Comments

1. Plus Mike - Howard this week in the Seattle PI paper - fairly scathing about perks he requires/gets ...

2. And Seattle TV this weekend interviewing people who prefer non-Starbucks 3rd place for coffee et al in Seattle ... at times it is tough to be a loved billionaire!

Posted by sean_luxury at February 28, 2007 1:40 PM

I believe the customers are finding out that paying 2x for a cup of Joe that tastes burnt isn't all it's cracked up to be.

When Starbuck's is the only convenient option, I almost enjoy ordering a "small coffee". The "barristas" don't know whether to correct me to order in Starbucks-speak or just get me a cup of coffee.

I'll admit, charging $3 for a 50 cent cup of coffee was genius while it lasted.

Posted by Jeff at February 28, 2007 2:08 PM

Sorry, Jeff at least tell the truth..STBX does not sell a $3 cup of coffee. A small would be less than $2 and closer to $1.45.

Posted by C at February 28, 2007 2:12 PM

Jeff,

I actually didn't mind paying a premium for Starbucks. I found they were a nice respite during my travels and I enjoyed the whole experience. My problem is they seem to be sacrificing the experience so they can maximize short term profits. Kind of like saying, "you know, instead of real wood we can use plastic. Cheaper, easier to form, and almost as good."

Posted by Mike Neiss at February 28, 2007 3:06 PM

and to be fair, small coffee at Starbucks less than Dunkin Donuts...checkout starbucksgossip.com for pricing

Posted by Mike Neiss at February 28, 2007 3:12 PM

Mike,
Great point. I agree with Howard that Starbucks is getting a bit too...commercial, for lack of a better word. I'll go to one if there is no available alternative, but find that there are much more intriguing places in most cities.

In our area we have one neighborhood that has several coffee shops within a few blocks of each other, including a Starbucks. Drive through there on a Friday or Saturday night and there are crowds at the locally owned spots. The Starbucks has a few well healed folks hanging out, but the college students, artists and poets are somewhere else.

Posted by Andrew Hayden at February 28, 2007 3:51 PM

Yes, my local McDonald's coffee is definitely better than my local Starbuck's. Am expecting the local Starbuck's to fold ... Howard, you need to move fast ... My suggestion: hit the road incognito. Visit your stores and the competition. See what is really going on ....

Posted by Mike L at February 28, 2007 3:57 PM

You know Andrew, even the concept of a Starbuck's drive through seems weird to me...Always good to see you hear Andrew. Hope things are fabulous your way

Posted by Mike Neiss at February 28, 2007 3:57 PM

Perhaps they need to "de-starbuckify" Starbucks, knock it down, start it up again. Hey what if they ditched the big round sign and went underground with the back end supply chain 'stuff' and opened coffee shops that had moxy aka local arty hangouts. cool systems + art farty ambiance.

Posted by Steve Gray at February 28, 2007 4:04 PM

We, Japanese like a brand.
We understand "Entertaining" and "Experiences".
Even if we pay about three hundereds of yen at first,
we have been satisfied with the big value more than it.
However, we hope we could get to require the bigger surprises
and the treatments if changing into the experiences in every day all too soon.
I hope I could enjoy the "LIVE" and "Professionals" of Starbucks.

Posted by Makio Yamazaki at February 28, 2007 5:36 PM

Tom,

Thanks for the post!

I posted about Howard Schultz's memo as well, but I hadn’t heard about the McDonalds taste-test thing.

"I often mentioned to my colleagues that Starbucks was beginning to feel a lot more like a fast food restaurant than a cool place to hang."

Perfect example! This is how I've been feeling as well. I've been frustrated in the past having to stand elbow to elbow in a crowd of customers because 2/3 of the floor space is taken up with product displays. When I want coffee makers, CD’s and kitchen doo-dads, I'll go to Target; all I want from Starbucks is my coffee!

(Okay, and maybe a Chonga bagel…)

I too hope this memo is a wake-up call to Starbucks, as I really like their coffee.

Thanks again,

-Perry

Posted by Perry P. Perkins at February 28, 2007 6:24 PM

Very good!

