Seattle's Best Coffee is making a bet on car-dependent commuters in Dallas-Fort Worth, opening 10 small stores around the metro area that combine drive-through and walk-up windows, while forgoing interior seating for patrons.Previously, it had only one such store, in its hometown of Seattle. The shops, measuring 523 square feet each and staffed by up to five employees at a time, opened May 20 with the aim of appealing to north Texans who'd rather stay in their car when ordering their morning coffee or breakfast. The walk-up window is meant to provide an option for pedestrians who are shopping at stores near the locations, most of which have been placed close by large retailers.
Seattle's Best, a division of Starbucks (SBUX) since its 2003 acquisition by the coffee giant, now has around 75 retail stores following the DFW openings. The bulk of its existing units, primarily housed in office buildings, airports and shopping centers, are cafe-style with inside seating.
For the new shops, DFW made sense in part because the population is growing rapidly, and cars are the most popular way to get around, according to Frank Sica, vice president and general manager for Seattle's Best. Between July 2011 and July 2012, the Dallas-Fort Worth-Arlington metro area had the largest increase of any region in the country, the Census Bureau says, adding 131,879 residents. In 2010, DFW ranked No. 4 among the country's Metropolitan Statistical Areas, with 6.4 million inhabitants. Though the region has commuter rails and buses, including the DART system in and around Dallas, cars are far and away preferred.
"So it's very commuter-centric, first and foremost," Sica says. "Secondly, when we look at Dallasites in terms of their patterns of going out, they are out into restaurants and eating away from their home at a rate of 70% higher than the national average." (The information on dining out is credited to Bundle, a New York-based firm that gathers data on spending.)
The chain used to be closely associated with Borders book sellers, but with that company's 2011 bankruptcy, Seattle's Best lost 475 outlets. Beyond its own stores, Seattle's Best coffee currently is sold through channels including Burger King (BKW) and Subway restaurants and on Delta Air Lines (DAL).
Seattle's Best expects to open four more of the drive-through and walk-up stores in the area during the weeks ahead, though Sica says he couldn't disclose specific plans for future locations elsewhere. "We're very focused on Dallas-Fort Worth right now, and we do have a very robust plan for expansion," he says.
Adult coffee drinkers in the U.S. consume 40 billion cups of coffee outside the home annually, Sica says. He adds that, in DFW, 158 million cups were purchased last year, market-research firm StudyLogic found. According to the National Coffee Association, 83% of American adults drink at least some coffee, with 63% of the nation's residents having it every day.
Sica acknowledges Seattle's Best is very aware of the fact that the drive-through coffee market is incredibly competitive, making for a multitude of alternatives for commuters. In terms of pricing, Seattle's Best isn't aiming at the buyer who might be paying a premium at its parent Starbucks, which had $13.3 billion in revenue last year, or at a local specialty brewer, but for coffee drinkers who get their java from convenience stores, gas stations and fast food restaurants. The latter would include the likes of McDonald's (MCD), who itself has made a major push into an expanded coffee and breakfast menu in recent years.
At the Seattle's Best DFW stores, a regular hot coffee costs $1.29 to $1.79, depending on its size. The food combinations will start at $3.49. The priciest "signature coffees" on the menu are $3.99, for large items such as the Mint Chocolate Chip Mocha.
- Consumer Discretionary