A libertarian barista on Starbucks

Jacob Grier has a blog post at Smelling the Coffee on the contradictory impulses he feels towards Starbucks — as a libertarian who nevertheless thinks quality control at Starbucks has gone down. Read the whole thing, but the part about how Starbucks has affected the industrial organization of coffeehouses is particularly interesting:

Let’s begin with the easy issue: Starbucks is driving independent coffee shops out of business. Anecdotally, this may seem obviously true. Many people can name a favorite coffee shop that went out of business soon after a Starbucks moved into the neighborhood. The fact is, though, that Starbucks is creating a market, not destroying it. Growth in both independent and corporate coffee shops has been huge over the past fifteen years, thanks in large part to consumers being introduced to specialty coffee drinks in the safe confines of their local Starbucks. The Specialty Coffee Association of America, a leading trade group, tracks American retail sales. In 1989, the SCAA estimates there were 585 coffee houses operating in the U.S. By 1995 that number had risen to 5,000. By 2003, there were 17,400 shops in operation. Starbucks growth is notable, but it’s far from the sole factor driving these new shop openings. The SCAA reports that 57% of the shops open in 2003 were independent, having only one to three locations. Microchains (4-9 units) made up another 3% of the market. All the large chains combined make up the remaining 40%. [Source .pdf] A 2004 article in the Willamette Weekly finds a similar pattern at work in Portland. In 2003, a misguided miscreant attempted to blow up a new Starbucks in a neighborhood where residents claimed to not want the imperial corporate giant. But a survey of the local yellow pages reveals that indie shops were doing just fine in Portland:

According to the Portland Yellow Pages, before Starbucks came to Portland in 1989, there were 28 coffee shops in the city. Today, there are 91 non-Starbucks coffeehouses in Portland proper, compared with the chain’s 48 stores within city limits.

Bellisimo Coffee Infogroup, a consulting company for coffee shops, notes that Starbucks plays an important role in giving people their first gourmet coffee experience, after which they can and often do branch out to try out other sources. Tully’s, a smaller chain, agrees, intentionally locating new stores in the vicinity of existing Starbucks locations. In the same Willamette article, one coffee expert gets perhaps a bit too effusive, but his point is well made:

“Every morning, I bow down to the great green god for making all of this possible,” says Ward Barbee, publisher of the Portland-based coffee trade magazine Fresh Cup.

Of related interest: this Tim Harford essay in Slate about why Starbucks doesn’t advertise it’s “short” cappucino.