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From Grounds Up, Coffeehouse Reinvents Itself

November 11, 1998|KAREN E. KLEIN

Long before it became trendy, Mike Sheldrake opened a specialty coffeehouse. For years, he dominated a market niche no one else was addressing. But when gourmet coffee got popular, and the competition got a little too close for comfort, Sheldrake learned he had to move out of his comfort zone if he wanted to stay in business. He was interviewed by freelance writer Karen E. Klein.

When I opened in 1976, we were the only place between Brentwood and San Diego with an in-house roaster. We were the only espresso bar in Long Beach.

Now, we have 20 competitors in our one-mile local shopping district. There are a host of well-financed, smart, hard-driving businesses competing with us. Just because we serve a great cup of coffee and we've been here longest doesn't do it anymore. Homeownership turns over 50% every two years here, and that's not counting renters. New residents will go toward the national logo before they'll come in our shop.

Four years ago, Starbucks opened a shop nine blocks away. Our monthly retail sales dropped. When they opened another Starbucks--one block away--last February, I was in danger of losing my business.

I hired Bob Phibbs as our sales and marketing director. He came up with 110 changes that needed to be made. What he said made sense, but it was threatening because he pointed up things that I should have been doing but wasn't.

First off, we wrote an operations manual and a job description for every employee. Next, we hired an all-new counter crew, put them through a 35-hour training program, taught them to sell and required them to pass a 100-question test.

The previous employees had given discounts to regular customers. We discontinued that practice and our sales went up 11% in the first month alone! Some people got mad and went away, but they came back when they found that the competition wasn't going to sell them a 50-cent cup of coffee, either.

We doubled our advertising budget and dreamed up a statement that we put on every ad we run: "Down the street from ordinary." All our ads have a sense of humor, tweaking the nose of the giant, and they emphasize our best selling point: All our coffee is roasted right on the premises.

We put more point-of-sale material in the store, started sponsoring charity events, offered classes on coffee, made up brochures and started a newsletter that is mailed to 3,000 customers. We even ring a ship's bell and have the employees make an announcement when each batch of beans comes out of the roaster.

We darkened the letters on our logo so it's easier to see from the street, re-merchandised all the gift ware, relighted the entire store on the inside because it was too dim at night, repainted our 35-seat patio, bought new chairs, re-landscaped, put in new wind screening and brought in all-new coffee cups.

For 20 years, we sold coffee in white, Styrofoam cups that cost 2 cents each. Bob took one look and said, "These are a marketing tool and you've got to use them that way." I did not want to double-cup or do the java jackets, and I resisted when I learned that paper cups cost about 25 cents each.

But we found a manufacturer of insulated paper cups and we held a contest for local artists to design our cups. The whole community got involved and the buzz was fantastic. A panel of officials judged the designs and they were so good we picked three, one for each cup size. People love them so much they're taking them home as souvenirs!

It was scary, embarking on all these changes, because we were already losing money, I wasn't making the profit I needed and I knew there was the possibility I might fail. I just told myself that if I failed, I'd rather go down in flames, trying as hard as I could, than not do anything and fail eventually anyway.

During the last nine months, our sales have increased 20% to 30% a month, and we're not even into the holiday season yet. That's an incredible result for a small business like ours, and it proved to me that I can compete with the large chains, especially because I control my own manufacturing. I can sell a better product cheaper and give customers a reason to choose my business.

If your business can provide a lesson to other entrepreneurs, contact Karen E. Klein at the Los Angeles Times, 1333 S. Mayflower Ave., Suite 100, Monrovia, CA 91016 or send e-mail to Include your name, address and telephone number.



* Company: Polly's Gourmet Coffee

* Owner: Mike Sheldrake

* Nature of business: Specialty coffee roaster and retailer

* Location: 4606 E. 2nd St., Long Beach

* Web site:

* E-mail address:

* Year founded: 1976

* Number of employees: 13

* Annual sales: $850,000

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