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Tuesday, 27 March 2007 14:11 |
| John North
Editor & Publisher |
Over a cup of my favorite java, I read where Howard Schultz, founder and chairman of Starbucks coffee company, recently declared ó much to his credit ó that he was experiencing a ìcrisis of conscienceî over the direction that his fast-growing company is taking.
In stirring the pot, Schultz told how he originally conceived of Starbucks as being a ìthird placeî ó a respite from both the workplace and the homefront, where people could hang out, read the newspaper and befriend the ìbaristasî behind the counter.
He
called the aforementioned the ìcoffee experience,î which made customers
willing to pay $4 for a product that used to cost them 60 cents.
Indeed, in an
internal memo he wrote to his top executives that was leaked to
Starbucksgossip.com, Schultz lamented the loss the company has suffered
since Starbucks has grown from six stores in 1987 to more than 13,000
stories today.
For instance, he
pointed to the firmís decision some years ago to install automatic
espresso machines, which, he wrote, ìsolved a major problem in terms of
speed and service,î but also made buying a cup of Starbucks coffee a
more antiseptic experience. Specifically, he complained about the loss
of aroma because the baristas no longer scooped coffee beans from bins
and ground them in front of customers.
Schultz said
that streamlining the companyís store designs had caused them to lose
ìthe soul of the past and reflect a chain of stores vs. the warm
feeling of a neighborhood store.î Further, he contended that the
Starbucksí experience was becoming commoditized, and he urged the
executive team to ìgo back to the core.î
The irony of the
aforementioned is that Schultz is the man who approved the very
compromises that he complained about in his memo. These changes, he
felt, would help the company grow faster. And, despite a recent lag,
the company stock has skyrocketed 5,000 percent since it went public in
1992 ó in large part, analysts say, because Schultz was so fanatical
about growth.
To be fair,
analysts have pointed out that Schultz ó almost from the beginning ó
has fretted publicly and privately about the difficulty of achieving a
balance between quality and growth for the Starbucks brand.
ìStarbucks is
the fastest-growing retail story of all time,î John Glass, an analyst
for CIBC, was quoted as saying in Joe Noceraís Talking Business column,
headlined ìA double shot of nostalgia at Starbucks,î which appeared
March 3 in The New York Times.
From my
perspective, Starbucks has jeopardized the European coffeehouse
experience by diversifying into food, music, books and other items. To
that end, I donít think the chairman can realistically expect to have
both aroma and meteoric growth in same-store sales, the latter being
Wall Streetís most important barometer.
The slippage is
shown in a recent Brand Keys survey of 20,000 people showing that
Dunkiní Donuts now has higher customer loyalty than Starbucks.
Worse, Consumer
Reports recently concluded that McDonaldís coffee is superior to that
of Starbucks. Thus, at least to some degree, savvy marketing ó not the
coffee quality ó deserves credit for the enormous appeal of Starbucks
and other high-priced coffees. (Not to be low-balled by McDonaldís,
Starbucks already has started putting in drive-through windows.)
Based on his
actions, I suspect that Schultz is engaging in some java jive by
expressing concerns about Starbucks losing its soul. Did the company
ever have a soul, even metaphorically speaking?
Nevertheless, I
think Schultz deserves praise for even raising the subject of his
companyís soul, regardless of his motivations. At least somethingís
brewing.
In their daily
grinds, I hope other chainstore chiefs also will question their own
hell-bent quests for soulless same-store sales growth ó and consider
tossing out the dregs in favor of savoring some authentic bean
enlightenment.
ï
John North, publisher and editor of the Daily Planet, may be contacted at publisher-at-ashevilledailyplanet.com.
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