Starbucks

Kim said Starbucks’ success is not entirely because of the coffee sold at its locations. That company took the idea of a “mom and pop” coffee shop and combined it with the comfort of a modern hotel lobby such as a Marriott. While the mom and pop coffee shop might sell good coffee, the patrons who go there are mostly truckers who are not interested in having conversations, he said. But in the lobby of a modern hotel, it is much easier to start a conversation; therefore Starbucks combined good coffee with comfortable, friendly locations to sell coffee, he said. While it is true that Starbucks sells coffee, “what they are really selling is atmosphere,” he said. By changing the atmosphere in which coffee is sold, Starbucks created an uncontested market and made the competition irrelevant, he said. Starbucks “created and captured new demand,” he said.

Starbucks (SBUX, news, msgs) is making changes to the way it grinds and brews coffee as it tries to win back customers amid economic weakness and increased competition.

Instead of grinding coffee only in the morning, baristas will grind beans each time a new pot is brewed. Timers will buzz to signal when it's time to make a new batch, according to internal Starbucks documents reviewed by The Wall Street Journal.

The changes are part of the Seattle company's effort to reinvigorate the "Starbucks experience" in the face of competition from less-expensive rivals such as McDonald's (MCD, news, msgs) and 7-Eleven. With Starbucks' changes, customers will be able to hear the whir of grinders and smell the aroma of fresh coffee all day.

The adjustments will begin to roll out in Starbucks' more than 7,000 company-operated U.S. stores next month, a company spokeswoman said.

Two years ago, Howard Schultz, then chairman of the company, wrote a memo to executives blaming the chain's excessive focus on growth and efficiency for cheapening the coffee-shop experience he long had championed.

Schultz wrote that an earlier switch to...