"Starbucks News Watch"

Starbucks Betting on Drivethrus

SEATTLE, Dec 23, 2005 (AP Online via COMTEX) -- Leaning out the window of her SUV, Tami Cornwell orders the same drink she gets almost every day: "Double-tall, four-pump vanilla caramel Macchiato." A high-tech recruiter, she's gotten hooked on the growing number of drivethrus Starbucks has been opening in recent years. "On weekends, I like to go into the store," she said one morning at a drivethru north of downtown on her way to work. "On the weekdays, it's more about convenience and caffeine."

The world's largest specialty coffee chain once shunned the drivethru concept, fearing it might alienate customers who like to come inside and sip their lattes while listening to music in cozy chairs. In the early 1990s, as independent espresso stands were starting to gain a steady following, Starbucks stuck to its original game plan: giving people a "third place" to escape from the hustle and bustle of home and work. Eventually, it got hard to ignore coffee lovers' demand for a quick java fix without leaving the warmth of their driver's seats. "We have a habit of giving customers what they want, and when a customer has six kids in their car or their favorite pets and it's raining or snowing, that's creating an experience for them that will want to make them use a drivethru," said Jim Donald, Starbucks' president and chief executive.

Starbucks started testing out the market in 1994, opening its first drivethrus in car-crazed Southern California. It had dozens of drivethrus doing brisk business within a few years. There were 170 and counting by 2001. It opened 354 drivethrus in the U.S. during its latest fiscal year, pushing its nationwide total to 1,065 - nearly 15 percent of its roughly 7,300 domestic stores. The 2005 fiscal year, which ended Oct. 2, marked the first time drivethrus comprised more than half of Starbucks' new company-operated stores - those that aren't licensed in airports, hotels, grocery stores and the like.

The company now has drivethrus in every state but Vermont and Wyoming. Internationally, Canada has 35 drivethrus, there are nine in Japan, four in Mexico, and one each in Puerto Rico and Indonesia.

Aside from the headset-wearing baristas, the ambiance in many of its drivethrus reveals the same attention to decor Starbucks gives its traditional stores, with cushy chairs and art on the walls.

Drivethrus will continue to add to Starbucks' bottom line, making up about half of the new stores the company opens domestically over the next few years, Donald said.

Starbucks would not disclose how much drivethrus have boosted its revenues, though Donald said in general, they tend to post higher first-year sales, averaging about $1 million, compared to roughly $715,000 for traditional stores.

Bruce Milletto, president of Bellissimo Coffee InfoGroup in Portland, Ore., said he's surprised it took so long for Starbucks to get into the drivethru business. His consulting firm has helped thousands of small businesses open coffee shops and drivethrus over the past 15 years, he said. He's gotten used to hearing clients sneer at Starbucks, denouncing the company as a corporate giant that's bound to try to put them out of business. He tries to convince them it's not such a David-vs.-Goliath thing. "Starbucks is oftentimes, to the small independent coffee entrepreneur, thought of as the devil to the industry. What most people don't realize, is that without Starbucks, the industry wouldn't have exploded as it has," Milletto said.

Espresso drivethrus dot so many parking lots and street corners in Seattle and its surrounding suburbs that some have difficulty surviving. "You get customers by stealing from other drivethrus," said Mark Weber, owner of Scooter's Espresso in Seattle's Pinehurst neighborhood. "You're not creating new customers." Weber gets enough morning rush-hour customers to be breaking even after about five months in operation. He's tried to drum up new business by offering 20 percent off coffee drinks from noon to closing time, but hasn't gotten much of a response. As he sees it, Starbucks' growing drivethru presence is making it harder on independents. "They take away a lot of business away from the small operations," he said. "They were the only game in town for years, so they've built up their market share. ... They're masters at marketing, no doubt about it."

Critics have long derided Starbucks as the McDonald's of coffee. Now some chuckle that drivethrus just make them look more like it. Donald bristles at such a suggestion: "We are not the McDonald's of anything," he said. "The drivethru is another convenience for our customers as we want them to enjoy a great cup of coffee."

Starbucks: http://www.starbucks.com

Bellissimo Coffee InfoGroup: http://www.espresso101.com/

By ELIZABETH M. GILLESPIE
AP Business Writer