Chain Smokin’
As Starbucks Closes Stores, Phoenix Coffee Grows

Sarah Wilson-Jones, looking almost cocky, sits in the new Phoenix Coffee store on East 9th Street and recalls the day that she decided to take on Starbucks. She’d just found out that the mega-chain was opening a store on Lee Road in Cleveland Heights, down the street from one of Phoenix’s two stores at the time.

“It scared the crap out of me at first,” says Wilson-Jones, who has owned Phoenix Coffee for the past ten years. Then her attitude changed. “They lasted five years, we kicked their butt, and they left. It ended up being great for us.” Starbucks closed their Lee Road store in 2007.

It was a turning point for Phoenix. Ten years ago, the company was mostly known for its wholesale business. Today, they have five stores in Cleveland Heights, Cleveland, South Euclid and Lakewood and over 50 employees. A sixth store will open this fall on West 9th Street in the Warehouse District.

“We thought we couldn’t compete at retail,” says Wilson-Jones. “But the competition made us stronger.” These days, wholesale is a much smaller part of the business. Instead, Phoenix showcases its product at its stores. Twice a week, fresh beans are shipped from the downtown roastery to each of its locations.

Starbucks recently announced a plan to close more than 600 stores in the U.S. (on top of 100 stores they closed in 2007). Their stock price fell 42% in 2007 alone. Starbucks cites a poor economy and a tough retail market as the reason behind the downturn.

Yet sitting in her new store in a jean skirt and bead necklace, looking equal parts hippie coffee shop owner and business guru, Wilson-Jones has another explanation for Starbucks’ woes.

“They’ve become McDonalds,” she says of the Seattle giant, which was founded in 1971 as a single store selling beans in Pike’s Place Market. (The company now has about 11,000 stores in the U.S. alone, and is expanding abroad.) “You can’t create a unique, personalized experience when you’ve got thousands of stores. Our stores are special.”

Given Phoenix’s growth spurt, you’d think Wilson-Jones would be happy that Starbucks closed their Lee Road store in 2007. She’s not.

“Having Starbucks around seems to make local businesses more unique,” she says. “After they opened on Lee Road, that’s when we started turning a profit.”

Independent coffee shops benefit from being close to Starbucks, Wilson-Jones says – the chain gives the local shops something to compete against, and much like a neighborhood densely packed with good restaurants, consumers flock there for coffee. She knows that Starbucks helped to create a market for her product – coffee, as she likes to point out, is the world’s second most valuable commodity, right after oil.

Phoenix’s success highlights a trend – in recent years, local coffee shops have been successful by becoming the anti-Starbucks. Using the backlash to their advantage, these independents have driven sales by focusing on their product, customer service, and the character of their stores. The independents control about 60% of the coffee market, says the Specialty Coffee Association of America (SCAA). The coffee market grew by about 40% from 2002-2007, but independents still hold a majority share.

Dewey Forward, owner of Dewey’s coffee shop at Shaker Square and a 35-year veteran of the retail business, says his customers today are “more cognizant of local companies … They know that we offer a more personal experience. Starbucks set the bar high – but now they’ve saturated the market.”

Forward, however, does not believe that a Starbucks at Shaker Square would help his business. “We’d beat them – but it would still hurt us,” he says. “The market is only so big.”

Niki Gillota, owner of Gypsy Beans at West 65th and Detroit Avenue, sees demand for the sense of place that local coffee shops offer. “We know our customers,” she says. “We know their kids and their dogs. We offer that ‘third place’ environment that’s different from home and work.”

Wilson-Jones says that Phoenix has beat out its competition by focusing on fresher coffee.

“Our coffee is never older than a week to ten days,” says Wilson-Jones, whose coffee has earned a Golden Cup certification from the Specialty Coffee Association of America (SCAA). By contrast, she says, Starbucks ships their coffee from out of state, and keeps it for up to three weeks before it is brewed.

“Our business is definitely catering to the coffee nerd,” Wilson-Jones explains her quest for quality. “We want to really push the envelope in terms of quality, and those customers are attracted to our stores.”

Phoenix also puts a big emphasis on employee training – each barista receives at least twelve hours of instruction before serving their first espresso.

This year, three Phoenix baristas are working on signature drinks for the national barista competition, held every year at the SCAA convention. Wilson-Jones, who is a certified judge, was a timekeeper at the world barista championships in Switzerland in 2006.

“There’s an art and a science to coffee,” says Wilson-Jones. “The science involves measuring cups, thermometers and graphing … when we get it right, we send the coffee off in a cup to the competition judges.”

She adds with a playful grin: “The cup looks just like the pee cups they give you in the doctor’s office.”

Phoenix’s training focus is apparent on a Monday morning as Wilson-Jones and five Phoenix staffers gather for a “coffee triangulation test.” The coffee tasters are undertaking a “double-blind” taste test in an effort to try to identify different types of coffee beans and hone their taste buds.

Dawn Andrews, who is the manager of the roastery and a fourteen year Phoenix employee, smiles as she enters the tasting area. “This is one of the only places where slurping your coffee is encouraged,” she says.

Talking ceases as the Phoenix folks get to it. With all of the sniffing and slurping, one would have thought they are tasting bottles of fine Italian wine, rather than coffee. Here, it seems, there’s not much of a difference.

“This is a coffee lab,” Andrews explains. She points to the cups on the table – drinking glasses filled with a precise mixture of ground coffee and hot water. The crust has been broken with a spoon, and then scooped out for tasting. “This is how people have been tasting coffee for a hundred years.”

The tasters sit around a table and discuss the results afterwards – it’s not your typical Monday morning staff meeting. Wilson-Jones reports ruefully on the ones she missed. “It’s that damn Italian!” she cries.

Quality is not the only thing Wilson-Jones is obsessed with. Not content with chasing Starbucks off of Lee Road, Wilson-Jones recently upped the ante in her rivalry. She ran an advertisement in Cleveland and Seattle papers applauding Starbucks for closing its stores for several hours to train its baristas.

The ad’s cheeky compliment didn’t rouse a response at Starbucks’ corporate headquarters. Yet it was picked up by colleagues. “Some folks from a Seattle coffee shop came up to me at a conference and said, ‘We loved your ad,” Wilson-Jones says. (It was created by a regular customer who sent it unsolicited to Wilson-Jones.)

Yet Wilson-Jones doesn’t run many ads like this. “Doing genuinely interesting things with your business is all the marketing that you need to do,” she says. Phoenix relies on high-traffic store locations, word-of-mouth, Internet marketing such as a coffee blog, and special events such as coffee tastings.

For instance, the coffee chain is hosted a “Tour de Phoenix” bike ride on July 26th, promoting the event as an opportunity to help the environment, get exercise, and of course, stop off at Phoenix stores.

Wilson-Jones also markets her company as socially conscious in other ways. A portion of their coffee is fair trade, and they carry a brand called Café Feminino, which is grown on women-owned farms.

“In Latin America, women command respect from men by being in control of their finances,” says Wilson-Jones. “That’s a big deal there.”

In the end, Wilson-Jones relies on her employees to come up with interesting ideas and take ownership of selling the product. “I think any executive has to be smart enough to listen to their employees,” she says. “I’ve learned a lot from mine.”

Story and Photos from Cool Cleveland contributor Lee Chilcote leechilcoteATgmail.com

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