Dive Brief:
- Foot traffic at Chicago's Starbucks Roastery, which is located on the city's Magnificent Mile, has been solid since its opening in mid-November, according to Placer.ai. The location is Starbucks' sixth Reserve Roastery and its largest location in the world. The chain saw its biggest crowd on Saturday, Nov. 23, when visits spiked 180% over the baseline average between Nov. 1, 2019, and Dec. 31, 2019.
- Placer.ai's data shows that the holiday period from Thanksgiving through New Year's was higher than the baseline average, with visits especially high on weekends and Saturday as the highest-trafficked day. About 50% of the Roastery's customers come from outside of the Chicago trade area, traveling more than 30 miles to visit the location.
- Early reports also noted that wait times to get in the door ranged from 30 to 60 minutes during the day.
Dive Insight:
Placer.ai's data shows that the Reserve Roastery really is a destination location. That's the point: Roastery locations feature several different bars with different types of brewing techniques, for example, offering customers the opportunity to try flights of espresso and compare how those different brewing methods affect the taste of the coffee. The Chicago store also offers curated cocktails and a full kitchen.
No doubt more customers are clamoring for such experiences. Euromonitor International predicts experiential consumer spending, which includes food service, will hit $8 trillion by 2030. Technomic estimates that 70% of consumers prefer to visit eatertainment formats versus a traditional casual dining restaurant for group occasions.
Starbucks Roastery hits on this trend and and caters to growing consumer demand for premium coffee experiences as well. Research from Nestlé shows that coffee drinking has moved into a "third wave," in which coffee is "an experience as much as it's a beverage." No doubt a massive, immersive experience and options like Kenya Barichu and Sun-Dried Uganda Red Cherry allow Starbucks to show off its coffee authority.
It's clear Starbucks likes what it sees from this fledgling concept. During the company's Q1 fiscal year 2020 call last week, CEO Kevin Johnson called Starbucks Roasteries "brand amplifiers" that attract an average of 10,000 visitors a day with a peak of more than 21,000 visitors in a single day.
In 2018, Starbucks executives said the company plans to launch 1,000 of these upscale stores, but Johnson has since said the coffee chain will scale back on these plans, first testing to see if six to 10 reserve stores yield enough returns to fund new large-scale stores. A conservative number seems more likely, not only to maintain the exclusivity halo the concept seems to have created, but also to keep costs in check. Roasteries aren't cheap. Leases on North Michigan Avenue average $450 per square foot, for example, and the Chicago location also includes a $6,500 espresso machine.
Perhaps most importantly, Roasteries are a critical piece of Starbucks' increasingly diversified portfolio, one that also includes traditional stores and a pickup-only store in New York that lets customers order in advance on their phones and pick up their orders without the wait. Different customers want different experiences and conveniences at different times, and Starbucks seems to be fulfilling all of these occasions. At least for now, it's working. As COO Roz Brewer said during the January call, "we're seeing increased traffic when we create new formats." At a time when traffic is hard to come by in the industry, that's a big deal.
