Starbucks will be launching a new “neighborhood” concept store next week under the name “15th Avenue Coffee & Tea” that adds beer and win to the menu.

Andrew Hetzel, the founder of coffee consulting group Cafemakers, said Starbucks may also be renaming its stores to provide a testing ground for changes and, possibly, to bring in a new brand of consumer.

“It looks to me that they are testing a specialty sub-brand to see if they can capture some other segment of the market that would otherwise be disillusioned by a large corporate chain,” Hetzel said, adding that opening only one at first “gives them a live shop to test changes in menu offerings, store design and, perhaps, procedures quickly” without disrupting operating stores branded with the Starbucks name.”

You can read the full story tomorrow in many newspapers that subscribe the AP feed, or find it online now on news websites, like CBS News. These syndicated articles tend to disappear after some length of time, so if reading this long after the event, you may need to search online to find a different copy. It’s unlikely that I will return to update the link.

In addition to what was quoted in the article, I have a few more thoughts:

The best of any specialty food businesses cannot exist on a large scale, so a smaller scale business will ultimately need to be spun off if Starbucks wishes to compete in the high end specialty coffee market.

Think of the situation in terms of a restaurant — the best fine dining restaurants are normally one single unit or a very small chain. Once you expand to two locations and beyond, it becomes increasingly difficult to maintain the same customer experience that could be found at the first. Chef skill, front of house training and availability of ingredients all become increasingly complex to maintain to a consistent level, so often sacrifices need to be made in the name of consistency over quality so that customers know what to expect when they walk through the door of every location. These problems multiply with 10, 100 and 1,000 units, and you can see what sacrifices Starbucks has made in order to grow beyond 16,000.

Just like a fine dining restaurant, the best of coffee shops have highly skilled baristas and often use unique coffees that may not be available in the quantities possible to serve a consistent menu at more than a handful of locations. I expect that we will be hearing more about this new concept over the next several months and possibly years.

Complete 15th Avenue Coffee and Tea Article

Starbucks Corp. said Thursday it is wiping its name from one of its Seattle-area stores and adding alcohol to the menu.

The Seattle-based gourmet coffee chain said it is changing the name of one of its existing stores in its hometown to a name that reflects the neighborhood location. The store will be called 15th Avenue Coffee and Tea. It will open next week and will serve coffee and tea as well as wine and beer.

The company said it will then open two more Seattle-area stores without the Starbucks name in locations that aren’t currently Starbucks stores.

The chain said if the rethought coffee shop is a success it will consider replicating it in other cities.

“It’s interesting,” said Morningstar analyst R.J. Hottovy, “especially since the Starbucks brand has been such an integral part of their success.”

Hottovy said he thinks the Starbucks brand still “resonates” with those who drink coffee regularly. But, he added, with the recession now in its second year, the brand may be struggling more because it is considered “premium,” and therefore expensive, by consumers.

The company has been unable in recent months to keep its sales growing as more consumers cut out small luxuries to save money. Starbucks is slated to report its fiscal third quarter financial results on Tuesday and analysts have largely predicted another same-store sales decline, particularly, in particular, that competition with lower-priced rivals like McDonald’s Corp. has heated up.

McDonald’s has been rolling out its own line of espresso-based drinks to all of its 14,000 U.S. locations and has been heavily promoting the beverages.

Andrew Hetzel, the founder of coffee consulting group Cafemakers, said Starbucks may also be renaming its stores to provide a testing ground for changes and, possibly, to bring in a new brand of consumer.

“It looks to me that they are testing a specialty sub-brand to see if they can capture some other segment of the market that would otherwise be disillusioned by a large corporate chain,” Hetzel said, adding that opening only one at first “gives them a live shop to test changes in menu offerings, store design and, perhaps, procedures quickly” without disrupting operating stores branded with the Starbucks name.

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