The Espresso Dilemma (Solved!!)

It’s now been five months since my unplanned departure from Starbucks. Of the many adjustments I’ve had to make, several concern coffee acquisition and consumption. Specifically, what products are out there that I’ll like, and how much should I expect to pay for them?

I really like coffee, and I have a bit of a caffeine dependency. I’m not one of those people who drink coffee all day long. I drink more coffee than the average person, but no more than the average coffee drinker. Chances are, if you drink coffee, you drink about 3 cups a day. There is obviously a sense in which caffeine is addictive, but unless you consider crankiness antisocial behavior or believe people resort to crime to feed their habit, it’s hard to make the case that caffeine is addictive in the same way other drugs are. Of course people in the coffee business discuss this whole topic only reluctantly and always euphemistically. “Habituating mood-enhancer,” a phrase I heard from someone at one of Starbucks’s many ad agencies over the years, is perhaps my favorite way to express our reliance on coffee. (Rule of thumb: if you work for Starbucks, you never use an apostrophe with Starbucks, in any situation, for any reason; once you’ve left, you’re on your own to run with this as far as your apostrophal comfort will take you.)

But aside from dependency, for which a wicked, debilitating headache is pretty much the worst-case outcome, the whole matter of paying for coffee is something I’ve had to confront. As a Starbucks employee, one of my benefits was a free pound of coffee every week. In addition to that, I was entitled to a 30% discount in Starbucks stores and could drink all the coffee I wanted at the office, including espresso beverages.

This brings up the whole question of value, which is one of the big business challenges facing Starbucks right now. When coffee is free or deeply discounted, it’s easy to forget what customers pay for it. Over the years, as Starbucks added dozens and dozens of flavors, new drink “platforms” and expanded nationally, it was really easy to have essentially no idea what customers were paying. Prices differed from market to market, but not always in ways you might assume – an area where costs might be higher may also have more competition, which would put downward pressure on prices. Areas with little competition created different issues: in some respects, Starbucks was basically able to establish the value of specialty coffee products in such markets. This opened the door to less sophisticated startups, who could simply match Starbucks pricing, getting premiums they had not earned, and to others who saw the opportunity to undercut the out-of-towners.

One of the first times I really had to think about this question of value was in my early years at Starbucks, when Howard Behar, one of the legendary leaders of the company, wanted to change one feature of the discount policy. In those days, employees were entitled to free beverages, anytime, in any store, whether you were working or not. Howard felt it was important, for a variety of reasons, that we pay at least a discounted price for drinks when we weren’t working. It was pretty controversial – by definition, it seemed to be a “takeaway” – always unpopular. I recall debating this with a colleague who worked in restaurant sales, which meant he spent a lot of time on the road and that he would potentially be affected more than most people. In the end, his admission that it would no longer be worthwhile for him to pull off the freeway for a cup of coffee if it cost him a dollar pretty much proved Howard’s point to me.

So while I always appreciated the value and quality of Starbucks coffee, over the course of almost 22 years, I got used to paying $X for coffee. So now it’s difficult for me to see anything but those discounted prices as the appropriate cost of the product. And the overwhelming majority of the coffee I drank – all that I drank at the office and what I made at home with my free pound – were essentially free. And as the years went by, like a lot of Starbucks customers, I pretty much quit making coffee at home except for on weekends.

My new lifestyle calls for coffee just about every morning at home. I generally make caffe lattes – one with two shots of espresso for my wife and a second for myself, with four shots. (Rule of Thumb: A single shot of espresso has about 75 milligrams of caffeine, about double the amount in a can of Cola. Most things I’ve read suggest limiting daily caffeine intake to 600 milligrams. Check out http://tiny.cc/19gqL to learn more, including how many Kit Kat bars or cans of Red Bull it’d take to kill you.)

