The Sinking Mermaid

Ok, so Howard announced the new initiatives.. Nothing unexpected here. Yes, the stores need to smell like coffee, it’s a coffee shop. People expect certain smells from certain environments. I mean picture an outhouse that does not smell like, well you know, how you expect an outhouse to smell. Where’s the charm in that? I don’t know about you, but that burned egg smell that came from those breakfast sandwiches was just nasty. Nothing smells worse to a hungover drunk than walking into a coffee shop and smelling burned eggs. Not that I would know that personally. Steaming soy, now that is something else that does not sit well after a night of bourbon. I know of a barista that used to nearly hurl every morning when some “lactose intolerant” freak with a political agenda would waltz in at 5 am and order their “milk should not be subsidized” latte.   Anywho..

SEATTLE–(BUSINESS WIRE)–In one of its most significant efforts to transform the company and reignite its connection with customers, today Starbucks (Nasdaq:SBUX - News) is conducting an unprecedented in-store education and training event for more than 135,000 partners (employees) in U.S. company-operated stores. As part of this major customer-focused initiative, Starbucks is also introducing a promise to exceed customers’ expectations by delivering the perfect drink every time.

When customers arrive at their Starbucks store tomorrow morning, they will be greeted with the following promise:
“Your drink should be perfect, every time. If not, let us know and we’ll make it right.”

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I’m really amazed at the number of stock analysts who are buying into the propaganda. Folks, don’t be naive, it’s just propaganda.

For those of you out of the loop, let’s review the basics:

1. All Starbucks retail partners go through extensive training: Star Skills, Brewing the Perfect Cup, Diversity Training, Bar Class and who knows what else has been added to the list since I worked there.

2. The automated espresso machine, built by Thermoplan, has limited adjustments. The unit has a programming card, but the employees don’t have access to that. A barista can make adjustments to the grind, but even in the hands of an expert, the highest quality drink possible on this machine, is still somewhat mediocre.

3. When I worked in the stores over a decade ago, if your drink wasn’t perfect, you got a new one AND you received a Starbuck (a free drink coupon).

So what training is being offered in the stores? Further training on adjusting the grind? A dissertation on pushing the steam button? Advanced theory of pumping syrup in the cup? What new policy about “just say yes” can be implemented that is not already implemented?

What I picture will take place during this training, after having sat through several snore sessions, aka Howard Schultz speeches, is an automatonic reiteration of Starbucks Mission Statement from Howard, wherein “passion” will be blurted out no less than 3 times per sentence and where all of the weight of fixing this company’s ills will be placed on 7 dollar an hour employees.

Your comments are appreciated… ~S

(1) http://biz.yahoo.com/bw/080226/20080226006641.html?.v=1

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.