If Starbucks Wants to Reclaim the Third Space, It Needs to Stop Selling Mid-Level Coffee

“Too fancy to be basic, too basic to be fancy”

Photo by engin akyurt on Unsplash

Anthony Bourdain wrote in Kitchen Confidential that “when business drops, or fails to improve (the owner) panics, starts looking for the quick fix…tinkering with concept, menu, various marketing schemes.”

I was reminded of this when I recently read that Starbucks intends to reclaim the third space. Starbucks’ sales have been plummeting for a while now, and last quarter was their worst since the pandemic.

They have been called a victim of their own success. They may have introduced the world to better coffee, but were promptly surpassed by the third-wave coffee movement. That movement is now a major competitor.

According to many industry experts, Starbucks could be doomed. So they’re doing exactly what Bourdain said and are making changes.

CEO Brian Nicool thinks he can turn this ship around by becoming a community hub. A third place — somewhere that isn’t home (the first place), school or work (second places) but somewhere people can socialise, build community, and foster creative intention. A place for everyone, regardless of socio-economic status, political views, age, race, or job.

Starbucks has a mountain to climb if they want to do this, not least how to foster a welcoming community-esque atmosphere into their identikit c.40,000 stores.

But there is something else they have to consider. Something, as a food and drink writer, I’m most interested in:

How can you have a third space — especially one which satisfies the quality-obsessed demands of younger generations — with mid-level coffee?

“Too fancy to be basic, too basic to be fancy”

Being co-founder of the specialty coffee app Kava means I spent a lot of time thinking about, drinking and assessing coffee. And Starbucks, I’m afraid to say, is the last place I would go.

Starbucks sits squarely in the second-wave coffee movement. It is considered its instigator. In the 1970s and 1980s, Starbucks pulled consumers away from the poor quality, commodity coffee of the first wave and towards slightly better quality coffee of the second.

Kudos to Starbucks for their efforts because without this second wave, we wouldn't have the third: Speciality coffee — my stomping ground — with a focus on lighter flavour profiles and sustainable sourcing of beans.

Starbucks is the middle child of the coffee movement, and it shows.

It certainly struggles with identity. If you believe Starbucks, you would think their beans are of the highest quality. They use phrases like “ethically sourced” and “handcrafted by our outstanding green apron partners.”

But it’s not that simple. Starbucks is currently being sued over its claim that 100% of their coffee is ethically sourced when there are “significant human rights and labor abuses across Starbucks’ supply chain.”

The quality of the coffee is decidedly mid-level too. Plenty of Reddit threads will tell you it tastes terrible (frankly, I can’t disagree) and is overpriced for what you get (I can’t disagree with that either). Baristas are allegedly under-trained. The CEO himself admits their product is inconsistent.

So they're stuck in the middle. Or as NPR put it:

Starbucks is “too fancy to be basic, too basic to be fancy.”

This doesn’t bode well for their desire to reclaim the third space. According to sociologist Ray Oldenburg author of the Great Good Place, one of the main characteristics of a third space is that it should be unpretentious and not expensive.

Right now, that is not Starbucks. Their dedication to customisation can make visiting a store daunting for those uninitiated in the ways of the venti mocha with quad shot, caramel drizzle, oat milk, extra hot, and extra whipped cream.

Prices are high too. Here in Portugal a Starbucks tall cappuccino is €2.90. In my third space snack bar across from my apartment, it’s €1.15.

Even the third-wave specialty places with great coffee don’t charge much more. My local specialty coffee shop charges €3 per cappuccino.

As it stands, Starbucks coffee doesn’t work as a third space. It’s just too mid.

If it wants any chance, it’s got three choices:

Price down, level up, or “go European”

The world has changed since Starbucks started over 50 years ago. Consumer tastes have changed too — younger generations are famous for their dedication to quality. They don’t want mid, they want good.

In this environment, Starbucks can’t just look at the cost of its coffee, it needs to look at the quality too. Right now they’re in the sticky middle. To pull themselves out, they could go one of three ways.

Price down, level up, or the wildcard — go “European.”

The price-down option is to look back to what first-wave coffee does so well. Cheap, fuss-free jolts of caffeine.

I was at a snack bar just this weekend drinking this exact sort of coffee. The place was filled with all ages drinking coffee or picking up weekend bread and pastries. A third space in action, all for the price of an 85-cent espresso.

But cheap also means sourcing cheaper, less good quality beans which isn’t exactly on brand for Starbucks. Cheap will likely mean less profit per espresso shot. And cheap won’t attract those quality-focused younger generations.

The second option is to level up. Follow in specialty coffee’s footsteps and source better coffee. Simplify the menus. Train the baristas in the ways of latte art, pourovers, and how to make a decent flat white.

But leveling up is difficult too. Would better quality coffee even attract people already frequenting their independently run specialty coffee shop? Would it attract younger clients? With Gen Z being the only generation to prioritise quality over price, I’m not sure.

The third option is what I call “going European.”

Offer an everyday-priced coffee alongside higher quality, more expensive options.

I call it the European option because I’ve seen it work in specialty coffee shops in countries like Italy, Spain, Portugal, and France. These are places with famously low coffee pricing. The price of a single-origin 90+ point specialty espresso could send poor 70-year-old Pedro into a tailspin. So many coffee bars offer a cheaper alternative for those looking for “just a coffee.”

Incidentally, I took this approach in my wine bar which also hit many of the characteristics of a third space. Yes, we had higher-priced, higher-quality wines, but you could still drink a decent glass for £3.50 or a bottle for less than £20.

That sort of pricing was unheard of for our part of Britain but we did it because we wanted to be accessible to as many people as possible. And we could do it because we served them alongside more expensive options.

It worked for us. And if Starbucks is serious about reclaiming the third space, this European option could work for them too.

If I’m being honest, Starbucks will never be my choice of third space. But I live somewhere where cheap snack bars and specialty coffee shops outpace Starbucks by a factor of thousands. I am lucky enough to have other options.

That’s not the case for everyone. In your neighbourhood, perhaps it’s Starbucks or nothing.

So I want Starbucks to achieve their aim. I want them to become community hubs. Places for people to gather, chat, laugh and feel connected to their neighbours.

To achieve this, Starbucks must make major changes. That starts with getting the raw product right.

Starbucks could have their cake pop and eat it too. They could offer both quality and value. Only time will tell if the company can return from the brink of doom or will be another victim of mediocrity.

The world is watching, Starbucks. Don’t let us down.