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The Starbucks Economy

Posted on Jul 23, 2008
Starbucks logo
Flickr / M@rcopako

By Marie Cocco

    I’m not one to take lightly the loss of 12,000 jobs, especially when they come with good benefits such as health insurance and vacations for part-timers. Still, I’m finding it hard to suppress a bit of smugness over the downsizing of Starbucks, the ubiquitous coffee chain that put the word latte on everyone’s lips.

    By next week, the first of 600 stores Starbucks intends to close will be shuttered, a shrinkage necessitated by a drop in profits and an overall drift of purpose that seems to have thrown the company into the type of identity crisis some of its patrons try to work out while lounging at the cafe. My irritation is directed at neither the company’s management nor its employees, but at the Starbucks culture. It’s always annoyed the heck out of me.

    Starbucks seems to be a place that carries a whiff of excess. In its own way, it has a lot in common with SUVs, hot tubs and television screens wide enough to fill a wall. That is, it represents the bit-by-bit extravagances that helped get us into the tight economic jam we find ourselves in today.

    I never did develop the Starbucks habit, an addiction that can cost otherwise levelheaded people $25 or more per week. Years ago, I remember shocking a colleague when I told him I walked across street each morning to get coffee at a shop where the basic brew was a dime less than a comparable cup at the Starbucks just an elevator ride down from my office. I could have easily afforded the 50 cents extra per workweek, but what was the point? A brewed coffee was a brewed coffee. And since neither Starbucks espresso nor its various versions of “latte” bear much resemblance to the real things I’ve consumed in Italy (or even growing up in an Italian-American neighborhood), I never much cared for them. Eventually, I gave up buying coffee from a shop altogether. Not that there’s anything wrong with that.

    But the list of stores Starbucks is closing is a revelation. It shows that the company expanded to byways of America where I have no doubt that a decade ago, few would have deliberated the purchase of an expensive coffee, let alone an oddly named beverage. Take, for example, the store that is about to go dark in Triadelphia, W.Va.

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    That’s near Wheeling, in the heart of an old steel and coal region that has struggled economically for what seems an eternity. “We haven’t had retail [growth] in our county for 30 or 40 years now,” says Greg Stewart, the development director for Ohio County. 

    Yet the county has succeeded recently in developing a major retail and office park, which has generated about 3,000 new jobs. Big-name discount department stores were lured in, and a big draw is Cabela’s, a huge hunting, fishing and camping emporium. In 2007 when Starbucks wanted to move in, local officials had hoped the coffee shop would take a storefront in the “lifestyle center’’ of the development, which features a theater and a pedestrian space. But the company chose a different spot in the development. And so, only a year after it opened, this is one of the first shops in the country that Starbucks will close.

    Bridget Baker, a Starbucks spokeswoman, said she couldn’t discuss store-by-store performance, nor would she disclose what the most popular purchase was in Triadelphia. She did volunteer that Starbucks offers more than 87,000 different “beverage combinations.”

    “Coffee seems to be something that’s popular among a wide group of people,” Baker says. “Obviously customers want us to be there. That’s how we choose sites.”

    Still, the people of Ohio County aren’t exactly latte liberals—a political term that could not have been coined without Starbucks. The median household income there in 2005 was $34,199, according to the Census Bureau. Four years ago, the county voted overwhelmingly to re-elect President Bush. In this year’s Democratic primary, Hillary Clinton won 58 percent of the vote against Barack Obama.

    Some neighborhoods are fighting to keep their Starbucks. Included among them are Manhattan shops serving upscale offices and, according to The New York Times, a cafe in downtown Newark, N.J., that has become a meeting spot and a symbol of resurgence in the city.

    And Triadelphia does like coffee. Stewart says he’s already in talks with other food purveyors and is hopeful about filling the storefront soon: “We’d love to just put Dunkin’ Donuts right in that space.”

    Unglamorous, perhaps. But maybe good to the last drop.
   
    Marie Cocco’s e-mail address is mariecocco(at)washpost.com.
   
    © 2008, Washington Post Writers Group

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By Inherit The Wind, July 30, 2008 at 1:57 pm Link to this comment

I detest Starbuck’s for a coupla reasons.
1) The coffee costs like it has alcohol in it—but it doesn’t.
2) It’s lousy coffee. Period.

But Starbuck’s is not responsible for the downturn in the economy.  Despite all the fuzzy psycho-babble explanations, the economy sank as a result of the chain-reaction caused by insane, excessive borrowing by the Federal Government since 2001, that distorted the credit and international currency markets completely out of recognition.

It goes back to George Bush doing what George Bush has always done: He sees a bolus of money and thinks “How can I get that in the hands of my friends?”  This goes back to BEFORE he was governor, to his Rangers Stadium swindle, follows through his milking of the U of Tx Endowment and lands at his turning the Clinton surplus into a HUGE deficit, even before 9/11.

Then his war to seize the Iraqis’ oil turns into another huge money grab for his buds—and we have a trillion dollar deficit—THAT is what sank our economy.  Everything else is aggravating circumstances, but not a cause.

So, if for you Starbuck’s is da bomb, go for it.  Me? I prefer Dunkin’ Donuts coffee for the cost and the taste—and the donuts!

