Starbucks shop tries wine, 'coffee theater'

[June 25, 2010]  SEOUL, South Korea (AP) -- As experiments go, this one isn't flashy.

But the success -- or failure -- of one Starbucks cafe on the edge of a trendy Seattle neighborhood could ripple through the nation's coffee house industry.

Because where Starbucks goes, others follow.

Dubbed "Olive Way," the store is the biggest percolator yet for ideas that the world's largest coffee company has been testing separately at nearly a dozen locations around the globe. And what succeeds at Olive Way will most likely be spread to other Starbucks stores around the country.

With muted, earthy colors, an indoor-outdoor fireplace, cushy chairs, and a menu with wine from the Pacific Northwest's vineyards and beer from local craft brewers, this 2,500-square-foot shop in the Capital Hill neighborhood will reopen in the fall with espresso machines in the middle.

"It's going to feel very different," said Kris Engskov, Starbucks' regional vice president.

The machines at Olive Way will be part of what executives call a coffee theater. Counters will be narrower -- a slim as a foot in some places -- to bring customers closer to baristas; the machines will brew one cup at a time to extract deeper flavor from beans.

The store will be the chain's only location that sells beer and wine in the U.S., though another Seattle test cafe that doesn't carry the Starbucks brand began selling alcohol last year. The menu at Olive Way will be bigger, full of savory foods that pair with coffee, wine and beer. And customers will be able to customize the offerings, some of which will be freshly made.

The decor is to offer a departure from Starbucks' sometimes formulaic green-and-tan -- with local artists' work, regionally reclaimed building materials, a community work table and a meeting area set off by a sliding door.

As at any restaurant chain using its stores as real-life laboratories, there's no guarantee every idea from Olive Way will be successful or be implemented across the company. And the company wouldn't say how much it's spending on the effort, or how soon elements from the shop might expand to other locations.

But executives are optimistic that some will find their way to other locations, especially in vibrant urban neighborhoods where the chain can attract affluent customers who may prefer a low-key hangout over a crowded bar.

The pilot shows how hard Starbucks is working reinvigorate its brand, which stumbled under the weight of hyper-paced over-expansion. The chain closed hundreds of stores and cut scores of jobs, and founder Howard Schultz returned to help the company re-emerge.

Now, Starbucks plans more measured growth and is working to relax its corporatized image by returning to its days as a place where people want to linger for hours sipping coffee. It plans to offer free, unlimited Wi-Fi in all company-run stores; it's letting customers tailor drinks even more, and it's opening stores with more community flavor. A Seattle shop uses an old bleacher from a nearby high school for shelving, and a New York City store's floors and counters are made of wood reclaimed from a century-old Pennsylvania barn.

All the changes are part of an appeal for more afterwork customers at a chain that gets the bulk of its in-store business before 11 a.m.

"The key in the restaurant business is to differentiate themselves, and clearly they're making a move to do that," said Morningstar restaurant analyst R.J. Hottovy. "I think the idea of trying to localize the business, that's an aspect that will certainly work and help differentiate the brand and make it a lot less cookie-cutter than what you see in standard Starbucks."

It will be a challenge. Gourmet coffee shops still sold 53 percent of specialty coffee drinks like mochas and lattes last year, but that was down from 57 percent a year earlier, according to data from market research firm The NPD Group.

The coffee business has become increasingly competitive as restaurants -- from independent doughnut shops to Goliath's like McDonald's Corp. -- go after Starbucks. Servings of specialty drinks rose 17 percent at fast-food chains and 23 percent at doughnut shops this year, and they fell 8 percent at gourmet cafes.

Starbucks plans to file building permits Friday with Seattle city officials to renovate the store.

[Associated Press; By ASHLEY M. HEHER]

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