August 11, 2009

Why does Starbucks perform so well?

Because what they offer is judged superior to the alternatives by consumers -- duh.

But for anyone who was an adolescent or older during the '90s, this may come as a surprise. After what Generation X re-labeled the decade of excess and corporate greed (which was really only a few years in the middle of the '80s), the anti-yuppie and anti-corporate backlash gained a lot of steam during the decade of grunge and postmodernism. The worldview that we inherited was that super-huge companies like Microsoft or McDonald's or Starbucks only got so big because -- well, they couldn't tell you how the ball got rolling if they were so crappy, but once they did get that big, they were going to stay that way through inertia -- regardless of the quality of their product. There were network effects, or lazy sheeple, or people wanting to buy things for reasons other than how well the product did its job (e.g., to look cool).

We can easily dismiss all claims that patrons of Microsoft, McDonald's, or Starbucks go there to look cool -- these companies have been the objects of ridicule for a decade or more by the culture snobs, and in Starbucks' case, most lower-middle and lower class people too. For example, as far back as 1998, it was cliche to whine about a Starbucks popping up everywhere: that was the year that the Simpsons ran a gag about every store in the mall being converted into a Starbucks during a single trip, and it was the year that The Onion ran a gag about a new Starbucks opening within the restroom of an existing Starbucks. Eleven years of derision later, there is even less of a chance to score hip points by buying from Starbucks.

More plausible is the claim that people aren't paying just for the product but the entire experience -- yeah, kinda. But get real. People will put up with the Soup Nazi if his product is better than the other guys' stuff.

So why don't we get the answer straight from the horse's mouth -- what does the the consuming public think about Starbucks, compared to their competitors? First, we can ignore all those taste tests done by a handful of self-described "caffeine junkies" from the office of a New York media company. Most importantly, they don't represent the broader group that Starbucks, Dunkin' Donuts, etc., compete over. Plus they're small in number, and without any expert qualifications. Perhaps if they could prove they had superior noses and tongues, like renowned wine tasters, then we could forgive the small sample size -- after all, experts with superhuman senses will always be rare. But just being a coffee junkie doesn't mean anything -- imagine if Slate ran a taste test of wines "as judged by five alcoholics from around the office." Who would care?

I've managed to find three surveys or tests that had large numbers of the broad target audience, two of which seem pretty free of influence from the companies judged, and one that was commissioned by one of the tested companies. I'm interested in finding similar data that go back awhile, to see if the rise of Starbucks tracked an increasingly favorable perception of its coffee. That's the assumption unless we get good evidence to the contrary. Note -- the coffee that people actually buy when they go to Starbucks, the majority of which is espresso-based specialty coffee, not drip coffee. But that will take lots of work, so if I do that, it will definitely go up at the pay-for-data blog.

One taste test between Starbucks and Dunkin' Donuts showed a preference for the latter, although it was packaged coffee brewed at home rather than the stuff brewed in the store itself, and it was black drip coffee, not an espresso specialty coffee. Recall that most people go out for coffee only if it's specialty -- hence all the jokes about how Starbucks customers are frou-frou people who aren't interested in a regular cup of joe, but instead crave their caramel macchiatos and vanilla mocha lattes. Read the press release here. The sample size was under 500. I don't know exactly what role Dunkin' Donuts played in this survey, but it's clear they commissioned it or something, as only these two brands were tested -- any neutral test would certainly have included at least McDonald's, and probably 7-11, Burger King, Caribou Coffee, Peet's Coffee & Tea, etc. Plus they had a separate website planned for the results.

The other two have larger sample sizes and were administered by third parties not obviously influenced by any of the companies tested -- USA Today and Zagat. When a critic compared various quick service coffee brands, USA Today offered a poll for readers to say which coffee they like best. See here for the results. When I checked it, there were 9142 votes, with 44% for Starbucks, 33% for Dunkin' Donuts, 13% for McDonald's, 7% for 7-11, and only 3% for Burger King. The coffees all appear to be non-espresso, and Starbucks still handily won. So much for Burger King's pathetic attempt to bring premium coffee to construction workers -- they would have had better luck selling classical music CDs to truck drivers.

