9 August 2016
A recent episode of BBC Business Daily explored how people feel about big and small brands with some discussion of some of one of the world’s largest coffee shop brands, Starbucks. It asked whether consumers were more likely to trust big global brands or small ones, beginning with a discussion about Starbucks.
While the US did not invent drinking coffee, nor do they have the longest coffee culture, there are some who believe that much of the coffee shop culture in many western countries stems in many ways from the activities of Starbucks. The company now a global venture is seen as a high end retailer (in some countries) which you “can now find from Singapore to Johannesburg, selling $5 skinny lattes and frappes fuelling office workers everywhere in their morning commute”.
Coffee shops have now become big business – according to the BBC coffee retail more generally has become worth more than $100 billion – which has experienced massive expansion, in part due to the expansion of one global brand in particular, Starbucks.
The BBC travelled to Seattle, USA to visit where the Starbucks phenomenon began, in particular the reporter travelled to Pike Place Market, where the first branch was opened by three friends back in 1971. It was there the reporter talked with Zev Siegl, one of the co-founders of Starbucks Coffee Company. Initially Starbucks was a coffee bean vendor, and people tended to make coffee at home or would buy it in restaurants. It wasn’t until the mid-1980s when coffee started to take off in the US as a takeaway beverage, and you begin to see the popularity of the Starbucks brand rise.
The question was posed: Why do you think coffee has become the commodity that people are prepared to spend a lot of money on relatively speaking very day… a $5 coffee being a normal thing to buy on a daily basis now, when that just simply didn’t exists a few years ago?
Zev responded that one of the key drivers of coffee’s popularity, is that coffee has caffeine in them, and that because caffeine gives you a bit of a lift, people want to keep experiencing that, and it has just become part of people’s lives. In reality I think the popularity of coffee shops has a lot more to it than that, it’s about what else is on offer there, the type of space the café offers, as well as how customers are treated, and the extent to which the café has integrated into the local community.
Mr Siegel left in 1980, when the company only had a few branches, and it was after this time that the company began to really grow into the global brand that it is today with more than 24,000 outlets in 70 countries around the world. Responding to questions about how he felt about leaving the company at this time, and how different the company was Mr Siegel responded that he was actually still excited by the fact that he can travel to so many places around the world and see a Starbucks store: “I’m pretty excited when I go to out of the way places, you know Johannesburg, Kuala Lumpur and I step out of my hotel and within a block I see a Starbucks store, and that makes me thrilled”.
But, as the reporter highlighted, a lot of people who enjoy coffee, people who tend to visit independent coffee shops might have a more negative view of Starbucks – not necessarily a place that would be seen as a place to get high quality coffee, compared to some of the other coffees on offer.
Zev’s response that while there was a ‘a lot of bashing of the big guy’ he didn’t view it like this. Instead he argued: “Seattle’s a great example, there are a great many Starbucks stores in Seattle, I’ve lost track of how many, but there are far more independents and they come in every stripe and shape and size. I don’t think the independent coffee
industry would have grown the way it has all over the world, if it wasn’t for Starbucks popularizing and setting the bar so high. The work that Starbucks did2 in the 70s, and that has been carried on starting in 1984 by the modern day Starbucks was at a very high level. So when you have a market leader establishing what might be called a high bar where not only the coffee has to be good, the coffee bars have to be good, the packaging has to be good, the employees have to be well trained, the world of coffee is at a very high level. Starbucks also sets relatively high prices which leaves so much room for other companies in the same business, other coffee bars to be successful because, they do not have to have low prices and I think it is a great enabler. The coffee bar that we’re sitting in for example. I’m not sure it would be here if they couldn’t charge as much as they do for the coffees we’re enjoying.” Essentially he argued that the coffee shop landscape wouldn’t be the way it was today if it wasn’t for places like Starbucks. In Seattle there is an extremely diverse coffee culture, it was one of the first places I ever really started to think about the different type of cafes, after going on a coffee crawl back when I visited the city in 2011.
The main focus of the programme was to consider how people feel about global brands. Talking with people on a central London street some consumers said they felt it was sad that in many ways shopping in high streets between places like Spain and the UK has become too similar because the big brands dominate. When asked if they would like more options to shop in independent shops rather than big chains, the response generally was that they would, for some items. One member of the public highlighted that when she was travelling she tended to head for big brands because it was more trustworthy in their opinion. The example that was given was when a lady recently travelling in India ended up spending a lot of time in Starbucks because she was concerned about ‘the water situation’. In this case she said that when travelling she trusted big brands, but when shopping locally she would prefer local brands. Further members of the pubic talked about liking small brands for fashion, because of better quality, but big brands for things like electronics because of issues of quality. There were only a few quotes from a few consumers but it interesting to consider how some people view levels of trust for different types of brands for different types of products. With coffee and cafes, I wonder how many people do tend to visit Starbucks when abroad because it’s familiar, because they know that they can have the same kind of drink they have at home, and the surroundings won’t seem too different. I imagine for a lot of people this might be the case. It would be interesting to explore these issues further, given the rise in the number of independent coffee shops in the UK alone over the last few years, it suggests that consumers want more than what the high street coffee chains can offer.