialty / local place. Why doesn't Mcdonalds beat local artisan restaurants? Because their strategy is to be easy, convenient, familiar, safe, etc. The food/coffee is pretty bad, but you know what you get. This apparently is what the masses want. Predictable experience. Ask any child (and most adults) and they will confirm the truth: McDonald's is actually a local optimum of fast-food deliciousness. It may not be healthy, but it's definitely tasty (though I say that as someone who has not eaten there in many years, I am certain that their standards have not fallen, simply because they basically invented fast food standardization.) Like most great fast food, it simply presses all of the buttons of salty, sweet, tangy, greasy/creamy, and savory, and usually incorporates contrasting textures and temperatures (note hot fries + burger vs. cold soda or frozen shake/soft serve.) McDonald's food is bad in the same way that Coke is bad: it's made by a giant corporation, it's highly processed and contains questionable additives, it's readily available and heavily advertised, and consuming a lot of it will make you overweight and very unhealthy (see Super Size Me.) On the other hand, you can actually lose weight and potentially improve your lab numbers if you eat a low-calorie McDonald's diet (see The McDonald's Diet.) I can only speak for myself, so this will be very subjective. Starbucks ha no soul, and their drinks are targeted at an American audience who don't know better. As a European I'd rather give my money to espresso bars doing good filter coffee than spend a minute standing in line at a Starbucks. I've been remote working for years and many coffee shops in my home town treat me like furniture by now, since I often worked 4-5 hours daily from their tables, rotating my favourite places. I am good friends with some owners and many many baristas, so I get a bit of a special treatment when I'm there. Starbucks is a fast food restaurant, and have no reason to change their business model.