Before It Settled Down With Princi, Starbucks Had A Hot Fling With La Boulange

Ronald Holden , CONTRIBUTOR

I write about food & drink as a pleasurable activity and as a business Opinions expressed by 

Convection ovens like this one at a Starbucks store in Seattle warmed up pastries from La Boulange

Every publication in the country seems to have covered the opening, in Seattle this week, of the first Princi bakery in North America. The popular mini-chain of artisanal bakeries (six shops in Milan, one in London) had caught the fancy of the then-CEO of Starbucks, Howard Schultz, who admired founder Rocco Princi’s dedication to his craft and saw a fit for Princi bakeries inside the new mega-stores he wanted to build. Reserve Roasteries they would be called, vast showcases to coffee, “Willy-Wonka” palaces (Schultz’s words).

Sure enough, the first Reserve Roastery opened in Seattle three years ago. But the food was not Princi’s, not yet. At the time, Starbucks was still digesting its $100 million purchase of another popular mini-chain of artisanal bakeries closer to home: La Boulange in San Francisco.

And that’s where things get complicated, depending on whom you talk to. Though Starbucks was “married” to La Boulange (which had its own whiz-kid founder, a Frenchman named Pascal Rigo), Schultz was now seduced by Princi.

And the company wasn’t in a rush to make a change. Rigo, it turned out, was a genius at baking pastries “at scale” and getting them into Starbucks stores.  During his 30-month tenure Rigo put convection ovens into 12,000 stores around the country, doubled food revenues, and changed the entire supply chain.

“We used real butter, organic English muffins, cage free egg whites,” he  reminded me in an email this week. “We used Stallbush blueberries, real bananas, real lemon and lemon juice, re-invented the breakfast sandwiches platform, served everything warm.”

The 230-calorie sandwich sold for $3.45. “This is great food!”

Rigo kept hoping Starbucks would do more to promote its food program. “Why not tell the world?” Rigo would ask.

“Princi is seven stores, nice.” Rigo says, eyeing the femme fatale who has stolen his boss’s heart. “What has been done in 12,000 stores in North America is just unbelievable…nobody knows it! What are they waiting for ?”

One of the things they were waiting for was, apparently, Italian  capital.  Starbucks told the Wall Street Journal yesterday that it is planning to open 1,000 stand-alone Princi bakeries around the world, with hundreds in the U.S. alone, serving small-batch Starbucks “reserve” coffee. The financing for that expansion will come from two Italian private equity funds, Milan-based Angel Capital Management and Pekepan Investments.

Well, when the Reserve Roastery finally did open its doors in Seattle, the cafe inside, occupying a third of the store’s footprint, was not La Boulange but a perfectly fine pizza parlor from local restaurateur Tom Douglas. (My colleague George Anders wrote about the space for Forbes.com last year.) And La Boulange? Well, La Boulange went away. She actually disappeared. Vanished.

Rigo licked his wounds, then shook himself off, marched right back to Seattle, and went to call on Costco. After all, Costco sells food, too. So why not sell good stuff? And yes, Costco has started to do just that, selling Rigo’s products in  Northern California.

Rigo re-established a handful of his neighborhood bakeries as “La Boulangerie” and took back his 40,000 square-foot production warehouse. He has 300 employees in the US, and is setting up a chain of independent mini-bakeries, La P’tite Boulangerie, to serve small towns on the French Riviera.

Despite his shabby treatment (the “Princi is higher level” comment by a Princi manager was unfair, he feels),  he still thinks Starbucks is “a genuinely great company.” For whatever reason, Starbucks didn’t move fast enough, or didn’t realize how important food could be to a company that, even today, defines itself by its caffeinated beverages.

“We’re not a coffee company serving people,” Schultz has said many times, “we’re a people company serving coffee.”

Yes, but.

The average ticket at a Starbucks is $5. The average at the Seattle Reserve Roastery is $20. You’d be tempted to concentrate on the $20 customer, right? But keep in mind that there are 26,000 stores where people spend $5, and only one where they spend $20.

Wouldn’t it make sense to get the tens of millions of customers who frequent the 12,000 stores were Rigo rolled out his pastries to spend a little extra? Maybe buy a decent sandwich, freshly warmed? Not some plastic-wrapped hockey puck, either.

Rigo feels he cleaned up the category by offering food without preservatives, artificial colors, artificial flavors. “What do you think this category would do if customers knew all of that,” Rigo asked in an email. “One ingredient at a time, one sandwich at a time, we were changing what people eat in this country.”

Sounds like a motivational book by a business leader, a tome with a title suggesting you need to build a company “one cup at a time.” We all know the author, a guy named Howard Schultz.