New Orleans coffee drinkers support independents, shun Starbucks - American Independent Business Alliance AMIBA

November 09, 2004

LUKEWARM RECEPTION
Metro area coffee shops are holding their own against Seattle coffee giant Starbucks, thanks to residents loyal to local brands and tourists trying regional taste treats

By Jaquetta White
Business writer

Starbucks who?

That seems to be the question from coffee shop owners in the metro area six years after the Seattle coffee giant moved in. Back in 1998, Starbucks Coffee Co. threatened to put a stranglehold on New Orleans coffee shops in much the same way it had in cities across the country by placing its sleek chain stores next to local coffee shops.

But even before the first free-standing Starbucks opened on Magazine Street, coffee shop owners here bet that Starbucks would learn that New Orleans was different and that locals would be loyal to the home-brewed products. And now, they say, they were right.

There are 24 PJ's Coffee and 13 CC's Coffee House shops in the metro area. Add to that the seven Cafe Du Monde shops, four Rue de la Course shops and two each of the Morning Call and Puccino's coffee shops, and the New Orleans area has more than 50 cafes that aren't Starbucks. What's more, there are dozens of neighborhood coffee shops with one outlet.

Starbucks, meanwhile, has 15 stores in metropolitan New Orleans, including six in the city, according to the company's Web site. Not bad, but the company is known for putting shops within walking distance of each other.

The national chain has three free-standing Uptown locations. It has three downtown locations, but those are inside other businesses. The other stores are outside the city's borders. Notably absent are sites in Mid-City, Lakeview and the French Quarter.

"The reality is that we were so strongly set into the marketplace when they came into it that they haven't hurt us at all," said Jerry Roppolo, who, with his wife, Debra, owns the Rue de la Course coffee shops. In fact, Roppolo said, "Sales have increased by almost 100 percent in the last six years."

Starbucks does not have plans to expand in the metro area now, said Heywood McGuffee, regional marketing manager, in a written statement. McGuffee said Starbucks looks at several factors before deciding to open a new store.

"Most importantly, however, we choose to offer Starbucks locations based on what our customers tell us. We spend a lot of time listening to our customers and understanding what we can do to enhance their experience."

Dan Geiman, an analyst with McAdams Wright Ragen in Seattle who follows Starbucks, said the company's store total in New Orleans "strikes me as a bit of a small number." That could indicate that Starbucks isn't pleased with the way it's performing here, Geiman said.

"I think it's probably safe to say that (Starbucks') store openings are based on how their stores are doing in that area," Geiman said. "Where they see opportunity, they're certainly going to move in."

In cities that Starbucks considers of comparable size to New Orleans, it has sometimes double the number of stores it has here. The Tucson, Ariz., metro area has 25; metropolitan Cleveland has 48; and Fresno, Calif., has 32 with one on the way. Larger cities have many more: Atlanta has 101; New York has 361.

Locals are quick to point out that there are no freestanding Starbucks shops on Canal Street, though the main drags in other cities have many.

Geiman said it's puzzling that there aren't more Starbucks here considering that the company has been steadily appealing to wider demographics. In fact, Starbucks recently raised its eventual goal for domestic stores from 10,000 to 15,000, he said.

New Orleans, Geiman said, would seem an area ripe for expansion considering that real estate is comparatively inexpensive here so the company would have to sell fewer cups of coffee to do well.

Not everyone is as surprised.

"I think there are niches in that market that national chains would never be able to fully address," said Mike Ferguson, a spokesman for the Specialty Coffee Association of America.

New Orleans, because of its high tourist traffic, would seem to have the potential to be taken over by Starbucks, Ferguson said. "The thing is about a national chain, especially in an area that is tourist-rich, is that (tourists) like to know what they're going to get. That's generally true in tourist and shopping districts."

But in New Orleans, a place known for its cuisine, it's likely that tourists are more apt to try the local fare, Ferguson said. And that helps the city.

Local coffee shop owners agree and say they also are helped by local coffee tastes.

"Even our store, which is only two doors down from their flagship store, did not see an appreciable loss in business," said Phyllis Jordan, founder of PJ's.

Since Starbucks moved into New Orleans, Jordan says PJ's has added stores in the metropolitan area. But, she says, PJ's and other companies probably could have expanded more were Starbucks not in the marketplace.

Still, she said she's a bit surprised Starbucks hasn't opened more stores here. Jordan said she remembers seeing one projection that put 44 Starbucks in this area.

"I suspect they did not get the reception here," Jordan said.

She said New Orleanians are chauvinistic when it comes to their businesses.

"The best and worst part of New Orleans is our parochialism," Jordan said. "People do like to support the local team."

Cheryl Dutton, vice president of La Boucherie Coffee House in the French Quarter, said Starbucks is probably running into the same challenges Krispy Kreme Doughnuts Inc. did during the 1 ½ years it operated in Jax Brewery near the legendary Cafe Du Monde before Krispy Kreme shut down in June.

"I think the guys (at Starbucks) know what they're doing. We should hope to be that successful," Dutton said. "But I think New Orleans is a special market. New Orleans is different from the New Yorks and the San Franciscos and the Atlantas. We have our own flavors and tastes. People are a little different here."

When asked whether it had found competition in New Orleans any stiffer, McGuffee of Starbucks, in an e-mail, said, "We feel that Starbucks represents one choice in the New Orleans community. This choice will not suit everyone, and different coffee shops serve different needs."

At least one local start-up has found success even with all of the competition, including Starbucks.

The 8-month-old La Boucherie at Chartres and Conti streets, within a quarter mile of two Starbucks, has seen brisk business, Dutton said.

"It has been a tremendous success," Dutton said. "Sometimes you just can't go into competition with the local guys."

Fair Use Notice
This site occasionally reprints copyrighted material, the use of which has not always been specifically authorized by the copyright owner. We make such material available in our efforts to advance understanding of issues and to highlight the accomplishments of our affiliates. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is available without profit. For more information go to: www.law.cornell.edu/uscode/17/107.shtml If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.