Starbucks Machinery Lurches Forward, Runs Over My Croissant

Store closings happen all the time in our retail paradise of America. If it’s a small store, you’ll never hear about it unless you do business there. If it’s a big chain, it’s in the media, like GAP’s announcement that it would close 175 stores. People who don’t work there shrug it off.

But the announcement that Starbucks would shut down by the end of September all 23 La Boulange cafés in the Bay Area (most of them in San Francisco) and two plants that supply them with freshly baked bread and pastries and other foods left me with, let’s say, mixed emotions.

Two of the cafés are within easy walking distance: in North Beach (on Columbus) and on Russian Hill (on Polk), the latter being one of our favorite lunch spots and source of freshly baked bread and croissants. What attracted us to La Boulange when we came to San Francisco was the bread, particularly the “peasant bread,” a big round loaf with a thick, crispy crust. That first slice with some butter, oh my!

At the time, the Polk location was small, and on weekend mornings, noisy and cramped. When they moved to the larger location next door, it was a relief. Whether it made sense financially is another question.

When Starbucks announced in the summer of 2012 that it would acquire La Boulange for $100 million in cash, corporate speak washed over San Francisco.

“It’s a superb opportunity to bring high-quality food into Starbucks,” said Cliff Burrows, president for the US. And he told Modern Luxury in an email:

“In La Boulange, we’ve found a company that shares our passion for reinventing and elevating an entire product category while doing it in a socially responsible way.”

“We see an opportunity to bring the artistry of the French bakery to the U.S. marketplace in a similar way that Starbucks brought the romance of the Italian espresso bar to many American coffee consumers for the first time.”

La Boulange Founder Pascal Rigo was made senior VP and charged with developing recipes and training suppliers to make pastries the way he’d been doing it for years.

At La Boulange, the coffee changed and the service got smoother. There might have been other signs of Starbucks-ization, but we didn’t see them.

Starbucks has since been selling La Boulange-labeled sandwiches and other foods at its stores in the US and Canada. Last quarter, sales of food items jumped 16% year over year. So they must have done something right.

Starbucks actually bought the parent company, Bay Bread LLC, whose delicious “peasant bread” you can also buy at Trader Joe’s here where it’s called “Pain Pauline.” But it’s sold as a half-loaf in a plastic bag, which softens the crust and ruins it. So you have to take the half-loaf out of the bag and set it cut-side-down on the counter for 24 hours to let the crust get crusty again. And you’ll never get that first crusty slice of freshly baked bread.

So Trader Joe’s might be scrambling right now to find another supplier for its stores in the Bay Area.

Six years before Starbucks appeared on the scene, Rigo, who hails from Bordeaux, France, sold a majority stake of Bay Bread to Next World Group, a privately-held investment firm. Its original intention was to expand La Boulange nationwide with hundreds of outlets. But by 2012, six years into it, they still hadn’t started going nationwide.

“It would have taken us much more time,” explained Sébastien Lépinard, founder of NWG. “Having Starbucks come in is an amazing opportunity for La Boulange and Bay Bread.” It was an exit, and he went for it.

Modern Luxury, which sat down with Rigo for a chat, put it this way at the time of the sale:

The deal – a tacit acknowledgment by Starbucks that its current selection of mega-scones and other bloated fare is “terrible,” as Rigo puts it in an unguarded moment – means that he and his team will be supplying food to tens of millions of customers a year. “It’s like being in charge of one-third of the bakeries in France,” he marvels.

So why shut La Boulange down now, after two failed attempts to take it nationwide? Why not keep it around as a San Francisco institution? Was it losing that much money?

Running the stores has become a distraction, Burrows said. Makes sense. Why go through the hassles of turning 23 cafés mostly in San Francisco into 230 cafés nationwide when Starbucks already has a machinery in place that stamped out “more than 21,000 stores in over 65 countries,” as it says.

The deal never made sense on that level. It wouldn’t surprise me to learn that it had been planned all along to shut down the cafés once “La Boulange” has become an established brand inside every Starbucks.

So Burrows told the Wall Street Journal in impeccable corporate speak that an analysis determined that “the La Boulange cafes are not a sustainable model for Starbucks long term.” Sure, there were underperforming stores, but the main reason for shutting the whole thing down was to focus on the core Starbucks business, he said. And Rigo would leave Starbucks.

