Coffee Shops

Topics: Coffee, Starbucks, Seattle's Best Coffee Pages: 10 (2571 words) Published: February 1, 2008
The Brewing Business of the Philippine Specialty Coffee Shop Industry*

In the past, people were used to drinking instant coffee. This was before the advent of specialty coffee shops in the country. Today, coffee shops are a common sight especially in the Manila metropolis.

Specialty coffee refers to the highest-quality green coffee beans roasted to their greatest flavor potential by true craftspeople and then properly brewed to well-established standards (Specialty Coffee Association of America (SCAA)).

The SCAA further explained that specialty coffee tastes better than instant or mass-produced coffee because it is made from coffee beans grown only in ideal climates and prepared according to exacting standards. Also, specialty coffee possesses a richer and more balanced flavor.


Specialty coffee shops trace their roots from the coffee shops of Europe in the 16th and 17th century upon the introduction of coffee which became a popular drink. In the United States, specialty coffee shops are said to have been popularized by Starbucks Coffee.

Starbucks Coffee was established in 1971 by Gordon Bowker, Jerry Baldwin, and Zev Siegl originally to sell coffee beans only. The company's current business of retailing coffee beverages came about when then marketing person Howard Schultz (currently Chairman) got interested in selling espresso by the cup after visiting Italy. Initially, the company tested the new business model in one of its outlets and became an instant hit. Despite of this success, however, one of the owners opposed Schultz's idea of expanding the concept to all of its stores.

In 1985, Schultz left Starbucks and opened his own specialty coffee shop called Il Giornale. By 1987, the owners of Starbucks decided to sell the company to focus on a 1983 acquisition Peet's Coffee and & Tea, which was Starbuck's coffee bean supplier. Schultz, together with other investors, purchased Starbucks for US$3.7 million. Schultz eventually changed II Giornale's name to Starbucks Coffee Company.

Starbucks currently has more than 10,000 outlets worldwide, with 93 located in the Philippines operated by its franchisee Rustan Coffee Corporation.

In the Philippines, even before Starbucks came in 1997, there were enterprising Filipinos who had the foresight to put-up specialty coffee shops. The pioneers in the local industry are Figaro Coffee Company and The Coffee Experience, both established in early 1993.

Figaro Coffee Company was set up by a group headed by Pacita Juan, the company's president and chief executive officer. Its first outlet was a small kiosk located at the Glorietta mall in Makati. The outlet was initially called the F store.

The Coffee Experience, meanwhile, started in the same mall in Makati, also under a different name - Coffee X. It now has 24 outlets located mainly in Metro Manila.


The main product is specialty coffee. Differentiation is made through the various coffee concoctions and variants. Companies also offer other beverages such as tea and juices, complementing products such as breads, cakes, and pastries which are produced in the operators' own commissary plant, supplied by an affiliate or purchased from third party suppliers. Some even serve breakfast, lunch, and dinner.


The market for specialty coffee shops was estimated to be at least P2.6 billion in 2004 (Figure 1). Foreign brands accounted for 69 percent of the market; the rest are local brands.

Figure 1. Estimated Market Shares by Brand Type, 2004

Figure 1

Source: SEC, Interviews with Key Players, February-March 2006

As of February 2006, the Philippine specialty coffee shop industry consisted of at least 15 major players - 10 are foreign and five are local brands.

The foreign brands include Café Nescafe, The Coffee Bean & Tea Leaf, Dome Café, Gloria Jean's Coffees, McCafe, San Francisco Coffee Co., Seattle's Best Coffee, Segafredo Zanetti Espresso, Starbuck's...
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