The Blend of Barista and Sommelier: Starbucks Enters the Wine Biz
On June 25, Starbucks CEO Howard Schultz announced that it will use a testing ground store dubbed “Olive Way” to experiment with several new concepts. With rampant growth halted, Starbucks is looking for ways to draw customers back to the store. One of the new concepts is to introduce wine and beer as part of its product offering. Is this a good idea? Will doing so completely change the culture of the store, or is it a brilliant move to capitalize on the distribution network to extend sales into the evening hours?
I think it’s a great idea! In fact, I have a 30 page business plan dated June 8, 2007 that speaks to the very brilliance of the idea. Howard Schultz, you’ll be hearing from my attorneys. 
The reason for the birth of DrinkNectar.com and @nectarwine on Twitter was to brand the name for the eventual opening of Nectar Coffee and Wine or Drink Nectar Coffee and Wine Bar (still up in the air with the name). I’m a planner. I have a master plan for life. Most of it is in my head, but some things are written down as goals or milestones along the journey. The master plan for the business is to have the wife finish her 20 years at “The Bank,” go to college to get her Masters in Elementary Education and then get settled in her teaching career. While that is happening, I would lay the foundation for the future wine and coffee bar with eventual plans to open in late 2011 or early 2012. Well, the wife is in school and the blog and branding has taken on a life of its own. I’m still trying to wrap my head around the potential opportunities but we’re still moving forward with the master plan.
I realize it’s not a new concept or new idea. I’ve actually seen several similar business models. The majority of people attempting to do this either go mostly coffee with a small wine selection, they have a full stock bar with a handful of “house” wines and something resembling an espresso maker, or they are actually a full service restaurant with a pretty good wine selection. My business will combine retail wine, glass pours of over 100 wines, full service espresso and tea, and light fair food selections (probably pre-made from local vendor to avoid the need for a full kitchen). When I heard Starbucks press release I was at the 2010 Wine Bloggers Conference and I have to admit the news took a little wind out of my sails. First to market matched with scale is a powerful combination. Will there be any room in the market in 2012 when I’m finally ready/able to go with my dream?
Do you think it will work? Is Starbucks on to the “next big thing?” Will a company like Starbucks be hindered or helped by its size and scope? Can Starbucks deal with the challenges of distribution, liquor licensing, branding, selection, knowledge, service, and underage access? I think the concept will work for Starbucks, but only in select stores. To go big in scale, they’ll have to work with a large distributor, and centralize the shipment of wine to their stores. Working with local wineries across their business footprint could be a logistical nightmare. A company like Starbucks will want to leverage any large scale efficiencies to streamline costs and maximize profits (which is what they are really after). The pilot store may include a handful of local Northwest wine and micro-brew, but if the concept expands, you’ll begin to see more mainline brands like Chateau St Michelle, Hogue, Mondavi, and other Constellation and Precept wines. Unlike coffee, where Starbucks can get away with 3-4 different roasts and 8-12 different bulk coffees, wine lovers will not flock to a store with a selection of 4 reds and 4 whites. However, the Starbucks wine concept will most likely be a success. It will eventually do for wine what Starbucks did for coffee. Starbucks involvement in the wine business could be a catalyst to break down interstate shipping barriers too.
Is your barista going to become a sommelier too? One other issue will hinder Starbucks on the road to wine domination. Knowledge…wine lovers are turned off by inferior service and expertise. Inexperienced wine drinkers desire to be educated. Will your local barista have the knowledge needed to service the wine business? Will Starbucks start to hire wine stewards for the later hours in the day? It is one thing to be able to explain the difference between light, medium and dark roast and only a handful of coffee drinkers geek out over the difference between Sumatra and Ethiopian. Imagine the training obstacles with learning the differences between varietal characteristics in even the most basic selection of wine.
While I may have been deflated by the original news, I’m now even more motivated to pursue the business I’ve been thinking about for four years. Starbucks will open some doors and break down barriers of consumer perception of a wine AND coffee bar. BUT…Starbucks will also leave the door wide open for someone to do it RIGHT with attention to local product, large selection, and knowledgeable service. Thanks, Starbucks, for validating my idea. I wish you much success with “Olive Way” and look forward to the competition. With that said, if you’re a Starbucks executive reading this…feel free to reach out, I’d love to talk about business opportunities.
think of it this way: free case study! you get to watch what experienced business people do, on THEIR dime, find the flaws, and have an even better model ready to roll out in 2012. find out how the market responds to theirs, what would work better on OUR side of the mountains, and then tweak your strategy for success! sure there’s something to be said for being first, but there’s even MORE to be said for being better! keep up with the plan! sherryrose
Thanks, Sherry! I really appreciate the support! You’re right about watching to see what opportunities I can take from their mis-steps.
