The Emerging Trend That Starbucks Will Miss

This morning I went, perhaps for the last time, to my local Starbucks (Nasdaq: SBUX  ) to have coffee and a treat and spend a couple of hours working. I ordered what has become my usual pairing in recent weeks -- a latte and a Valencia orange cake.

"I'm sorry," said the barista, "but we aren't carrying the Valencia orange cakes anymore. Would you like something else instead?"

Um, for me, you don't have "something else."

See, I recently found out that I have celiac disease. It's a lifelong inability to properly digest gluten -- a gluey protein found in wheat and barley and a few other grains. This was once thought to be an extremely rare condition, but recent studies have shown that it's quite common -- but many of those affected don't (yet) know it. And left untreated, it can cause all sorts of nasty health problems.

At the moment, there's only one treatment: Don't eat gluten. No bread, no cookies, no oatmeal, no cereal, no soy sauce, no beer, no to all sorts of things that you probably enjoy every day without realizing that there are gluten molecules floating around in them. Things that I enjoyed, too, until recently. Though right now, after a few weeks on this diet, I'm enjoying something else -- the best health I've had in my adult life, by a long shot. It really is amazing.

But I digress -- this is, after all, an article about Starbucks.

What does Starbucks have to do with this?
Earlier this year, responding to the increasing number of people who are being diagnosed with this thing, Starbucks introduced a tasty gluten-free treat -- the Valencia orange cake. It was magical -- and the celiac community reacted with delight. Why magical? Because it had just a short list of natural ingredients, it wasn't overly expensive, and -- unlike most gluten-free pastries, which tend to taste somewhat like pastry-flavored sawdust -- it was delicious. It had the texture of actual cake. As we celiacs say, it was something we would have eaten anyway. What a treat!

But now I can't get it. Apparently it has a short shelf life, and although it supposedly freezes well, most Starbucks stores don't have freezers, which meant a lot of dumped inventory and not a lot of profit.

Bummer.

But this is much bigger than my missing a little cake I didn't really need to be eating anyway. I think this gluten-free thing is on the verge of becoming really big business. And it looks to me as if Starbucks is jumping off a new trend just as it's picking up steam, and that seems like a really bad move.

Why "gluten-free" is about to become big business
As I mentioned, celiac disease was long thought to be very rare, but research done in the past few years has determined that more than 2 million Americans have it. It can be the root cause of many disorders, ranging from various autoimmune diseases and gastrointestinal cancers to depression and, recent case studies suggest, autism.

Many more folks may have some level of allergy or sensitivity to gluten. Most don't even know it. But there are some new, inexpensive tests available, and awareness is spreading quickly, so many will be finding out in coming years.

Do you sense a huge business opportunity there? A lot of big companies do. Until relatively recently, gluten-free food was the province of a few small companies that were cross-marketing to other markets -- natural foodies and those allergic to things like soy and eggs. For a while, it was hard to find outside upscale grocery stores like Whole Foods (Nasdaq: WFMI  ) , expensive, and for the most part, not very tasty.

But now, some heavy hitters are jumping in. General Mills (NYSE: GIS  ) recently launched gluten-free Betty Crocker cake and brownie mixes, and modified the recipes for Corn Chex and Rice Chex to eliminate gluten. Restaurant chains like P.F. Chang's (Nasdaq: PFCB  ) and Brinker International's (NYSE: EAT  ) Chili's have developed gluten-free menus. Anheuser-Busch recently launched a gluten-free beer: Redbridge (it's not bad).

On the other side of the equation, Shire (Nasdaq: SHPGY  ) and GlaxoSmithKline (NYSE: GSK  ) are funding efforts to develop medications that can mitigate the dangers of gluten or stop the harmful reaction altogether. The first of those meds could hit the market in a year or two.

All of those companies -- and many others -- are in a great position to profit from the coming explosion of interest in gluten-free and therapeutic options.

But apparently, not Starbucks.

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Fool contributor John Rosevear thought Redbridge was OK, but so far his favorite gluten-free brew is New Grist, a microbrew from Milwaukee. He has no position in any of the companies mentioned. Whole Foods and Starbucks are Motley Fool Stock Advisor picks. The Fool owns shares of Starbucks, which is also an Inside Value selection. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (12) | Recommend This Article (15)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 30, 2009, at 4:37 PM, funzone99 wrote:

    While I think the issue that you face is real and that situation is frustrating, as a small business owner I can understand why Starbucks can't carry everything for everyone. I think Starbucks does there best to look at every situation individually and try to do whats right when they can without putting other people out. I think where some of the responsibility lies is with individuals who have Celiac not coming in to support the product. If it doesn't turn over, you can't shelve it and you certainly wouldn't want an expired pastry or ask Starbucks to keep a case on hand just for you individually. I think they will continue to monitor the situation and try to do the right thing. In the meantime, what I also think Starbucks does do well is to take constructive criticism well. Have you attempted to send them your comments before putting an article out about it. You might be surprised how respectfully they respond.

  • Report this Comment On July 30, 2009, at 4:53 PM, cswalker21 wrote:

    Just because your local store stopped carrying your special cake doesn't mean you can't still get it. They have your gluten-free cake at my local store. Chances are you only have to travel a few blocks to find another location that may have your sensitive-tummy cake. Just go to Starbucks.com and look under Nutritional Information. You can search for a location by zip code and it will tell you what treats they serve there. Or you could just take your one bad experience and use it to malign an entire corporation on your soapbox. Yeah, that'd be responsible journalism.

