Fast Company: The Multimillion Dollar Quest to Brew the Perfect Cup of Coffee

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Mach
Posts: 36
Joined: 17 years ago

#1: Post by Mach »

http://www.fastcompany.com/3033306/coff ... erfect-cup
Danielle Sacks wrote:Coffee crusaders, backed by caffeine-buzzed venture capitalists, are taking aim at Starbucks with a $7 cup of joe. And you might even consider buying it.

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beer&mathematics
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#2: Post by beer&mathematics »

TD;DR give me the cliff notes version
LMWDP #431

Intrepid510
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Joined: 13 years ago

#3: Post by Intrepid510 »

It's pretty good goes over the major private equity buy ups in the 3rd wave and better on their niche market. While taking a brief look at Starbucks and how if they wanted to they could squish the third wave at any moment, but are not because the margins are too small.

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boar_d_laze
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Joined: 17 years ago

#4: Post by boar_d_laze »

It's an interesting piece, which surveys some of the recent action in the Third Wave, but has some shortcomings. From a financial/economics standpoint, the largest is that the author realizes that standardization is the enemy of quality, while failing to understand that expanding a niche business into the near mainstream or further expanding a mainstream business like Starbucks in the near niche of the Third Wave -- the thrusts of the article -- require standardization.
Intrepid510 wrote:While taking a brief look at Starbucks and how if they wanted to they could squish the third wave at any moment, but are not because the margins are too small.
Another failure of the article is that the author fails to understand that this is pure BS and bluster on Starbucks' part. Starbucks' current market and the niche Third Wave market are different markets. Starbucks wouldn't lose a dime on a Caramel Flan Frappuccino Light Blended Beverage by selling a Clover brewed gesha. If something makes money, it makes money. If it doesn't make as much money as something else it's just a different way of making money that still makes money.

Interesting, but maybe not important: The author brings up the Steampunk vs Cho competition in Los Angeles, but I'm not sure if he got that Steampunk's one vote margin represented a tie in consumer preference, not a victory.

Something else which isn't discussed, not that you'd expect it to be although it's extremely important at the high end of almost every market: Selling Veblen (or even Giffen) goods, is more profitable than quality by itself. That is, people don't buy Bentleys simply because they're good cars; and Bentley makes money by understanding that.

People who want the best cup of coffee are (a) already turned off by Starbucks' branding; (b) have some awareness that Starbucks can't provide highest quality on a large scale because no one can provide highest quality on a large scale; and (c) aren't motivated by the status conferred by paying as much as possible so much as by what's in the cup, but snob appeal, at the level of personal validation -- e.g., "my taste is not the common taste" -- counts.

Bottom Line:
Better as an article than a spreadsheet. Worth the read because it will make you think, but not enough useful information to be worth incorporating a CliffsNotes version.

Rich
Drop a nickel in the pot Joe. Takin' it slow. Waiter, waiter, percolator