As Starbucks retreats, it’s full speed ahead for Port City Java

As Starbucks begins closing stores, and fans grumble about their new Pike Place Roast, you may be left wondering if they have lost touch with their loyal customers. Messing with someone’s daily ritual could be hazardous to your business health. One company in the “cup of java” business that understands this all too well is Port City Java.

In talking to Don Reynolds, Chief Operating Officer of Port City Java, the gourmet (or specialty) coffee business breaks down into three primary segments: 1) The volume end of better coffee by the likes of McDonald’s, and Dunkin Donuts, 2) The global specialty coffee segment owned by Starbucks, alone, and 3) The regional specialty coffee segment known as “coffeehouses, cafes, and roasters” like Port City Java, and Peet’s Coffee & Tea.

Starbucks, amongst the more publicized anxiety surrounding the store closings, has been quick to say that the Pike Place Roast has helped increase sales in the drip coffee segment of their business. But, one wonders if the success in one area will be to the detriment of customer loyalty and send Starbucks fans looking for new destinations for their daily grind.

In the case of Port City Java – and others like them – they are in a market segment all their own. And, where Starbucks is in retreat, Port City Java continues to grow and expand – they are even going International with locations in Costa Rica, Saudi Arabia, a new location in Jordan, and possibly Kuwait in the future.

What accounts for Port City’s success? What I found in talking to Don was their success is built on an emphasis to see the patrons as “guests”. When asked about what has fueled their growth, he said, "operations and execution at the unit level is everything; the guests are paying 100% of the bills." As he speaks, you can feel his commitment to a better customer experience.

But, it wasn’t always that way. I asked Don about the proverbial kick in the gut that most growing businesses feel at one time or another. It’s that moment when you realize what you are doing isn’t working and that you have to make a change. He reflected on their franchise operations in 2005 and how they learned the lesson that franchisee selection is very important to long-term success. Don stressed the idea that as a business, you must “differentiate your concept and organization; find YOUR niche and execute better than anyone in the world to create YOUR concept and value for your guest." Today, they manage a very successful franchise operation, which helps fuel their expansion.

Recognizing that coffee is often a daily ritual for an individual, Port City Java emphasizes the hospitality aspect to their business. They want to provide exceptional products served in a special way. They spent 18 months developing their breakfast sandwiches, which included a significant investment in equipment – they use a turbo oven that allows them to bake their own products inside each store.

To continue their growth, the spotlight will remain on the customer experience. Beyond the “Give Us A Holla” campaign on the Web site – for customer suggestions, experiences, or questions – managers and staff are in constant chatter with everyday patrons and visitors.

Since coffee falls into the discretionary spending category, in today’s Economy the amount to be spent is fixed. The variable is how it can be spent. The decision of where to spend, and what to spend it on, will ultimately rest with the customer experience. It sounds like Port City Java understands this and knows how to navigate market swings; there is a business lesson in this for all of us.

Comments

[Peter]

PK addition – Compare the success of Port City Java with the developments of Bear Rock Cafe. See the story update of the Bear Rock management change in this Post: http://salesbarriers.typepad.com/one_goal_revenue_generati/2008/06/blockbuster-and-bear-rock-cafe-out-apple-and-brueggers-in.html