Starbucks hitches ride with Safeway and Target

The coffee chain is opening more mini-cafes inside supermarkets and other stores. Smart move?

By Kim Peterson Aug 25, 2010 1:53PM
Credit: (© Michael Conroy/AP)
Caption: Customer in a Starbucks storeStarbucks (SBUX) knows more about the real-estate downturn than most chains.

A few years ago, the company's real-estate moves were brazen bordering on reckless. It opened stores within blocks of each other and expanded too quickly in underperforming areas. The economic crisis forced Starbucks to shut down 600 stores in 2008, leaving the battered company to rethink its strategy.

Now, Starbucks has seized upon a new expansion idea, one that removes much of its real-estate risk. Forget the responsibility from a stand-alone location. Why not plant more mini-cafes in Safeway(SWY) and Target (TGT) stores?

The coffee chain plans to open more "licensed stores" than company-owned stores next year, The Wall Street Journal reports. These licensed cafes are important to the company because they serve a dual purpose. In addition to selling coffee, the cafes point shoppers to the growing number of Starbucks-branded products on store aisles.

Encouraged by the success of its Via instant coffee, Starbucks wants to ramp up the number of products it sells at supermarkets and other stores. Via sales have topped $100 million in the U.S., the Journal reports. Post continues after video:
Can't blame Starbucks for seizing upon new opportunity. But is it sacrificing some principles to do so?

Once upon a time, Starbucks wanted to be a place where customers could relax with a beverage, or meet friends to chat. Sofas and newspapers were the norm. Authenticity and comfort were a priority.

It's hard to capture any of that ambiance at the Safeway near my house, where a Starbucks kiosk and two tables are sandwiched between the cash registers and the restrooms.

Is Starbucks giving up on the coffeehouse vibe? Actually, we're probably seeing a split into two types of Starbucks: The conventional, take-your-time cafe and the bustling buy-our-stuff kiosk.

The Starbucks brand may come out a little worse for the wear, but the licensed stores are helping the company fill in its revenue stream in a more dependable way.
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