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Wednesday, October 29, 2008

Starbucks as an economic indicator

By OWEN MORRIS
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Over at Slate, resident business expert Daniel Gross has an interesting article that, in essence, makes a correlation between the state of a country's banking crisis and how invasive Starbucks has become there. For instance, London and Spain are being hit extremely hard by the financial crisis and they both have high densities of Starbucks.

It's an article straight out of Thomas Friedman's theories (Gross references Friedman's Golden Arches Theory of Conflict Prevention) and while it may work for international banking, it got me wondering if the theory would also hold up a little closer to home.

Have U.S. cities with high percentages of Starbucks been hit harder by the housing and banking burst than cities with lower percentages?

When it comes to a housing crisis, yes. This survey from 2006 shows the city with the most Starbucks per capita to be Las Vegas. Guess what state has had the nation's highest foreclosure rate for 20 straight months? Yep, Nevada. (Las Vegas ranks seventh-highest among cities in foreclosure rate.) Foreclosures have hit hardest in California, which makes up nearly a third of all foreclosures in the United States. California's number-one city in terms of foreclosures is Stockton, followed by Merced, Modesto and Vallejo-Fairfield. Stockton and Vallejo had the eighth-highest number of Starbucks per capita. Modesto lies between San Francisco and Sacramento, which has the fourth-highest number of Starbucks per capita.

More correlations: Denver is sixth in Starbucks density and Colorado Springs is 13; Colorado has the eighth-highest foreclosure rate. Georgia is sixth in foreclosures; capital city Atlanta is seventh in Starbucks density. Ohio is seventh in foreclosures and Cincinnati is 10th in Starbucks density.

When it comes to the banking crisis, things get murkier. BusinessWeek put together a list of 20 cities that are going to be hit hardest by the financial meltdown. Coming in at number-one was Darien, Connecticut, which only has one Starbucks for its 20,000- plus population. The number-two city was Bloomington, Illinois, population 50,000 and home of two Starbucks. Going through the list it was clear that towns in Connecticut, New Jersey and New York are going to be hardest hit. Yet none of those states have especially high Starbucks densities.

Going a little deeper into the numbers I realize why. New Jersey, New York and Connecticut are all prime Dunkin' Donuts territories. Darien, Connecticut, has only one Starbucks but two Dunkin' Donuts. A quick search of Google Maps reveals 395 Starbucks near Manhattan and 295 Dunkin' Donuts. The same search reveals 409 Starbucks in smaller San Francisco and not one Dunkin' Donuts.

The conclusion: The housing bubble is mainly in the West and South, which is strong Starbucks country. The financial meltdown is mainly in the East and Northeast, which is as much Dunkin' Donuts territory as it is Starbucks.

Either way, I am still glad that Kansas City doesn't have that many Starbucks.

Original here

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