I stumbled into a Belgian chocolatier the other day and noted the wide variety of coffee beverages it sold in addition to its other delectables. I inquired what kind of chocolate it used in its mocha drinks, as I am wont to do given my status as chocoholic, and I was stunned by the reply. "We melt down a combination of our dark and milk chocolate and mix it in." Needless to say, the resulting concoction was pure heaven. Now I knew I could never, ever go cold turkey from both coffee and chocolate.
So I got to thinking about our loved, and hated, coffee chains -- Starbucks (NASDAQ:SBUX), Peet's (NASDAQ:PEET), and Diedrich (NASDAQ:DDRX) -- and how they prepare their mocha drinks. Peet's and Starbucks use what I consider to be inferior syrups (what syrup isn't inferior?). Diedrich, along with privately held Coffee Bean & Tea Leaf, uses chocolate powders that are very high in sugar. Whole Foods (NASDAQ:WFMI) has the guts to use Ghirardelli powdered chocolate, which, although marginally better, is still cut with a lot of sugar.
Is there a market to be captured for an even higher-priced cup of coffee? I ask that because these purveyors of java already have managed to secure three bucks or more -- unthinkable before Starbucks -- for a chain-store goblet of caffeine. Because they already charge premium prices for their drinks, would people pay even higher premiums for the real thing -- a mocha with the finest chocolate the world has to offer?
This goes beyond just chocolate in mocha drinks, but to the entire business model. That is to ask, can the affordable luxury of upscale drinks be pushed even further? All the chains offer chocolate bars and pastries, but only Peet's really goes the distance by using high-percentage cocoa and pastries from outstanding local bakeries like La Brea Bakery here in Los Angeles. What if it brought in the best desserts it could find? Could it extract more money from consumers?
I believe the coffee lifestyle is sufficiently ingrained in our culture that now would be a good time to pad the profit margins by going that extra step. I know that I won't be setting foot in a chain again anytime soon, having found my chocolate nirvana, and I bet other people would do the same if Starbucks began a trade with Belgium.
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Coffee snob Lawrence Meyers always asks what kind of chocolate a coffee store uses, but doesn't own any stocks mentioned in this article.
