James Siminoff

The Coffee Market

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There are 2 businesses that I will never go into, restaurant/hospitality and airlines.  So this post in no way is trying to elude to my entrance into the coffee market but I do think that it is becoming an interesting market and opportunity for entrepreneurs.

The coffee market is being split into 2 distinct verticals, high end (where Starbuck’s used to be) and low end (Dunkin Donuts, McDonalds, 7-eleven, etc.).  The opening that I see becoming clearer and clearer to the market is the high end.  Starbuck’s in its quest to grow and please the stock market continues to bring itself down market, calling coffee, well coffee, as they do now was a really bad idea.

My wife used to be a Starbuck’s person, on a dialy basis, now she likes going to a slightly more expensive and boutique coffee house called, Cafe Luxxe.  I have gone with her a few times to Luxxe and if my business senses are correct then Starbuck’s is going to experience a lot more pain in the future.  The local “influencers” have all switched from the local Starbuck’s to Luxxe and at almost any time of day Luxxe is crowded and the 2 Starbuck’s down the street are much lighter on traffic.

I ma sure that there are a lot of Luxxe’s in markets like LA that are taking the influencers business.  The problem for Starbuck’s is that some owner/operator shops will start to expand to be small local chains (Luxxe is adding a 2nd location next month).

Starbuck’s will be in a bad spot when it has smart high end local competition and the low end is already too established to compete with.  Also its infrastructure is already built around high end which is going to make it very tough to compete profitable there if that is where they go.

My call is Starbuck’s short and local regional chains long.

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