Starbucks: Corporate dope pushers
This afternoon in my office’s cafeteria I found a new refridgerator stocked with tasty beverages. Starbucks Iced Coffee in a can. And guess what: it’s free. For now, at least. Want some candy little boy? C’mon, try it. I remember a couple of years ago seeing them giving away cans of their then-new double-shot canned caffeine high downtown on the sidewalk. They’ll get you hooked and then you come back begging for more, $5 in hand. Sound like any other industry we know?
Many years ago I remember a friend of mine saying she was investing in Starbucks because she saw it as an aggressively run company that sells an addictive product. Wise choice she made. I’ve also heard several amusing stories recently about how Starbucks got their venture capital.
At business school lectures I’ve had at least two VC’s tell me this exact story: Howard Shultz comes into their boardroom to pitch them on how he’s going to charge $5 for a commodity product that regularly sells for 25 cents. The VCs listened politely to his presentation, waited for him to leave the room and then laughed their asses off. This must have happened to him a lot, since I’ve heard about at least two incidents of it. Barring hindsite, it was a reasonable reaction, IMO. Now I hear my b-school friends trying to figure out how to charge $5 per brick for really high-end bricks. There’s one key missing element to this plan: mortaring a row of really nice bricks on Tuesday doesn’t give you blinding headaches on Wednesday if you decide your wall is all done being built.
Interestingly, in order to actually secure funding, Shultz had to prove that urban coffee markets are/were really far from saturation. To demonstrate the almost insatiable desire of modern yuppies to suck down sweet foamy caffeine drinks, he opened 2 Starbucks retail stores on the same block of downtown Chicago. The fact that both stores quickly became profitable was proof enough to the investors that this business was going to go somewhere.
And here I am, freshly back on the wagon, having endured my blinding headaches, staring at these two tall tasty tins of temptation sitting on my desk… rat bastards…