The decline of the empire of Starbucks

26 July 2008

Matthew Lynn says coffee is the pure brew of capitalism — as the credit crunch bites, no wonder the world’s most ubiquitous coffee-house chain is heading for trouble

The formula certainly worked. By the time Starbucks listed in 1992, it had 165 shops. It opened its first foreign store in Tokyo in 1996, and in 1998 it arrived in Britain when it bought the Seattle Coffee Company (a business largely cloned from Starbucks anyway) and rebranded its chain with the soon-to-be-familiar green and white colours. Over the next decade, Starbucks mushroomed to more than 16,000 shops around the world. It even opened in France — though purists will be pleased to note that it struggled there, and shied away from Italy altogether.

There was no great mystery about the model. Starbucks, whatever it liked to claim, never really had the best coffee in the world. But like most chains it offered something else instead: reliability. You could drop into a Starbucks anywhere in the world and you would know what you were getting. It introduced the sort of café where you could sit around drinking coffee and reading the papers to countries where such places had never really existed before. In Britain, it was a big step up from Joe’s greasy spoon with Nescafé in a chipped mug. Likewise, to most Americans it was a step up from an old- fashioned diner.

Along the way, Starbucks turned itself into a cultural icon, inspiring admiration and contempt in equal measure. There is a whole shelf of books about Starbucks: ten at the last count, including How Starbucks Saved My Life, the story of a JWT executive who goes to work at the coffee chain after getting downsized (and soon to be made into a film starring Tom Hanks). During the dotcom bubble, it became a cliché that every new business was started in Starbucks: like most clichés, there was some truth in it, and the chino-clad, Starbucks-cup-clutching entrepreneur became an archetype of the era.