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Starbucks Corp. (NASDAQ: SBUX) shares have left a taste in the mouth of shareholders almost as bitter as some of its brews as investors fretted about looming competition with McDonald's Corp. (NYSE: MCD) for the caffeinated consumer. Finally, the coffee chain, whose shares have plunged 48% over the past year, has woken up and smelled the over-priced Java.The Seattle-based company ousted Chief Executive Jim Donald and replaced him with Chairman Howard Schultz, really the company's heart and soul.
In a letter released by the company, Schultz uses business school buzzwords such as "customer-facing" "customer-focused" and my favorite "re-igniting our emotional attachment with our customers" to discuss the mess in which Starbucks has found itself.
Let me simplify it some: McDonald's sells really good coffee for 69 cents without an attitude. Dunkin' Donuts sells good coffee and food that's far more edible than anything at Starbucks. The company has serious problems.
Sure, Starbucks made its name creating an atmosphere where trendy people can look smart, sipping a grande moccahino as they pretend to work on their laptops. The world has changed and now Starbucks had to change with it. Schultz has acknowledged that people may be getting sick of Starbucks. The company is going to slow the pace of U.S. store openings and shut underperforming locations, a move that's long overdue.
Starbucks is smart to make a big push overseas though McDonald's will be nipping at its heels there as well. In a moment of candor, Schutlz admitted that many of Starbucks's problems were self-inflicted. The question is whether Schultz will be able to bring Starbucks back to its glory days.
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Reader Comments (Page 1 of 1)
3-14-2008 @ 1:37PM
JerryM said...
Jim McDonald was an amazing CEO and did exactly as instructed-add more locations than anyone thought possible in a very short period of time. It is a shame Howard's return will get all the glory as most of these very same stores will add so much to the bottom line after we get past the current slowdown/recession. Starbucks (with a little judicious site pruning and non-coffee menu refinement) is well positioned to prosper toward the remainder of this decade and well into the 2010's. Thanks Jim for a job well done!