Everything but the Coffee

by Simon, Bryant

  Schultz’s moment started to take shape before he even knew it. In 1979, Alfred Peet decided to sell Peet’s. Things didn’t go well for the initial buyers, and they put the company up for sale again in 1983. This time Jerry Baldwin couldn’t resist. For him, Peet’s was coffee, the real thing. Borrowing heavily, he bought the Bay Area company. Soon the debt bogged down both businesses. Baldwin had to sell one of them, and he picked Starbucks. Now Schultz had his chance. He took to the streets, boardrooms, and law offices of Seattle looking for investors. With the clock running out, as he tells it, he finally got the money together and bought Starbucks (with, interestingly enough, financial help from Baldwin’s personal coffers).

  Schultz took over Starbucks and its handful of outlets on August 18, 1987. He promised investors to open 125 new stores over the next five years. Within six months, he launched the first international Starbucks, in Vancouver. Perhaps even riskier, he tried to crack the midwestern, middlebrow market of Chicago. If he could make it there, he wanted his financial backers to see, he could make it anywhere. At the same time, Schultz had a much more focused yet harder-to-see strategy he put into play.

  • • •

  Business watchers and academics have written stacks of papers and articles about Starbucks’ growth. They have marveled at its branding acumen, customer service regime, and shrewd and early acquisition of key managerial talent.15 But they have glossed over its cagiest moves. From the beginning, the company strategically managed its growth, picking its earliest locations with class appeal above all else in mind. Howard Schultz and his advisers knew if they could get socially respected and admired early adopters on board, just like Baldwin had done with the Pike Place Market store, others would follow. In a sense, they were taking their cues from some of the oldest theories about consumption available.

  In The Theory of the Leisure Class, first published in 1899, Thorstein Veblen spotlighted the emergence of what he famously called conspicuous consumption.16 In the turn-of-the-century world of industrial-driven, new urban plenty, he argued, people began to draw social distinctions through the purchase and then display of ostentatious consumer objects. In particular, he talked about—and disparaged—the over-the-top buying of the wealthy, how the rich used very public consumption to distinguish themselves from the people below them. Perhaps even more central to subsequent buying patterns, Veblen also noted a trickle-down effect of emulation. Once an object got associated with the successful, he explained, those below them bought these goods, unleashing an endless, uphill game of chasing those on top. Once the wannabes came on board, Veblen elaborated, the upper classes moved on to another showy item and new ways of making distinctions.

  Maybe Howard Schultz read Veblen in college or on the plane back from his visit to the first Starbucks. Even if he didn’t, he tried to set up his own corporate process of trickle-down consumption. When he took over Starbucks, he started to move it out of the Pacific Northwest. But his expansion revolved as much around status acquisition as it did geography. At first, he made sure to put his stores in the direct paths of lawyers and doctors, artists on trust funds and writers with day jobs as junk bond traders. In those early years of the 1990s, Schultz made it hard for anyone with an Ivy League degree, a passport filled with stamps from foreign countries, and annual incomes over $80,000 not to trip over one of his logoed outlets. Unlike an owner of one of the beat coffee shops of the 1950s, he didn’t set up in transitional neighborhoods or in fringe places like, for instance, Chicago’s neobohemian Wicker Park, where residents wore T-shirts with this community’s name on it saying, “Small, Medium, and Large.” Starbucks went to places like nearby and upscale Lincoln Park or the business-heavy Loop area.17 Beyond Chicago, Starbucks went right to the center of worlds of wealth, higher education, and creative professional work. There were a lot of these places during the Reagan boom of the 1980s and the dot-com surge of the 1990s. Throughout these two decades, the incomes of the richest Americans soared and spending rose. During these same years, the successful held off getting married and waited to have kids, and big-box retailers, exploiting the global glut of cheap labor and limited regulation, drove down the cost of basic goods. All of these factors freed up money for women and men already drawing the highest salaries to spend on high-end items packaged with clever narratives that allowed them to draw new distinctions between themselves and others.

