Starbucks Is Way More Than Just Lattes

SEATTLE -- Starbucks (SBUX) is changing what we eat and drink. It's altering where and when we work and play. It's shaping how we spend time and money. That's just for appetizers.

Starbucks has an even glitzier goal: to help rewrite society's pop culture menu. The company that sells 4 million coffee drinks daily in the USA is hot to extend its brand beyond the espresso machine to influence the films we see, CDs we hear and books we read. In the process, it aims to grow into a global empire rivaling McDonald's.

"It amazes all of us -- how we've become part of popular culture," says Chairman Howard Schultz, sitting casually in his office near a photo of him arm-in-arm with Mick Jagger. "Our customers have given us permission to extend the experience."

The kingpin of pricey coffee is intent on ranking among the top trendmeisters before the decade is out. Something like: If you love the taste of our coffee, you'll love our taste in pop culture, too. "Call it the Starbuckization of society," says George Ritzer, sociology professor at the University of Maryland. "Starbucks has created the image that they're cutting edge."

Schultz is dead serious about taking his company Hollywood -- and beyond. Starbucks Entertainment, formed two years ago, has 100 employees and is relocating to Santa Monica, Calif. It retained the William Morris Agency to help link the brand, via marketing ventures, with films, music and books. In some cases, Starbucks will have a financial stake.

"We are engaged every day in discussions with the highest levels of people in the entertainment business," Schultz says.

Starbucks has had talks with musicians Jagger, Bono, Prince and Chris Martin about promotional links with CDs, division president Ken Lombard says. He says he hears from record labels, film studios and publishers daily about possible tie-ins.

They might need Starbucks more than it needs them. Its stock is up about 5,775% since it went public in 1992. It's had 172 straight months of same-store sales growth.

Music was Starbucks' first foray into pop culture. It shared in eight Grammy Awards in 2004 for backing the Ray Charles Genius Loves Company CD. Its stores sold about 835,000 copies, about 25% of sales. In 2005, Starbucks sold 3.5 million CDs of all kinds.

"We are in a unique position to transform the way music is discovered and delivered," Lombard says.

Starbucks' film effort was less commercial, but Schultz says the plan is to back films that fit the brand. "We would not do the next Spider-Man." Its first deal has been to promote Lionsgate's Akeelah and the Bee for an undisclosed equity stake. Since opening April 28, the movie has earned mostly positive reviews but posted modest sales of $14 million through May 14.

Next up, Starbucks will sell, and might publish, books. "The search is on for the right one," Lombard says.

It also is testing in a few sites a plan to make stores what Schultz calls "digital fill-up" stations for entertainment downloads. By ramping up Wi-Fi networks already in more than half its stores, Starbucks could offer not only a place to check e-mail on a laptop but also load an MP3 player. "People are using our stores in ways we never imagined," he says.

Like Oprah Winfrey, Starbucks is emerging as a self-appointed culture guru. It's drawing folks who want a jolt of what's "in" with their java.

"People promote their own brands -- even promote themselves -- by being Starbucks consumers," says Jeff Swystun, global director at brand-savvy Interbrand.

Starbucks manages to project itself as both hero and renegade. As a brand, says Watts Wacker, futurist at FirstMatter, it's a lot like Bono: a good man and bad boy.

Starbucks is also ubiquitous. It has 7,950 U.S. stores -- plus 3,275 elsewhere -- and an average of five opening every day worldwide. Its long-term goal is 15,000 U.S. stores, 30,000 globally. By contrast, McDonald's has 13,700 U.S. stores, 31,000 globally. "Starbucks has found a way to reach every demographic," says Barry Glassner, author of The Culture of Fear. "It's hard to be an American without stepping in one."

Some do every day. And 24% of Starbucks' customers visit 16 times per month. No other fast-food chain posts numbers even close.

Sun Cunningham plans her days around Starbucks. "I guess it's a little crazy," says the consultant from Silverthorne, Colo. "But whenever I run errands, I map it out so I can stop at a Starbucks in between."

