Coffeenomics

By MIKE MILIARD  |  December 11, 2009

Still, just as the stock market and real estate prices can go only so high, it turns out that there is a cap to perpetual expansion, too.

"Starbucks was locked in its own kind of internal battle between two imaginings of the corporation," says Simon. "One that Wall Street had, about endless growth, and the other, in the company, that it would become and remain this bastion of authenticity and good coffee. In the end, the Wall Street people won out and sort of stretched the brand."

If Starbucks blew up back in the '90s by selling a certain cachet, that exclusivity became harder to maintain with 16,000 branches serving 40 million customers each week. "Scarcity," says Simon, "has value."

By contrast, he cites Peet's Coffee and Tea, a West Coast contemporary of Starbucks that's been conservative in its growth over the years, with only 200 American stores, mostly on the West Coast. "There's very little difference in what they serve. But it's allowed [Peet's], by staying smaller, to kind of control the quality of coffee."

Consider one of the chief engines of Starbucks's mid-2000s efflorescence: the Frappuccino. Viewed from the perspective of the bottom line, it made sense: "It totally gave them access to a larger market, including teens. It made for a longer coffee day and more business in the summer." But this "adult milkshake with as many calories as a Big Mac" (as Simon calls it in the book) also diluted one of Starbucks's original selling points: deep, dark, rich, potent, flavorful coffee, brewed and served with care.

That tactic was a big misstep, argues Quelch. It moved "way beyond what a coffee purist would consider appropriate into a lot of slightly fluffy new products," and became "a hostage to stock-market expectations," leading to a "relentless increase in number of store openings, thereby diluting the exclusivity of the brand."

Such overstretching is the logic of capitalism. "It often consumes itself," says Simon. "It creates markets that often overwhelm it, desires it can no longer contain."

And that, in part, is why we find ourselves in a country littered with foreclosed McMansions and boarded-up malls — never mind the overworked and overcaffeinated office drones, tapping their laptops with existential melancholy.

"We're deeply schooled by this consumer culture that we can have it all," says Simon. "And I think that the general gnawing sense that many of us have that we're not getting any of it is part and parcel to this. There's so many things promised in what we buy, and it only leaves us wanting more."

Mike Miliard can be reached at mmiliard@phx.com.

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