  In its first wave of targeted expansion, Starbucks opened, as it had in Chicago, under banks and brokerage houses, next to courthouses and universities, and near downtown Nordstroms and Marshallses. When the company left the city, it headed for older, tree-lined suburbs and well-heeled hamlets. In the mid-1990s, for example, Starbucks opened an outlet in Millbrook, New York, the Dutchess County home to Mary Tyler Moore and Katie Couric, sometimes referred to as the rural Hamptons. A New York Times reporter described the village, as it liked to be called, as “exclusively . . . elite and affluent” and quoted a developer who said that the members of this community possessed “a little bit of self-indulgence.”18

  A few years before opening in Millbrook, Starbucks looked for other ways to expand the brand in the right directions with the right people. When it first started to grow, Starbucks sold USA Today. But the McDonald’s-bright, news-lite paper couldn’t make the right connections for the company. The educated class—the people with money and cultural capital and the ideal early adopters for high-end products in the 1990s—read the New York Times. Starbucks wanted these people in its stores, walking down the street holding its cups, and talking about its drinks at brokerage house and architecture firm water coolers. So the company dumped the McPaper and signed on with the Times. Around the same time, Starbucks struck a deal with United Airlines to serve its coffee on all flights. Relentlessly focused throughout the 1990s on high-income, well-educated consumers, Starbucks also entered into licensing agreements with airport vendors. After that it teamed up with Barnes and Noble to sell coffee in that chain’s bookstore cafés.

  “Talk about your target audience!” exclaimed Denny Post, a woman I interviewed who was then a marketing bigwig with Burger King. (She would later go on to work for Starbucks.) Businesspeople, frequent travelers, and book buyers—“these are people with decent incomes,” she noted. They are the people Starbucks wanted to make a connection with first. But this growth wasn’t just about Starbucks. When the company started to expand, the well-heeled and educated—mainstream tastemakers and standard-bearers for the behavior of others—were rethinking their ideas about the standardized and the real, about status and consumption. They were ready to make a move that would kick-start a new Veblenian cycle of emulation.

  For much of the postwar era, the broad, somewhat undifferentiated American middle class found itself sandwiched between the rich on top and the working-class below them, with the poor even further below them. Most of these accountants and account executives, furniture store-owners and doctors shared a common commitment to modesty and thrift. The rich might show off and spend wildly, but the middle class demonstrated its sensible frugality by buying convenient and useful items. That didn’t mean that they didn’t occasionally splurge on a chrome-trimmed car or a cashmere sweater with a mink collar or chicken cordon bleu at a French restaurant.19 But these weren’t everyday things.

  Perhaps no company embodied the consumer ideals of the staid organization men and steady housewives of Muncie more than Sears. The Chicago retail giant offered reliable products at reasonable prices. Good stuff and good value attracted the cautious middle class who cared more about how long things lasted or how convenient they were than how they looked. (Cars and boats were for showing off, but again, they were not everyday things.) In many middling social circles, the ability to sniff out a deal translated into social standing and respect. But the same deals that brought the middle classes to Sears, and then to McDonald’s, and later to Wal-Mart, also attracted working people and the poor. Laborers and the even less well-off went to these places because they had to; saving a
few dollars on cereal, batteries, and paper towels left more money for clothes, carpeting, and cars. Yet at the upper edges of the middle class, people with no financial worries didn’t want to look, act, or consume like the poor or the ordinary.20

  Looking for ways to distinguish themselves—to broadcast their wealth, know-how, and sophistication, all key markers of status as the twentieth century drew to a close—the upper reaches of the middle class developed new consumption patterns in the 1980s, as Starbucks started to take off. Mostly they looked for luxuries, indulgences big and small, that the poor, the working classes, the middle of the middle, and the least refined of the rich could not afford or appreciate. Cultural critic James Twitchell has called this trend “living it up.” Others have talked about the era’s “affluenza” and “luxurification.” Whatever the name, beginning in the 1980s, Twitchell writes, Americans staged a “revolution” not of “necessity but of wants.” Products from Prada, Gucci, Lexus, and Evian became a “virtual fifth food group,” as the United States, Twitchell announced, became “one nation under luxury.”21