Perhaps this will make room for new ventures, even better bread and croissants. Or perhaps Starbucks will put its own stores in some of the locations. Either way, we’ll miss La Boulange on Polk. We certainly won’t be buying our bread or croissants at Starbucks. And we wish Rigo good luck with his next endeavor.

A miracle happened in San Francisco in May. The median home price, after having already spiked in the prior months, jumped again. But we know how to deal with this:  We’re “riding this wave while we can, as far as we can, for as long as we can.” Read… San Francisco Insanity: Median Home Jumps to $1,275,000

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  17 comments for “Starbucks Machinery Lurches Forward, Runs Over My Croissant

  1. lg
    Jun 17, 2015 at 10:45 pm

    Starbucks….fast food for the millenial smurfs that can’t tell the difference between horse shit and real food!

  2. Scott
    Jun 17, 2015 at 11:03 pm

    Dammit !
    La Boulange is great.
    Should have known Starbucks would wreck that whole thing.

  3. paul
    Jun 18, 2015 at 2:23 am

    100 million dollars is a lot of money to buy bread and sandwich recipes — and a brand that I have never heard of before reading this article.

  4. night-train
    Jun 18, 2015 at 3:58 am

    Change often sucks doesn’t it? Especially when it is we who have to change.

    There are some excellent artisanal bread recipes in “Mother Earth News”. I am really pretty lazy about around the house stuff, but it doesn’t hurt to learn some sustainability skills. Just in case.

  5. Petunia
    Jun 18, 2015 at 7:40 am

    I don’t do Starbucks and don’t know the cafes you profiled. However, I did notice that in a local mall there are two new stores that sell pastries, one sells French macaroons and the other tiny cupcakes. The price of the macaroons is $2.50 each, they are a little larger than a quarter. The tiny cupcakes sell for $1.50 each. I tried both and they were extremely good but for me extremely overpriced. I suspect that by the time I am in the mood to blow $10 again they will be gone.

    I am not surprised by the closing of the cafes in SF. Everything is going big chain corporate or disappearing. No doubt Starbucks only wanted the brand and not the stores. They are buying growth like every other big company that can’t innovate with all that new cheap labor and overworked old labor.

    As an aside, is all the free food offered as a perk to techies affecting the SF restaurant scene. Inquiring minds want to know.

  6. NotSoSure
    Jun 18, 2015 at 8:39 am

    Sorry not a big fan of La Boulange, best French bakery in the city of San Francisco is Tartine. They only have one store though and the line can get crazy depending on day and time of day.

    • Jun 18, 2015 at 10:29 am

      Great place. But it’s a pretty good hike for us to get there…

      • NotSoSure
        Jun 18, 2015 at 11:36 am

        It’s not easy for me to get there either, and I don’t have a car. Gonna go to Bi-Rite creamery one of these days, been a while since I’ve tasted their Salted Caramel.

  7. Paulo
    Jun 18, 2015 at 9:17 am

    I make our own family bread and it is the best. I simply will never ever eat commercially bought bread ever again, unless it is holding a burger once a month or so.

    When you get on to bread making, it is dead easy. I usually pick a rainy morning, (a Sunday when I was working) and have it rising in about 20 minutes. When I bake it I am in for lunch or a coffe break and check out articles, (like this one). Nothing like just out of the oven bread with a melting butter trying to get free.

    Starbucks coffee beans from Costco are about 1/1,000 the cost of a snotty brewed barista cup. I always thought their displayed foods were plastic models until I saw a waitress take out a rubbery looking breakfast sandwich and put in in a microwave for a customer. Apparently, people think this is food.

    Is there really any difference in a heated up rubber sandwich and gas station food?

    You guys need to work less and learn to cook and eat at home. Real food!! I say this, respectfully. You will live longer and eat better along the way. Life is short.

    • Jamie
      Jun 22, 2015 at 8:48 pm

      Gas station food…. that is so funny and true!