Manhattan resident Eve Epstein goes to Starbucks daily. Three mornings a week, she also takes her son, Asher, 2, and meets her best friend — with her toddler. "Our kids will spend their childhoods there," she jokes. For parents, she says, "Starbucks is the new McDonald's."

While Starbucks is just getting into the pop culture business, it has already touched us all by:

• Changing what we'll pay for coffee. In its less costly markets, a "tall" (small, 12 oz.) cup of regular coffee still costs about $1.40. In its priciest market, New York City, a "venti" (large, 20 oz.) Frappuccino will set you back $4.90.

"We live in a society where people think $5 is $1 because of Starbucks," says Marian Salzman, trends guru at JWT Worldwide.

Washington, D.C., lawyer Lisa Terry, who goes four times a week, gives Starbucks a nickname based on her average tab: FourBucks.

Starbucks not only made four bucks a cup acceptable, it opened the door for others. "I got into the business because of what they created," says Michael Coles, CEO of 500-store Caribou Coffee.

Not everyone has bought in. Some 1,829 consumers were asked by Marketing Evaluations, The Q Scores Co., last year to rate 170 major brands for "value." On a scale of 1 to 100, the average score was 26. Starbucks came in at just 10. "The consumer is saying, 'Man, look what I'm paying for this!' " says Steven Levitt, president of the firm.

• Changing coffee tastes. Like it or not, Starbucks has changed expectations of how coffee should taste. "They've done a great job of raising coffee standards," says Bryant Simon, author of the upcoming book Consuming Starbucks.

Starbucks coffee buyers, tasters and its quality control team taste an average 1,000 cups per day. It's forced McDonald's and Burger King to upgrade their brews.

• Changing what we eat. "It's hard to eat healthy at Starbucks," says Marion Nestle, author of What to Eat. "Portions are too big, and the drinks are full of calories."

It's about to get easier. This year, Starbucks has started a menu revamp with more better-for-you foods. Fruit and yogurt parfaits and warm breakfast sandwiches have rolled out in many markets. New salads are under review. Even Starbucks trail mix is on tap. Healthier food "is part of every conversation we have," says CEO Jim Donald. But coffee is the focus, he adds.

• Changing how we order. Starbucks made custom ordering chic, says Brad Blum, former CEO of Burger King, now a restaurant industry consultant. "People take a sense of ownership when their order is personalized," he says.

• Changing how people meet. "There's a sense of security when you go there," psychologist Joyce Brothers says. It has given people a "safe" place to socialize, she says.

Terry, the D.C. attorney, says Starbucks is the only place she feels comfortable meeting guys on first dates. "It's cornered the market on meeting places," she says.

• Changing cities. Starbucks is influencing urban streetscapes. In brochures for high-end apartments near New York City, it's not uncommon to see "near Starbucks" as a selling point. A Starbucks in the neighborhood is "definitely an indication that an area has arrived," says Doug Yearley, a regional president with builder Toll Brothers, now putting up luxury condos near a Starbucks in Hoboken, N.J.

• Changing social consciousness. Starbucks has added more than a teaspoon of social responsibility to its premium coffee.

No other retailer in North America sells more Fair Trade coffee — marketed by co-ops that guarantee living wages to coffee growers. It has 87 urban locations co-owned by Earvin "Magic" Johnson. It's begun rolling out paper cups made with 10% recycled materials.

Many of its part-time "baristas" are eligible for health and 401(k) benefits, something that Schultz is proud of and that has had an impact on the industry. But some employees push for more. A union recently formed in Manhattan to seek more pay and "to make Starbucks more socially responsible to workers," barista Daniel Gross says.

Despite recent moves to become a cultural curator, Schultz says Starbucks still has to earn its stripes as tastemaker. Much as it would like to become an "editor" of culture, he says, "one of the great strengths of Starbucks is our humility."