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FAIR TRADE: Coffee locals brace for battle from Seattle
JACKSON HOLE, WYO – When Stefan Grainda set up shop three years ago just east of the Town Square, the coffee market already was becoming a bit crowded. By the time he looked to move JH Roasters closer to downtown, the bean juice business had gone from slow-drip to double espresso.
Within a comfortable walk, java junkies can now get their cup at JH Roasters, Dolce, Cowboy Coffee, Shades, Pearl Street Bagels, Pearl Street Market, The Bunnery, Cafe Genevieve, Wake Up Café, Persephone and Betty Rock. Are we missing any?
Oh yeah, Starbucks.
News that the global megamug was swooping into Town Square’s premier corner with a 2,000-square-foot café at Lee Gardner’s t-shirt shop rocked Jackson’s caffeinated society. It sets the stage for a David and Goliath showdown: Corporate America, heck, corporate world, versus the local little guy. And Grainda, for one, isn’t about to go down without a fight.
“I was talking with Lee about renting his space. He liked my idea and everything. We were all set to move in,” Grainda said.
The owner of JH Roasters thought he had a deal with Gardner to pay what he called a really high price for rent – $65 per square foot. Then Gardner stopped answering his calls. He heard through his real estate agent the deal suddenly was off. “It was a plan for exactly the same location. Same layout and square footage. Same idea and concept as what Starbucks eventually came in with. Only I was local.”
Grainda said he knew Starbucks had been sniffing around Jackson for nearly a year. He heard the corporate coffee giant had approached Gardner over the winter but that the deal never materialized. Grainda thinks once he got close to signing, talks with Starbucks heated up again. Starbucks signed a letter of intent and Grainda was sent packing. Gardner did not return calls for comment.
Bullish business model
Starbucks’ construction manager, Eric Hopp, said the new Starbucks at the corner of Cache and Broadway will be a flagship shop with more amenities and menu options than most cafes flying under the logo. It will be open into the night hours as well. Hopp turned all further inquiries over to District Manager Amy Thompson, who said the spot on the square is a premier location for Starbucks and that they’ve been looking to put in a company operator store for quite some time.
“I was just in town there last weekend,” Thompson said. “We’re really excited to be a part of the community and to be a partner with Lee and Lee’s Tees.”
Starbucks’ business model has been wildly successful. The Seattle-based company pulled down $13.29 billion in revenue last year, making it the largest coffee corporation in the world with 17,575 stores in 55 countries, according to the company’s 2012 year-end report. And they’re still growing. Worldwide, Starbucks has expanded into China with an anticipated 4,000 stores there by the end of 2013, and most recently, corporate announced it would be opening its first stores in Columbia, South America. Domestically, CNN reported late last year that the coffee king will increase its number of U.S. stores 13 percent by 2017.
But some methods Starbucks has used have come under fire. The corporate giant has been accused of buying out competitor’s leases and otherwise using its financial clout to muscle into a market and drive out local competitors. Starbucks insists they only bring more buzz and business to local shops when they come to town.
“That’s Starbucks typical PR spin,” Lisa Miller said. Miller owns Shades, a 28- year-old local café next to Sweetwater Restaurant that’s been serving Great Northern Coffee. “Their modus operandi has been to put others out of business. Why else would they go in right next to everyone? All these places around downtown create a high saturation point and now comes a national chain anchoring the corner right on the Town Square. Yeah, it’s easy to have sour grapes but that’s their business strategy.”
Dolce owner Joe Rice was blunter. “They are the bastards of the coffee industry,” he said.
Thompson countered, “Starbucks creates jobs and partnerships within the community. We are just looking to be a part of the coffee culture in Jackson.”
“But our area is so small. It’s not a big city,” Grainda said. “Look at Idaho Falls. They say, ‘Yeah, Starbucks helped our coffee culture.’ That’s because there was no coffee culture. There was nothing. But we have plenty of good local businesses and good local coffee here. As far as I know we have three specialty coffee roasters – Great Northern, Snake River and us – all certified organic. I don’t think there will be any business that will be helped by having them here. Starbucks has nothing to offer here.”
Starbucks’ first foray into Jackson Hole did not go smoothly. A company rep approached Jackson Hole Mountain Resort President Jerry Blann in 2003 about an insider deal that would bring near exclusivity for Starbucks in the valley in exchange for a $100,000 kickback to be shared by the Chamber of Commerce and JHMR if they could help sell at least 115,000 pounds of the brand name coffee, annually. Steve Duerr, executive director of the Chamber at the time, was hot for the idea and called for a hasty meeting to approve without inviting Great Northern’s Diane Guslander. She wasn’t pleased.
Opposition from Guslander, Pearl Street Bagels ownership, and several other local business owners eventually put the kibosh on the backdoor deal that if inked would have locked Jackson Hole into Starbucks for three to five years.
Sharing the pie
The large floor space at the new Starbucks (scheduled to open Sept. 20) will allow the shop to concentrate more on breakfast and lunch items in addition to their famous brew. Scott Boxrud recently moved his Pearl Street Market operation into the old Teton Steakhouse location – right around the corner from the new Starbucks.
