The “Walmart” of Coffee: How Strong is the Starbucks Brand?

February 10, 2020

In Fullerton, California, there is a natural experiment in coffee. A Philz Coffee opened up directly across the street from a Starbucks. A left turn will take you to Philz. A right turn will take you to Starbucks. I interviewed 23 people at Philz and asked them why they prefer Philz to Starbucks and how they first learned about Philz. I then went across the street and interviewed 16 people and asked them why they preferred Starbucks to Philz and how they first learned about Starbucks. Going toe-to-toe, I wanted to find out which brand had more sway and why.

Philz coffee was founded in San Francisco in 2002 and now has 57 locations spread throughout the San Francisco Bay Area, greater Los Angeles area, San Diego, Washington, D.C., Sacramento, Maryland, Virginia, and Chicago. Their motto is “One cup at a time” and they specialize in hand-made coffees. One small cup of coffee at Philz is $3.60 at the Fullerton location.

Starbucks, on the other hand, was founded in Seattle in 1971 and, as of 2019, the company operates over 30,000 locations worldwide. Starbucks uses automated espresso machines for efficiency. A small cup of coffee at Starbucks is $2.15 at the Fullerton location. A small cup of coffee at Philz is 67% more expensive than Starbucks.

Turning first to Philz, 74% of people surveyed said that they liked the coffee at Philz more than Starbucks–the taste, quality, and selection. One woman said: “I like Philz because the blends are all really unique and all the flavors I’ve had are really good.  It’s just very different from Starbucks.  I just like the flavor of all of them.” People used the words “exotic,” “doesn’t taste cheap,” “more unique” to describe the coffee at Philz. Even though the drinks at Philz are more expensive, one person said, “I think it’s more quality for your buck.”

In terms of atmosphere, 17% of people surveyed at Philz mentioned the environment as a reason they liked Philz better than Starbucks. One person said, “the environment and the baristas are more interactive.” Another person said, “it feels more intimate than Starbucks.”

Also, two people mentioned customer service as a reason they liked Philz. One person said, “I like how you can personalize your drink completely and they’ll make it perfect to how you like it.” Another person mentioned that they could tailor how sweet their coffee was at Philz.

Finally, 17% of people said that they do not necessarily like Philz over Starbucks. One person said they were pretty equal. Another person said she gets Starbucks every morning, but she also gets Philz. She goes to Philz because “there are just way more choices you can have.” There was one person who said she does Starbucks more than she does Philz, but she goes to Philz to get their mint mojito coffee. She said, “I like their mint iced coffee. I just like mint and coffee and Starbucks doesn’t have anything like that.”

In terms of how people came to know Philz, about 50% said they learned about it from a friend. One person said she goes to Chapman University and everyone there goes to Philz. Another student of Biola University says a lot of people there like Philz and will travel 15 to 20 minutes to come and get coffee. About 35% of people surveyed said they just passed by or live in the area and decided to check it out. Only one person mentioned the internet, Yelp, as a way of learning about Philz.

On the Starbucks side, two people mentioned coffee as the reason they came to Starbucks. However, one of the two persons said, “I just come to get regular coffee. Nothing special.” The other person said she liked the Frappuccinos at Starbucks, but she really preferred Peet’s Coffee which does not have a nearby location.

25% of people surveyed at Starbucks did not know of or had never been to Philz. One person said they go to Starbucks because they know Starbucks, they had never heard of Philz even though it was across the street. Another person said, “Philz? There’s a Philz here?”

No one mentioned atmosphere as a reason for going to Starbucks, but they had a motley list of other reasons for going–including convenience, familiarity with the menu, had a gift card, and had a long history of going to Starbucks. One person said that he goes to Starbucks not for any particular reason, but people he knows go there. Another pair said that they were looking for coffee and Googled “Starbucks,” and that is how they ended up there. Yet another person said that her coach told her they use the same spit at Philz for all their drinks and it mixes all together, so she stopped going.

25% of people surveyed at Starbucks said that they do not necessarily prefer Starbucks. One person said that he actually prefers Philz because he’s a fan of pour-overs and a little more than just basic coffee. However, he came to Starbucks because he needed the work space. He had been there for six hours already before I interviewed him. Another woman said she prefers Philz as well, but it is always full and there is never space there. She said that Philz has a better atmosphere. She also likes Philz because you can bring in your own jars for coffee and it helps with the environment.

In terms of how people first learned about Starbucks, 38% mentioned family. One man said his sister got a job at Starbucks when it first opened and that is how he learned about Starbucks. 19% of people surveyed said they learned about Starbucks because it is everywhere. Others said they did not recall when they learned about Starbucks; it was so long ago. However, one woman said she remembers that when Starbucks first came to town, it was a negative thing because they were putting the independent coffee shops out of business. She remarked, “It was a big thing that Starbucks was coming in and taking over like Walmart. That’s how I heard about it.”

This natural experiment reveals that the Philz brand is described as unique, exotic, and intimate. The Starbucks brand is described as regular, basic, and nothing special. People are more likely to learn about Philz through friends and people are more likely to learn about Starbucks through family. The next step would be to see if the introduction of Philz across the street impacted the sales of the Starbucks.

Source: https://en.wikipedia.org/wiki/Starbucks, https://en.wikipedia.org/wiki/Philz_Coffee

Leave a Reply

Your email address will not be published. Required fields are marked *