The Guardian (London) August 4, 2001

SPILLING THE BEANS: It is one of Britain's biggest boom industries, with new shops springing up quicker than you can say cappuccino. Clearly, we're becoming a nation of coffee lovers - but is the cup that runneth over about to turn bitter? Joanna Blythman reports

By--Joanna Blythman

'Hi. My name is Steve. I work in the centre of London. I walk to work along the Strand from Charing Cross station. In my journey, I pass two Starbucks coffee shops, three Coffee Republic coffee shops, two Caffe Nero coffee shops and two Costa coffee shops. My journey is under a quarter of a mile; it takes less than 10 minutes. One of the Coffee Republic shops is right next door to my office - the building used to be a good independent cheap tailor's, which saved me on three occasions when faulty drink-through lids caused coffee to ruin my work shirts - and I don't object heavily because the product is quite good and the company, as far as I know, is British. But I do object to the Starbucks stores I pass, because both used to be nice cafes to frequent. And I object to the new Starbucks opening opposite my office because, quite frankly, THERE IS NO F***ING NEED FOR IT!"

Welcome to <www.ihatestarbucks.com where you can have a global gripe about the coffee chain you love to hate, and give it a good kicking in the company of disgruntled independent cafe patrons, "terminated partners", "ex-baristas", anti-globalisation activists and the massed (and swelling) international ranks of people who find themselves distinctly underwhelmed by the prospect of a decaff, tall, low-fat, extra-whip, creme-de-menthe mocha with a chai spice muffin.

Each contributor to the I Hate Starbucks messageboard has a different bugbear. Several want to know why Starbucks uses Italian words such as "barista" (Italian for "barman") when its largest market, the US, is English-speaking. "Does this translate as: 'Ha, ha, you've paid Dollars 4 for a mocha'?" one asks. An ex-barista, who worked in an outlet in a Manhattan bookstore, reports that many of this presumably literate clientele now think "venti" means "large" in Italian, not "20", because Starbucks uses it as the name for its largest coffee. (The "venti" is actually a 20fl oz measure - though the chain likes to talk Italian, it still counts in imperial, not metric, units.) A "number cruncher" adds: "If Starbucks buy only from the best 1% of coffee beans, but sell in so many stores . . . doesn't their rapid expansion mean there aren't enough 'best 1%' coffee beans available, as they've already bought them all?"

Some messages are clearly defamatory; others strike a serious note, questioning the company's treatment of coffee producers or its labour relations. But the overwhelming complaint is best summed up by Steve in London - people are outraged at the mass invasion of their high street by Corporate Coffee Inc.

You can see why. The first UK Starbucks opened on King's Road in London in September 1998. Now there are 211 in the UK - an average six new coffee shops each month. Its spread attracts nouns such as "plague" and "virus", but some of the criticism is unjustified. Despite its rapid expansion, Starbucks is still only number two in the UK Corporate Coffee Wars, behind our indigenous chain, Costa, which has quietly built an empire of 240 shops and is opening new branches at the rate of one per week. But Starbucks is an easy target. It's up there with Nike and McDonald's in the rogues' gallery of the anti-globalisation campaigners, and its typically American, in-your-face tactics make it a convenient target, just as it was for demonstrators at the World Trade Organisation summit in Seattle in 1999. Less interested, for the time being, in nationwide geographical coverage than in high-profile metropolitan dominance, Starbucks opens in clusters and screams out at you so you can't miss it. It wants that highly visible corner site with maximum pedestrian traffic, the corner opposite and another couple in the same block, too. In the US, Starbucks has been criticised for using a highly aggressive strategy in which it blankets a desirable target area, making coffee competition so fierce that independents and smaller chains are forced out.

"As part of its expansion strategy of clustering stores in existing markets," explained the company's 1995 annual report, "Starbucks has experienced a certain level of cannibalisation of existing stores by new stores . . . but management believes (this) has been justified by the incremental sales and return of new store investment." Put cynically, Starbucks is prepared to take a beating on individual stores, even make a loss, for the sake of long-term market dominance.

In 1998, when Starbucks came to the UK, it seemed adopt the same remorseless tactics here, too, and gave itself eight years' grace before it was expected to show a profit here. It took its chequebook out of its deep pocket and set about acquiring more prime locations. "Starbucks didn't understand the market," says an industry insider. "Its property teams would walk into a Boots and offer a premium for the lease. Not only did it have to have the lease, it didn't want any rival to have it, either." In the absence of any significant independent opposition, Starbucks typically set up a few doors along from its main rival, Costa. Smaller chains felt obliged to squeeze in, too, fuelling the now familiar "coffee rows".

