Starbucks Makes a ‘Lifestyle’ Move
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?