* Starbucks' experimental cafes may signal upmarket move
* Alcohol on the menu at the test cafes
* Pour-over brewing method exported to Starbucks cafes
By Lisa Baertlein
SEATTLE, April 4 Heavy velvet curtains, indie movie nights,
single-origin coffees, wine and beer, mouth-watering organic pastries and
gourmet cheese and meat plates -- this is Starbucks?
Well, sort of. It's Roy Street Coffee & Tea by Starbucks Corp (SBUX.O),
the result of Chief Executive Howard Schultz directing his store designers
to break the mold and build a neighborhood coffee house from scratch.
The cafe is located in Seattle's eclectic Capitol Hill section, home to
a vibrant gay community, grunge rockers, hipsters and mansion dwellers.
It and the similarly edgy 15th Avenue Coffee & Tea, also in Starbucks'
hometown, have been dubbed "idea incubators" by the now mass-market coffee
chain and operate in one of the most competitive cafe scenes in the
Some company watchers say the two cafes signal a plan by Starbucks to
move its stores back into the top end of the market, a niche it essentially
vacated when it went mainstream with its lattes and Frappuccinos -- now
facing competition from McDonald's Corp's (MCD.N) even more mass-market
"The Starbucks brand has shifted over time from being a specialty brand
to being more of a mass brand. There is a gap at the top of the market,"
said Harvard Business School marketing professor John Quelch. He added that
smaller rivals like Peet's Coffee & Tea PEET.O and Caribou Coffee Co
CBOU.O have seized the opportunity to fill that void.
"Obviously, Starbucks does not want to concede that top end of the
brand pyramid to those competitors," said Quelch, who did a case study of
Starbucks in 2006.
The test format could "re-energize" Starbucks' upmarket appeal and
attract the kind of following originally drawn to the upstart brand 20-plus
years ago, Quelch said.
The company debuted the test cafes last summer, shortly after it
unveiled its new Starbucks store designs at University Village and 1st
Avenue & Pike Street in Seattle.
Starbucks' new store designs focus on energy savings and "green"
building materials. Like the test stores, they have an urban industrial
aesthetic that incorporates recycled building materials ranging from
salvaged wood to high school bleachers.
"A major objective of ours was to get back on the leading edge of
retail design," said Arthur Rubinfeld, president of Starbucks global
development. Rubinfeld returned to Starbucks to "reinvent the store
experience" shortly after Schultz retook the helm of the flagging brand in
Dan Geiman, an analyst at McAdams Wright Ragen in Seattle, said the new
designs have more of a focus on coffee and a "more organic and less
While Starbucks has made no announcements about its plans for the test
cafes, they already are exporting ideas.
If you are the rare bird at your local shop who likes a bold brew or a
decaf in the afternoon, you may have had a coffee made with the "pour over"
method, where hot water is poured into a cone filter that drains into a
serving cup. The method, popularized in cutting-edge independent cafes, was
perfected for use at most U.S. and Canada Starbucks' outlets by Roy Street
and 15th Avenue staffers.
FULL RANGE OF ADULT BEVERAGES
During a Reuters visit to the Roy Street cafe one rainy work day
afternoon, customers ran the gamut from toddler-toting moms to freelance
workers and retirees.
Among them were University of Washington graduate students Nadine
Maestas and Deborah Kimmey, who came for the ambience, the coffee and the
"It's a much improved atmosphere over other versions of Starbucks,"
Maestas said of the decor, which is punctuated by locally crafted
metalwork, reclaimed wood counters, industrial fixtures and richly
During their visit, they ordered coffee, beer and wine.
"We go through the whole process of drinks," joked Kimmey.
CEO Schultz took the inspiration for Starbucks from Italy's cafes,
which offer espresso-based drinks and alcoholic beverages ranging from beer
to wine to grappa. Starbucks has never embraced alcohol sales in the U.S.
or abroad -- but it has tested sales of such "adult beverages".
In 2000, Starbucks offered beer and wine in three test "Cafe Starbucks"
outlets in Seattle, which served breakfast, lunch and dinner. It also sold
those alcoholic drinks in two "Circadia" soup, salad and sandwich shops
located in San Francisco and Seattle. Those concept stores eventually
closed, and some locations were turned into Starbucks stores.
Beyond that, Starbucks has conducted limited-time tests of beer and
wine sales in Japan and Spain.
The Roy Street and 15th Avenue cafes debuts revived speculation that
Starbucks could one day sell beer and wine at its 16,000-plus global
But, so far, the answer to that question is no.
"We have no plans at this time to offer these beverages in other
locations," a Starbucks spokeswoman said.
(Reporting by Lisa Baertlein; Editing by John Picinich)