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Thread: Starbucks: too much growth hurting chain

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    Elite Member Mr. Authority's Avatar
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    Default Starbucks: too much growth hurting chain

    Trouble brewing

    Instead of trying to offer its customers 'romance and theatre', Starbucks needs to stop opening so many new branches and start making better coffee
    Conor Clarke

    January 15, 2008 6:30 PM

    I spend a good portion of my waking life in Starbucks, and am sensitive to its changes. One came along about a month ago: for the first time, I was asked if I wanted "room for dairy" in my coffee. The request was too inelegant to be spontaneous - "room for dairy"? - and after some highly scientific research into the matter (I talked to a couple of idle employees) an anonymous barista revealed that the orders came from on high: "We're supposed to start making the patrons feel like they are a crucial part of the beverage-making process."

    If it sounded at the time like a bizarre and desperate new policy, the desperation became a little more understandable in light of last week's headlines. Starbucks' share price dropped in 2007 by more than 40%, and Bear Stearns lowered its rating of the company's stock from "outperform" to "peer perform" - which is a way of saying the company has gone from being as frothy as a Frappuccino to flat as a cup of regular joe.

    If that wasn't enough to convince you that the company is in trouble, its chairman also dumped the chief executive - along with two other execs - and installed himself at the helm. And, just to pile on a few more challenges, an article in the Wall Street Journal revealed that McDonald's is about to challenge the long-dominant Starbucks by offering specialty coffee beverages. It's a regular David versus Goliath contest - until you realize that David has 15,000 US locations and $21.6bn in annual sales. All said, it was a bad year capped off by a worse week.

    So what went wrong? Many things. Starbucks was no doubt hurt by a general slowdown in consumer spending: the same shoppers who cut back on luxury goods at Tiffany's probably cut back on their venti macchiatos, too. Then there are the little details. The Wi-Fi access at Starbucks still isn't free - despite the fact that readily available high-quality internet is swiftly becoming the norm for the US coffee-shop set - and much of the new in-house music is as annoying as it comes. And let's not forget the general brand-dilution that attends trying to sell everything under the sun. My neighbourhood Starbucks sells board games, which seems like a product that is no more obvious to market in a coffee shop than, say, toilet plungers.

    But, most importantly, the company is choking on its own growth. According to the Financial Times, Starbucks added 2,500 stores last year, which amounts to about one-sixth of its global total and well over six stores a day. There is a widespread sense that quantity has come at the expense of quality. Training a large enough workforce and keeping each interior fresh and clean is a bit more difficult when the number of stores jumps an order of magnitude every few years. Or, as the Onion put it, "New Starbucks Opens In Rest Room Of Existing Starbucks."

    At least chairman and now chief executive Howard Schultz seems to be aware that this is the case. When Schultz writes in a recent memo that the company is "emerging from a period in which we invested in infrastructure ahead of the growth curve" and needs to "shift our emphasis back onto customer-facing initiatives," I take him to mean (minus the business jargon) that Starbucks needs to stop opening stores that feel like restrooms and start making customers want to walk through the doors of the ones that already exist.

    Still, Schultz should be worried that 80% of Starbucks' purchases are consumed outside the store, if only because the carry-out crowd is what McDonald's is going to want to pick off - since exactly zero people go to Micky D's for the ambience. (McDonald's learned that the hard way: no one remembers it now, but the turn of the century saw the rise and meteoric demise of the "McCafe," an attempt to add coffee-shop corners to existing McDonald's.) And Schultz also has a tendency to describe his company's problems in increasingly bizarre terms. A widely mocked memo from last year asked for changes that "evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience," an experience that Schultz wrote includes the "romance and theatre" of the coffee-making process and an "intimate experience with the barista" - which sounds a little lewd, if not illegal.

    Of course, all institutions have their founding myths, and Starbucks' dates back to a 1983 trip that Howard Schultz made to Italy, where (so it goes) he discovered a mysterious and apparently little-known beverage called "the latte". Like a knight with the holy grail, Schultz stole out of the foreign lands with this "latte" and returned triumphant to an American market that was equal parts grateful and amazed. The rest, as they say, is history.

    Well thanks, now everyone knows what a latte is. We can safely assume that novelty isn't going to keep the dollars rolling in, and neither is some half-theatrical, half -transcendental experience with the barista. Romance isn't going to save Starbucks, but maybe competence is: good coffee, a comfortable place to read the newspaper, and employees that can summon just enough intimacy, romance and theatre to make the experience worthwhile. Or maybe just the first two.
    Comment is free: Trouble brewing

    Yeah I agree, there are too many Starbucks. Outside of the gym I work at, there are like 3 Starbucks on the same downtown street within 4 miles of each other. Not to mention that their "coffee drinks" tast like dishwater and ass. ugh

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    Elite Member yanna's Avatar
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    I'm pretty sure the wi-fi access is free in Greek Starbucks. Strange.

    I went to the first Starbucks that opened in Athens the other day and it's clear it's gone to the dogs. I don't know about romance and theatrical whatever but the barista was hopeless. My latte with extra espresso tasted like water and the boyfriend's mocaccino was lukewarm. I'm pretty sure she forgot my extra shot. Also, she was gross, greasy looking and with braces that had stuff sticking on them. I'm not fussy about what I eat, usually but I was a little grossed out.

    I hate it when those poor Starbucks employees tell me things in a lifeless robot voice that I know they've rehearsed a million times. It's beyond ridiculous.