But the UK market is not entirely a walkover. First, there are astronomical rents and rates on prime locations. London retail property costs, for example, are second highest in the world after Tokyo. Then there are premiums of as much as pounds 1m just to buy your way into an established coffee business, before you even look at the cost of fitting out a typical outlet, estimated at pounds 250,000 per unit. All this has to be recouped in a two- or three-year lease. Even at a hefty pounds 3.35 per shot, you have to sell a serious number of raspberry mocha chip cream frappuccinos to keep the investors happy.

Increasingly, the buzzword in Corporate Coffee Land is "saturation". How many more coffee shops can our caffeine-twitchy cities take? And why does Starbucks persevere in what seems an oversubscribed, expensive UK market, when it can open stores in Asia for 20% of the equivalent UK outlay? The tantalising, long-term carrot dangling on the end of the pricey, short-term stick is the potential for an explosion in UK consumption. Coffee is the second fastest growing UK market after mobile phones. The average Brit consumes only 2.4 kilos of coffee per year, while your average Swede, say, gets through 11.5 kilos. In bulk terms, one year's consumption in the UK equals two days' in Italy.

We trail on the quality front, too. We still import around 70% robusta, the cheap, bulk, workhorse bean of the coffee world, not quality arabica; and 85% of the coffee we drink is not "real" coffee but instant. So the potential for making money by growing the "real" coffee market is breathtaking. Britain stands out as a peculiar world aberration in its continuing preference for instant coffee, developed as a wartime "dry" supply for US forces. Instant is coffee that has already been brewed, then evaporated in chimney towers using hot air. Manufacturers are notoriously secretive about their processes, but instant remains an overwhelmingly industrial product, involving the brewing of vats of coffee in vast processing plants. The only real innovation since the second world war is freeze-dried coffee, which smells marginally better than powdered. The base coffee has scarcely improved, either. A typical instant is made from mainly robusta beans, or the most basic cheap arabica, bought from commodity coffee-producing countries such as Brazil and Vietnam, which flood the market with cheap beans at prices well below the production costs of high-quality "estate" producers. "Instant coffee is just not in the same bracket as the coffee we sell," says John Thompson, coffee buyer for Taylors of Harrogate. "There is no way you can relate either the price or the quality of, say, AA Kenyan beans to anything instant."

Curiously, the recent proliferation of coffee chain shops may, in fact, reflect how much the UK still prefers the image of real coffee to the reality. "These chains give the impression that we are becoming a nation of coffee consumers," says Giles Hilton, who scours the world sourcing single-estate coffees for Whittard of Chelsea, "but actually what we are drinking is a small amount of coffee washed down with gallons of milk to drown the bitterness we Brits hate. A typical latte is a quarter coffee, three-quarters milk."

The first assault on the UK's reputation as a nation of bulk (if not quality) tea drinkers came with wartime rationing, when many people moved to milky drinks such as Ovaltine, and later from them to milky instant coffee. Marco Arrigo, coffee consultant and UK director of Illycafe, the Italian system said to deliver the perfect espresso, says we are still going through a Milky Bar phase in our appreciation of coffee: "These new chains appeal to a childish palate that likes milky drinks and an audience more interested in the atmosphere than what's in the cup. Most British people would find an Illy coffee undrinkable. The chains are very faddish and low-quality. We think we ought to drink coffee because it looks cool to walk around with a bucketload of it and a mobile phone, but we don't really enjoy it that much."

The atmosphere Starbucks sells, of course, is that of the Central Perk coffee shop in Friends: the cool, independently-owned extra sitting room on the street corner where tight-for-space Manhattanites hang out. Cafes and coffee drinking have always had an image of cool sophistication, and one of the things that enrages people about Starbucks is that it has appropriated the look and feel of the cosmopolitan coffee house to make a highly profitable, homogenised, global brand. The sting is that, instead of the individual atmosphere and interesting single-estate coffees you find in good independent houses, you get a formula corporate cafe selling what has been described as a nondescript house blend under a tower of froth - milkshake for grown-ups.

Much of Starbucks' success here can be attributed to our willingness to believe that the Americans know more than we do about coffee-making, which may be the case but isn't saying much. The concept of "big" coffee was invented in the US, where a copious supply of pale brown liquid - Coca-Cola or coffee - is a traditional accompaniment to food eaten both on and off the hoof. Nevertheless, to the relatively green UK coffee consumer who drinks instant at home (as opposed to the enthusiast who sees instant as the antichrist), Starbucks still has an aura of chic.

