Comment: Starbucks Venti, full-fat disruption please
When Starbucks hit the UK shores in 1998 on London’s Kings Road it brought over the novel concept of the ‘third’ place, which sat neatly alongside home and work, where people could drop by to meet friends or enjoy a bit of solo rest and relaxation over a tall latte.
In the intervening years it has moved radically away from this original model to the point today where it has become almost anything but that third place of its heritage. It is instead much more a purveyor of grab-and-go cold drinks. Consider that in the US as many as 74% of orders are drive-thru, mobile or delivery. And rather than new stores housing comfy sofas the company is opening mobile pick-up stores that are no more than hatches on the high street with no internal space whatsoever.
By 2025 it hopes to have 40% of its delivery orders coming through these pick-up stores or its small Express sites. On top of this cold drinks account for 75% of its business. And this is not a boring selection of drinks because over the years it has extended its offering to an incredible 380 billion options when you factor in the syrups, foam variations, milk types and toppings. This represents an incredible change from its basic menu that it originally offered.
What exactly happened? It wasn’t as if it intended to disrupt its original model, it just happened because it has undoubtedly been one of the most innovative retailers that has both developed products ahead of the curve and also followed the trends and satisfied new appetites.
It was quick out of the traps with its app that was linked to its digital loyalty programme and enabled customers to order ahead and reward them for their custom. It recognised the way the wind was blowing and fixed its sail accordingly. This is why it has set the pace in digital ordering. Its product innovation has been equally impressive and led to its uprooting of its old proposition.
It has also constantly played around with store formats, which is why at one extreme it has the tiny take-away-only kiosks with peanuts sq footage and at the other end it has its mammoth Starbucks Reserve Roasteries that measure around 35,000 sq ft. In the middle sit its traditional outlets at around 1,800 sq ft.
It’s not to say these changes have been painless. The company is currently grappling with how to handle customers coming at it through myriad channels and demanding an incredibly complex array of drinks. The company is working hard on new technology and operating processes to serve its increasingly impatient, convenience-driven clientele. There’s no lingering around with a book anymore, it’s more about an order being dispatched instantly.
If anybody is in any doubt about the success of Starbucks’ disruptive approach then just look at its ongoing expansion in the UK. The total number of branded coffee shops grew 3.6% to reach 10,200 outlets, according to the Project Café UK 2024 report from the World Coffee Portal, which found Starbucks along with Greggs (apparently it sells plenty of coffee) opened as much as 73% of the 350 net new stores. In contrast, Costa closed a net 17 sites over the past year, and as many as 29% of operators did not open any new outlets in the past 12 months.
There is certainly much for retailers of all descriptions to learn from the agility of Starbucks and its willingness to rip-up the operating manual and technology stack in favour of some new way of working. This is why it has managed to open as many as 38,000 locations worldwide (including licensed units), which puts it second only to McDonald’s in the size stakes.
Although I’m no great fan of Starbucks’ coffee, you have to admire its ability to change and continue to set the pace in the lucrative mainstream branded coffee shop market
