I believe it was 1993, probably right after the Starbucks (NASDAQ: SBUX) IPO. At the time, I worked in downtown Vancouver B.C. and one day a tourist from Toronto asked me to take a picture of her in front of a Starbucks. This picture, she said after thanking me, will make all her friends back east really jealous. I thought she was nuts. Vancouver had Starbucks stores as early as 1987, but the hype really started in the early 90s. Personally, I never liked Starbucks coffee. The strong roasted flavor wasn't to my taste, not to mention I felt Starbucks promoted a stuck-up atmosphere to allow it to charge outrageous prices for a cup of coffee I didn't even want. Seems I was in the minority, and Starbucks went on to become a true success story. People liked the coffee and the upscale atmosphere.
Starbucks grew fast, opening more and more locations, until the growth affected the business. From an upscale atmosphere where baristas prepared espressos and other specialty coffees, machines were brought in and no doubt the coffee lost some of its taste, not to mention value in the eye of the consumer. A corporate atmosphere replaced the intimate coffee-shop one, especially with the introduction of sandwiches and breakfast. Locations were cannibalizing each others' profits, and lately, to pour salt on the loyal customers wounds who stuck with the company and paid $3+ for coffee, it started experimenting with $1 coffees -- Star ... buck?
So . . . should Starbucks continue the recent trend of becoming more fast-food like, or should it get back to the basics as a supplier of premium coffee made with loving hands in a more exotic atmosphere? It seems that mostly, the preference is for the latter.
This afternoon, after markets close, Starbucks will report its quarterly earnings. Howard Schultz, Chairman and visionary, has returned to the role of CEO after ousting Jim Donald earlier this month, and is set to present his plan for the company, of which he gave only parts earlier. Most likely, this will include opening fewer stores, closing some under-performing ones and re-focusing the company to get it back on track to what it once was.
Starbucks has been hit recently by drops in traffic just as it has experienced increased costs, especially milk. Its shares consequently declined some 42% in 2007. Year-to-date, SBUX shares have declined over 3%.
Tonight, a lot will hinge on Schultz's forward plan, more so than the actual results, but the company's guidance and analyst expectations call for earnings of 28 cents per share in its fiscal first quarter.
Can the company regain the trust of its loyal consumers? Can it maintain its premium standing? Can traffic and growth increase while maintaining operating efficiency? Is Schultz the right man for the job? These questions and more may be partially answered later this afternoon. Should be interesting.
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Reader Comments (Page 1 of 1)
1-30-2008 @ 5:16PM
blastKiller said...
I completely agree with you! I've NEVER liked Starbucks or thought that their coffee/sandwiches/baked goods were particularily enjoyable or worth what they charged ($8 Americanos, $4 brownies)!
Good luck trying to mass produce the "look and feel" of an intimate coffee shop - it's just going to end up being an exercise in "branding" and fake attempts to seem "connected" to the customers;
Maybe they'll even try to associate themselves with ecological/social causes but we all know in the end it will get axed if it doesn't do enough to raise their "image".
1-30-2008 @ 8:56PM
Mr. noitall said...
Could it be that Starbucks was just a "FAD"!!!
2-14-2008 @ 10:28AM
Bookshoppgirl said...
I'm from Wisconsin and will travel 20 miles to Milwaukee for a cup of Alterra coffee over Starbucks anytime! Not only is the flavor of Alterra's lattes SO much richer, the service at our southeastern WI store is haphazard, at best. The baristas are so busy standing around talking with one another and goofing off, (occassionally there's an exception) that I'm usually standing there for a good minute or two at the counter before anyone notices me. I can always count on a stressful experience if I'm already running late for work, as they meander over to the expresso machine, talking to everyone else as they slowly make my not-so-tasty-drink. Starbucks, please do a better job SELECTING your new recruits. Three years ago, that location's crew was excellent. It's been downhill ever since, and I would like to save my gas money when in search of a good coffee.