Starbucks warns of damage to brand
Posted by TheShot on 24 Feb 2007 | Tagged as: Quality Issues, Starbucks
You can always count on the founder of a company to retain the passion of its original business concept — long after the recruited executive wonks have arrived, armed with hockey-stick charts and completely dissociated from the inconsequential “widgets” they’re peddling for maximum revenue and EBITDA growth.
Starbucks founder and corporate chairman, Howard Schultz, is case and point. In a memo dated Feb. 14, Schultz addressed Starbucks executives expressing his concerns that their measures to facilitate massive growth have damaged their brand: Is Starbucks being watered down? - Food Inc. - MSNBC.com. (Also the Wall Street Journal: Starbucks Chairman Says Trouble May Be Brewing - WSJ.com, UPI: United Press International - NewsTrack - Chairman: Starbucks commoditizing itself, and Television New Zealand: Starbucks warns of damage to brand | WORLD | NEWS | tvnz.co.nz.) In his memo, Schultz cited their superautomatic espresso machines (”Verismo hell”, as I call it), bagged coffee (not scooped fresh beans), and “cookie-cutter” store designs as signs of major brand erosion that have helped open the door to fast-food chains and other competitors.
“In order to achieve the growth, development and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have (led) to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”
We’ve been saying this all along: Starbucks wasn’t always this poor. They just sold their soul to the devil for massive growth. Ironically, Schultz’ memo is perhaps the best sign in recent years that Starbucks might still have a chance to become relevant again to the specialty retail coffee trade they were so instrumental to popularizing over the past 10-15 years.
Unfortunately, the other corporate truth is that founders are often tolerated as crackpots. Meanwhile, executive teams do their best to ignore them and keep counting the money as fast as possible — until it’s too late. Starbucks’ cancer has metastasized with their growth, and I see only a terminal diagnosis of irrelevancy.
UPDATE: February 27, 2007
The irrelevancy news for Starbucks just keeps on comin’… Today Forbes reported that Dunkin’ Donuts edged out Starbucks for first place as the hottest coffee chain — according to Brand Keys’ latest Customer Loyalty Survey [linked PDF from 2006]: Dunkin’ Donuts Edges Starbucks - Forbes.com. This marks the first time in five years that someone other than Starbucks topped the list from these revered marketing researchers.
UPDATE: March 4, 2007
Today’s Washington Post published a story illustrating how none of this is news to residents of Seattle, Starbucks’ birthplace: Is Malaise Brewing at Starbucks? - washingtonpost.com. The comments from customers at Victrola are particularly pointed.
UPDATE: March 23, 2007
…And Starbucks shows no signs of slowing down their expansion: delawareonline ¦ The News Journal ¦ Starbucks aims for 40,000 locations worldwide.
5 Comments »
on 06 Mar 2007 at 1:31 pm PT 1.Espresso News and Reviews - TheShot.coffeeratings.com » All the King’s Horses, and All the King’s Marketing Consultants… said …
[...] That’s all I could think of when reading the media and blogosphere response over the past week to an executive memo written by Starbucks’ founder and corporate chairman, Howard Schultz (as reported here two Saturdays ago). In the memo, the founder lamented the loss of Starbucks’ “romance” for the sake of rampant, metastasis-like growth — citing the infiltration of superautomatic Verismo machines, bagged coffee, and cookie-cutter store designs. The memo was leaked as a sort of PR stunt; Starbucks first floated it out, leaving it up to public interpretation to see if it had the desired effect, and only afterwards did the corporation verify the memo’s authenticity. [...]
on 08 Mar 2007 at 2:49 pm PT 2.Espresso News and Reviews - TheShot.coffeeratings.com » Coffee roaster pushes beyond its ‘Peetnik’ roots said …
[...] Will Peet’s growth plans allow it to preserve a higher quality standard? Or will it succumb to becoming just another Starbucks wannabe where quantity rules over quality. Peet’s needs to preserve its quality standards as a differentiator. However, those standards will inevitably decline with their expansion plans. The question is how much. UPDATE: March 8, 2007 Peet’s expansion plans were the subject of a Contra Costa Times article today: ContraCostaTimes.com | 03/08/2007 | Peet’s future is percolating. Their challenge is how to grow without the bloat of Starbucks. [...]
on 26 Mar 2007 at 10:41 am PT 3.Espresso News and Reviews - TheShot.coffeeratings.com » Coffee roasting for the computer age said …
[...] It’s no secret that I generally disdain superautomated espresso machines (myself and Howard Schultz apparently included) and the convenience-step-forward/quality-step-backwards home pod machines. So you may get the (false) impression that, when it comes to coffee, I am an anti-technology Luddite. While I have never placed PID temperature controllers on the group of my home machine — and while I have no faith a machine will ever be able to toss out substandard shots the way Sammy Piccolo can — with coffee roasting it’s a different story. [...]
on 16 Apr 2007 at 3:58 pm PT 4.Espresso News and Reviews - TheShot.coffeeratings.com » Starbucks: the coffee giant blending in Europe said …
[...] Today on Agoravox, a European citizen journalism portal, a poster wrote an article about the growth of Starbucks Coffee in Europe: Starbucks; the coffee giant blending in Europe - AGORAVOX - The Citizen Media. Over the past few years, the chain has proliferated in Paris, the UK, and a multitude of other European locations as it continues to execute on its plans to expand to 40,000 stores. [...]
on 20 Jul 2007 at 2:49 pm PT 5.Espresso News and Reviews - TheShot.coffeeratings.com » Starbucks, Hershey to offer coffee-flavored chocolate products in the U.S. said …
[...] bristle at the suggestion that their corporation represents the fast food of coffee. (This despite lamenting memos from the chairman to the contrary.) But when was the last time Starbucks made a corporate decision [...]