Strange Brew Wake up and smell Starbucks' latest coffeehouse concept.

Something's brewing at Starbucks. Never content to rest onits laurels, the Seattle coffee giant that made a splash withgrab-and-go coffee has quietly premiered a new concept.

Through its latest venture, Circadia Coffee House in SanFrancisco, Starbucks is experimenting with a completely differentapproach to java. A swift departure from Starbucks' sparse,no-nonsense ambiance, this 3,100-square-foot coffeehouse is gracedwith antique furnishings, red velvet curtains and well-worncouches. More than just a place to grab a cup of joe, Circadia alsoboasts complete breakfast, lunch and dinner menus; a full liquorbar; live music; Internet access from many tables and a privatemeeting place called the Green Room. This cross between aneighborhood coffeehouse, a restaurant and a bar caters to a hip,urban crowd, many of whom have shunned Starbucks in the past.It's also a place where customers can sink into a comfy couch,sip a mocha or martini, and stay awhile.

Why develop such a distinct offshoot? Starbucks won't spillthe beans as to how the new venture fits into its overall corporatestrategy, nor will it discuss any of its future plans for expandingthe Circadia concept. What it will say is Circadia is anexperiment of sorts, an attempt to test new waters and expand itscustomer base. "We were looking for an environment that would[attract] a different kind of customer," explains GailDiSantis, Circadia's concept manager. "We wanted to bringcustomers in at different times of the day and not just be about[coffee] to all people."

Circadia doesn't use any corporate branding. Nor does itleverage Starbucks' name in any way. In fact, there are nooutwardly visible signs that the place is even linked to Starbucks,and many patrons don't have a clue it's owned by the coffeepowerhouse.

Within industry circles, it's not exactly clear whatStarbucks is attempting to achieve with this strategy. But the factthat Circadia resembles a neighborhood coffeehouse, yet hasStarbucks' massive marketing clout and brain power to supportit, raises speculation as to its possible effect on smallcoffeehouses, bars and restaurants, should Starbucks choose toexpand the concept. Some insiders, however, wonder about itschances for success. "It's kind of an oxymoron for a largechain to go after a local neighborhood concept like this,"says Ted R. Lingle, executive director of the Specialty CoffeeAssociation of America. "Local independent coffeehouses existbecause [the owner] truly wants to create a community watering holefor people. That's a big motivation for them to be in businessand a big factor in their success. I'm not really sure ofStarbucks' motivation for doing this."

So far, analysts have greeted Starbucks' new Circadiaconcept with a collective yawn. They feel its "all things toall people" approach is spreading the company too thin.

Ron Paul, president of Technomic Inc., a restaurant consultingfirm in Chicago, sees Café Starbucks, the cozier"coffeteria" style venture Starbucks launched in Seattleand Chicago, as a more significant industry trend. "It'smore of the next generation of the Starbucks brand, and that soundsto me closer to where Starbucks should be focusing," hesays.

At Circadia, however, customers look anything but bored. Theplace is abuzz with people sipping and socializing, and most viewit as a comfortable place to spend their time, morning, noon andnight.

Is Circadia the start of Starbucks' next big venture? As faras we can tell, it isn't shaking up the industry. But whateverStarbucks does, it always makes people sit up and take notice.

While some may view Circadia as a natural next step in thecompany's evolution, it can also be seen as a step back intime, a chance for Starbucks to get in touch with itsentrepreneurial roots.

"We really wanted to create a true European or New Yorkcoffeehouse," DiSantis says. "So we just started there,and everything kind of evolved naturally. The whole venture hasbeen very entrepreneurial."

Babies On The Board

When it comes to business, kids say the darndestthings.

In The Portable Business- aurus: A Treasury of Insight, Wit,and Wisdom from Tomorrow's Captains of Industry (ChandlerHouse Press), Steve Bennett seeks counsel from candid kids onrunning a hypothetical company. One situation involves thecompany's popular dinosaur puppet. When another company startsselling dinosaur puppets that are larger, cost less and even make aroaring sound, the young board of advisors respond:

"Maybe you should add stuff like three more legs--no, fivemore legs, and six heads and antennae. Then you could sell them assomething really different, like `alien dino puppets.' I thinkmany people would come back to buy them." --Alyssa,8

"Maybe put TWO T-Rexes in a pack, and when you rub theirtummies, they would roar AND they would fight. Maybe they wouldwatch FOUR T-Rexes fighting. I think you could sell a lot thatway." --Aaron, 6

"If you copy somebody, you have to ask permission. Did theyget permission to copy your store? No, they did not. So call thepolice immediately." --Audrey, 8

"If they make a bigger T-Rex, you make a smaller one andtalk about the benefits, like, it would fit in yourpocket."--Nathaniel, 10

"Make all of our puppets have sound effects. Then lower ourprice to match their price. Don't go lower, though, becausethen they'll go lower and we'll go lower and thenthey'll go lower and we'll go lower andthen . . . the dinos will be free."--Dylan, 9

One For The Books

By G. David Doran

Starbucks, Barnes & Noble, Circuit City--they're notcalled category killers for nothing. So imagine bookstoreentrepreneur A. David Schwartz's surprise upon learning thatthe big guys aren't always the bad guys.

When the president of Milwaukee-based Harry W. SchwartzBookShops learned late last year that his biggest supplier, IngramBook Group, was being bought by his biggest competitor, Barnes& Noble, he was certain his days were numbered.

But nearly six months later, Schwartz's four-store chain isstill going strong. That's due in part to a business deal withhis former Goliath--as Schwartz now receives a credit towardservice usage fees. Although he's grateful, Schwartz knowsIngram/Barnes & Noble isn't being friendly for the heck ofit--Schwartz happens to be one of the distributor's bettercustomers, and severing the relationship would probably harm theparent company's bottom line.

"It's a difficult emotional issue to have the successof your number-one distributor rely on the success of yournumber-one competitor," says Schwartz. "But this iscapitalism, and there's no room for emotions."

Contact Source

Harry W. Schwartz BookShops, (414) 270-3434, http://www.schwartzbooks.com