My weekly demand for coffee at home is about 294 grams (6 shots x 7 grams x 7 days.) At $10 a pound, (at the low end of regular pricing for good coffee,) that’s about $6.50 a week for coffee beans, and coincidentally about what it would cost for the drinks each day at Starbucks and its competitors. Which reminds me of the first moment during my time at Starbucks when I could see that the business was changing before our eyes. I was managing the store at University Village in Seattle, which was then (and remains) one of the highest volume stores in the portfolio. It was around 1989 or 90, during a time when we sold 1,000-1,400 pounds of coffee by the pound each week. On a Saturday morning, one of the busiest times of the week, a couple came in and ordered a half-pound of Espresso Roast, ground for their home espresso machine, and two double-tall lattes to drink while they shopped at the nearby grocery store. Their purchase totaled $8.20 -- $4.10 for the two drinks and $4.10 for the half pound of coffee. It struck me at that moment that people were happy to spend as much for something that would be gone before they got home as they were for something that would likely be fueling a week’s worth of early mornings. Today’s Starbucks store at University Village is about four times the size it was when I managed it, does probably three times the business, but sells a fraction as much coffee by the pound.

Coffee was only a small part of my life when I joined Starbucks. My wife and I moved to Seattle in 1985. Coffee was already a bigger deal in Seattle than it had been in Phoenix, but nothing like it would eventually become. We had acquired a small espresso machine for home use and frequented the espresso cart at Nordstrom. Up to the time I joined Starbucks, I probably would not have self-identified as a coffee drinker. I liked it alright, but even then I could tell a lot of it wasn’t any good. When I joined Starbucks and began learning about coffee, the taste and style of Starbucks became the lens through which I saw all coffee. That I had the opportunity over the years to really get to know coffee and learn about from the inside, from industry pioneers and in a really fun environment meant only solidified the notion that Starbucks = Coffee. Of course I knew there were other good coffees out there – few at first, then arguably fewer – but now, it seems safe to say there is more good coffee available in the US than any time in the last quarter century, if not longer.

Which brings me to the Espresso Dilemma. Starbucks Espresso Roast is a really terrific blend of coffee, and its taste is so imprinted in my brain and on my tongue that it’s hard to embrace much else. But I have to pay for it now – I bought a pound yesterday, for $10.45. That’s about 97 cents a day for our lattes at home, which is hard not to see as a bargain. Yet – when you’re used to free and you’re unemployed, $10.45 seems like a lot. And frankly, there is part of me that would like to see less of my money go to Starbucks right now. I loved my time there; it was terrific fun most of the time, and Starbucks gave me a chance to see huge chunks of the world and meet famous people. Even so, it’s fun to explore other coffees, and given all that has changed at Starbucks and the rest of the coffee world, saying Starbucks = Coffee no longer works for me.

And so I’ve been trying different coffees at home to make our daily lattes. I’ve acquired coffee in a number of different ways, and for lack of a better way to summarize my findings; I’ll group them by method of acquisition, which essentially revolves around price.

Free. When it comes to free, economists and marketers agree: price matters, and free is a price most people can live with. I count myself among those happy with free. So on a couple of occasions when former Starbucks colleagues have offered me a pound of coffee, I’ve chosen Espresso Roast and found myself in possession of one of my favorite things at one of my favorite prices.

One rainy spring morning, a friend and I headed out on a little tour of Seattle coffeehouses. We visited Café Vita on Capitol Hill here in Seattle and had a lovely time. One of the employees noticed us looking carefully at things, including bags of coffee stored in the retail area and he offered us a tour of the roastery and warehouse, both of which are located behind the café. It was terrific fun and he gave us each a bag of a new blend they’d just come out with, a sort of joint venture they have going with Theo Chocolates. It was a nice gesture and the blend worked nicely for my lattes at home. Theo is an interesting Seattle company, and their partnership with Café Vita is a perfect fit. You can read a bit more at http://tiny.cc/f0xDt.

Shortly after the coffeehouse tour, I was having coffee with another former colleague, Joe Fugere, owner of Tutta Bella Pizza in Seattle (and now Issaquah.) (www.tuttabella.com) Like both Joe and everything on the menu, the coffee at Tutta Bella is authentically Italian. (Joe is actually not Italian, but he is very authentic; based on the respect he enjoys from the Italian barista in the Columbia City restaurant and the surprising number of Italians coming in for coffee, he might as well be.) Joe uses Attibassi Espresso from Italy, which he and his team selected after trying just about every coffee around. Read a bit about the coffee here: http://tiny.cc/g8IiT. For a person of my background, using this coffee at home was nothing short of scandalous. Like most Italian espresso blends, this coffee includes some robusta beans. (Rule of Thumb: Over 70% of the coffee in the world is arabica, the generally-regarded-as-superior of the two commercially important species of coffee. But there’s plenty of bad arabica out there, and most lousy coffee in the US is lousy not because of robusta, but because of stale, cheap, crappy versions of the good stuff.)

