June 1, 2006
Bob Krummert
Some full-service operators may have plenty to be concerned about as Starbucks gears up to add hot sandwiches to its product line. The coffeehouse giant has fantastic real estate, unmatched marketing prowess, saturation-level penetration of most key markets and a share of mind among consumers that's almost off the charts. Everything this company touches turns to gold.
Except, that is, when it tries to be a little like a restaurant. It's something with which Starbucks has always struggled. A lengthy test run in Seattle several years ago convinced the company it was a heck of a lot easier and more profitable to simply serve customers hot drinks than it was to try also to prepare and sell them hot food.
Now Starbucks is giving it another try. This time the chain is rolling out a hot sandwich line using premium ingredients.
The five-item product lineup includes:
* an Egg McMuffin-esque sausage, egg and cheddar sandwich that's served on a toasted English muffin;
* a peppered bacon, egg and cheddar sandwich;
* a turkey bacon sandwich that features cholesterol-free eggs and low-fat white cheddar cheese;
* a Black Forest ham, egg and cheddar sandwich; and,
* an Eggs Florentine model offering with baby spinach and havarti cheese.
The cost: $2.95 each-a modest charge relative to the rest of Starbucks' pricing structure. It's a price point that should enable Starbucks to compete for sandwich business with most fast food chains, let alone full service.
To heat its offerings, the company has installed small ovens-capable of heating four sandwiches at a time-in selected stores. To date, you can get hot sandwiches at Starbucks stores in Seattle, Portland, Washington, DC, San Francisco and, as of this morning, 126 stores in Chicago. Not all units in these cities have ovens, but most eventually will get them.
How does all this conspire to hurt business at full-service operations? Starbucks plans to serve these sandwiches all day and night, not just in the morning. Before, customers couldn't really make a meal out of what they could buy at a Starbucks. Now they can.
And breakfast sandwiches might not be the end of it. Starbucks is also rolling out two new warm lunch sandwiches today: A tomato mozzarella offering with basil and spinach for the healthy dining/vegetarian crowd; and a Southwestern turkey sandwich featuring pepper jack cheese.
How can you fight back? If there's a Starbucks or two near your location, you'll probably want to think about the quality and variety of the sandwiches you offer. When you do, keep in mind that Starbucks just has a warming-type oven as its lone piece of equipment; you've probably got a lot more. They heat their sandwiches on site, but don't make them there.
Or you could go political on them. When threatened with the arrival of a second Starbucks in his neighborhood, Hans Siemers, owner of the Uptown Café in San Carlos, CA, got busy. He circulated a petition that would limit the number of coffee shops in the city's downtown area, gathering more than 1,200 signatures. His call for a moratorium is now under consideration by the San Carlos City Council.
Will he prevail? Probably not. Starbucks had already obtained the necessary building permit before Siemers filed his petition. Even so, it's going to slow down the arrival of that second Starbucks in San Carlos.
Will Starbucks find automatic success in the hot sandwich business? Not necessarily-but you'd better have something in mind if it does.
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