“I don’t think it will have much of an effect on me at all. Some others, it could hurt them, maybe,” Boxrud said. “Can’t say I fully support them coming in here, of course I don’t. I’m not thrilled about it. But it’s a free market. I’m not going to be afraid of it. You just hone in on what you do best.”
Grainda said he thinks Starbucks knew exactly what they were doing when they stuck their pushpin in the heart of Jackson’s café clustered map.
“Here is what I think they did. They look at all the coffee shops around, and they said if we just land in the middle,” Grainda said, slamming his fist down on the table. “We take everybody’s business. Or part. Twenty percent of mine, 20 percent of Dolce, 20 percent of Cowboy Coffee, 20 percent of Shades. All these smaller local businesses may not get killed right away, but Starbucks, being big, can wait you out longer. They can afford to take their time – one year, two, three – to sit tight and wait for some of us to either die or give up.”
Guslander, who has owned Great Northern Coffee since 1985 and opened Cowboy Coffee in Gaslight Alley a year ago, said, “I think Starbucks will take away from everybody; like splitting the pie. We have a limited number of people here. But I think we have a good location. People will see both places. Some will choose us because of the Western image, locally roasted coffee and different atmosphere. Some may choose corporate just like they would a McDonald’s.”
Miller, too, believes Starbucks operates certain stores as loss leaders until the competition is pulverized. “They’ve got big money behind them. They can absorb losses for a while,” she said. “But I’m sure it’s not cheap what they are paying to be where they are. If locals back us, how long will Starbucks be willing to put up with losses before they give up and pull out?”
Even Cathy Beloeil, who owns Café Boheme on the other side of town, knows what it’s like to have Starbucks for a neighbor. The franchise boutique in Albertson’s has taken a bite out of her daily proceeds.
“It’s going to affect the local coffee shops. Not me as much as the shops that are in town,” Beloeil said. “And maybe not so much with locals who have already made a choice and have their favorites. But where we will lose a lot is among tourists. They will go to Starbucks just because they know the name, even if they weren’t going to have coffee.”
Everyone agrees the pie will be sliced thinner now and the off season is when local shops will really feel the crunch. “During the summer season I think everybody can thrive in here. But the biggest question is what happens when off season comes?” Grainda wondered.
Vacationing lemmings may gravitate toward the familiar green mermaid siren logo during the busy summer months, but when off season hits, it’s usually the locals who determine the businesses that live or die.
“I’m not saying Starbucks is something bad or Starbucks Coffee shouldn’t be here. I mention that all the time: It’s the free market. It’s a free country. It’s just business and that’s how it works,” Grainda said. “But it comes down to loyalty. I don’t want to say I rely on locals, but I trust in locals. If you treat your locals right and they are really loyal to you, well, they work in other businesses and industries. They work in motels and hotels. If locals really want to promote a local business, which helps them in the end, they can recommend for visitors to go to Jackson Hole Roasters, Cowboy Coffee, Dolce, or to Shades, or to Persephone. I think this gives power to the local community. Power to help us survive or power to hurt.”
Guslander said she has never taken her customer base for granted, especially the locals. “I hope our locals stay loyal,” she said. “In Jackson Hole, you have a group of people who are really passionate about supporting local businesses, and they appreciate the freshness and high quality of coffee.”
Boxrud tried serving Starbucks coffee at Pearl Street Market. He listened to his loyal customers and switched back. “I’ve always liked Starbucks,” he said. “But we got a lot of feedback. We listened to our customers, and switched back right away. Snake River Roasting has been really good to us.”
Boxrud said he thinks most tourists prefer to seek out local shops rather than the convenience and predictability of a brand name. “I will say this: big chains are going to find they are running right into a community with loyalties.”
Free enterprise issues aside, some business owners worry more about the future of Jackson than their own bottom line.
“To me, it’s a little more pollution of what we have here in town,” Grainda said. “What’s next, are we going to put McDonald’s on the Town Square? Are we going to put a Walmart in here? It’s going to become like every other town. Do we want to go in that direction? I think it’s a question for building owners and city officials. You are now going to see a huge Starbucks logo up on that tower where the clock used to be. Is this what we want people to see when they first come into Jackson? I think it’s just kind of chipping away at the last of the Old West we claim to be.”
Miller doesn’t see the trend reversing unless city planners give the little guy a leg up against the deep pockets of out-of-state developers and retailers.
“I feel bad that Jackson is getting to be the kind of town where the average Joe has to have such mega bucks behind them to get a foot in the door,” she said. “We have been barely scraping by for the past two years. Even without Starbucks, it’s been harder and harder to get by. You can be really bitter about it, but maybe it’s time for some of us to pull out. We’ve ridden out a lot of stuff but when you see big money like this come in, it’s pretty scary.”
When the dust settles, Grainda might be the last local café owner standing. If Starbucks wants his business they’ll have to kill him.
“This is my life. This is my baby. This is everything I have,” Grainda said. “I live in a 500-square-foot apartment. I do it all because I love what I do.”