Just as important are the fast food ratings that Zagat released a few months ago. See here and click on the "fast food" tab. The sample size here was over 6000. Unfortunately there are no percentages for how many preferred each brand, just rankings. At any rate, in the Best Coffee category, the ranking is Starbucks, Dunkin' Donuts, Peet's Coffee & Tea, McDonald's, and Caribou Coffee. Three of these were also ranked in the independently administered USA Today survey, and the ranking is the same -- Starbucks, followed by Dunkin' Donuts, and then McDonald's. I assume that Zagat also rated 7-11 and Burger King for coffee, but that they scored far lower than was needed to break into the top 5, so the full ranking probably agrees with the USA Today survey.

Moreover, the Zagat survey rated the facilities and the service of Starbucks and its competitors in what they call the Quick-Refreshment Chains -- "National counter-service chains where coffee, ice cream, frozen yogurt or smoothies are the featured offering." Dunkin' Donuts did not place in the top 5 for either category, while Starbucks scored 4th in Facilities and 5th in Service, behind other specialty / premium coffee chains. Though not in the same Quick-Refreshment group as the other two big coffee contenders, McDonald's placed 2nd in Facilities and 4th in Service in the Mega Chains group.

In sum, not only does the coffee-consuming public prefer Starbucks' coffee to that of its competitors, but it's a pretty nice place to hang out and the service is good (most baristas are amiable young girls). Obviously taste matters more -- otherwise McDonald's would be neck-and-neck with Starbucks, and Dunkin' Donuts, whose facilities and service apparently aren't so hot, would be the clear loser. But it's doing better than McDonald's, although not as well as Starbucks.

So there you have it. We conclude that the media industry interns who've run taste tests before and found Starbucks inferior to Dunkin' Donuts have brains too caffeine-addled to properly judge the taste of coffee. If they tended to be in favor of Starbucks, and by a not-so-gigantic margin, their results wouldn't be unusual. But they almost universally praise Dunkin' Donuts and slam Starbucks, with McDonald's in the middle -- the reverse of what everyone else says.

Since most of these losers live on the East Coast, this shouldn't be surprising. I was brought up and lived most of my adult life there too, but middle and upper-middle class people from the Mid-Atlantic through New England, lacking an official state religion, have developed a cult of the honest golden age of America -- it's rather Minnessotan, actually. You see this most clearly in their national pastime -- pretending to give a shit about baseball. Sure, some poor souls really are fascinated by the sport, but for 99% of upper-middle class East Coasters, it is pure affectation. It lets you pretend you have something in common with the people who clean the toilets in your office building, but it's not so contemporary in popularity that you could actually yak with them about it -- they're more likely into NASCAR, basketball, or dog and cock fighting.

Dunkin' Donuts, founded in New England, fits in perfectly with the East Coast retro faux populism -- more 1930s intellectual than 1990s street vagabond. First, it used to have blue collar associations -- you only have to recall that bloated, goofy schmuck who used to be their spokesman. And plus, only proles scarf down donuts. But Fred the Baker hadn't been in commercials since 1997 when he died in 2005, and Dunkin' Donuts now makes most of its money selling coffee, not donuts. I just checked my local supermarket tonight, and the packaged coffee for both Dunkin' Donuts and Starbucks is 75 cents per ounce (although Dunkin' Donuts' coffee is cheaper if you buy it online for some reason). Let's not forget They Might Be Giants recording a commercial jingle for Dunkin' Donuts -- talk about desperate to look cool. (If they wanted real New England populism, they should have asked Brian Dewan to make a commercial like he did for M2 awhile back.)

The use of the nickname "Dunkin' " just makes it worse -- or better, for their phony down-to-earth purposes. Can you imagine how quickly you'd be pilloried if you referred to the store as " 'Bucks" or "S-bucks"? It's almost as annoying as referring to Baltimore's baseball team as "the O's" when you couldn't care less about them, although not quite as retarded as Marylanders who invite you to go out for pizza at "Sole D' " (Sole D'Italia). And it's not just into casual talk that this grating nickname forces itself -- this NYT news article uses Dunkin' nearly twice as much as Dunkin' Donuts. Seriously, you fags need to go get a life.

Rebranding Dunkin' Donuts as a yuppie-in-hiding coffee chain has surely been good for their business, but let's get real about whose customers are trying to look cool and oh-so-authentic. It's 2009, not 1996, and affluent posers these days much prefer Dunkin' over Starbucks. For normal people, though, the taste of the coffee served is more important than getting a little help in proclaiming your authentic coolness, and that is why Starbucks controls the market.


