Starbucks Is 50 and Emboldening Its Rivals More Than Ever

Bloomberg Opinion , October 12, 2021

Starbucks is marking its 50th anniversary. If you think that number must be off by a couple of decades, you’re not alone. The chain only made its way into most of our lives in the 1990s. Its success was a slow brew, requiring several recipe changes.

The original Starbucks wasn’t a café. It sold gourmet beans and equipment so customers could make their own coffee. In 1981, a sales rep for one of its suppliers visited to see why four small stores in Seattle were selling more of a simple drip setup than all of Macy’s.

His name was Howard Schultz. Like Ray Kroc, the milkshake machine peddler who saw potential in the McDonald brothers’ burger joint, Schultz thought big. Starbucks could go national, he told the owners, with “dozens of stores, maybe even hundreds,” and become a brand-name “synonymous with great coffee.” In 1982, he joined the company as marketing chief.

Here, Starbucks history gets complicated. Inspired by the coffee bars he saw on a 1983 trip to Milan, Schultz wanted to bring ubiquitous cafés to the U.S. When Starbucks wouldn’t take the idea beyond a test store, he started his own company, called Il Giornale.

The parting was amicable, with the owners of Starbucks investing in his new venture. Within a few years, they were ready to concentrate on other businesses and, in 1987, they sold Starbucks to Schultz.

He merged it with Il Giornale, kept the older name, and tested his vision by opening stores in Chicago, far from the latte-loving Pacific Northwest. “Until we succeeded in Chicago, we couldn’t prove that our idea was transportable throughout North America,” Schultz wrote in his 1997 book “Pour Your Heart Into It.”

The first few years were rough, and the concept took tweaking to adapt to the market. Prices needed to rise to cover higher rents and wages, and nobody wanted to venture outside for coffee in the winter, which meant lobby locations were essential. By 1990 the Chicago stores were working, and the company turned the first profit of the Schultz era.

In 1991, the national rollout truly began, with entry into Los Angeles. Starbucks was an instant hit. “We were shocked at how many people were familiar with the Starbucks name,” the regional manager told the Los Angeles Times, whose report included the obligatory celebrity sightings: David Lynch and Kyle MacLachlan of the hot TV show “Twin Peaks,” and singer Paula Abdul, who, confided a Starbucks staffer, “parks her car illegally to get her tall nonfat latte.”

The following year the company went public, garnering $25 million to expand even further. In 1994 it bought a Boston-area company that invented the Frappuccino. (In Boston, people call milkshakes “frappes.”) It ended that year with 425 stores.

Coffeehouses existed in the U.S. before Schultz came along — they played a big role in 1950s beat culture — but they occupied a narrow niche. Like Schultz himself before his fabled trip to Milan, most Americans had never experienced café culture.

“What Schultz captured from the streets of Milan was not just the community-building potential of the coffeehouse but its essential commonality: the idea that its appeal could be expanded across class and neighborhood rather than remain exclusive to the college town or urban Italian enclave,” writes Kim Fellner in her 2008 book “Wrestling With Starbucks.” Starbucks took a specialty concept and made it a mass phenomenon, with several lasting effects on American business and culture.

The Aesthetic Imperative

Starbucks doesn’t just sell beverages. It delivers a multisensory aesthetic experience. “Every Starbucks store is carefully designed to enhance the quality of everything the customers see, touch, hear, smell, or taste,” wrote Schultz. “All the sensory signals have to appeal to the same high standards. The artwork, the music, the aromas, the surfaces all have to send the same subliminal message as the flavor of the coffee: Everything here is best-of-class.” (Emphasis in the original.)

Pre-eminence may have been the original connotation, but as the stores became ubiquitous they changed consumer expectations. Design as good as a Starbucks became not an aspiration but a minimum standard.