It is, of course, the chain that doesn't want to be seen as a chain, and suggestions that it is the McDonald's of the coffee world are not appreciated - even less so now that McDonald's is snapping at its heels in the US with its new McCafe concept. "Hold the fries and make mine a McLatte to go," seems to sum up Ronald McDonald's business strategy since he opened the first McCafe in Chicago in April. BSE in Europe has given consumers the jitters and consequently the burger market is running out of steam, offering only diminishing returns. Diversification is increasingly attractive to the burger chains, and what better antidote to their trailer-trash image than to enter the upmarket world of "gourmet" coffee? McDonald's, according to president Alan Feldman, is "aggressively looking for ways to grow our business under the golden arches, and McCafe gives customers another reason to visit McDonald's".

Like Starbucks, the McCafe has the obligatory coffee shop leather sofas, but otherwise delivers a twee cafe experience with white china, lace curtains, mahogany-lined walls and vintage French posters, not to mention a cappuccino for 20 cents less than it costs at rivals such as Starbucks. If the Chicago McCafe takes off, industry analysts predict that McDonald's will open another 100-200 over the coming year.

So, while it would have to go some to catch up with Starbucks' 2,500 branches in the US, the threat is there. And McDonald's has already bought into the UK coffee business: it owns Aroma, with 38 branches in London and the south-east, and has a 33% stake in Pret A Manger, the sandwich chain with an up-market image and a not inconsiderable coffee trade. The UK coffee shop market grew by 55% between 1997 and 2000, with market analysts Allegra predic-ting further growth of 22% each year until the "saturation" year of 2003. And as the market matures, there is evidence that people can now tell the difference between brands. Coffee Republic is hedging its bets, offering a hybrid of US and Italian coffee styles, but other UK-owned chains, such as Caffe Nero and Costa, make a virtue of a more sophisticated Italianness. Caffe Nero uses Italian cook Ursula Ferrigno as food consultant and its directors attribute its rapid growth (58 stores since 1997) to its being "well-differentiated as a European-styled, as opposed to American, coffee house". Costa, meanwhile, emphasises its "true Italian coffee experience", the provenance being its roots as a company set up in London in 1971 by the eponymous Sergio and Bruno, immigrants from Parma, albeit one now owned by the brewing giant Whitbread. In the growing UK coffee market, a European image might well be an asset, and not just because you are less likely to have your windows smashed by anti-capitalist rioters or have an "I hate" website dedicated to your brand.

"Starbucks may have taken the UK by storm, but the UK has a love-hate relationship with Americana," says Costa's marketing director, Laurie Morgan. Costa has already stolen a march on Starbucks and shown itself more in tune with the zeitgeist of the British consumer by being quick to put Fair Trade coffee in its shops (10p extra on an espresso) and give a guarantee that it won't use genetically-modified anything. In the US, Starbucks has been the target of an effective "Frankenbucks" campaign run by the Organic Consumers' Association on Fair Trade and Genetic Engineering. Starbucks was unable to guarantee to its US consumers that its prod ucts do not contain milk from cows injected with GM bovine growth hormone rBGH (known as rBST here). According to a Starbucks spokesperson, Starbucks "recognises that GM is a sensitive issue" but, that despite its best efforts, the company "cannot absolutely guarantee that its products are completely GM-free".

In continental Europe, however, where consumers actually like the taste of coffee and will down a double espresso at the bar without flinching, Corporate Coffee's world domination business plan is highly problematic. There is but one lonely outpost of the Starbucks empire, recently opened in Zurich, and the celebrated pavement cafes of Vienna, Paris, Madrid, Amsterdam and Rome seem confident about seeing off any Starbucks invasion. Indeed, the Italians are raising the espresso experience to dizzy new heights with the opening, on via delle Torri in Trieste, of Caffe Illy, a stylish, minimalist, ultramodern "coffee laboratory", designed by London-based architect Claudio Silvestrin and featured recently as the ultimate espresso bar in the design guru magazine Wallpaper*.

Might Caffe Illy even be an Italian prototype chain to pre-empt Starbucks or McCafe? There are no Irish cream or raspberry cappuccinos to be had at Caffe Illy, and Andrea Illy, who heads the company founded by his grandfather in 1933, has made it clear that he has no intention of putting a Caffe Illy on every other European corner. "You need to own the coffee shops yourself, so you can keep the quality high. With franchises (the coffee chains' model), you lose that control." But then Illy, of course, is the Rolls-Royce of continental coffeedom, a total coffee-making system whose "perfect espresso" has established it in top cafes throughout Europe and earned it the restaurant patronage of leading European and UK chefs such as Marco Pierre White, Gordon Ramsay, Raymond Blanc and the Roux Brothers. The Illycaffe system specifically addresses each and every espresso-making variable (bean quality, blend, grind, pressure, temperature, water hardness, filter and even cup size) in a scientific, skilled manual process designed to come up with the goods every time. This is in stark contrast to the super-automated, idiot-proof "bean-to-cup" equipment that is filtering into many chain coffee shops. All you have to do to make an espresso with a bean-to-cup machine is pour beans into the top and press a button. The same machine will also dispense hot milk, to save the wrists of the barista who would otherwise struggle with the jug of foaming milk your typical US-style latte demands. "Traditional machines risk the human touch and results can vary, rendering quality dependent on the nightlife of the staff on duty. But coffee from push-button machines, on the other hand, is consistently poor," says Marco Arrigo.

