retail news in context, analysis with attitude

In the UK, the Observer has a long piece about Starbucks’ travails, noting that CEO Howard Schultz recently told shareholders that the company is facing the biggest economic challenges of its history, and that Starbucks “somehow evolved from a culture of entrepreneurship, creativity and innovation to a culture of, in a way, mediocrity and bureaucracy … We have somehow lost our edge.” Schultz also said that it is possible that the era of expensive, gourmet coffees may be running out of steam.

“In a memo to employees, he lamented how automatic coffee machines had improved efficiency but given customers a more 'antiseptic experience',” the Observer reports. “He noticed how the smell of the company's breakfast sandwiches overpowered the aroma of coffee and new flavours had been introduced in place of genuine inspiration … The quandary Starbucks faces is one that confronts any rapidly expanding business. The original idea is lost. While investors reward growth, especially in in-store sales, it must ultimately slow and the stock slide. Schultz, who returned as CEO this year, must now negotiate the narrow path between restoring the brand and fostering growth.

“He has proposed grinding the coffee by hand again (to restore the aroma), phase out the over-powering breakfast sandwiches (replacing them with more healthy fare), introduce a new, smaller espresso machine so baristas can see over the top and better connect with customers. Perhaps most remarkable are plans to scale back Starbucks' emphasis on espresso-based fare and return to more traditional, drip-based drinks.”

KC's View:
Any reader of MNB knows that I am an enormous Starbucks fan, but I noticed something the other day. A dictum apparently has come down from headquarters that each coffee has to be done individually…and that baristas even have to the foam cup-by-cup. While this would seem to be an admirable nod to craft coffee brewing, I also noticed that this decision slowed the line down considerably…and actually annoyed some of the customers on line.

This reflects the challenge facing Starbucks, and, to be honest, any retailer dealing with customers in the same sort of way. It is the eternal struggle between art and commerce, as companies look to find a balance that generates both quality and profit.