We have all seen the news that Starbucks was selling beer in its stores. This was surprising to start, but now seems very logical. It is a high margin product, something which people consume to relax and which fits their beverage service set up. So how should we feel about this as brewers?
This article talks about Starbucks and about its expanding new market. Generally, for Starbucks, the word “expanding” is mentioned a great deal. However, the thing which startled me was that Starbucks was looking to get into the beer business. I’m not scared for myself. I don’t imagine that I’ll go in for a coffee, and come out 2 beers down instead. But more concerned with the idea of what their model did to a commodity industry. They took a product usually sold for less an a dollar, and turned it into a $5 luxury everyone loves.
The modern business idea of providing something, but selling something else is a great business idea. It is sometime refered to as a “Loss – Leader”. In coffee it started with an idea from Dunkin Doughnuts, wherein they decided to sell a beverage which complemented their existing lineup. Dunkin Doughnuts is now one of the top coffee brands in America. It has far out sold their doughnuts! Then Starbucks took it to a new level, and said lets just have coffee, but really sell the experience of it. They also started treating their coffee as a luxury item and set the price to match.
Now, Starbucks is finding that they need to expand their offerings to bring in new customers and generate revenue. The VP’s working on this are betting that the culture of beer is going to work well with their focus market. However, how will this be different from any another craft beer bar? Why should we care? It is simple, they reach a demographic who might not be exposed to the craft beer movement. They also have a large enough base that their consumer base can easily make it profitable, but that would be the same case if they sold dippin’ dots. They chose to sell beer for a bigger reason.
The most logical reason is that they see beer as the fastest growing market segment in their customer base, and that it will be the safest, most efficient bet considering their existing structure. This is exciting to us, though, because people outside of the beer industry are now investing in the future of craft beer.
If Starbucks is betting on craft beer being a solid revenue stream for them, they are betting on people paying a premium for a premium product. They are also a mainstream enterprise so they will help grow the market in ways no brewery, or other organization could. In short, unless I am just completely looking at this incorrectly, this is a good thing for us.
It is a great time to be in the biz.