Starbucks, I wrote in my 2003 book “The Substance of Style,” “is to the age of aesthetics what McDonald’s was to the age of convenience or Ford was to the age of mass production — the touchstone success story, the exemplar of all that is good and bad about the aesthetic imperative. Hotels, shopping malls, libraries, even churches seek to emulate Starbucks.” The combination of high-quality ingredients, well-designed surroundings, and counter service provided the model for fast-casual restaurants like Panera and Chipotle. If your dream is to open a neighborhood restaurant, you’d better budget for making it look good. Standards have risen.

Third Places

In 1996, Starbucks abandoned the hard-edged, contemporary store design inspired by Milanese coffee bars in favor of a cozier aesthetic with more comfortable seating. “While my original idea was to provide a quick, stand-up, to-go service in downtown office locations,” wrote Schultz in 1997, “Starbucks’ fastest growing stores today are in urban or suburban residential neighborhoods. People don’t just drop by to pick up a half-pound of decaf on their way to the supermarket, as we first anticipated. They come for the atmosphere and the camaraderie.” Spotting a business opportunity in a social critique, Starbucks began to think of its stores as “third places.”

The term comes from sociologist Ray Oldenburg’s 1989 book “The Great Good Place,” which lamented the loss of old-fashioned Main Streets with their familiar gathering spots. Living in impersonal suburbs, he wrote, Americans had lost places that “create an environment in which everybody knows just about everybody,” the hangouts that are neither home nor work. “These places serve community best to the extent that they are inclusive and local,” he wrote. (Emphasis in the original.)

Interviewed by Fellner for her book, Oldenburg said he preferred his local bar to Starbucks, whose baristas he found “impatient if you stumbled over your drink order.”

Of course, Starbucks regulars have quite different experiences. And bars aren’t suitable for everybody or every occasion. Starbucks provides, in Schultz’s words, a place where “no one is carded, and no one is drunk.” It’s a safe, quiet spot to meet for first dates, Craigslist sales, even job interviews.

When a Philadelphia Starbucks manager called the cops on two Black men who sat down without placing an order, she caused a national uproar. It turned out they were waiting for a third man, who was white, to join them for a business meeting. The racially tinged incident created a scandal because it violated Starbucks’ brand promise as a welcoming third place.

The Demonstration Effect

Today the U.S. has more than 37,000 coffeehouses, with Starbucks accounting for about 15,000. In 1991, there were only 1,650, including 165 Starbucks.

“Despite the Starbucks onslaught, independent coffeehouses are not only surviving but proliferating,” wrote Fellner amid an anti-Starbucks backlash, particularly on the left. Starbucks inspired its detractors to create alternatives.

In a 2004 study, marketing scholars Craig J. Thompson and Zeynep Arsel found that the customers for anti-Starbucks cafés broke down into two distinctive groups, served by different environments. One group, which they called “café flâneurs,” found Starbucks boring: “a conservative, relatively banal cultural space, catering to an equally bland corporate clientele.” They didn’t think Starbucks was evil, merely dull.

The other, which Thompson and Arsel dubbed “oppositional localists,” hated Starbucks as a symbol of capitalism. “Their preferences for local coffee shops are anchored by a steadfast conviction that they possess insight into the devious and diabolical workings of global corporate capitalism that is lacking among the general population and most particularly the typical Starbucks customer,” they wrote.

The first group emphasized quirky aesthetics, the second leftist politics. They both created opportunities for coffeehouse entrepreneurs — opportunities highlighted by the contrasting model of Starbucks.

More recently, a so-called third wave of coffeehouses has grown up, emphasizing connoisseurship. “It is a subculture focusing on artisanship and expertise, sensual experience, face-to-face communication, and ‘community’ in one of its most traditional senses, but is also technologically driven (especially with the attention and prestige accorded certain sorts of equipment) and makes extensive use of the Internet as a venue for discussion, social planning, product reviews, and so forth,” writes sociologist John Manzo.

Third-wave proprietors appreciate the subtle flavor notes in their coffee — and the power of a good story and well-framed Instagram posts in their marketing. They are the children who grew up in the world Starbucks created, where sociable drinking can mean caffeine rather than alcohol and coffee comes from beans, not cans.