Wednesday, July 2, 2008

More Bad News Brewing at Starbucks.


From the Wall Street Journal today:

"In its most significant pullback yet to its U.S. expansion, Starbucks Corp. said it will close an additional 500 U.S. stores and cut 7% of its work force." Wall Street Journal, July 1, 2008.

Since its start in 1980 Starbucks has built 11,000 stores nationwide. That does not include Europe and China or anywhere else in the world. It is an American business success story. Like them or not, no one can deny their business acumen, and not just in coffee, as music marketers they are second only to Apple and maybe Walmart.

But nothing grows forever. Times change, markets change, and eventually saturation itself slows the growth. And, there is competition , which they haven't had. It took McDonald's about 10 years to realize that Starbucks wasn't a fad, but now that they have, and the younger coffee drinkers are bringing the kids in for a happy meal, they are poised to fill in as Starbucks falters. I repeat, McDonald's coffee, when fresh, is pretty good to good. Which is saying something because 5 years ago it was bad to very bad.

Investors will like the store closings and the releasing of 5-10 thousand employees, but, and I hate to keep saying this, the Starbucks problem is a "vision thing." They need to reclaim their base with an exceptionally good and fresh cup of coffee. In the last year or so I have had too many "not hot enough" cups of coffee, seen more than average number of disgruntled employees at the counter, and seen stores not cleaned to the old standards. It was a coffee shop, now it is a JC Penney's that sells coffee. That's the problem.

1 comment:

victor said...

speaking to the choir!