Posted by MATEUS! at February 28, 2007 7:37 PM

I've recently hired several young, enthusiastic former Starbucks employees. They were burned out by the drudgery and pressure and did not have heartwarming stories to share.

Posted by Kate at February 28, 2007 7:39 PM

I think there's an interesting idea here, and I can't decide if it might boost the brand or fracture it. What if, as has been hinted at, Starbucks began to construct some sort of "Localbucks" where the store was/could be individualized and given the small-shop atmosphere beloved by the creative types who frequent the mom and pop coffee shops? Bring in the manual machines, turn down the lighting, get rid of all the frickin' merchandise, and host musicians and readings and such. Could this exist as a partner brand?

Posted by Marco at February 28, 2007 8:37 PM

This memo is a bit late. By definition an organisation become a commodity when I get to hear about it!

We have several coffee shops near my office - I can't tell the difference. Not only is STBX a commodity but the CONCEPT of any coffee shop being a special place is a commodity.

New idea required.

Posted by PaulH at March 1, 2007 3:33 AM

Hmmm interesting thought Paul, As you know from Tom's writings we are pretty much zealots about branding and avoiding commodity hell. To me, a coffee shop becomes a commodity when they start relying on price to compete. Any special value, perceived or real, that separates it from the masses frees it from commodity land. Seems to me the new idea included understanding that coffee could be more than Maxwell House or Folgers. I use to love arriving in Europe and having my first cup of coffee..so much fuller and better than our hot brown liquid. I don't look at my local coffee shop as a commodity. Beyond great coffee, they offer community and a very comfortable atmosphere. But then again, my barber shop (and my barber) does the same. Dewey, my barber, is a cross between Will Rogers and Willard Scott. Always entertaining, always treated as a guest...come to thnk about it, the haircuts aren't anything special, but the experience always is.

Posted by Mike Neiss at March 1, 2007 5:28 AM

In London, where I have been visiting for the last couple months, there are Starbucks shops on nearly every block. Starbucks might be intent on remaining unique, but if there are more Starbucks around than McDonalds, Starbucks is not likely to remain appealing much longer.

Posted by Katie at March 1, 2007 8:12 AM

Yes Katie! I remember recently leaving my hotel in London and literally there were Starbucks on each end of the block. I couldn't believe it! It reminds me of my days at UPS. We did not even put our numbers in the phone book at one point because we knew we could not handle the added volume without a serious decline in service standards. Very controlled growth (and I know I am showing my age!)

Posted by Mike Neiss at March 1, 2007 8:32 AM

1. Howard in Seattle is loathed by the NBA/sports crowd in that he could not gain $100M new arena [taxpayers'] concessions for his Seattle SuperSonics - so he sold them to an Oklahoma City group that may soon take them to OC ... Starbucks NYET now to many ...

Posted by sean_seattle at March 1, 2007 9:23 AM

Is McDonald's coffee really worth trying?
Hot brown dirty water is what I remember...

Posted by Jimi at March 1, 2007 9:38 AM

Well, I am not a huge fan...but just about anything is worth trying right?

Posted by Mike Neiss at March 1, 2007 9:51 AM

C posts:
"Sorry, Jeff at least tell the truth..STBX does not sell a $3 cup of coffee. A small would be less than $2 and closer to $1.45."

C, I'm not a fan of hyperbole, so I humbly stand corrected. Thanks.

My point was overpriced with no differentiation left. Isn't that the fate of all fast movers who stop and smell the roses while the competition catches up (copies!)?

Posted by Jeff at March 1, 2007 9:59 AM

Right Jeff...and that differentiation = distinction = brand. That is why I praise Howard for having the courage to look hard at what this growth strategy has done to the differentiation. I think he shows guts that I don't often see at his level.

Posted by Mike Neiss at March 1, 2007 10:24 AM

I agree with the brand stuff - but does there reach a point where no matter how good YOUR brand is the whole market as removed the ground from under your feet so to speak

Posted by PaulH at March 1, 2007 10:55 AM

Mike,

What are you doing hanging out in coffee shops? Get back to work. I'm flying around the world speaking to thousands of people and busting my ass while you're hanging out at coffee shops with free wifi?

