Will The Clover Put Green Back In Starbucks' Future?

After several announcements from Starbucks regarding disappointing earnings, and Wall Street's abandonment of its once darling retailer, things looked pretty bleak for Big Green. But people forget the power that can be wielded once the giant is stirred.

Effortlessly, Starbucks purchased The Coffee Equipment Company and, in a single stroke, positioned itself to protect its market share from being poached at the top by quality-minded independents.

The Clover was the latest preoccupation of coffee fetishists, but curiously, few saw how its networking capabilities made it a highly-scalable, enterprise technology. Fewer still spoke of how this fact made it a technology ripe for the plucking. And yet, in retrospect, it could not be more clear that this, not beautiful boutique coffees at Stumptown's annex, would be its future. Each coffee can be profiled, roasted, packaged and shipped. That coffee can rollout on a specific day with Starbucks IT staff having uploaded its profile and dosing to the Clover at that, and every other store which will serve the coffee. The Clover can even be monitored remotely for certain maintenance issues, maintenance staff dispatched if there is a problem needing immediate attention.

In theory, it is an extremely elegant solution to the Starbucks' challenges. It addresses Starbucks' challenge of having a product of high-enough quality to be competitive with small-batch roasters and third wave coffee shops nipping at away at it's market share amongst consumers looking for the finest coffees. By having complete command of the coffee's extraction profile at each location, Starbucks has removed improperly calibrated equipment from its challenges. It also minimizes the need for highly-trained baristas. All things being equal, having the Clover should result in coffee of much higher cup quality and a high degree of consistency in the extraction regardless of location.

Of course, is Starbucks coffee good enough to compete cup to cup with the best small batch roasters? No. Even at its best, it will fall short. And will Starbucks be able to out-cheap its competitors at the bottom, Dunkin' Donuts and McDonalds? No.

Though the move to buy The Coffee Equipment Company and deny potential competitors access to the technology was smart, it is not so much an offensive move, as a defensive one. Starbucks position is defensive at top and bottom, hoping to hold most of its market share, but effectively giving up it's most discerning coffee customers, and ceding the commodity consumers to companies like McDonalds, who can generate even better economies-of-scale to beat up a competitor.

In a later post I'll talk about why it is good for independents that Starbucks has denied them this technology.