Posted on August 5, 2008 - by deCadmus

Starbucks Stumbles, We Eat Schadenfreude Pie

It’s enough to make even Motley Fool cheerleader Alyce Lomax choke on her coffee.

Consider –

• 600 store closings (or 12,000 job cuts)
• 1000 additional job cuts at the home office
• a first ever quarterly corporate loss, and
• diminished expectations for the rest of the fiscal year.

But wait, there’s more! Remember Starbucks’ purchase of the Clover brewing system? How they’ve made this innovative brewing system unavailable to every other coffee shop on the planet so they can have it all to themselves? Yeah… well, there’s a little problem:

“…I’m standing in line at a hilltop Starbucks in Seattle’s Queen Anne neighborhood — one of Clover’s beta sites. I do a taste test: a cup of Clover coffee versus brewed coffee. A young barista tells me they’re out of the first two specialty coffees I request and suggests instead Starbucks’ everyday blend, called Pike Place. During brewing, the barista stirs the grounds into the Clover with a clunky rubber spatula — not a metal whisk — and pours the concoction into a crummy paper cup. I smell, I sip, I inhale. I can’t tell which cup of coffee is which — and neither is anything special. Is it the beans? My palate? After a few minutes, I finally pick it out: This coffee tastes a little bit like hype.”

Thus, even while we empathize with folks who’ve been cast loose from their paychecks (sorry, really… and best of luck) witness our collective grim delight in watching the coffee giant get its comeuppance.

Let me offer two cautionary notes…

Firstly, Starbucks’ rising tide lifted with it the status and visibility of a thousand mom n’ pop coffee shop and indie coffee bars. That tide may now be rushing out to the deep blue sea. Consider this a small craft advisory: those same economic factors that gouged a hole in the good ship Starbucks may prove rocky shoals for the indie retailer, too.

Secondly, some perspective is in order. About the same time that Starbucks was reporting its first ever quarterly loss, Exxon reported quarterly profits in excess of Starbucks’ entire market capitalization. Woof.

So, enjoy your slice of Schadenfreude Pie. It’s tasty… but have too big a helping and you’ll be sorry.