Starbucks: A Fall from Grace
September 10, 2008 · Print This Article
Just a few short years ago, Starbucks’ status as an international coffee giant was unquestioned. Starbucks had enjoyed a meteoric rise to become a giant, multi-billion-dollar corporation with tens of thousands of locations across the globe. The economy here in the U.S. was good enough for millions of Americans to feel okay with spending up to $5 on a coffee drink. In 2006, the Starbucks stock hit an all-time high and the company was expanding feverishly. Multiple locations could be seen on the same street in many cities, and there weren’t any signs of stopping.
Then, sales began to drop off. The stock got hammered. The company hired back its key founder to help them get on the right track, and announced the closing of 600 stores across the U.S. It was a swift decline for a company that had swelled to 16,000 stores since its inception in 1971.
So, where did Starbucks go wrong? Their first problem was they got too big for their britches. Starbucks failed to recognize that saturating the market would give rise to a sea of detractors, not to mention the fact that there’s only so much coffee that people can drink. In growing so large, Starbucks also made the fatal mistake of cutting out what made them stand out in the first place: fresh, high quality coffee and what CEO Howard Schultz describes as ‘romance and theatre’.
When Starbucks first became popular, it was their fresh-ground, top shelf coffee beans that were brewed with a smile and friendly conversation in an intimate environment that made them so alluring. As they grew into a monster corporation, these elements were put to the wayside so the company could shave money off their budget and maintain a formula that could be easily copied. It was a dangerous bargain, though they didn’t realize it at the time.
Starbucks took for granted the idea that customers embraced them because they’re Starbucks, not because the coffee was great. The pre-ground beans, automated espresso machines and drive-thrus chipped away at what made people like Starbucks in the first place. They removed most of the soft, comfortable chairs and carpeting from their stores. All of this made people less likely to see Starbucks as a place to relax, read, chat with friends or hold business meetings.
They also began to muddle their brand a bit by experimenting with various reportedly smelly breakfast sandwiches, movie promotions, liqueurs and their very own record label.
As Americans’ wallets got lighter, more of them began to scorn high-priced fancy coffee drinks and respond to advertising by competitors like Dunkin’ Donuts, who espouse the idea of simple coffee at low prices, though they do offer lattes, mochas and frappuccino-like drinks as well. And then there’s the uprising of locavores, who believe that coffee shops should be small, intimate, unique and independently owned.
The company is working on turning it all around, though. In addition to closing 600 stores and laying off some 1,000 employees, Starbucks is trying to get back to its roots at a rapid pace. They’re improving their espresso equipment to ensure the freshest, highest quality brew possible, and they’re also focusing more on the brews they offer. Their simple, comparatively inexpensive drip coffee will get more attention, and a reward program for loyal customers is being put into place. They’ll be putting more emphasis on training baristas to make consistent drinks across the board, so customers know what they’ll be getting at each location. The reaffirmation of their focus on what made them successful in the first place – coffee – will likely be their saving grace after this brush with disaster.
The biggest lesson that Starbucks has learned from all of this – and that you can take away from it as well – is to know when to stop. You don’t have to go along with every idea. You don’t have to grow to the point of making your company the butt of one-on-every-corner jokes.
Better times may well be ahead for Starbucks, if they can manage to stick to their current goal of keeping it simple and sticking to what works.
Photo by Flickr user jimg944
Comments
Got something to say?
You must be logged in to post a comment.