THE TASTEMAKERS.(Starbucks, Kodak, etc.)(Company Profile)

For much of the twentieth century, coffee was America's drink. A 1939 survey found that ninety-eight per cent of the country's households drank coffee. After the Second World War, consumption rose steadily until the early sixties, when the average American was downing almost fifty gallons a year. Then coffee went cold. Younger consumers came to regard it, like Scotch, as a palliative for parents and squares. The arid blends peddled by Maxwell House and Folgers lost ground to Coke and Pepsi. Coffee consumption plummeted.

Along came Starbucks. Starbucks proved that you could sell "gourmet" coffee to the masses, and in the process turned itself into a seemingly

recession-proof enterprise. A few weeks ago, the company announced that, despite the weak economy, its profits were up nineteen per cent for the year. (It might be that rising unemployment suits Starbucks fine, delivering an exodus of time killers and resume polishers to its comfy chairs.) The real measure of Starbucks' success, however, is that it has helped turn America into a nation of java junkies again. During the nineties, the number of coffee drinkers rose by almost forty million. More than seven thousand new coffeehouses have opened since 1996.

Broadly speaking, there are two ways to build a successful business. You can give people what they want but give it to them more efficiently, as Wal-Mart and Dell have done. Or you can persuade them to want something that they didn't previously want, as Starbucks has done. One might call this the tastemaker approach. Instead of competing for a share of an existing market, Starbucks invented its own, heeding the advice of the economist Joseph Schumpeter, who wrote, in 1939, "It was not enough to produce satisfactory soap, it was also necessary to induce people to wash."

This is harder than it sounds; it's one thing to foist a fad on people, and another to have a deep and enduring impact on their everyday customs and habits. In the late eighteen-eighties, when George Eastman invented the Kodak--the first point-and-shoot camera--photography was the private domain of enthusiasts and professionals. Though the Kodak was relatively cheap and easy to use, most Americans didn't see the need for a camera; they had no sense that there was any value in visually documenting their lives. So, instead of simply marketing a camera, Eastman sold photography. His advertisements told people what to take pictures of: vacations, holidays, "the Christmas house party." Kodak introduced the concept of the photo album, and made explicit the connection between photographs and memories. Before long, it was more or less considered a patriotic duty to commemorate the notable--and not so notable--moments in your life on a roll of Kodak film.

Around the same time, Will Kellogg introduced Corn Flakes and popularized the idea of the healthy, light breakfast, and Colgate insisted that ...