starbucks reserve: the coffee shop of the...

  1 DEBORAH  WEINSWIG,  EXECUTIVE  DIRECTOR–HEAD  OF  GLOBAL  RETAIL  &  TECHNOLOGY  DEBORAHWEINSWIG@FUNG1937.COM    US:  917.655.6790    HK:  852.6119.1779    CN:  86.186.1420.3016  Copyright  ©  2015  The  Fung  Group.  All  rights  reserved.  

Starbucks Reserve: The Coffee Shop of the Future?

• On  October  21,  Starbucks  opened  Starbucks  Reserve,  a  new  concept  store,  in  Central  London.  

• The  store  features  table  service  and  a  coffee-­‐tasting  corner  where  customers  can  interact  with  the  baristas.  

• Starbucks  Reserve  offers  coffees  sourced  from  microplantations  and  boasts  five  different  coffee-­‐brewing  methods.  From  4  p.m.  on,  the  store  serves  wine,  craft  beer  and  sharing  plates.  

• Tables  are  designed  for  mobile  device  users,  with  wireless  charging  and  laptop  sockets.  

• A  number  of  innovations  introduced  at  Starbucks  Reserve  are  likely  to  be  replicated  in  regular  Starbucks  outlets.  

 Source:  FBIC  Global  Retail  &  Technology  

Back  to  the  Future  showed  us  in  1985  what  October  21,  2015,  might  look  like.  Unfortunately,  in  the  movie,  Marty  McFly  did  not  stop  for  a  tall  latte  at  Starbucks,  which,  back  then,  was  a  coffee  shop  chain  with  just  46  stores  across  the  Northwest  and  Midwest  of  the  US.  So,  we  had  to  wait  until  the  actual  “Back  to  the  Future  Day,”  October  21,  2015,  to  get  an  idea  of  the  future  of  coffee  shop  chains—that  was  the  day  Starbucks  opened  its  new  concept  store,  Starbucks  Reserve,  in  central  London.  

The  store  combines  superior  design—modern  furniture  and  large  glass  walls  on  the  front  of  the  outlet—with  a  traditional  British  pub  feeling—with  a  low  bar  where  people  can  sit  and  interact  with  the  baristas.  

  2 DEBORAH  WEINSWIG,  EXECUTIVE  DIRECTOR–HEAD  OF  GLOBAL  RETAIL  &  TECHNOLOGY  DEBORAHWEINSWIG@FUNG1937.COM    US:  917.655.6790    HK:  852.6119.1779    CN:  86.186.1420.3016  Copyright  ©  2015  The  Fung  Group.  All  rights  reserved.  

 Source:  FBIC  Global  Retail  &  Technology  

Visitors  popping  into  the  store  immediately  feel  that  they  are  not  in  a  regular  Starbucks.  A  barista  at  the  door  welcomes  customers  and  asks  where  they  would  like  to  be  seated.  A  large  digital  menu  board  is  visible  over  a  “grab  and  go”  area  that  displays  light  snacks  and  bottled  drinks.  The  display  is  situated  just  beyond  the  entrance  to  better  serve  on-­‐the-­‐go  customers.  

 Source:  FBIC  Global  Retail  &  Technology  

One  might  look  for  the  traditional  queue  at  the  counter,  but  there  are  no  counters  in  this  store.  All  the  transactions  occur  either  at  the  table  or,  for  on-­‐the-­‐go  orders,  at  the  entrance,  through  tablets  that  each  of  the  baristas  hold.  

Starbucks  Reserve  is  a  store  for  connected  consumers,  offering  fast  wi-­‐fi,  sockets  for  customers’  laptops  and  Powermat  wireless  charging  points  for  smartphones.  

  3 DEBORAH  WEINSWIG,  EXECUTIVE  DIRECTOR–HEAD  OF  GLOBAL  RETAIL  &  TECHNOLOGY  DEBORAHWEINSWIG@FUNG1937.COM    US:  917.655.6790    HK:  852.6119.1779    CN:  86.186.1420.3016  Copyright  ©  2015  The  Fung  Group.  All  rights  reserved.  

 Source:  FBIC  Global  Retail  &  Technology  

Apparently  aiming  to  attract  a  discerning  clientele,  Starbucks  Reserve  features  special  coffees  and  brewing  methods.  Mimicking  the  “edgy”  independent  coffee  shops  that  can  be  found  in  London,  the  store  offers  different  brewing  methods—Chemex,  pour  over,  siphon,  Clover  and  the  classic  Nuova  Simonelli  machine—some  of  which  are  quite  spectacular.  The  siphon,  for  instance,  is  a  system  consisting  of  a  double-­‐chamber  vacuum  and  halogen  beam  that  resembles  a  piece  of  chemistry  lab  equipment.  