  Consuming luxury, as Veblen had noted long before, however, was never about bringing people together. Buying was, and certainly remains, about etching distinctions. Amsterdam-based trend watcher Reinier Evers refers to Twitchell’s trading up, with a more pointed and closer-to-the-mark class analysis, as the “snobization” of America. “We live in a consumption society and a meritocracy,” he believes; “thus, our identity is shaped by the things we consume. So the more luxury items we can purchase and show the rest of the world, the higher we rank in society.”22 Increasingly over the last two decades, women and men with higher salaries and more college classes under their belt broke away from the sensible middle class and engaged in a new round of conspicuous consumption. But unlike the wealthy of the turn of the century whom Veblen had based his research on, they didn’t show off their status simply by buying expensive things—though elevated cost was important to them. Buying pricey cups of coffee and industrial kitchen appliances certainly allowed them to show that they had money, money to burn. Yet they also wanted to show off their education and know-how. That is where the authenticity part mattered and where it became, under Starbucks and Whole Foods and so many other natural-looking chains, more about status and sophistication than it was about the counterculturally tinged consumption and rebellion against the fake that Jerry Baldwin and his fellow travelers favored. Post-post-hippies, like Howard Schultz, associated authenticity not so much with the search for more genuine products, wrote consumer behavior specialist Michael Solomon in 2003, as with a range of upscale values, “like a better lifestyle, personal control, and better taste.”23

  To display smarts, superior tastes, and even enlightened politics, the upper classes of the 1990s focused their buying on things that looked natural and rare but also required special knowledge to fully understand. They bought a California wine to demonstrate that they knew about exceptional vintages, or a Viking stove because they knew that real cooks used these oversized machines, or a bike trip through Provence because they knew from their college art history classes that the hills and sun there inspired pained and brilliant painters. This buying was not just about changing aesthetics, as David Brooks suggested in his bobo study, or about the intrinsic value of design, as Virginia Postrel argued in The Substance of Style. 24 It tied the upper middle classes back to Veblen. Buying in post-Reagan America was not about keeping up with the Joneses; it was about separating yourself from the Joneses, the conformists in the middle. Yet, as Veblen had predicted and Schultz surely knew, the Joneses would follow. That was, in fact, what Schultz was trying to set up. By the turn of the new century, the Joneses were indeed on board, but getting them to Starbucks required turning Baldwin’s search for the authentic—even if it did take place in the marketplace—into something less authentic and farther from its original sources.

  As Schultz took aim at the young, the well-paid, and frequent travelers, he continued to portray his company as a bastion of authenticity. Highlighting the firm’s know-how and coffeeness, Starbucks employed “baristas” who served espressos, cappuccinos, lattes, mistos, and americanos in tall, grande, and venti sizes. Some of the Italian-sounding names were real, and some were made up. But the intention was always the same: to link the Seattle-based company to Europe, the very center of true coffee culture in the eyes of most well-traveled North Americans. Nowadays, this language seems rather overblown, but in Schultz’s early years it was easier to believe. The company did more than just create a language about coffee. It backed it up with strong, audience-winning coffee performances that helped to solidify the bonds between the brand and early adopters.

  For much of the late 1980s and early 1990s, Schultz’s Starbucks bought reasonably high-quality beans and treated them the way experts say they should be treated. Giving the stores a lush coffee aroma, employees ground the beans fresh behind the counter right before brewing them. In those days, Starbucks used semiautomatic Marzocco machines, meaning that employees needed to know how to make the drinks. Over the course of several days, company instructors taught new employees how to grind beans fine for espresso, load the portafilter, and pull the shot just as a thin gold-crusted crema formed on the top. That was just espresso. Trainees had to learn how to steam milk to the right temperature and scoop out the foam for cappuccinos; they had to be able to tell the difference between medium and dark roast, single-origin coffees and multiregional blends; and they had to know how to brew coffee in a French press and in a drip maker.25