I had a cappuccino at Tutta Bella, and it was carefully prepared, beautiful to look at, and very tasty. It was easy to tell that there was some robusta in the blend, but the claim that these beans add body and aid the formation of a lovely crema on top of the espresso clearly seems to be true. Both these things, along with Joe’s graciousness and the barista’s skill, made it easy to say yes when Joe offered me a bag of the coffee to use at home.

To be frank, I struggled with the coffee when I used it at home. The home machine I have, like all home machines, is no match for a great commercial unit like they have at Tutta Bella. (My home model is a fairly new machine Starbucks sold, the name of which I can’t even begin to conjure up…I do remember there was a big marketing push behind it and that some of the design work was apparently done by BMW.) It’s a decent and reliable machine, and the espresso shots made from the Attibassi beans looked beautiful. The taste, however, was a bit disconcerting to me. The flavor of the robusta beans is just plain foreign to me and I couldn’t get past it. My wife had no trouble with it, I should say, and that means quite a lot in that she takes her latte at more “normal” strength and is a pretty observant drinker. (In fact, her strongest negative reaction to date has been the morning I opened a fresh bag of Starbucks – she found it harsh compared to whatever we’d drunk the prior day.)

To this point, the answer to the price/value question is a resounding “Duh”: Free coffee is good, at least when you know the people I do. There are no doubt gifts of coffee out there so heinous that I would not drink them; however, I believe that receiving a gift graciously is a mark of maturity, as is knowing what to do with gifts others may make better use of.

Not free. After carefully researching the matter, I’ve come to the conclusion that all coffee is either free or it’s not free. The price of free coffee seems to be fixed at $0.00. (I wonder if we need the government to investigate this. Collusion?) There is WAY more price variability in coffee that is not free, largely due to the ongoing practice of price discounting in grocery stores.

I’m fond of grocery shopping, all things considered. I rarely go more than a few days without at least a quick trip to the store—I prefer to buy produce no more than a day or two before its intended use, and when I’m cooking dinner, I don’t generally plan the meal several days in advance. (You never know what you’re going to be in the mood for, and when you have the luxury of time, it makes sense to use it.) So now that I have to buy most of my coffee, I’ve gotten in the habit of checking coffee prices regularly.

There is pretty much always something on sale, either in the bulk bins or within the packaged coffee selections. I’ve come to the conclusion that there’s just too much risk involved in buying coffee from the bins in grocery stores – the risk of stale coffee just seems too great. Not only is it impossible to know how long the coffee has been in the bins, it’s unclear to me how fresh the coffee they use to refill the bins really is. And even good coffee tastes lousy when it’s stale.

Most of the pre-packaged coffee in grocery stores is sold in 12-ounce bags. I know that a one pound bag (16 ounces / 454 grams) of Starbucks Espresso Roast costs $10.45 at a Starbucks store. That’s just sixty-five cents an ounce, so unless I am getting something really good or paying a very low price, the one-pounder at Starbucks is my default. The coffees I like – such as Peet’s, (Major Dickason’s Blend, sold for $13.95/lb at Peet’s stores; www.peets.com) some of Café Vita’s blends (especially Café Luna, sold for $13.50/lb in their café; www.cafevita.com) and a few others, are usually $9.99-11.99 for the 12-ounce bag. This translates to $13.32 to $15.98 per pound. So basically, the threat of a crushing caffeine withdrawal-induced headache is the only rational reason for me to pay for coffee if it’s not “on deal,” as they say in the grocery trade.

If I can buy coffee I know I like for sixty-five cents an ounce, I shouldn’t pay more than $7.80 for a 12-ounce bag. Given how grocers price things, $7.99 is the price I’m usually looking for. So any price that is >0 and <$8.00 will usually entice me to buy multiple units of a coffee I know I like. It’s obviously possible to spend much more or much less on coffee than sixty-five cents an ounce. Do either at your own peril, however.

Finally, having worked through this exercise, I realize that I know longer have a dilemma. I know what I like, how much I need, and what I’m comfortable paying for it. I shall now apply these same principles to our health care dilemma. Don’t hold your breath.