- (not really) Tom P

Posted by (not really) Tom P at March 1, 2007 1:27 PM

to say a quick word...i am a college student in every aspect...i am poor,i am extremely busy,i like a nice quiet place to study nightly,and i need caffeine to keep me up as to study...i go to starbucks on a nightly bases...not because i love the coffee, but because i love the atmosphere...i know all of the employees by name,i get free coffee on occasion,and i can study in peace and quiet...i have no complants about starbucks at all...its not like a mcdonalds,the coffee and other beverages are spectacular, and the atmosphere is the best for a late night study...just thought i would throw in my two cents...

Posted by bob at March 1, 2007 4:30 PM

and as for the mcdonald's coffee...at least paying $1.45 for a coffee at starbucks i know i don't have rats crawling around in my coffee grinds like at the mcdonalds in new york...we need to treat mcdonalds for what it is...a nasty,rat infested,fast food resturaunt with greasy burgers and over salted french fries...at least thats my two cents...

Posted by bob at March 1, 2007 4:36 PM

That's a great comment Bob. Keep working and keep drinking the coffee. Isn't it just wonderful to hear of students working so hard? I agree with you and the coffee is certainly not the reason I go to Starbucks. My reason is to sit on a bar stool and 'people watch' in the street outside. Frankly I don’t find the coffee anything special. I’ve tasted better in supermarket cafes. And I have to say I do not find there is some ‘magical unique’ atmosphere in Starbucks. It is ok but not earth shattering. Perception is everything however and obviously I am in a huge minority on this Blog in saying Starbucks is over rated. Yes, I know the figures prove me wrong. Maybe it is to do with - as mentioned earlier by Paul and Katie earlier - there are just too many Starbucks in England. Maybe the old saying is right ‘familiarity breeds contempt.’ I remain unconvinced despite the figures.

Posted by Trevor Gay at March 1, 2007 6:01 PM

Here is another thing Starbucks might want to change. I was recently in Abilene, TX with a co-worker. He drinks coffee and went to Starbucks first thing in the morning since the free hotel coffee is not very special. To his surprise there was no coffee available at Starbucks. Their brewer was out of commission. He was astounded!

Posted by Richard in Houston at March 2, 2007 12:33 AM

Trevor - I can't taste better in my supermarket cafe - my super market cafe is a StarBucks!!!

Posted by PaulH at March 2, 2007 3:57 AM

Brilliant Paul :-)

Posted by Trevor Gay at March 2, 2007 5:45 AM

Firstly, full marks to Mr. Schultz for picking up on the problem but low marks for his tardiness. This is a guy who is regularly held up as an example of someone with his finger on the pulse because he visits 25 stores per week etc etc: so what took him so long? And what value having your finger on the pulse if you're so slow in reacting? There's a lesson for us all in this.

Secondly, if you're going to open Starbucks in places like open shopping malls, large airline lounges, train stations etc how can you hope to get the value of an aroma and the whole experience? Maybe they need to think about where they place the stores as well as how many.

Thirdly, here in the UK at least they need to give a bit more priority to replacing some tired old furniture and keeping the cafes clean and tidy.

My bet is we'll see some store closures as they go back to fewer venues being better operated. And btw, I agree with Trevor about the taste. Next time anyone's in the UK, try Thorntons the chocolate maker. They don't put a cafe in every store but where they do, I've always found them to be excellent.

Posted by Mark JF at March 2, 2007 6:57 AM

Trevor - I think your point that you don't find anything unique or special about the Starbucks atmosphere is exactly Howard's point. And I do think their coffee was better when it was ground to order. I remember reading somewhere about their new coffee processing plant (I think in Kansas) where they were using jet engines to roast huge quantities of beans at one time. That is when I had my first inkling that perhaps the finance and ops folks were winning over the brand folks. And just as there are occasions where box wine is fine, mass produced not bad (not great) coffee sometimes will do. I think Starbucks needs to step back ( I don't think they will) or recognize that in trying to gain mass appeal they have lost any advantage of being a special, third place. Always good to see you here Trevor. Sorry I missed meeting you at the London event....Mike

Posted by Mike Neiss at March 2, 2007 6:58 AM

Mark JF – Thornton’s – now you’re talking!! - Fabulous – all things in moderation though. Exercise and diet obsession must not be compromised … well go on … perhaps a little :-) Our American friends don't know what they are missing!

