The Breakdown | Explaining Southern California's economy

Starbucks 'Barbucks' to serve alcohol, Southern California will be sipping beer and wine


Ready for your Pinot Grande? Starbucks, the giant coffee retailer, has been undertaking a transformational experiment for the past two years. Back in 2010, on its home turf in Seattle, it began serving beer and wine and premium food in a setting that was meant to evoke a soothing nighttime experience more than a peppy morning wakeup call. 

Now "Barbucks" is coming to the Southland. We don't yet know how many locations will serve alcohol along with caffeine, but we do know that the option will be available — and that Starbucks will be charging more-or-less typical prices. Wines will range from $7-9 a glass, while beer will clock in at a fairly modest $5.

We already know that Starbucks can print money, so to speak, by transforming coffee beans, milk, syrup, and other ingredients into $4 and $5 beverages. The beauty of wine and beer is that it requires much less labor to serve than producing a latte.

By-the-glass markups at most bars and restaurants of decent reputation tend to be fairly hefty. A $9 glass probably came from a $9 bottle. And while the size of a "pour" varies, you usually get something like five glasses from a standard 750ml bottle. Presto! A $9 bottle is transformed into $45 — and gross profit margin of 80 percent.

Starbucks will face some costs that it currently avoids in the coffee business. A big one is glassware. I haven't visited any of the pilot locations and don't know the quality of the "stems" that 'Bucks is using. It looks like they've contracted with somebody to create a unique Starbucks glass, stemmed and stemless, that they've been selling in Seattle for about $7 a pop. Let's assume something like a 50 percent price increase, so the stems Starbucks is using cost it about $3.50.

Paper coffee cups, of varying sizes, don't have to be washed for resuse and can head straight for landfills or recycling. Restaurants and wine bars, however, need to factor in the cost of cleaning the stems, not to mention "breakage" — wine glasses lost to minor disasters.

There's also licensing and staff training and so on. But having been around the wine business for years — and having at one time considered becoming a small-operation wine-program consultant — I can say that setting up a wine-by-the-glass program is fairly straightforward. Once you establish the selections and educate the staff, it's pretty much a simple matter of answering questions, pulling corks, controlling the size of the pours, and reporting back to mother ship the wines that are or aren't selling. You build the machine, turn it on, and then watch it make money.

Did Starbucks just become the best bar in the Southland? We'll see. Bars are bars and coffee bars are...well, there are plenty of folks who need Starbucks more than they want Starbucks and prefer other operations. However, based strictly on the financials, this could be a very good business for 'Bucks.

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