Having worked for a large retailer in the past, I am pretty certain that the employees will have almost no training on the wines they serve, and as such will know nothing. There is no way that Starbucks will pay their people enough to get people who already have any knowledge, and it seems likely to me that the training will be insufficient to have their servers be very effective as a wine guide. Call me cynical, call me negative, but I will be shocked if Olive Way is even a half-way decent place to go for a glass of wine.
I agree with the above commenters. Follow SBux to see where their shortcomings are and then beat them at their own game. You’ll be able to provide more expertise, and a very different segment of wine to your customers. SBux will require big name distributors that can guarantee stock so that they will have consistency amongst a state/county. That’s what big name chains are good for. Go to a Starbucks in Denver and have the same experience that you do at your home location in Seattle. So, the boutique wine experience, including small production, cult/garagiste wines is wide-open to you.
skeptical but willing to give it a try. Maybe if they bring in local wines as well as the national brands that will create buzz?
Awesome, depending on their wines and whether they’re choosing higher alcohol wines to go with higher than normal levels of caffiene, Starbucks may finally have found a new customer in me. I know it feels like they’re beating you to the punch, but they’re actually just paving your way. So yes, let it motivate you – it’s proof what a great idea it is!!
Thanks, Tamara – that’s how I felt after I thought it through. Starbucks paved the way for the influx of coffee shops and boutique cafes all across the country. I think this could prove to do the same for wine bars!
Josh
1 – Skip the by the glass pours and go with Enomatic, http://enomatic.us/ – or at least look at it in case you already haven’t. Obviously a much bigger capital investment / risk, but I think it is an option worth looking at and if I were Starbucks, this is what I’d be using.
2 – I know we used to have a chain of coffee and wine shops here in Atlanta, but I think they all failed…before the economy tanked. It was called PJs. I had their coffee once or twice and it was okay, but nothing special. I never went there for wine.
3 – We also have an independent place called Java Monkey, where they do regular wine tastings and have been thriving for quite a while as far as I know. I don’t live near there, but it is in a great location and area of town. http://www.javamonkeydecatur.com/ is their website, but right now they have it listed as being updated. Contact @RandomOenophile if you want an opinion on it, as I know she goes there quite often.
4 – Wine retail is brutal, at least here in GA. Trust me, it is a real guts and little glory type business.
5 – I think 100 options by the glass is a bit too much. I think you’d be better off with keeping a smaller list and constant rotation, kicking off the losers and replacing them with new choices. When the winners run out, you replace them and hope the next vintage is as good. Just my opinion. I’m guessing you’ll be focused on smaller production wines?
Sounds like a great plan. I look forward to hearing / seeing more.
Kevin, Awesome advice and links. I’ve heard of PJ’s too, didn’t realize they went under. 100 by the glass can be a lot, there is one shop in town that does 60 and I’d at least want to match that. I really appreciate your insightful comments and suggestions!
Josh,
You should continue in my estimation. Do it differently and/or do it better!
Thanks for the vote of confidence, Craig…you and I may be talking soon!
Interesting idea. If it improves the wine retail selection in smaller cities, I’ll be fan, because right now it sucks in Spokane! Hopefully they don’t go the route of $10 glasses of KJ Chard and Columbia Crest Merlot!
ps…Josh, would love to see another wine establishment in town, good luck! 100 wines by the glass is a lot. The one shop in town that has 60 doesn’t serve the wines at correct temps and you could tell a few of the wines had been opened for a bit too long. Food for thought…
Darren,
I agree – I would invest in the enomatic system mentioned in a previous comment for some of the less frequenly selling more high end wines. Where do you tend to shop for “retail” in Spokane?
I don’t purchase too many wines in town but when I do its usually Huckleberry’s or Williams Seafood. And you?
Honestly, I have quite a few wineries that ask me to review their wine…very humbled…when I do have a need to buy wine, I prefer to buy from a local winery or from Huckleberry’s and occasionally Costco
Nice! Well…if you ever form a tasting panel, hook a brother up!
Put it this way, boutique coffee shops still do well. In fact, local shops in some towns do WAY better business than the local Starbucks. You’ll just have to beat them on ambience and quality, which frankly shouldn’t be tough. And you’ll have the luxury of being your own marketing guy. Feel like partnering with a local restaurant? Want to rock a tasting at a local theater or book store? You make the call and act on it.
This is good for you, actually.
Thanks, Dustin. I fully expect to serve you a fine glass of wine when you’re in town!
Definitely, we’re overdue!