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By Marnie, July 28, 2008 at 6:15 am Link to this comment
(Unregistered commenter)

This is just another example of building business on cash flow rather than liquidity.
Good banks wouldn’t lend to companies that are in the red.  But because lenders can receive enormous interest payments, basically forever, they actually facilitate companies staying in debt, and paying for their expansion with unsupported loans.  They make a ton of money in the short term, to reinvest in another bad debt, but get badly stuck when the economy slumps.
Since, rapidly expanding companies, which finance from unsupported loans, have no liquidity to protect themselves in economic downturns - guess what happens?

Their implosion then grossly feeds the economic down turn because their employees loose their incomes, and because business like Starbucks, Wal-Mart etc, often drive smaller locally owned business out of business – so there is no safety net in the local economy to pick up the employees or the sales taxes. 
Also, since most of these large chains and businesses pay no property tax, as an exchange for promised enhanced sales taxes or higher employment in that area, the local economy looses income on multiple levels.  Since local business, that did pay commercial property taxes, and kept profits local, are driven out of business, again the local safety net of economy no longer exists.

I’m curious – could you get an economist to figure what the actual loss in municipal wide income is for each cup of Starbucks’s coffee that is now not sold?

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By fkuechmann, July 26, 2008 at 1:36 pm Link to this comment
(Unregistered commenter)

” the first of 600 stores Starbucks intends to close”

Since when does one buy a cup-a-joe in a “store”? I always get mine in a “joint”, as in “dat coffee joint on the corner”.

Stores indeed. No wonder *$ is closing 600 “stores”.

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By Walter J. Kelly IV, July 25, 2008 at 3:26 pm Link to this comment
(Unregistered commenter)

Yall got it right. WP wouldn’t touch this, hasn’t as far as I know. This country and the world is in a deep hole of problems to solve. Expensive coffee ain’t going to get it.
Thank you.

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By present, July 25, 2008 at 4:42 am Link to this comment
(Unregistered commenter)

Ah ha! a taboo satirized. Regarding one’s navel - an invitation to participate with a slight squirm in distant sensing that it is indeed a step up to engage navel… contemplation.
The marginalization (ie ‘profit’ margin) requires our complacent denial of Millions of people without food, quotidian lives demanded for a theory of economics forcibly going global is more real than the natural diversity of human life on the biodiverse ground in diverse places. Oops, I forgot, the system id god. Thats not a typo. The giant lumbering pastiche, like the emperor has no clothes.

The ‘localvore’ experiment - an experience of globalization and sacrifice of the marginalized, by living with necessities generated locally. Every indulgence enjoyed on the globalized back of other peoples becomes immediately apparent. We are invited to wake up and smell the coffee, er, I mean the whiff of excess.

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By Kevin, July 24, 2008 at 11:59 am Link to this comment
(Unregistered commenter)

Dave. I get the point of the article. What I’m criticizing about it is that half of it is about Marie explaining to us how great she is that she walks a couple blocks to not go to Starbucks, like she’s too good for it or something. I’m a liberal person, but at the same time I embrace some of the more mundane things in life. I go to Walmart. It doesn’t mean I like it, but it doesn’t mean I’m better somehow than the people who go there regularly. Half of this article has a point, the other half is about Marie giving herself a high five in the mirror. “Years ago, I remember shocking a colleague when I told him I walked across street each morning to get coffee at a shop where the basic brew was a dime less than a comparable cup at the Starbucks just an elevator ride down from my office.” Shocked? Really. Doubtful. He was probably shocked that Marie went out of her way to tell him about it. That’s part of the problem with these bleeding heart liberals, their sacrifices are pointless to them unless they have some sort of recognition for it.

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By Dave L, July 24, 2008 at 10:42 am Link to this comment
(Unregistered commenter)

That’s to funny! Give this girl a break. All of us “doing well” liberal latte American’s are far to self-indulged. This includes me as well. What I think Marie was trying to say, is we are wasteful nation, a nation that is into whatever is supposed to be “the thing” in pop culture. You know, latte, cell phones that take pictures, etc. We need to wakeup and understand there are those like the folks in Ohio who have more important issues, like feeding and providing healthcare for their families while we think the world is ending because the local Starbuck is closing. Hillary understood that and that is why she did so well in Ohio. Now if only the rest of us could understand that too!

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By Hank Essay, July 24, 2008 at 10:04 am Link to this comment
(Unregistered commenter)

Actually if the writer knew anything about coffee, she would know that Dunkin Donuts has invested millions of dollars in its own coffee efforts to compete with Starbucks. In fact, its coffee has a huge hipster underground following…so, in this case, it is not the all-American, good ole’ Dunkin Donuts of old…It, too, is a branding machine that sells not only a range of coffee (beans and ground) products, but also sells some of the most unhealthy, fatty food imaginable…And for this, you cheer? Please.

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By Kevin, July 24, 2008 at 2:09 am Link to this comment
(Unregistered commenter)

Congratulations Marie! That was the most self-righteous, self-congratulatory, my pooh doesn’t stink article I’ve ever read here on Truthdig. Shame on you!

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