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Interesting piece in the Wall Street Journal suggesting that Starbucks, which has opened more than 2,000 new stores in the US alone during the past three years, may have contributed to “an oversupply of coffee shops” and may have to “put the brakes on new-store openings.”

The story notes that “the opening of so many new stores is proving distracting to management, analysts say, at a time when it is juggling multiple tasks - from selling the rights to distribute Starbucks’s packaged-coffee business to Nestlé SA to integrating a joint venture in China. In the U.S., the chain is trying to figure out how to revive afternoon sales while still reeling from the controversy over the arrests of two black men at a Philadelphia Starbucks in April.”

This is all happening at a time when the company’s longtime leader, Howard Schultz, has announced that he will be stepping down at the end of the month, with speculation focusing on a possible political career.

The story notes that “Schultz was the chain’s strongest advocate of aggressive growth. For years, he talked about the impact declining mall traffic was having on brick-and-mortar retailers. In late 2013, Mr. Schultz declared there was a ‘seismic shift’ in consumer behavior in which online shopping was posing a great threat to malls—and to retailers that depend on mall traffic.

“His answer: Build even more stores, but not just any stores. High-end cafes, he said, would give people an experience worth leaving their homes for. The company said it would build 20 to 30 giant Roastery stores serving rare and exotic coffees and up to 1,000 smaller stores under the Reserve brand that would do the same.”

Analysts suggest that Schultz’s departure could clear the way for Starbucks to back off some of those store opening plans.
KC's View:
If I remember correctly, this is one of the problems that Starbucks had back in 2008, when it hit a rough patch … too many stores, and it had to retrench a bit. And I’ve never been persuaded that the high-end strategy is the best approach … that much investment in Roastery and Reserve stores had the potential of putting the company at risk in the event of an inevitable economic decline.

I do think it will be interesting to see how Starbucks adjusts its strategies and tactics in a post-Schultz era.