Starbucks Makes a ‘Lifestyle’ Move

Discussion
Dec 20, 2006

By George Anderson


There’s something going on in Chicago and we’re not talking about the Bears. Starbucks is taking its baristas and beans and leaving Jewel. At the same time, the coffee chain is moving ahead with opening more of its cafes in Safeway-owned Dominick’s Finer Foods.


An unidentified spokesperson for Supervalu-owned Jewel-Osco told Crain’s Chicago Business that the decision for the chain to up and move out of 13 stores was Starbucks’ decision. “This was not our call,” she said.


A spokesperson for Starbucks did not offer comment.


Interestingly, Starbucks is pulling out of Jewel despite it having the greatest share (41 percent) in the Chicagoland market.


On the other hand, Dominick’s has consistently lost share in past years for a number of reasons, including what many have characterized as corporate neglect. Parent company Safeway’s decision to rollout its Lifestyle format began to pay dividends almost immediately in other markets, however, and the company has been converting Dominick’s along the way.


Safeway and Starbucks have a history together. In its 2006 Fact Book, Safeway reported that 41 percent of its stores contained a Starbucks café or kiosk. In the Chicago area, there are Starbucks in roughly 50 Dominick’s.


Jim Hertel, senior vice-president at Willard Bishop Consulting, said of the Starbucks’ announcement, “In an environment where you have two relatively similar food retailers that have been in a pitched share battle for years, the ability to claim a competitive advantage could have a big impact. Dominick’s can use Starbucks as a way to draw new customers and enhance loyalty.”


Discussion Questions: What impact will Starbucks pulling out of Jewel have on the competitive situation in Chicago? What has the relationship between
Starbucks and Safeway meant for the grocery chain? Do you see Starbucks as becoming a standard feature in all Safeway-owned stores?

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8 Comments on "Starbucks Makes a ‘Lifestyle’ Move"


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Joseph Peter
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Joseph Peter
15 years 5 months ago
It’s great to see Safeway finally pouring money into Dominick’s…the overall store design is a lot more upscale than the previous Safeway Decor that was being rolled out at Dominick’s. In the previous decor, the money and fancy decor were only invested into the Starbucks cafe, while the rest of the store was given a plain vanilla box feel. Now with the entire Dominick’s store being given a “Starbucks” lifestyle design feel, it only makes sense that Starbucks feels more at home in the Dominick’s stores. I believe Dominick’s was the pioneer of “in store cafe’s” since Bob Mariano’s roll out of the Fresh Stores in the early 1990’s. At first, the cafes in the Fresh Stores were Dominick’s branded cafes and eventually Starbucks moved into many of the cafe spaces. Now, let’s see what happens with Meijer and Starbucks. I know a few of the Meijer stores in Chicagoland have Starbucks. Dominick’s will have an advantage. I know when I shop at my Canal and Roosevelt Dominick’s early on Saturday morning, the first thing… Read more »
David Livingston
Guest
15 years 5 months ago

Pulling Starbucks out of Jewel will probably have little to no affect on Jewel. Generally the people working behind the counter at Starbucks whether it be in Jewel/Albertsons, Domimick’s/Safeway, or Target look pretty lonely anyway. Dominick’s tends to operate lower volume stores so it would appear Starbucks is leaving a weak location for an even worse location.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 5 months ago

The Starbucks in my Safeway (NorCal) is nearly always busy. They seem to be doing well, and the aroma is phenomenal. I am a self-professed coffee snob. I lost my way when a brand manager for Kroger’s Spotlight Bean Coffee in the mid 80s. Today, I use Starbucks French Roast exclusively, buy it on sale, and grind and brew it strong at home (with a press). No foam, no frills, no foofy. I never visit the Starbucks location in my Safeway, although I walk by it several times a week.

How many hardcore coffee snobs like me are out there, sucking down the Starbucks brew at home, but having no knowledge of what a mochaccino latte is? Or even caring? Reach us, Starbucks-in-Safeway-stores, and then we’ll talk.

s sarkauskas
Guest
15 years 5 months ago

Let’s not forget that there are plenty of Starbucks in Target stores around here, too. I work at a Meijer store that has a Starbucks, and shoppers love it. I wonder if perhaps Jewel wanted more Starbucks than the corporate chain was willing to dole out, given the prevalence in Dominick’s and other venus.

Mark Lilien
Guest
15 years 5 months ago

For weeks, the local weekly paper in Teaneck NJ ran front page stories about whether Starbucks was coming to Teaneck, an upper middle class suburb. From the tone of the quotes and the high profile of the saga, you would’ve thought Starbucks was a movie star. When the landlord announced another (noncoffee) retailer was taking the location, the paper’s story about the terrible disappointment felt like the town was dumped by the movie star. To some people, Starbucks is a Great Big Thing. Any supermarket with a Starbucks has a built-in traffic magnet.

Ben Ball
Guest
15 years 5 months ago

Weighing in as an “interested native” of the Northern ‘burbs of Chicago, the morning consensus around our shop is that this is more a statement of the national Safeway/Starbucks relationship than an indictment of Jewel’s stature in Chicago. Having said that, many of us also feel that the transition of our Dominick’s stores to Safeway’s Lifestyle format is a “Back to the Future” experience. More specifically, Safeway should have left the original Dominick’s strategy in place to begin with.

David Livingston’s observation that the baristas in supermarket locations don’t look all that busy, regardless of the chain, is indicative of the impact a Starbucks has on total store revenue (not much, we guess). But the net effect of Starbucks’ alignment with Dominick’s will be a powerful perceptual reinforcement of the “Lifestyle” format that could impact the market share battle with Jewel. That is exactly what Safeway needs in this market to get back on track.

Steven Roelofs
Guest
Steven Roelofs
15 years 5 months ago

The Dominick’s a few blocks from my condo in Edgewater was remodeled into a “Lifestyle” store this past fall. I never liked the store and preferred to take the El to shop at Treasure Island in my old Gold Coast neighborhood.

A few weeks ago, I went to Dominick’s to pick up something I had forgotten to get at Treasure Island and I was amazed. The wooden floor in the produce section, the selection of prepared foods, the new organic items, etc. rendered the store unrecognizable. It now feels like a Treasure Island or Whole Foods. Starbucks adds to the upscale atmosphere, but quite honestly so would Peet’s, Intelligentsia or Caribou. But it isn’t the main reason I now shop at the local Dominick’s. I’d shop the remodeled store without it so I don’t think it will make a difference to Jewel either.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 5 months ago

Jewel/Albertsons missed the boat just before Safeway bought Dominick’s. Jewel could have been first in the marketplace with Starbucks.

Dominick’s and its Fresh Stores, back then, micro marketed Starbucks shops in proper neighborhoods and continued to consumer market its Fresh Stores with the added benefit of Starbucks.

Winning combination. Hmmmmmmmmmmmmmmmmmm

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