Re: Businessweek’s article on Reenergizing Starbucks
Check out this story:
http://www.businessweek.com/innovate/content/feb2008/id20080220_372003.htm?campaign_id=yhoo
Starbucks stores, today, are exactly what you share holders and analysts wanted. They are dumbed down, canned, cookie cutter, efficient in a pre-packaged sort of way, over priced and staffed by minimum wage workers. That’s great! Right? No? That’s not great? Since when? This is the same lean, mean, profit producin’ machine that has enjoyed a 40+ P/E until just recently, so what’s your beef? Nothing has changed.Oh, but wait, things are slowing down and everyone is in panic mode. I see now. You fools thought that the gravy train was going to last forever. You didn’t realize that there is a finite customer base willing and able to shell out $5 per visit to a Starbucks and that there is a physical limit to the number of possible stores (and it ain’t 40,000).
Yes, Starbucks grew. It grew like the wind. It grew so fast, that those of us who supported the growth within the company couldn’t keep up. It grew so fast it became the fodder for jokes by big time comedians. It grew so fast people got sick of the sight of a store. But, what happens when you are done growing? Well, we are now finding out. Rather than listen to analysts or so-called experts, who may have never stepped foot in a Starbucks prior to when Frappucino came along, meaning they never visited a Starbucks when there was some quality, why not listen to someone who actually knows something?
NOTHING THAT STARBUCKS CAN DO WILL REIGNITE THE GROWTH TO THE LEVEL IT WAS, NOR CAN THE “OLD DAYS” QUALITY BE RESTORED.
Ahem
But for sake of argument, let’s focus on the idea of restoring the quality:
1. Get rid of Fappucino and their ilk. Sure, noisy blenders destroy the “Experience”, but more importantly, Frappucino is hardly a high-quality product. It’s a mix, consisting mainly of corn syrup, that is made by Pepsi.
2. Get rid of automated espresso machines. Consistency is good, but consistently mediocre is not good. The reason these machines were implemented, in the first place is because the employee turnover in the store was so great.. See point #3.
3. Fix the “90 day” crew turnover problems. You can’t have knowledgeable baristas preparing high-quality drinks, when the average tenure is “a month or so”. This is the one fix that NOBODY wants to discuss. Raise salaries without raising prices? Won’t that cut into profits? Why, yes it will and your 3rd house in Vail will have to wait, Mr Shareholder, so that “Fred the barista” can afford to pay his $550 a month rent. If you want Starbucks to be better than McDs, then you should stop hiring the same class of worker.
4. Concentrate on the basics: drip coffee, lattes, whole bean sales, FRESH pastries (how’s that 2 dollar frozen muffin taste?)
Note, that none of these quality initiatives will fix the growth problem. They all cut into profits, increase service times and the average customer won’t appreciate them. But, to be honest, Starbucks started out as a company that the average customer didn’t appreciate. It was an elite company with superior products that had a small, loyal, educated, coffee-loving audience. Those days are gone and trying to go back and recreate them is foolish.