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Reinventing the French cafe

Columbus Cafe plays David to Starbucks’ Goliath
/ Source: Reuters

When Philippe Bloch came up with a plan to sell take-away cafe lattes to picky Parisians used to shots of eye-popping espresso, his bankers balked and traditional French cafe owners called him crazy.

“You can't reinvent a business as old as the French cafe,” quipped one rival at the opening of the first Columbus Cafe in central Paris back in 1994.

Nearly a decade later, the energetic Frenchman and his partner Ralph Hababou have built up a chain of over 30 coffee bars and more are on the way.

But their success in winning over Parisians with a distinctly American-style coffee concept has not come easily and their struggle offers some clues on why Seattle-based java giant Starbucks is still steering clear of France, some 20 years after U.S. fast-food icon McDonald’s set up shop here.

In a new book, Bloch describes his crusade to create Columbus Cafe — a tale of battles with French bureaucrats, disheartening meetings with investors and even a trip to court where he was admonished by a French judge for trying to be “too American.”

Like McDonald’s, which took the better part of a decade to turn a profit in France, Columbus is only now reaching the break-even point.

But after years of flirting with failure, the chain and its flavored lattes, brownies and muffins is winning fans — vindication for Bloch, who put a successful consultant career on hold after falling in love with an American-style espresso bar on Columbus Avenue in New York in 1993.

“Culturally we are beginning to win our battle,” Bloch said. “The concept is beginning to become a part of everyday life.”

Huge cultural challenge
He expects the chain’s revenues to rise by more than 50 percent this year to approach 10 million euros.

A new flagship store opened in Paris this month. Bloch expects to add at least 10 new cafes in the Paris region by the end of the year.

These figures look pretty paltry compared to the $3.3 billion in sales recorded last year by Starbucks, which now counts over 6,000 cafes worldwide.

But they make Columbus the second-largest espresso bar chain on the continent. Given the unique challenges of the French market, that is no small accomplishment.

Aside from the social costs associated with the 35-hour working week law and other French structural and regulatory obstacles that can wreak havoc on profit margins, Columbus is asking French coffee drinkers to take a major cultural leap.

Most are accustomed to small shots of muddy espresso in a tiny porcelain cup, tossed back while standing at the counter of the drab corner cafe while dragging on a cigarette.

Columbus serves a wide variety of coffees, from flavored and iced brews to more traditional cappuccinos and cafe lattes. They all come in paper cups and most of the cafes offer minimal space to linger.

Some are non-smoking and the staff, or “baristas,” have an amiable American edge to them, the legacy of Bloch and Hababou’s early careers as customer service experts.

Traditional cafes in decline
One reason Bloch had trouble selling his idea to investors in the early days was the steady decline of the traditional French cafe. The country counted some 300,000 at the start of the 20th century; about 43,000 exist today.

Instead of wooing a dwindling core of veteran customers, Columbus has attracted a new, younger, predominantly female clientele with its trendy products and welcoming cafes.

About 60 percent of the customers are women under 30.

“We are drawing in new people who weren’t tempted by the grimy cafe down the street with the drunk standing at the bar and cigarette smoke everywhere,” said Bloch.

That is music to the ears of Starbucks, which continues to impress investors with its growth in the United States, and is aggressively pursuing new customers in Europe.

On the continent it already has cafes in Austria, Germany, Greece, Spain and Switzerland. In Britain, where it has around 350 branches, it has emerged in only a few years as a dominant player in a highly competitive market.

Still, its recent experience in other foreign locales, where its approach is to partner with local firms, underscores the difficulties inherent in exporting its coffee concept.

More competition
In February, Starbucks Coffee Japan said its operating profit fell 70 percent in the nine-month period to December 2002 amid rising costs and intensifying competition.

In March, Starbucks Coffee International decided to pull out of Israel, closing its six stores there due to “operational challenges” in the market.

Starbucks could also be vulnerable to anti-American boycotts in the wake of the Iraq war — a factor Chairman Howard Schultz said last month the company was monitoring closely.

Analysts say the idiosyncrasies of foreign markets are partly to blame for setbacks in the firm’s international development, but they also point to increasing competition.

“Three years ago, the debate was whether Starbucks would be successful abroad,” said John Glass, an analyst at CIBC Global Markets in Boston who follows Starbucks. “Now the question is how they will fare against mounting competition in the form of knock-off chains.”

Glass expects Starbucks, which does not comment on its foreign expansion plans, to set up shop in France “fairly soon” and says they have the capital and track record to succeed here.

Bloch agrees. He has no illusions about the ability of Starbucks to swoop onto his home turf and prosper, even if it suffers a few bureaucratic headaches on the way. His aim is to ensure Columbus Cafe is along for the ride.