  After initial training, the company pushed ongoing coffee education for its employees. I remember when I first started drinking Starbucks in the early 1990s, the manager at the store near my Pasadena apartment regularly sat down with servers in the late afternoon for coffee tastings. I would hear them sniffing, quaffing, and slurping. I would listen as they talked about the citrusy hues of Ethiopian coffees and the mellow nuttiness of Colombian beans. I would watch them scribble messages into small notebooks. Every once in a while they would share the coffee with those of us in the store reading our books and having our meetings. Eventually some of the knowledge seeped down, not to me but to some of my fellow regulars. Still, the performances made an impact. I was convinced that Starbucks knew a lot about coffee and that when I purchased its coffee I got a little of that knowledge. Even people who didn’t go to Starbucks learned this lesson. In those days, people would see me with a Starbucks cup and say stuff like, “You know your coffee, don’t you? I just drink the regular stuff.”

  Schultz didn’t just let the coffee do the authenticity talking. He often boasted to reporters that Starbucks didn’t advertise. Of course, this wasn’t exactly true then, and it isn’t true now. The stores and the cups serve as two persistent advertisements, and so do the firm’s endless sponsorships (and filling of public spaces) of fun runs and literacy drives. Even the health care provisions for workers are a type of advertisement. But until the crisis-ridden days of 2007, Starbucks didn’t run TV commercials or radio promos; it rarely handed out drink coupons or frequent-customer cards. Before then, Schultz turned his company’s lack of obvious advertising into a badge of honor and a bond with his customers. He knew that by the 1990s his target audience of the well-educated distrusted traditional advertising. They saw it as a fraud, as deliberate and deceitful acts of corporate manipulation. They saw themselves, more-over, as smart enough and media-savvy enough to be above these kinds of cheap ploys. They were individuals, in their minds, not sheep. Schultz, then, created a different image for his company. He wouldn’t shill his coffee with flashing neon signs or halftime ads at the Super Bowl, as middling brands Bud and Chevy did. In fact, his company spent only 5 percent of what McDonald’s spent and a third of what Dunkin’ Donuts spent on traditional forms of persuasion.26 Still, that didn’t mean he didn’t push his lattes. Understanding how the well-educated and well-paid constructed their self-images in an age of advertising backlash, Schultz sold his brand in quieter w
ays through storefronts, logoed cups, and endless interviews (i.e., mythmaking) with reporters in which he talked about how his company didn’t need to promote itself.27

  Starbucks’ design schemes further highlighted its claims of naturalness and coffee knowledge. When the maverick experience architect Wright Massey mapped out a handful of templates for company stores in the mid-1990s, he made room for coffee bins, like at the original Pike Place Market shop. He also incorporated displays in outlets that traced the transformation of the beans from the fields to the cups. Some even let you touch raw, unprocessed green beans. Massey used a mixture of colors to enhance the natural look. The very first Starbucks stores went for a sleek, slightly European feel. While this decor tied the brand to the continental center of coffeeness, it didn’t speak loudly enough—by the mid-1990s—to upper-middle-class desires for the natural and how the natural made them look and feel better.28 Massey got the company more in tune with the times. He splashed the stores with a color palette of blues, reds, greens, and browns. Each of Massey’s individual colors represented, in his naturalist narrative, a part of the coffee-growing process. Blue was for water; red, for the fire needed to roast the beans; and green and brown, for the plants and soil. Adding more detail, Starbucks put down wood floors and earth-toned tiles and bought chairs and tables stained in light to medium shades of beige, brown, and cherry. Even the accessories to the coffee had a natural, closer-to-the-source look and feel. For example, sugar at Starbucks was brown and came in brown wrappers. The napkins were brown, too. At first not many people knew just what a scone was, but with its awkward shape and fruit filling, it looked at a glance to be healthier and more natural than an Egg McMuffin. As a last touch, the decorators covered the store’s signature overstuffed chairs in rough-hewed natural fabrics.29