Governor riled over grocery stores' switch to Starbucks

Posted: Thursday, February 07, 2002

ANCHORAGE - Gov. Tony Knowles has stepped into a brewing coffee war.

Knowles fired off a letter and put in a phone call Wednesday to Safeway officials to protest the company's decision to switch from Alaska-roasted coffee to Starbucks at some of its espresso bars in Carrs grocery stores.

"This action is a slap in the face of many Alaskans - the Alaskans your company works to have as loyal customers," Knowles wrote in a letter to Steven Burd, Safeway president and chief executive officer.

In December, Carrs Safeway introduced Seattle-based Starbucks in the espresso bars of its Muldoon and Eagle River stores, replacing Kaladi Bros. and Cafe del Mundo, two homegrown Anchorage businesses. The grocery chain's district manager in Anchorage, Glenn Peterson, said this week that at least five stores in Alaska - four in Anchorage and the one in Juneau - will serve Starbucks espresso drinks and test customer reaction.

"This is retail. You're testing the water everyday," Peterson said.

Leanne Ng, the manager of the Juneau Carrs Safeway store, confirmed this morning that Starbucks will soon be available at its espresso bar.

"Yes, it's happening here," Ng said. "We are slated to start a 60-day, fast and furious remodel on Sunday, and that will rearrange the whole snack bar and Starbucks will go in there. My timeline is that the coffee will be available in about a month."

Starbucks will replace Tully's, another Seattle favorite. Tully's replaced Cafe del Mundo from Anchorage brew in July 1999. Local roasts will not be brewed in the espresso bar, but will continue to be available in whole beans and other forms in the coffee and tea aisle, Ng added.

"This gives everybody a chance to try Starbucks," Ng said. "We still sell Raven's Brew (blended and roasted in Ketchikan) and Heritage (blended and roasted in Juneau) in the store, and they are our best sellers. So there are still opportunities to taste Alaskan and Juneau coffees."

The grocery chain also has said it will continue to stock Cafe del Mundo and Kaladi's whole-bean coffee on its shelves.

Grady Saunders, owner of Heritage Coffee, found the controversy interesting. "They have never contacted us about brewed coffee," Sanders said. "We are always interested in anything that promotes local and state-wide business. But we have never been given the chance to present ourselves in the brewing area. However, they do contact us for service on their espresso machines, because we are the only ones in Southeast that can do that."

Any move by Carrs Safeway to replace locally made products touches a raw nerve with many Alaskans. Safeway's 1999 purchase of Carr Gottstein Foods Co., an Alaska grocery chain, was the subject of a class-action lawsuit brought by consumers who argued the takeover would give Safeway a monopoly over the state's grocery business.

The lawsuit was settled after the Alaska attorney general negotiated a consent decree that required Safeway to sell seven of its Alaska stores to viable competitors. The agreement attempted to settle potential antitrust violations.

The consent decree ultimately failed after six of the seven stores, sold to Alaska Marketplace, faltered under the new management. Alaska Marketplace became defunct 14 months after the purchase.

At the time of Safeway's acquisition of Carrs, the national chain promised to support local vendors, said Perry Merkel, owner of Cafe del Mundo. Knowles mentioned this in his letter to Burd.

"Two years ago you personally committed to me Safeway's intention to remain a supporter of Alaska products when your company purchased Carrs," Knowles wrote. "The decision to reduce the availability of Alaska products at Safeway-Carrs shelves violates, at a minimum, the spirit of the consent decree."

Knowles said Safeway officials assured him they would take another look at the matter.

Critics say the coffee flap is fallout from botched negotiations by the state before the takeover. University of Alaska Anchorage economics professor P.J. Hill served as an expert witness for the consumers who tried to block Safeway's purchase of Carrs.

"Knowles ought to be the guy with egg on his face. He didn't oppose the merger," Hill said.

Steve Conn, executive director of the Alaska Public Interest Research Group, agreed.

"This is a direct result of his promotion of that merger," Conn said.

Knowles said the state did its best to protect Alaska consumers in merger talks.

Empire reporter Ann Chandonnet contributed to this article.

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