Starbucks‘ biggest competition isn’t another coffee chain.
Instead of worrying about the impact of Dunkin’ Donuts or Tim Hortons, the coffee giant is keeping an eye out on trendy independent shops, according to CFO Scott Maw.
“We’re still not seeing any one competitor or even a smaller number of group of competitors being an influence on our business at any time,” Maw said at the UBS Global Consumer and Retail Conference on Thursday. “But what we have acknowledged … is the collective group of independent coffee shops out there, they are doing a lot of what Starbucks has been so good at for so long.”
In other words, Dunkin’ Donuts running a promotion isn’t going to hurt Starbucks’ sales. However, the rise of trendy neighborhood shops has the potential to draw customers away from Starbucks in the long term – especially if Starbucks can’t compete when it comes to service and environment.
“It’s that third-place environment, it’s a comfortable place to be, it’s an up-leveled coffee experience,” Maw said. “They’re not taking share [from] us but what we know is if we don’t have our service levels right and customers aren’t engaged in the right way, they now have options.”
The concern that independent coffee shops will win over Starbucks’ customers is amplified by the chain’s growing ubiquity, Maw said.
Widespread popularity can kill a trendy brand’s image. As Starbucks opens more locations, maintaining its coffee-snob-approved reputation becomes more difficult, especially in relation to independent chains.
- Matt Weinberger/Business Insider
“It would be easy for people to forget that we still source, roast, and deliver the highest quality coffee you can get anywhere in the world,” Maw said. “It’s as good as you can get, but for customers … they might not associate that with Starbucks because we’re everywhere.”
The company’s solution has been to invest in Roasteries and the Reserve brand, which provide a more upscale Starbucks experience.
Starbucks plans to open 20 to 30 Roasteries, which are tourist-friendly mega-locations roasting coffee in-house and serving expensive drinks like the $10 Nitro Cold Brew Float. Additionally, the company will open 1,000 Reserve stores, serving small-batch coffee and food made in-house, and it will add Reserve Bars at 20% of all locations, enabling them to serve more exotic blends made in a wider variety of methods.
Concern that Starbucks could lose its edge to independent coffee shops is currently one of the driving concerns at the company. In April, CEO Howard Schultz will step down to focus on the Reserve brand, which he has said he believes will have a “halo effect” for all Starbucks locations.