If you’re a Wall Street analyst, you might note that year over year, Starbucks’ valuation has slipped about 40%. If you’re one of several thousand Starbucks employees you may soon find a pink slip in your pay envelope, as the company moves to close 600 stores, eliminating some 12,000 jobs. 
If you’re an independent coffee house owner, you may be sitting there with your jaw hanging slack, just trying to wrap your head around the idea that, when Starbucks closes 600 frickin’ coffee shops, the move shrinks its overall footprint by a mere 8 points. And maybe if you’re a Starbucks customer you’re just so over that whole Starbucks thing. Sure, Starbucks was the epitome of hip for a while, but then they became, well… McDonalds:
Twenty years ago, it was love at first sip. Like every prisoner of love, I went from downing one cup a day to three or more. How, I wondered, had I gone more than 40 years without a midafternoon break or even a “for no reason” indulgence?
Today those memories are like bitter, stale grounds. These days the breaks aren’t fewer but are often enjoyed somewhere else. That early Starbucks mojo is no more. My disillusionment set in about three years ago, but the company’s ballyhooed “Starbucks experience” died even earlier, killed by a growing bureaucratic culture.
Ouch.
Maybe it *is* about the bureaucracy. There is, of course, a very real danger when you grow to the scale of Starbucks — or McDonalds — and your stores light up every other street corner, shopping mall and airport concourse. At some ill-defined point on your meteoric growth chart you may cease to become the sum of whatever got you there — whether that was a curiously strong cup of brewed coffee, a made-to-order espresso milkshake or a Happy Meal — and instead morph into a massive real estate holding company that also brews coffee by the gallon pot.
Or maybe it’s something else. What with mortgage meltdowns and gas prices at four bucks and change, a spiraling economy has customers feeling the pinch, caught between guzzling a latte or putting another gallon of fuel in the family hauler. Call it — as financial self-help author David Bach has — the latte factor:
The Latte Factor® is based on the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, fancy coffees, bottled water, fast food, cigarettes, magazines and so on, can really make a difference between accumulating wealth and living paycheck to paycheck.
Oh sure… financial gurus have been offering like-minded advice for decades… but those were years that lacked the incentive of four dollar gasoline and upside-down mortgages, too. Maybe folks are actually heeding the collective wisdom of the financial set. Maybe they don’t have a choice.
More likely what’s got Starbucks on the rocks is a bit — or a lot — of both factors. Which isn’t to say that Howard won’t be able to right the good ship Starbucks… but I’d wager the course corrections are far from over.
And while Starbucks is thrashing, other shops –small chains and indies alike — may be able to carve out some new opportunities for themselves, provided they’re able to keep their focus on the fundamentals: making great coffee and satisfied customers, one cup at a time.
July 8, 2008 at 7:03 pm
Starbucks lost its way a long time ago when it stopped sending baristas to training camp, switched to superautos, and apparently grew beyond the ability to maintain even remotely reasonable quality standards for coffee beans. There was a time, maybe 15 years ago, when I could walk into the local Starbucks and get an Americano that I didn’t want to spit out, but it has been years, literally, since the last decent espresso-based drink I got there (I try one every once in a while and almost always end up throwing them away after a few sips), and the drip coffee is usually not much better.
No, when they decided to focus on lowering labor costs and speeding up the line at the expense of a quality beverage, knowingly and purposefully drastically reducing quality in the name of volume, they truly became fast food, and the spirit of the original Starbucks was no more.
July 9, 2008 at 6:39 pm
I am not so versed in Starbucks’ lore to be able say with authority, “it was this moment, or that, when wheels began to wobble.”
My first sip of stunningly great coffee was served in Seattle, fittingly enough — but at a street cart — not a Starbucks. That first great cup started me on a path that’s led me to lots of interesting places in search of the perfect cappuccino, most of them also not Starbucks.
I couldn’t tell you when Starbucks stopped scooping beans or grinding coffee in their stores. I do recall, vividly, when they sent their trusty La Marzocco espresso machines off to the scrapheap and replaced them with super-autos… in effect replacing well-trained, highly-skilled and motivated people with automatons. That change prompted even long-time Starbucks fans to denounce the move as ‘the beginning of the end.’
They may well have been right.
Starbucks remains a strong, iconic brand and I’m not prepared to count them out. But I believe they’ve got some hard times ahead, still, as yet more crows come home to roost.
July 10, 2008 at 4:35 pm
Howie can’t turn back time. The damages done to the Starbucks he brought up from infancy cannot be undone. The company he built is gone and never coming back, and it’s been replaced with a much bigger behemoth with very different goals and concerns than the Starbucks of 1990.
To pretend he can turn back the clock would be sheer idiocy. Even if he perhaps still believes it in his own mind. The best Starbucks can do from here — since it cannot reasonably eliminate 3,000 US stores and go back to its original core — is to stop the bleeding and recognize themselves for what they are, not what they are not and can no longer be: a massive chain that has developed a lot of brand loyalty among a big segment of customers, who learned how to scale with lower and lower skilled employees, and who used technology to deliver it.
Forget quality: competition will run circles around that argument, and they have been for years. Let it go, Howie: you’re never going to be considered “great” coffee — the best you can hope for is “good”.
It’s about convenience and attempting to get some consistency from here on out. That’s the best they can do.