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Starbucks Tests New Store Names, Alcohol Sales

July 17, 2009


By Paul Ziobro, Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Starbucks Corp. (SBUX) is scrubbing its name from a Seattle location in favor of the store's street address in a test that could sprout more stores that seem more like the corner coffee shop rather than the global coffee giant.

The store, a former Starbucks that had been targeted for closing, is called 15th Avenue Coffee and Tea. It will also serve wine and beer and host live music and poetry readings as it seeks to take on a more community vibe where neighbors can gather late into the night. Bagged coffee in the store will also be slapped with the 15th Avenue Coffee and Tea name.

The chain plans to remodel at least three Seattle-area stores with names based on their addresses or neighborhood rather than the corporation, and it could expand the trial to other markets.

A Starbucks spokeswoman confirmed the test, first reported Thursday by the Seattle Times, was in the works, but an executive wasn't immediately available to comment on further details.

The test is the latest attempt by Starbucks to rejuvenate its in-store experience with changes like grinding coffee beans for each new pot and simplifying recipes for its muffins and breads. Starbucks is also opening stores with a more sophisticated tone that hearkens back to its early coffeehouse days.

At the same time, the coffee giant continues to face pressure as consumers remain wary in a shaky economy while McDonald's Corp. (MCD), with its recently launched McCafe, and other coffee purveyors pose fresh competition.

Operating a store under a different name could provide a fresh canvas for Starbucks to test a number of elements where consumers won't be biased by the company's name, says Ron Paul, president of Technomic Inc., a Chicago-based food consultancy. "It would only confuse the customer to put Starbucks on it," Paul said.

Serving alcohol like cordials and offering entertainment could help boost night-time business, making it serve more as a dessert destination after meals. Still, attempts at improving the customer experience may be lost on consumers for whom price has become the defining factor in where they spend their money.

"There is that 'third-place' aspect for Starbucks, but that's become less important" for consumers, said Paul, referring to a term commonly used to describe the chain as a gathering place.

Starbucks has been battling falling sales and traffic throughout the recession, causing the once fast-growing chain to shut hundreds of stores and lay off thousands of employees. Its last round of job cuts announced in January sent pink slips to 6,700 workers, while the company closed another 300 stores.

Starbucks shares took a nosedive, hitting a 52-week low of $7.06 last November, though the company's restructuring has helped restore order. The stock has more than doubled since, and is up 52% this year, recently at $14.39.

Next week, Starbucks is scheduled to report third-quarter earnings, with analysts forecasting another period of weak sales while the chain aggressively works to cut costs.

-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com

  (END) Dow Jones Newswires
  07-16-091313ET
  Copyright (c) 2009 Dow Jones & Company, Inc.

 


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