Coffee  blends  are  also  quite  unique,  featuring  beans  from  microplantations  in  coffee-­‐growing  countries  such  as  Vietnam,  Tanzania  and  Peru,  and  changing  periodically,  so  that  clients  can  always  find  some  new  blend  to  try.  The  store  also  features  a  coffee-­‐tasting  corner,  where  customers  can  sit  at  the  bar,  interact  with  the  baristas,  see  them  mastering  the  art  of  coffee  making  and  taste  the  final  result.  

 Source:  FBIC  Global  Retail  &  Technology  

  4 DEBORAH  WEINSWIG,  EXECUTIVE  DIRECTOR–HEAD  OF  GLOBAL  RETAIL  &  TECHNOLOGY  DEBORAHWEINSWIG@FUNG1937.COM    US:  917.655.6790    HK:  852.6119.1779    CN:  86.186.1420.3016  Copyright  ©  2015  The  Fung  Group.  All  rights  reserved.  

Unique  for  a  Starbucks,  every  day  from  4  p.m.  on,  the  store  serves  a  selection  of  world  wines  and  two  locally  bottled  craft  beers,  brewed  in  Hackney  and  Battersea,  together  with  charcuterie  plates  for  sharing.  With  this  move,  Starbucks  Reserve,  which  is  located  in  the  heart  of  London’s  theater  district,  aims  to  become  a  destination  for  a  late  afternoon  or  early  evening  aperitif  for  those  heading  to  a  restaurant  or  the  theater.  

 Source:  FBIC  Global  Retail  &  Technology  

Starbucks  Reserve  is  most  likely  going  to  remain  confined  to  premium  locations  such  as  central  London,  and  it  is  very  unlikely  that  the  concept  store  will  become  the  default  outlet  format  for  the  Seattle-­‐based  company.  However,  a  number  of  innovations  introduced  by  the  concept  store  are  very  likely  to  be  replicated  in  regular  Starbucks  stores.  

For  instance,  wireless  charging  points  for  smartphones  have  already  been  installed  at  some  regular  Starbucks  stores.  The  elimination  of  physical  counters  may  also  make  sense  in  some  regular  outlets,  as  it  could  reduce  wait  times—and  Starbucks  has  already  moved  in  this  direction  with  its  new  option  to  order  via  its  mobile  app.  

As  consumers  become  more  sophisticated,  it  is  also  likely  that  regular  stores  will  start  serving  more  premium  coffee.  But  we  think  it  is  unlikely  that  the  premiumization  in  most  Starbucks  outlets  will  go  as  far  as  introducing  five  different  coffee-­‐brewing  methods  or  serving  wines  and  charcuteries.  

The  new  Starbucks  Reserve  store  is  clearly  an  experiment.  It  can  be  used  to  test  the  market  and  see  what  innovations  can  be  successfully  exported  to  regular  Starbucks  stores  to  improve  the  customer  experience.  

  5 DEBORAH  WEINSWIG,  EXECUTIVE  DIRECTOR–HEAD  OF  GLOBAL  RETAIL  &  TECHNOLOGY  DEBORAHWEINSWIG@FUNG1937.COM    US:  917.655.6790    HK:  852.6119.1779    CN:  86.186.1420.3016  Copyright  ©  2015  The  Fung  Group.  All  rights  reserved.  

 Deborah  Weinswig,  CPA  Executive  Director—Head  of  Global  Retail  &  Technology  Fung  Business  Intelligence  Centre  New  York:  917.655.6790    Hong  Kong:  852.6119.1779  deborahweinswig@fung1937.com    Filippo  Battaini  filippobattaini@fung1937.com  

Marie  Driscoll,  CFA  mariedriscoll@fung1937.com  

John  Harmon,  CFA  johnharmon@fung1937.com  

Aragorn  Ho  aragornho@fung1937.com  

John  Mercer  johnmercer@fung1937.com  

Shoshana  Pollack  shoshanapollack@fung1937.com    

Kiril  Popov  kirilpopov@fung1937.com  

Jing  Wang    jingwang@fung1937.com  

Steven  Winnick  stevenwinnick@fung1937.com  

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