  1. You really can't compare Dunkin' Donuts to Starbucks because their atmospheres are completely different. DD stores have much less seating space than do Starbucks, and what they have is much more basic (plastic benches vs. upholstered sofas). It's the sort of place where one eats/drinks and runs. Definitely not like a Starbucks, where it's common to see people lingering for prolonged periods of time.

    By the way, Dunkin' Donuts takes it name from a specific type of donut it used to serve, the "dunkin' donut." It came with a sort of handle for ease in dunking it in coffee.


  2. I wonder how much, for instance in the Zagat's survey, loyalty to Starbucks brand could be attributable to the fact that people go to Starbucks for coffee primarily, whereas most go to Dunkin'Donuts or to McDonalds for food products, with coffee.

  3. You really can't compare Dunkin' Donuts to Starbucks

    That's what everyone says whenever there's a winner and a loser. But of course you can compare them -- they're both huge national quick-service chains that rely on coffee for their profits, both brewed and espresso.

    If you judge them only on taste, leaving aside atmosphere, Starbucks would still win because they win in large surveys of coffee taste.

    And most Starbucks customers don't hang around the place either -- if they did, they would need a lot more couches. I'm there for about an hour a day, and even when it's not crowded, most people get their coffee to go.

  4. people go to Starbucks for coffee primarily, whereas most go to Dunkin'Donuts or to McDonalds for food products, with coffee.

    For the Best Coffee category, though, they were just rating the coffee at the different places, not the full range of products offered.

  5. From what I can gather (sources: WineLibraryTV, Malcolm Gladwell's Ted Talk), one of the reasons tasters choices in food differ from most peoples' is because tasters taste a lot of food. They generally want something interesting, something different, something extreme.

    Most people, on the other hand, want something pleasant.

    The confounding issue is that there is social pressure (the potential for status gain) for ordinary people to ape tasters.

  6. Yeah, that could play a role too -- too much novelty-seeking among critics.

    But there is no social pressure to ape what the tasters prefer. It's just the opposite -- about 99% of the pressure you feel comes from people close to you in social space, and they would cast you out if you started to ape some Manhattan wine taster.

    Lots of the tasters' tastes are very simple and cheap to ape -- buying Dunkin' Donuts coffee, wearing pants, shirts, and ties, etc. They might not be as high quality as the most pricey espresso in town, or bespoke clothing, but they'd at least be heading in the tastemakers' direction.

    In reality, they wear khaki shorts, flip-flops or sneakers, and t-shirts. And most don't drink coffee at all, preferring soda instead.

  7. i enjoy the comments by hipsters that i'm a corporate coffee whore....culture snobs are equal parts humorous and irritating to me. Nothing says pretense like being unable to admit you are makes me miss the west coast: everyone knows their shallow there, i can respect that honest and awareness at least...rather than the crowds living off of their parents money or working for some corporation that still dress like they are a near homeless teenager in Brooklyn.

  8. I find it ironic that the same yuppies who go to Dunkin' Donuts to drink coffee out of styrofoam cups complain about the waste of natural resources and other big corporations doing things harmful to the environment.

    whereas the people who just go to Starbucks exchange the styrofoam for a partly recycled paper cup and use landfill space for less time.

  9. You are dead on about the faux populist appeal of Dunkin' Donuts. I'm sure it has other appeals, too, but this is the one I noticed when I moved out to the East Coast from the West three years ago.

    The thing is, I think these people talk about drinking Dunkin' Donuts more than actually buying it. If every upper middle class white yup who claimed authenticity via DD actually went there, it would be DD with 180 stores on the island of Manhattan, not Starbucks.

    Just weird.

    Of course, I'm from Seattle, where morons like these protest Starbucks for being not local enough. Somebody shoot me in the face. Please.

  10. Starbucks sucks because it's friggin expensive.

    Go to the drug store, get a bottle of 100mg caffeine tablets or a box of 200mg Vivarin.

    The objective is to keep your body alert, not to pay five goldang dollars for 100 mg of caffeine dissolved in water.

  11. I don't think that you can compare Dunkin' Donuts coffee with Starbucks coffee. Dunkin' Donuts coffee has a light, smooth flavor that goes well with food. Starbucks coffee is richer and more filling, making it better as a stand alone dessert rather than a part of a meal.

    Comparing Dunkin' Donuts coffee with Starbucks coffee is like comparing a glass of milk with a chocolate shake.


You MUST enter a nickname with the "Name/URL" option if you're not signed in. We can't follow who is saying what if everyone is "Anonymous."