  • Report this Comment On July 30, 2009, at 5:24 PM, Mandeclian wrote:

    The "Kind" bars at the register that are new are gluten-free. They keep well, taste good and aren't going to waste everyday, which is a sound business decision, which is what it's really all about isn't it?

  • Report this Comment On July 30, 2009, at 5:31 PM, TMFMarlowe wrote:

    cswalker21, with all due respect, you could stand to take some of your own advice and do a bit of research before posting. Google would have told you that the discontinuation is chain-wide, lots of feedback has already been sent by outraged Celiac sufferers (who by the way skew educated and affluent, and tend to be very loyal to the companies that offer good stuff for them), and Celiac is a lot more than "sensitive-tummy" -- in my case, it wasn't tummy-related at all, it was a whole set of other things that added up to damn near disabling, and that's not uncommon.

    Let Google be your friend next time.

    Thanks for reading.

    John Rosevear

  • Report this Comment On July 30, 2009, at 5:41 PM, TMFMarlowe wrote:

    Mandeclian, I tried one this morning. It wasn't awful, but it wasn't great, and at $2 for what is essentially a small handful of nuts and dried cranberries, it isn't exactly a good value, and it seems -- to me, at least -- weirdly out of place as a coffee shop offering. Trail mix doesn't really go with a grande mocha, y'know?

    Thanks for reading.

    John Rosevear

  • Report this Comment On July 30, 2009, at 10:20 PM, dlohmeier wrote:

    Good Article John, I can eat anything but my wife and daughters have Celiac. What I think most businessess miss in thier evaluation of the Gluten Free opportunity is the multiplier affect. When one member of a party can't have Gluten the entire party or family must choose a location that can accomodate that person.

    Disney learned this lesson years ago and profits by making the small accomodations necessary to allow sensitive diners to come and spend money at thier parks. Celiacs may be on ly 1% of the population..but it is a small group that few cater too and the resulting opportunities are very lucrative.

    Wake up Starbucks try again but this time with some better planning

  • Report this Comment On July 31, 2009, at 7:28 AM, walshmacneil wrote:

    What's more interesting is that when I travel to the UK the the Stabucks in the greater London area all carry the gluten-free valencia orange cakes AND also a very tasty brownie. I always stuff my briefcase with them when I'm going through Heathrow and then throw them in the freezer. It would be interesting to see what is different about the two markets.

    Another interesting anecdotal piece for me is that I tend to fly British Airways or United, the only two airlines who can reliably deliver me a gluten-free meal. Once, on an airline which shall remain nameless, I requested a gluten-free meal when I booked the flight, confirmed it with a live person on the phone and then only after boarding the 6+ hour flight was I told that they have no special meals. The flight attendant said: "We've never had that special meal. People ask for it all the time." Luckily, I always carry back-up bars-- but geez. It was her attitude mostly. She just didn't care.

    So, that's a lot of business class seats I won't be buying with them.

    Maybe Starbucks, which does not have the same concerns as small businesses, can figure out a way to serve this market.

  • Report this Comment On July 31, 2009, at 11:11 PM, Wheatfreekansan wrote:

    Great point, dlohmeier, all food establishments need to pick up on the fact that if one person in the group has Celiac the group will more often then not pick a place where everyone can socialize comfortably and safely. That doesn't translate to one empty chair, but two, three, or more.

    It was nice for the short period they were available to feel "normal" when going out for a break, or having a safe snack while out shopping. Mostly I have to pack a snack just in case.

    Hopefully, they will reconsider or come up with one that has a better shelf life, but same quality.

  • Report this Comment On August 01, 2009, at 11:28 AM, TMFMarlowe wrote:

    dlohmeier, that's an excellent point re groups, one I should have made in the article (and will remember for next time). Thanks for stopping by.

    John Rosevear

  • Report this Comment On August 01, 2009, at 2:24 PM, gfprincess wrote:

    Thank you John for a great article and bringing awareness to Gluten Free. check out www.glutenfreeregistry.com for a free search of gluten free friendly businesses. You'll see the companies that get it, and know that there is an advantage to offering gluten free options.

    Barbara

    dx 03/03

  • Report this Comment On August 01, 2009, at 3:02 PM, LoriJN wrote:

    My Bible Study group meets at Starbucks--but not anymore! When they discontinued "my" pastry, the whole group chose to meet elsewhere. I think that mainstream places will become less so, if they don't provide truly gf alternatives (I say *truly*, b/c some establishments still just pick off the croutons and serve the salad--and I can tell within the hour who does this, and it ain't pretty. Those places won't be seeing me again.) I have three family members who are slowly accepting that they are also gluten-sensitive, and they will be adding their social and family groups to the numbers that only patronize celiac-safe environments as they act on their awareness. Wouldn't it be interesting if wheat-oats-rye-barley became the feedstock grains, and corn-quinoa-rice became the mainstays?

  • Report this Comment On August 03, 2009, at 6:46 PM, joejelly wrote:

    Congratulations on your diagnosis and subsequent good health!

    If too many restaurants and businesses offered Gluten Free (GF) options too rapidly, then they would probably be underwhelmed by the demand from the celiac community who couldn't absorb the supply. Mostly because we've learned to cook and make do.

    I try to support establishments that have GF options in as many ways as possible. It is almost surreal when I eat at a place that offers a GF menu.

    Welcome aboard!

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