Bean a Long Time Coming

Starbucks, the high-powered gourmet coffee-house chain, finally finds grounds for expansion into Arizona

The Valley's coffee-house scene is about to get a huge caffeine jolt.
Seattle-based Starbucks Coffee Company has decided to launch a full-scale assault on local Java Man and Woman. Look for the first stores to arrive possibly as early as the end of the year.

Starting in 1971 with one shop, Starbucks has mushroomed into a coffee-retailing behemoth, riding a tidal wave of demand for high-quality coffee. In the downsizing 1980s and 1990s, more and more Americans discovered that life's great luxuries would be forever out of reach--no Lexus, no European vacation, no Chateau-Lafite. But they could splurge on a premium cup of joe without putting the mortgage in jeopardy. Starbucks was there to satisfy that craving.

Five years ago, the company went public, and Starbucks' combination of marketing savvy and top-of-the-line coffee set off spasms of delight on Wall Street. The analysts were right: In 1988, Starbucks had nine stores; in 1994, there were 300. Today, the company operates nearly 1,000 domestic and international outlets, and has more than 17,000 employees. It's the largest specialty coffee operation in the country.

Starbucks also has cleverly used its name-brand recognition and marketing clout to expand its product line. It has teamed up with Pepsi-Cola to produce a line of coffee-flavored beverages, and sells its own brand of coffee-flavored ice creams in partnership with Dreyer's.

Starbucks has had a small, low-key presence in Phoenix for several years. There's a kiosk at Sky Harbor International Airport, as well as mini-cafes in Barnes & Noble bookstores. But until now, the company has been reluctant to expand that toehold. That's because executives didn't think we were much of a coffee-drinking town. Even Japan and Singapore are getting stores before we do.

So what convinced Starbucks to brew up an explansion plan now? The key seems to be the company's mail-order business--locals are finally showing enough support to get headquarters' attention, says spokeswoman Cheri Libby.

Last week, Starbucks held an all-day session for job-seekers at a Camelback Road hotel. A steady flow of applicants streamed in, each eager to become a Starbucks "partner." And why not? Unlike most retail operations, the company offers training, medical benefits and stock options to employees who put in 20 or more hours a week. As a consequence, the annual employee turnover rate is about 60 percent, according to company officials. That's less than half the industry average.

Good coffee and good working conditions make Starbucks a popular employer. "Phoenix doesn't have a good coffee house," complains Fred Tay, who showed up to apply for a management position. Shandel Gauthier, who moved here from Portland, Oregon, in June, smells success, and wants to be part of it. "Starbucks has a great reputation in the Northwest," she enthuses.

Is Starbucks worried about the local competition? After all, over the past few years, there has been a tremendous coffee-house boom. Coffee Plantation, for example, has become a local corporate coffee giant, expanding from a single beachhead in Tempe to 15 Arizona stores (and more on the way). Independent coffee houses are springing up everywhere. But Anne Ewing, a Starbucks district manager from Las Vegas in town collecting resumes, isn't anxious. "There's plenty of room for everybody," she believes.

Oddly, Valley coffee-house operators seem to agree. They're taking their cue from Alfred E. Newman: What, me worry?

Mark Kramer, Coffee Plantation's vice president of operations, is even willing to praise his rival. He calls Starbucks a "consistent, solid" operation that inspires "a great deal of respect." As for his own company, Kramer is "confident and comfortable" about the future. "We genuinely feel we have a unique product of superior quality," he says. He also points out that with its lunch menu and variety of baked goods, Coffee Plantation occupies a market niche that Starbucks can't duplicate. And, he notes, "we already have brand recognition."

Another thing Coffee Plantation has going for it is location. And location. And location. Because there's almost no pedestrian traffic in our sprawling metropolis, coffee houses here tend to congregate in car-friendly shopping centers and strip malls. And Coffee Plantation is already installed in most of the high-profile spots, like Biltmore Fashion Park, Fashion Square in Scottsdale and the Harkins Theatres complex on Shea Boulevard east of Scottsdale Road.

So where could the battleground be? Downtown and the west side are still pretty much virgin territory, while the demographically rich northeast Valley and the new Waterfront development in downtown Scottsdale could be contested terrain.

The mom-and-pop coffee houses don't seem to be running scared, either.
Jamaican Blue Coffee House is a Scottsdale hangout that captures the traditional bohemian coffee-house spirit. If Maynard G. Krebs lived in the Valley, this is probably where he'd be grooving on his decaf mocha latte. Manager Henry Fries is serenely unruffled about the possibility of competing with Starbucks. He derides the company's yuppie image. "Our customers almost sneer at Starbucks corporate clientele," he snorts. "We have a loyal clientele due to the quality of our product."

That same anti-big-business attitude percolates at Java Road, a Tempe coffee house that caters to Arizona State University students. "We have our own niche," says employee Gavin Troy. "People like us because we aren't corporate." And it is hard to imagine Starbucks brewing a drink like Java Road's notorious El Kabong: four jolts of espresso with an equal amount of half-and-half, a caffeine drink designed to sustain a collegian's all-nighter.

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