In the Shadow of Starbucks

Building
success in the coffee shop industry is about brewing a community environment.
It’s one of the qualities of Italian coffeehouses that inspired Howard Schulz
to build Starbucks into a global brand, a brand that many analysts say has come
to symbolize the chain store more than the corner store.

Wes Herman, owner of
The Woods Coffee Co. in Whatcom County, has carved out nine such community
environments (i.e., retail stores) of his own and plans on expanding south in
2010. What started as a single stand-alone shop in February 2002 in Lynden
(population 11,000) quickly turned into a blueprint for success-one that
Starbucks is trying to replicate, says Herman.

Each of The Woods’ outlets has
its own community identity. The newest of the three in Lynden is at the base of
a 53-foot windmill in the Dutch-themed downtown. The Ferndale and Birch Bay
outlets, the two most recent additions, feature inside-outside fireplaces and
eco-friendly furniture constructed from local wood. But it is in Bellingham
where Herman created not just a coffee shop, but also a community center.

The
Woods took an old public building in Boulevard Park on Bellingham’s waterfront
and renovated it to LEED standards. “It was just a tired, almost 100-year-old
building,” Herman says. The 2,000-square-foot store sits steps from the water,
and a roll-up garage door brings the outside in. From there, Herman ties to the
community through sustainability.

With
a public composting center and a four-compartment recycling center, the
community has taken ownership of the building. That is why, Herman says, the
two-year-old store without a drive-through window has boomed into his
highest-grossing endeavor. The Woods shows that community interaction can be
more important than traffic. “The idea that people will drive in, walk in and
walk out [of Boulevard Park] is so foreign,” Herman says.

To
promote sustainable standards, The Woods is also the only coffee shop in the
county to offer 100 percent compostable clear and paper cups. He promotes the
use of tumblers for hot or cold drinks as an environmentally friendly practice.
Western Washington University students can even get a free cup of the Viking
Blend by wearing WWU gear and bringing in their own mug on “Western
Wednesdays.”

Sustainability
is just part of the culture of business for Herman. “It is involving people and
we want that interaction and participation,” he explains. Such interaction
helps create an essence of community, the paramount role in a new store’s
success. “In our case, we are connecting with community and trying to be a part
of it ourselves in ways that are unique to us,” Herman adds. “We create an
environment to have levels of comfort.”

Those
comforts include designing warm environments with leather sofas, Northwest
architecture (exposed wood beams, rock facades, etc.) and fireplaces. Local and
sustainable building materials and a Pacific Northwest color palette are also
features. Each store has its own unique twists that tie to the local
population.

“I
heard Howard Schultz say that they had lost their cozy, warm environment,”
Herman notes. What Schultz was trying to re-create, says Herman, is an
experience Woods already has. Indeed, if you walk into the original Starbucks
at Pike Place in Seattle or its new “non-Starbucks” 15th Avenue location on
Capitol Hill, it will give you a good sense of The Woods experience. “They [Starbucks] have standardized
what we do and how we do it and are trying to capitalize on it,” Herman says.

Herman’s
employees saw Starbucks officials scouting out The Woods stores, so he offered
to sit down and meet with a Starbucks regional manager last spring. They talked
store construction and working “green,” Herman says. Starbucks’ new stores
reflect those ideas, which include the use of reclaimed lumber, building the
bakery the same size as that in The Woods and the use of recycled materials and
products to earn LEED points. Starbucks representatives declined to comment for
this story.

While
Starbucks may be trying to capitalize on The Woods, Herman says he is
benefiting from Starbucks’ recent troubles. He acquired his Birch Bay outlet,
The Woods’ second top-grossing outlet, after Starbucks backed out of the
location before it was completed. Herman says he jumped at the chance to take
over the prime coffeehouse-ready location. “That building was built to the
specifications of Starbucks and we made architectural changes to meet our
standards,” he explains.

As
Herman thinks expansion, he knows that there is often no carryover from
community to community. He honed his brand with the first two spots in Lynden
and was forced to re-establish himself in Bellingham with multiple sites.
Herman thinks he can replicate the same identity moving south. “We believe it
takes multiple locations to establish a brand,” he says. “One store next to a
freeway doesn’t speak to who we are.”

Herman
is in discussions to bring The Woods to both Skagit and Snohomish counties-with
multiple locations in order to create a sense of community-but has already
landed on store 10. His latest endeavor, in Nairobi, Kenya, is slated to open
by the end of January.
While the choice of going overseas so early may seem
odd, he came upon the idea when he met a group of women from Whatcom County who
had established a school in Kenya to teach locals how to create sustainable
businesses. The new Woods will not only be a popular draw for those thirsty to
buy a cup of Western culture, but it will also be a hands-on teaching tool for
the students, as the outlet will use only local coffee beans. Herman says he is
motivated to help the school succeed, and proceeds from the Kenyan blend of
coffee in his nine Whatcom County locations are donated to the school.

It’s just the
latest step Herman is taking both to grow his business and to establish himself
as an alternative to the ubiquitous Starbucks. And with Starbucks watching, The
Woods is replicating its own brand over and over again-a brand focused on
community, no matter where that community lies.

Related: “The Third Wave”