Comments on: Starbucks as the new housing proxy?

By: Sandy

Sandy — Thu, 17 Jul 2008 20:51:13 +0000

The other thing missing in this equation is the distribution of competitors. Notice how the Pacific NW, where we have more stores than anywhere else, is not experiencing store closings. I used to work in the coffee industry for a competitor of starbucks which they acquired about 6 years ago. There's very little up here in the way of competition aside from Tullys and some of the smaller companies, but nothing on the scale of a Peets in California or a Caribou Coffee in the Upper Midwest. And, unlike the NW, I think Starbucks is seen as an outside company, and so doesn't get the level of support when people are cutting back. Also, I think they used to be a lot more careful about placement of their shops than they have been in recent years, so the areas where they have expanded more recently may be suffering because of bad initial planning, rather than as an indicator of the economy generally.

And, I agree with the person who commented about coffee generally being a pretty recession safe industry. When I worked in the industry about 12 years ago, we used to say that coffee was a recession proof industry because it's a small luxury that people can afford, even when they are otherwise feeling strapped. I think that is still true.

By: morganb

morganb — Tue, 15 Jul 2008 20:40:22 +0000

Spurious – great usage! I love it. I think as one commenter said
we're in the first wave of store closings. We'd also need to look at
store densities as well….

Just a “for fun” look at things…

By: Eric

Eric — Tue, 15 Jul 2008 20:02:43 +0000

That is a spurious correlation – the store closings correlate with the population distribution more than anything. Why no closings so far in FL or AZ?

By: morganb

morganb — Tue, 15 Jul 2008 18:43:10 +0000

i agree we'll keep an eye on it! interesting way of looking at things…

By: Joe

Joe — Tue, 15 Jul 2008 15:33:57 +0000

Since the Starbuck's closings are just entering phase 1.1, this is an interesting overlay. If Starbuck's next round hits Florida hard then the jury will no longer be out in my opinion.

Joe Filoseta
Seattle, WA

By: morganb

morganb — Tue, 15 Jul 2008 13:18:06 +0000

Good point Don. Up here in Emeryville, CA the local starbucks is
right under a bunch of overpriced, tiny condos…

By: Don

Don — Tue, 15 Jul 2008 13:14:49 +0000

Has anyone noticed that Starbucks always gets sucked in to new, mixed use development? That's what I've noticed over the last 12 years or so here in San Diego at least. Now that owners are upside down, it's no wonder that the stores are closing. I think that's part of the equation.

By: Todd Carpenter

Todd Carpenter — Tue, 15 Jul 2008 04:11:45 +0000

I would say that any correlation is more coincidence. Many times, items like expensive coffee tend to do better in in really down economies. Beer does well. Ice Cream does well. People just want one little bit of decadence. They can't afford to buy a new car, or even go out to dinner, so they go get a cup of coffee.

I think the problem with Starbucks is that people who are paying all their bills on time are cutting them out.