There is another school of thought, however, that insists, whether well-made or badly-made, espresso full stop is a crime against good coffee. "If I had really lovely single-estate coffee, the last thing I would do is put it through an espresso machine," says Anita Le Roy, who runs the Monmouth Coffee Company in London. "You have to raise the level of roast, so you've taken out a lot of the subtlety - the nuances simply go up the chimney. And the sheer pressure of the espresso process doesn't bring out the coffee's best qualities." Le Roy does put expensive single-estate Brazil into her espresso blend but, in common with true coffee purists, she advocates a plunger pot or an individual filter for people who really want to get to grips with the varietal charms of a coffee, be it Guatemalan Huehuetenango, New Hebridean Tanna Island or Indian Koorghully.

This point may not be lost on people who make real coffee at home. More do now fancy themselves as domestic baristas and espresso machines are increasingly popular. But according to Allegra's 2000 report, plunger pots remain the most popular equipment for home use, closely followed by filter machines and traditional Italian stove-top espresso makers, while electric espresso machines trail well behind.

Coffee experts query not just the techniques used by the big chains, but the quality of their beans, too. While Costa, for example, is proud of its famous Mocha Italia blend, perfected over 30 years, that blend in fact contains one-seventh robusta beans (less desirable than arabica), which might prompt coffee fans to say it has still not been perfected enough. Then there's the roasting. "My heart sinks when I see those dreadful signs that say the coffee is 'slow-roasted for perfection'," says Whittard's Giles Hilton. "I never drink it unless forced. Slow-roasted means baked, not roasted. It tastes like dog biscuits."

There seems, then, to be universal agreement within the established specialist coffee trade that Corporate Coffee neither knows how to make coffee properly nor starts with the right raw materials for the job. This may explain why some commentators feel unthreatened by the chains, looking on them benevolently, if a little patronisingly. "The chains have done real coffee a world of favours by taking people away from instant," Arrigo says. "They are the elemen-tary school for coffee education."

Others, however, are less sanguine. "Each time a chain moves in, we see a decline in the volume of coffee sold in independent shops," a senior manager at a major coffee company told Allegra. Another predicted that, "eventually, independent shops will be pushed out of high streets and shopping malls. They will survive only in suburban areas and small towns."

The number of independent coffee bars in the UK is still growing - just - showing a 1% year-on-year increase last year. "If independents are offering good quality and service, they are no more at risk than a Costa next to a Starbucks," says Allegra's Jeffrey Young.

Even so, in the US there is no doubt that Corporate Coffee has taken out much of the independent coffee sector. "Less than a decade ago, you could stroll into any number of great stores, from the Coffee Connection in Boston to the Pannikin in San Diego, and easily acquire the basic tools to start your own journey of coffee appreciation," says coffee buyer Kevin Knox. "Enthusiastic clerks would happily explain why the new-crop Kenyan was more exciting to drink at the moment than the Costa Rican estate, or why plunger-pot coffee was richer than electric drip. Nowadays, such ambience has been almost entirely replaced by the whir of the espresso grinder and the roar of the milk steamer, and actual coffee has become an anachronistic addendum to the fast-food frothed-milk business that masquerades as coffee today. The espresso machine, as the US specialty market has chosen to use it, has set back by 20 years the cause of great coffee and the welfare of coffee farmers."

Unless British coffee consumers wise up, Corporate Coffee is set to make a similar fortune in the UK out of dumbing down our nascent coffee awareness. But why let that happen? We may have been captivated - temporarily - by the phoney cosmopolitan gloss of the coffee chains, but the reality is that already, in planning terms, they are just another highly visible manifestation of the British high street's worrying lack of genuine diversity and its monolithic domination by a handful of powerful brands. In years to come, when the novelty wears off, chain coffee shops will have all the allure of a Bhs cafeteria. In the meantime, although they seem incapable of coming up with really good coffee, they are nevertheless intent on pulling off an alarming cultural con trick - passing off the liquid contents of all those trendy cartons as the ultimate coffee experience. We would be suckers to swallow it.