Howard Schultz wants to transform how people drink coffee once again.
The first time he did it, he brought European-style cafes to the United States, or at least he brought them into the mainstream. Starbucks (NASDAQ:SBUX) didn't introduce espresso-based beverages to the U.S., but it did take the concept out of dimly lit coffee houses and Italian restaurants and bring it everywhere. Essentially, the company took an existing model, gave it an American spin, and created something that worked globally.
Schultz and his company did that in part by expanding the coffee experience. He added flavors, drinks that were as much milkshake as coffee, and new ways to to experience a beverage many people drank for function, not enjoyment. Schultz also created cafes that fulfilled his idea of "a third place," somewhere besides work and home, where people could spend some of their time.
Starbucks has become a spectacularly successful company, with over 26,000 locations in more than 75 countries. Now, in addition to piling on to that total, Schultz, who stepped down as CEO but still serves as chairman, wants to create a new kind of coffee experience. His company will deliver that experience through its Roasteries and Reserve stores, and by adding Reserve Bars to existing locations.
A premium coffee experience
When Starbucks launched the Roastery idea, it was easy easy to see the appeal. The company would open Willy Wonka's Chocolate Factory-like coffee palaces in major tourist destinations, starting in its home market of Seattle. These would serve specialty products to area stores and function as a kind of Starbucks theme park. Consumers, because it would be a special experience, would be willing to pay more.
What seemed less logical was the chain's plan to open 1,000 or more Reserve stores while adding Reserve bars to up to 20% of its global locations by 2021. That seemed like an overly ambitious effort that consumers might not support.
Visiting the Starbucks Roastery, which I did during a recent visit to Seattle, makes Schultz's vision a lot more clear. Yes, the Reserve/Roastery can be an over-the-top experience, but that's only part of what the concept offers.
What is the Roastery like?
The Seattle location, the first of an eventual 20 to 30 Roasteries planned worldwide, has a fairly modest exterior, because, being set into a hill, its facade conceals its true size. Once inside visitors are greeted by an employee who points you in the right direction. There's an extensive merchandise section, a to-go-ordering counter (much as in a regular Starbucks), and a number of sit-down bars where well-trained baristas will curate a personalized coffee experience for you.
Ordering at the counter, which I did for my first drink, works like any other Starbucks, aside from having the option to have your order delivered to your table. The drink menu has some different choices, and the food mixes familiar items with higher-end baked goods. And, surprisingly, it's absolutely possible to grab a cup of coffee and a muffin at roughly what you pay at a normal store and be on your way.
If you choose to sit down at the bar, you get an entirely different experience, one closer to being guided by a knowledgeable wine sommelier than the one you get drinking coffee in a regular Starbucks. If you choose to consult the barista, he or she can guide you toward the right drink for you at that moment.
Since my first drink consisted of sample portions of regular and Nitro Cold Brew, I wanted something hot, but not a simple cup of coffee. My barista suggested an "Undertow," espresso suspended above chilled half-and-half and vanilla-bean syrup. The drink was an experience, with the cold piercing the hot and the sweetness of the cream and vanilla cutting the rich coffee perfectly.
For my third and final drink, my barista suggested decaf (a suggestion I ignored) and steered me toward one of the Roastery's Affogato desserts, which are essentially coffee with ice cream. I opted instead to try what the woman sitting next to me had ordered, an American Con Crema. This drink consists of a shot of espresso with hot water added to it, topped with espresso and orange-flavored syrup, finished with coffee-spiced foam and demerara sugar. The foam was thick, and the sugar added a tiny bit of crunch, elevating the drink and enhancing the coffee.
Why Reserve will work
Having experienced the Roastery/Reserve experience, it's easier to understand what Schultz intends to do. In a current Starbucks, both in-house and to-go orders offer a similar experience built around efficiency. You may linger over your drink, but the coffee, while good, is secondary to getting on your way, getting work done, or socializing.
At a Roastery, a Reserve store, or a Reserve bar in a regular store, consumers have the option of making the coffee the star of the show. You can get in-and-out fast, or sit with a laptop if you want to, but you can also try coffee brewed with the method that best suits the bean, try limited-edition blends or beans, or sample more complex drinks than you might not normally try, guided by your barista.
It's a different coffee experience supplemented with higher-end food, and it's one that will work as long as markets are picked well. Roastery locations are planned for New York, Chicago, Shanghai, Milan, and Tokyo that will be driven by tourists looking for a destination experience. Reserve stores will localize that experience, creating Starbucks locations that people go a bit out of their way to visit, where they meet up with friends. The Reserve bars will do the same thing in even more locations, allowing a customer to come in for a quick cup in the morning and then stop by on the weekend, afternoon, or evening, for a lengthier stay.
These new Starbucks concepts extend the day for the chain. Reserve stores and Reserve bars feature coffee as an activity, not just a drink. That should lead to more late-afternoon and evening traffic in existing stores that add a Reserve bar.
There will be stumbles as Starbucks rolls out this concept, simply because it's something new, but ultimately, there should be a market for a slower, better coffee experience. Roasteries and Reserve stores or bars will lure in the coffee snob, but they're also welcoming to fans who may not know much about what they're drinking but still want to have something better. These concepts extend the Starbucks brand while supporting and enhancing its existing locations, and they should become a major driver for the chain.