Vying with Starbucks: A Love-Hate Thing

As Starbucks' expansion loses steam, independent coffee shops reveal the subtle ways they compete with the coffee powerhouse

In July 2004, Kinley Pon was throwing his annual block party at his El Paso (Tex.) coffee shop, Kinley's House, on the same day that a Starbucks (SBUX) across the street was having its grand opening. Pon, 51, says he had planned the party for months—a day-long event with musicians, belly dancers, and local law enforcement intended both to promote his business and to raise awareness about drunk driving. Pon was surprised when an employee from the new Starbucks store walked across the street and started passing out Starbucks promotional cards to customers—on Pon's own patio. A spokesperson for Starbucks couldn't cite a specific policy regarding the distribution of promotions on a competitor's premises. "They did it for a week," says Pon. "But I allowed it to occur, because my reasoning was that they were going to pass them out anyways."

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