Competition Brewing

April 10th, 2007

By Ian Holliday

It has almost become an adage: Americans are always on the go. They work more hours and take fewer vacations than their counterparts in other first-world nations. They are scheduled sometimes to within an inch of their sanity. One wonders where they get the energy to make it through the day. For many Americans, the answer is in coffee.

The United States is the world’s largest coffee consumer. According to a 2007 study by the National Coffee Association, 82 percent of Americans drink coffee, and 57 percent do so on a daily basis. Retail sales of coffee in the U.S. amount to over $12 billion annually, and the company responsible for the largest portion of this figure is Starbucks.

With over 13,000 stores worldwide, Starbucks is the largest chain of coffee shops on Earth. But until a year ago, they had not penetrated the Ithaca market.

Ithaca is notoriously reluctant to embrace national chains of any kind. Wal-Mart was closed by a bomb-threat in May 2005, just five months after it opened in Ithaca. So when Starbucks opened its store on West Seneca Street in April 2006, Ithacans were understandably apprehensive.

A front-page story in The Ithaca Times profiled this tension between Starbucks and the local coffee shops, particularly Gimme! Coffee.

In the article, Ithaca resident and Gimme! customer Joseph Prisco was quoted as saying, “The idea of Starbucks in Ithaca … why not just have a vegan slaughterhouse? It’s ridiculous – a corporate entity living in Ithaca. My biggest fear is the homogenization of Ithaca. I don’t want it to be like Anytown, U.S.A.”

It has now been one year since Starbucks opened in its Downtown Ithaca location. Statistics on the store’s success are hard to come by, but the recent opening of a new location in Collegetown would suggest that Starbucks has been successful.

Ithaca seems to be a viable location for chain coffee shops. A Dunkin’ Donuts opened on South Meadow Street last December, and the crowd at its drive thru on weekday mornings would indicate that the Ithaca coffee market has not been over-saturated. Brian Fitzpatrick, restaurant manager of Dunkin’ Donuts Ithaca, said his store is doing well.

“We get a tremendous amount of repeat business,” he said. “We’ve been well-accepted.”

On the surface, Ithaca doesn’t seem to have changed all that much since the chains moved in. None of the coffee shops – chain or local – have closed, and in fact more are on the way. In addition to the new Starbucks, the owners of Juna’s Café are planning on opening a store on the Cornell campus.

The anti-corporate sentiment among some Ithaca consumers hasn’t gone away either. Joseph Murtagh, an Ithaca coffee enthusiast, goes to Gimme! Coffee on a regular basis but avoids Starbucks.

“I go to Gimme! because of loyalty,” he said. “I don’t know Starbucks. I’ve never really gone to Starbucks.”

But even though Ithaca retains the same stores and sentiments it has always had, there have been changes since Starbucks’ arrival. Local coffee shops like Juna’s Café have felt added economic pressure from their corporate competition. According to Juna’s co-owner Kathleen Pasetty, her store has lost thousands of dollars since Starbucks opened. But she says this only means money is tighter and refuses to portray her coffee shop as a victim.

“Starbucks coming in has forced us to really be on top of where we’re at financially,” she said. “We’ve reduced our menu, because food is not really profitable. Coffee is profitable. It isn’t as though they’ve taken so much of our coffee business, and we’re in trouble. It’s more that we have to streamline a little bit more.”

Last year, Pasetty would not have predicted that Juna’s would be forced to take such measures. Juna’s owners knew that Starbucks would have an impact on business, if for no other reason than consumer curiosity. They also anticipated that the new store would hurt any business generated by tourists. People tend to look for the familiar when they are in an unknown place. What Pasetty and co-owner Pam Gueldner did not expect was for their steady clientele to be affected.

“We’ve lost a fair number of regular customers,” Pasetty said. “I wouldn’t say half or anything that large, but we’ve lost customers. We’ve lost people who run their own small businesses. That’s a real slap in the face. We’re actually kind of outraged about it.”

Starbucks has been known to force local coffee shops to fold under the pressure of competition. The company’s mission statement, “To establish Starbucks as the premiere purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow,” is indicative of this as a corporate goal. The Web site www.ihatestarbucks.com has received over 5,500 posts to its guestbook, many of them lamenting the loss of stores like Juna’s.