  8. Wonkster
    Jun 18, 2015 at 11:31 am

    We must be neighbors, Wolf. I live halfway between the Boulange on Polk and the one on Columbus. While it did feel a bit like a “chain” it grew from a modest beginning on Pine St. into a pretty reliable place to get coffee drinks, sandwiches, etc. And a nice place to sit and chat, read, or whatever (and without wifi it wasn’t just a room full of laptops). We used to walk our son to school and stop in for a treat on the way. We had mixed feeling when it was bought by Starbucks but it didn’t change much and we didn’t boycott it or anything like that. The decision to just close them rather than sell them seems odd, as they certainly looked quite busy. I have seen elsewhere that this decision was probably due to the fact that the upside was smail relative to Starbucks’ massive revenue and was therefore a “distraction.” Clearly, Starbucks couldn’t give two s&^%$s about it. I suppose in this market the locations will be filled by expensive restaurants where new transplants to San Francisco will eat brunch and pay $15 for a glass of wine. Or maybe “pour over coffee” at $3 per cup. We could really use a Philz Coffee or Blue Bottle…

    We too will continue to “ride it out” I suppose, but watching one place after another with some local connection close (farewell Capp’s Corner, etc..) gets dreary. The whole area looks a lot like a corporate campus or the “quad” at a university these days. I understand that change is inevitable, but I can’t say the change around here has improved things for folks like me.

    • Jamie
      Jun 22, 2015 at 8:51 pm

      Pour over coffee. Is Folgers pour over coffee?

  9. Vespa P200E
    Jun 18, 2015 at 1:03 pm

    No La Boulange on east bay but I became anti-Starbucks for sometime and get better coffee at Peet’s especially at SFO and nearby Peet’s. I jut drop into get coffee but it seems less conspicuous crowd sitting at Peet and more so when one had to buy coffee to get wifi but they changed that policy with free wifi with wifi freeloaders taking up the space like Sbux.

    BTW – Howie learned the business and roasting beans from Peet’s owner originally from Holland.

  10. Michael Gorback
    Jun 18, 2015 at 1:31 pm

    Benediction:

    May a disruption of your coffee and designer bread routine be the worst thing that ever happens to you.

  11. CrazyCooter
    Jun 18, 2015 at 5:45 pm

    Back when I lived in Dallas, there was an Italian chain that opened up (Torrefazione) that had AMAZING coffee, pastries, and sandwiches. Everything was just quality and basically the same price as Starbucks. When they made the syrup for mocha’s, they used an industrial size back of Ghiradelli cocoa powder, a steel bowl, a wisk, and half-and-half. Customers had to add their own sugar. And the pastries would often be heated in a toaster oven – the place smelled like heaven and I never minded waiting in line.

    Then, one day, Starbucks bought them and closed them down (this store was a block from a Starbucks store).

    Starbucks is like McDonalds – they suck … consistently.

    My read then, as is now, is that by putting out a quality competitor, they can sell their overpriced crap with fat margins and make back the money they flushed putting the competition our of business.

    When they closed, I couldn’t find a substitue and bought a fully automatic Saeco machine and whole coffee beans in six month supply chunks. This was the only place I could find it back then (ex-wife got the esspresso machine in divorce):

    http://www.cooking.com/12-oz-perugia-blend-whole-bean-coffee-by-torrefazione-italia_221836_11/

    Regards,

    Cooter

  12. Mike
    Jun 19, 2015 at 3:30 pm

    This is why I laugh when people go on their “OMG, San Francisco has such good food?!” thing. La Boulange is a chain and the food is very average. The only props I would give them is that their stores are pretty.

    San Francisco has never risen above average quality for any place I have ever been to (which would 100 + cafes/bars/restaurants). It is a tourist town and the food reflects that. The people that move there have a weird “nothing in SF can ever be less than perfect” thing going on. If you want good food cross the bridge – Oakland has some places that know what good food is.

    Bottom line there are no rents in SF that support good food. Now you have to be going for some financial engineering angle to make the numbers work.

  13. Fred
    Jun 20, 2015 at 6:49 pm

    A nationwide boutique bread business is extremely expensive to build and run and margins are extremely thin. You must have a bakery in every single city you’re in and you must have your own distribution system in every single city to get fresh bread immediately to your stores, or as Wolf points out, the bread sucks. It doesn’t travel well at all. Very much different from coffee beans, as Starbucks found out.

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