July 9, 2008
Late arrival of coffee giant bucks trends in the villagePosted in International Economy · 36 comments ·
From Shanghai to Sydney, the image of freelancers emailing happily from wi-fi hot-spots, sipping a latte — all under the vaguely one-world, benign Starbuck’s Medusa logo — is one of the enduring images of globalization.
In recent months, the traders in Dalkey have been gossiping about the impending arrival of Starbucks in the old dispensary of the town. In the building where my children got their first vaccinations, a few doors down from where my grandfather’s paint shop stood, the ubiquitous brand is soon to open its doors.
You can tell a lot about the state of the general economy from the shops on the main streets of our towns. The painted shop fronts can reveal more about the town and the type of people who live there than any highfalutin socio-economic survey. For example, the takeover of the service economy from manufacturing is one of the more obvious trends.
Over the past few years, the complexion of the main drag in Dalkey, Castle Street, has mutated with the ebb and flow of the town’s fortunes. Out went shops that made things and in came shops that provided things. Of course, the estate agents elbowed their way in there too. A few years ago, the local electrical repair shop sold out to Sherry Fitzgerald, ironically just before the local property market peaked. The old launderette was also replaced by an up-market dry cleaners, whose strap-line was the simple “why iron”? I suppose nothing as degrading as housework could have been imagined two years back when there were manicures to be had.
One of the most notable arrivals on Irish main streets has been the coffee house. Today, almost every street in any town has its cafe, resplendent with shining Gaggia, coffee beans and smell of freshly ground Kenyan Mountain. The metamorphosis in Irish coffee habits has been remarkable. As house prices rose, so too did our appreciation of coffee, to the extent that a jar of Nescafe constituted a social faux pas from which many’s the housewife failed to recover.
Out went Maxwell House and Mellow Birds and in came double espressos, frappuccinos and the blueberry muffin. Such a taste revolution is not unusual. All booms are typified by similar crazes: in the roaring 1920′s, tea houses were the meeting place of choice and during the South Sea Share bubble of mid 18th century London, tea houses were also all the range.
The coffee craze that gripped the world in the past few years has led to an explosion in coffee joints of varying quality. However, none has dominated the streetscape like Starbucks. Starbucks is the bull of the market; and it encapsulates bull market euphoria.
Everything it represents captures the easy money, slacker lifestyle to which millions of people aspire. From Shanghai to Sydney, the image of freelancers emailing happily from wi-fi hot-spots, sipping a latte — all under the vaguely one-world, benign Starbuck’s Medusa logo — is one of the enduring images of globalization.
Like Amazon and Google, Starbucks saw a trend and grabbed it, becoming that most unusual of entities — a blue-chip corporate Leviathan masquerading as a lifestyle choice. Like the bull market it represents, Starbucks is enormous, inflated and everywhere. It spread around the world like a scented virus. For a company that started in the late 1980s in Seattle, and had only 165 outlets when it floated in 1992, its growth rate has been phenomenal. Like the Irish economy, Starbucks exploded in the late 1990s and accelerated on a diet of cheap money, social aspirations and euphoria into the Roaring Noughties. As the taste buds of the global middle class aligned with Orwellian conformity, this American giant grew and grew. Today, there are 15,000 cafes in 44 countries, serving the same Mint Mocha Chip Frappuccinos to the same Google-obsessed, Diesel-wearing, downloading, weight watching global tribe. In a few short years, the Starbucks’ generation was born.
It is apt that the first Starbucks in Ireland was in the Microsoft Headquarters in Sandyford. The canteen there, dominated by the two Seattle brands that bestride the globe — Starbucks and Microsoft — is like a well-heeled version of the United Nations. It is a veritable Babel of languages where Europe’s best and brightest sip the drink that has defined a generation while working for the company that has defined a generation.
But, like the boom years it represents, all is not well with the Starbucks generation and the company behind the global coffee craze. Falling house prices, no more easy credit and stock options disappearing down the plug hole of a falling market, have all taken their toll. Like the Irish housing market, the Starbucks share price is in free fall. Its share price — as you can see from the chart — is down 55pc since its highs of last November. Sales have plunged by 28pc as the Starbucks generation tightens its belts for the first time in more than a decade.
Which brings us back to the chatter in Dalkey. The question now is whether Starbucks in Dalkey is a leading or a lagging indicator? Is it a sign that the good burghers of this south Dublin town are going to spend more on such delights (as suggested by Ross O Carroll Kelly recently)? Or is it a harbinger of doom? Is it a sign of the end, where the last Starbucks is yet another sign of the excesses of the past few years and an indicator that we have missed the boat?
In all product cycles (and housing and stock cycles) there are the early adopters and the laggards. The early adopters spot trends first, embrace new ideas and make them hip. Ultimately, those that follow rather than lead tend to be left behind. They are the ones who buy houses at the tail end of the cycle or get into stocks at the top.
Much of the talk in Dalkey is limited to whether Starbucks will damage other cafes on Castle Street. Opinions are spilt. Many suggest that Starbucks will attract more people into the town during the day, driving up the footfall and benefiting everyone. Others argue that this global monster will elbow out everyone else.
However, these local concerns might be missing the global trends. With Starbucks outlets closing all over the US, will Ireland’s late Starbucks development signal yet another truth which is emerging in the slump: despite all our self -congratulation, we were never real leaders.