Mike - My view of chronological stages of how many businesses seem to go:

*enthusiasm
*positive naivety
*passion
*creativity
*originality
*success
*profitability
*more profitability
*arrogance
*complacency
*falling standards
*blindness to customers and competitors

*death … unless you change

I have never been a Starbucks devotee so I have no idea at what point they are on this scale .. you tell me Mike

Thanks for the comments and I’m sorry to have missed you too when I saw Tom in London May 2006 – when are you in UK again?

Posted by Trevor Gay at March 2, 2007 8:00 AM

I don’t think Starbucks has commoditized itself as much as it has impersonalized itself.

I stopped going to my new local Starbucks when the line started to creep out the door and they made you shout your order to the barista (over the loud music and the blenders that sound like jet engines) so they could get you on your way. The “experience” is like being in the queue at a McDonald’s drive-thru or being in line at a Disney World ride at the height of vacation time.

It seems that the emphasis has shifted away from the coffee and the experience to “move ‘em out,” and “Next!”

Perhaps Mr. Schultz should consult with Eddie Murphy’s movie makeup transformation artists and wait in a Starbucks line incognito. He might come away having a much better understanding of the real Starbucks “experience.”

The Virgin Companies seem to have avoided the commoditization trap; they’ve grown and succeeded, and not lost their personal touch.
_

Posted by Jeff Pasquale at March 2, 2007 8:23 AM

Trevor,

I like the way you've depicted the business life cycle. Seems on target. I'd add Panic or Knee-Jerk Reaction to Falling Profits, too.

I sat in on a teleconference yesterday with Michael (EMyth) Gerber. Part of his discussion sounded just like TP. Don't try to reinvent the business; start with a blank sheet of paper and do it all over again.

That's one way to tap into your passion and enthusiasm points once again.

"Get Back" - as the Beatles said.
_

Posted by Jeff Pasquale at March 2, 2007 8:36 AM

Thanks Jeff – or maybe the Lennon classic ‘ Imagine’ :-)

Posted by Trevor Gay at March 2, 2007 8:58 AM

As a place to hang out and do some work, I hear Panera Bread has become the alternative to Starbucks in many places. I've been meaning to check em out.

Posted by John O'Leary at March 2, 2007 9:43 AM

Mike, I had the same feeling the other day that the novelty of Starbucks has worn off. I wondered what Starbucks would have to do to keep it interesting/stay relevant. Certainly something! Bigger (globally, perhaps)? Better (their coffee isn't considered the best)? Different (hard to turn such a big ship)?

Speaking of relevant ... free wi-fi is everywhere, while Starbucks still charges for it. Are they trying to squeeze another penny out of consumers' pocket or stuck in a contract with T-Mobile they can't get out of? Regardless, they can't possibly keep going business as usual ... usual is boring and not necessarily effective.

The other side of the story ... what happens when Dunkin' Donuts increases its distribution? What happens to their retail outlets when they add new distribution channels? Is Dunkin' Donuts a coffee shop or a donut shop? How will they know when big is big enough and it's time to innovate?

Posted by darci riesenhuber at March 2, 2007 5:43 PM

Click on the 'memo to his executive' link. It's on the Starbucks gossip page. Read the employees' postings.

They're saying they've been betrayed.

They see senior executives from the days of the dream being shoved out,
they strive to give the perfect Starbucks experience to their customers and are punished for not pushing the pastries by having their hours and healthcare cut,
they believe that the gifted, committed, experienced baristas at the top of the pay scale are harrassed out of their jobs to save a buck on the newbies wages,
they have a large convention cancelled with no consolation prize...

Where the words and the actions don't mesh there's no integrity. These poor people are suffering from unrequited love.

My advice?

Hire a shellshocked Starbucks employee. Treat him/her gently. Woo them with your dream. Let Starbucks loss be your gain.

online ordering viagra australia Posted by Lois Gory at March 3, 2007 11:07 AM

Coffee n donuts - surely perfect synergy waiting to happen?

When the coffee is done - Go! Smell the flowers.