But Starbucks supporters are quick to point out that the company is not evil. As much as their goal may seem like the corporate equivalent of world-domination, Starbucks is merely doing business in a free market, and quite successfully. Beyond that, they have a reputation as a good place to work.

“You have to pick corporations that are worth being anti,” explained Joseph Gaylord, an Ithaca coffee consumer and the owner of American Crafts on The Commons.
“Starbucks treats their employees well, and I have no problem supporting them.”

Critics of Starbucks are not as readily accepting of the company’s reputation as Gaylord. While Starbucks does pay its employees more than other corporations and gives them access to health insurance, the combination of the two does not always add up to a decent living. When this is the case at a locally owned business, employees can effectively take their concerns to the owner.

At Starbucks, addressing complaints to the corporate hierarchy is much less possible. The company has a history of conflict with labor unions. Currently, only eight company-owned Starbucks stores are unionized, and all of them are in Canada.
Still, Starbucks has earned a reputation as a good corporation. While this reputation is certainly flawed, Starbucks as a whole is better than many other companies.

In terms of local economic impact, there is little difference between chains like Starbucks or Dunkin’ Donuts and local coffeehouses like Juna’s or Gimme! Coffee, says Elia Kacapyr, professor of economics at Ithaca College. None of them have a significant effect on local employment. In fact, the entire retail sector of the Tompkins County economy accounts for only 5,200 jobs out of 64,000.

According to Kacapyr, the psychological impact of corporate giants in the Ithaca area is more measurable than the monetary.

“[Starbucks] is a very small operation,” he said. “Any impact it has is more likely to be one of ambience and attitude. There is a constituency in Tompkins County that is anti-corporate.”

The one financial difference between a chain and a locally owned business is that the latter keeps all of its profits in the Ithaca area. But Kacapyr said this difference is insignificant because the majority of any retailer’s expenses are employees’ salaries.

“What you’re talking about with a ma and pa store is the revenues minus the costs equal the profits, and the profits go to the owners,” he said. “With a Starbucks the profits go to a corporation, and that corporation is definitely not headquartered in Tompkins County. But the majority of the costs are going to be for the employees. And the employees are probably going to live nearby either way, whether they work at Juna’s or Starbucks.”

Of course, the typical Ithaca coffee consumer isn’t thinking about economics when he chooses a coffeehouse. What draws Joseph Gaylord to Starbucks is the specialty drinks that can’t be found at local shops like Juna’s or Gimme! Coffee. He said he goes to Juna’s for regular coffee and to Starbucks for their mocha frappuccino. Even Pasetty praised them on that count.

“They’ve brought coffee to a whole new level,” she said. “I certainly need to give them credit for that.”

Starbucks is the reason “latte” is a household word. The modern concept of a coffee shop is largely defined by what Starbucks has done. The problem is, in many cases they’ve been too good at it. What Starbucks sells more than mocha frappuccinos is coffeehouse culture. But in bringing the coffee shop to the masses, they have homogenized an experience that thrives on individuality.

“There are so many places that are unique to Ithaca,” said Adrienne Clermont, a native Ithacan home for spring break. “I’d rather be in one of those places … than be in some place that is the same everywhere.”

The local events bulletin board in the Ithaca Starbucks is never full. It is usually populated sparsely: a poster for a recital at the Ithaca College School of Music, a picture of a lost cat. There is an attempt to localize, but it never rivals the boards at Juna’s or Gimme!, each of them teeming with flyers and notices and independent publications.

In its home-city of Seattle, Starbucks may still be a center of neighborhood activity. But elsewhere it has been so successful and expanded so much that it has lost touch with what a coffee shop is in the first place: a part of a community. Starbucks may be successful in Ithaca. But it will never be local.

Ian Holliday is a sophomore journalism major who doesn’t actually drink coffee unless someone hands him a cup and says, “hold this.” Email him at ihollid1[at]ithaca.edu.

Whaling Wall Matthew Farrell
Chow Feng Shui Josh Elmer
Stained Glass Ceiling Emily McNeill
Anarchitect Mike Berlin
SaHarrison Desert Harrison Flatau
Metrolollipopolis Jennifer Konerman
Tropic of Scurvy Heather Newberger
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