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    Elite Member sputnik's Avatar
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    they charge you for wi-fi here. bastards.
    so far the coffee is still decent here. i only ever have espresso or a latte so no idea about all their flavoured, complicated crap. i've always found them gross so i can't tell if their quality has gone downhill.
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    Elite Member Mr. Authority's Avatar
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    Quote Originally Posted by sputnik View Post
    they charge you for wi-fi here. bastards.
    so far the coffee is still decent here. i only ever have espresso or a latte so no idea about all their flavoured, complicated crap. i've always found them gross so i can't tell if their quality has gone downhill.
    I can tell you the one I went to like 1 year ago where I ordered those Frapps that Britney worships. Holy Hell I thought someone had spiked it with sugared dishwater, ugh. It did'nt help that the barists buried it in a 3inch layer of sugary creme and processed caramel.

    It was probably just that Starbucks but after that I decided to give up coffee once and for all.

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    Super Moderator NoDayButToday's Avatar
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    Fraps are for people who don't like coffee, but want caffeine. They're disgusting, and there are people who order them year round b/c they can't stand coffee taste, they want all the sugar, fat, and everything else to cover it up.

    Anyway, I work at Starbucks, so obviously this whole change has been a big thing for us. We're actually pretty hopeful. The chairman was the CEO in the past, he was the one who led Starbucks to being such a huge chain before the CEO that got fired over-extended us. That guy was the Walmart Wonder Boy and his corner cutting and Walmart philosophy has been evident since he took over. He got rid of a lot of the better blends of coffee and started focusing on way too many other products and lines (Starbucks had their money in movies and music by the end of it, and were opening up music stores with coffee bars in them-that no one would buy music at). The new CEO claims he's going back to the traditions that brought Starbucks to the forefront. We're already seeing little changes coming through at the store level, but they are little. His big focus for this year is beverage quality, so for all of those that think the coffee tastes like shit now, hopefully that's going to change. I'm personally hoping some of that quality thing includes going back to the better blends of coffee beans instead of the cheap crap they could find. I worked for the company 5 years ago and came back recently and there is a HUGE difference in the way things are done and taste now, it's ridiculous. He also says he'll be closing some of the stores since they're a victim of their own overexpansion.

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    Elite Member celeb_2006's Avatar
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    A while ago even I thought Starbucks was expanding way too aggressively. Starbucks doesn't even advertise on t.v. to my knowledge, their brand just spread through word of mouth and that unique experience. But I think any company is always in danger of over exposure. McD's is one of the few I know that gets away with opening like a new store every second or something.

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    Elite Member suede's Avatar
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    I don't like their coffee at all - I just don't see the obession that people have with it.
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    Elite Member MaryJane's Avatar
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    I went to London a few months ago and I could NOT believe it, there was a Starbucks in EVERY. SINGLE. BLOCK. And they were all packed!
    Me and my friend went there for breakfast all of the 3 days we were in the city because we didn't want to feel uncool!
    In Italy we don't have Starbucks and they say never will, because our coffee is sacred!

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    Elite Member sputnik's Avatar
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    ^^^^
    that's what they used to say about vienna and still starbucks arrived. though it's true that vienna has a huge expat community so that probably helped. but still... starbucks in the US is a good thing because it taught people to drink real coffee or at least made real coffee easily available, whereas before it was almost impossible to find real coffee in the US (it was all weak, watery shit) but i don't see the point of it in countries that already know how to drink coffee...
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    Elite Member MsDark's Avatar
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    Those froufrou drinks are for wusses. If I absolutely have to hit a Starbucks for a caffiene jolt I get whatever their "bold" selection of the day is and add my own shit (if anything) at the little self-serve bar with the milks and sugars and shit. But it really annoys me to pay that much for a cup of coffee to be honest.
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    Elite Member Just Kill Me's Avatar
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    Lewis Black I think; he did a little bit about the world ending and the space time stopping... something about one starbucks being right across the street from eachother; he was speaking of our lovely retardation on the corner of West Grey in Houston.
    Last edited by Just Kill Me; January 16th, 2008 at 12:50 PM. Reason: I typed cornery?!?!?! WTF is wrong with me?

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    Elite Member Butterfly's Avatar
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    There are 3 Starbucks in 1 mile from each other where I live. 1 in the Barns & Nobel, 1 right across the street in the Super Target, then a stand alone one on the corner. I must say that I love their Chi Tea Lattes
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    Elite Member Grimmlok's Avatar
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    It's funny, back in the mid to late 90's Starbucks was actually quite nice. It was a warm coffee house atmosphere, with really chill old jazz or even some trip hop playing nice and low.. they have big comfy couches or chairs you could lounge in and it was very relaxed. The coffee was actually excellent and there weren't ridiculously huge crowds all wanting their fix. You could spend hours talking with your friends or being a douche and writing on your laptop (just so everyone can see you writing, cuz that's what matters.)

    Now when I go in, it's basically like McDonalds.. rushing around, no real place to sit, the coffee isn't as good, and the sugary frappa-whatevers are just waaaaayyyyy too much.

    Hopefully they'll go back to the old way of doing things.
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    I've always thought it was over-rated. A friend of mine will get the biggest frap she can and it's inhaled in less than half an hour

    The only thing I like there are their chi teas and even then it isn't great 100% of the time.

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    Elite Member ariesallover's Avatar
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    Quote Originally Posted by NoDayButToday View Post
    He got rid of a lot of the better blends of coffee...His big focus for this year is beverage quality, so for all of those that think the coffee tastes like shit now, hopefully that's going to change. I'm personally hoping some of that quality thing includes going back to the better blends of coffee beans instead of the cheap crap they could find.
    So SB *was* using poorer quality stuff. It wasn't me imagining a change in taste?

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