Posted by GO! Smell the flowers at March 3, 2007 12:13 PM

Mike N

Congratulations! You have started a great conversation with this blog.... In this simple conversation so much is revealed about contemporary life, work habits, worker's expectations, the power of word of mouth advertising, etc, etc, etc.... Who needs a "focus group" when you can get a blog like this going...

On the issue of Starbucks my fleeting observations are as follows:

Is Starbucks now "hollowing out" its brand? Is it now more about making money than making coffee?

Around November last year, Starbucks announced what amounts to a $0.05 rise in price for a cup of coffee. Will we notice that extra five cents? Does it matter? I wonder?

In the spirit of giving Starbucks some positive feedback (even though some of it is actually negative) it seems to me that they are now “hollowing-out” their brand.

I would be prepared to pay an extra $1 for a cup of coffee at Starbucks on 42nd Street in New York because it has good coffee, service, and atmosphere. What makes the coffee worth more is that combination of quality product, service, and ambience. Isn’t this what Starbucks set out to achieve when they brought Seattle quality coffee to the world.

Contrast that positive feedback with my memory of buying a Starbucks coffee at Heathrow Airport near London. My experience at that site was the coffee is awful, service is non-existent and there is no ambience. I was left wanting my money back!

Starbucks built a brand by providing a good experience for myself and for my friends whenever we shared a cup of coffee. For me that good experience is no longer guaranteed. Starbucks has lost its way because it has lost its purpose.

In the 1980s factories were referred to as "hollowed out" when robots replaced people. At Heathrow Airport the staff at Starbucks are robotic in their approach to making a cup of coffee. Perhaps Starbucks is being “hollowed out”. Starbucks is no longer a place I can trust to serve me that good old Seattle coffee experience.

Richard

Posted by Richard Lipscombe at March 3, 2007 6:51 PM

Thanks Richard...it has been a pleasant and informative chat we are all having here. There are so many dimensions to the Starbucks brand story. I suppose for me they are just one more example of what happens when short term gains are chosen over the integrity and value of a brand. I saw it happen at GM when I was there and a former CFO became CEO and drove the strategy of efficiencies and cost above all else. Well they are paying for it now with efficiently built product that few want. One of my clients is struggling over the issue of being a very cool small company (they are fortune 500) or become a real large global player. I must admit I have worried about their brand erosion as well. I do hope Howard Schultz does something dramatic to try and recapture the essence of the third place, but I doubt he will. the genie is out of the bottle. I will still drink Starbucks, but only if it is convenient. and I would guess it will always be "to go". Might even try one of their fancy drive throughs....oh my. Anyways, we will be able to look back fondly and say "I remember when Starbucks was a cool coffee shop"

Posted by Mike Neiss at March 3, 2007 7:45 PM

Here's another perspective. Here on Oahu (Kailua), Starbucks has been refurbishing their stores, that's a plus. They still seem to get a good following and the line is crazy early in the morning. The local coffee store still does a great business and has free WiFi. Hard to believe that Starbucks still uses T-Mobile. As a sidenote, Time-Warner is setting up hotspots around the island so if you have Road Runner at home, you can connect free while out and about.

McDonald's is opening up their McCafes here. http://www.businessweek.com/magazine/content/06_20/b3984065.htm
From the Honolulu Advertiser
http://tinyurl.com/2ghwyk

This will be interesting!

Posted by Bob McAllaster at March 6, 2007 2:49 PM

I'd like to take a contrarian stand.

I think Starbucks did the right thing. The watering down of its exclusivity has made its investors billions in profits (I think. I didn't look) and given thousands a job. It milked the cow as early as it could as much as it could. Remember, money has a time value. A dollar today is worth more than a dollar tomorrow.

The idea of owning something small and special is nice. But owning something explosive is even nicer. The former is not necessarily longer lived either, given the pace of change. And investors have the money in their hands earlier, which they can use to invest in the Next Big Idea.

I think little of suggestions here about making Starbucks less accessible and therefore more exclusive. The opportunity cost is gargantuan (billions). The franchise would have its value significantly reduced overnight. Howard Schulz would be ousted. PepsiCo would buy it up.

Posted by Jeremy at March 7, 2007 1:14 AM