Starbucks – A Total Disconnect
The world’s largest chain of coffee houses is getting a lot of publicity lately – most of it negative. Of course the closing of 600 plus stores started the ball rolling, but their problems started a long time before the economy went south.
In a recent interview, Howard Schultz, CEO of Starbucks, outlined plans for a complete makeover of their breakfast offerings. His reasoning paralleled his own experience with healthier eating habits. Soon the Starbucks outlets will offer oatmeal, bran muffins and whole grain pastries. At the same time, Schultz was determined in another interview to take on McDonalds for the top spot in QSR breakfast choices.
How does a CEO of one of the largest restaurant chains in the world talk about their move to healthier choices and at the same time take on McDonalds? Since when did the word “healthy” and McDonalds become even remotely linked? People don’t wake up in the morning and decide to eat healthier today and choose McDonalds for their tuning of a new leaf.
I don’t think Starbucks will be high on the list of healthy eateries when their main product is a $4 caffeine laden product that has become a luxury for the working class in this economic environment. Blogs, foodie websites and reviewers have criticized Starbucks for months about the poor quality of their food items. Healthy had nothing to do with the pre-packaged, gas station quality breakfast sandwiches, sweet rolls and scones.
Schultz went on in another interview with the New York Times about the chain’s goal of reconnecting with the “customer experience”. Sorry, but the customers are telling you they want a less expensive coffee, Mr. Shultz. They can’t afford coffee that equals the gallon of gas they are paying $4 for. No one was staying away from your stores because you didn’t serve oatmeal and bran muffins. Now, according to your own words, you expect them to pay $4 for coffee and $3 for oatmeal or a muffin. I’ll bet McDonalds is shaking in their shoes.
Schultz is typical of a chain executive who flourishes in the good times, but has no link to reality in the bad. I expect further declines in Starbuck’s fortunes and stock price that has tumbled over forty percent this year.
Here is an opportunity for independents and small operators to continue to eat away at a large chain that has no direction. Starbuck’s problems started a couple of years ago when other small operators started to offer gourmet coffee blends at almost half the price. Consumers began to realize they were paying for a trendy habit that was unnecessary. It may have been “cool” to walk in the office with a Starbucks cup, but the reality was that it was just a good blend of strong coffee easily duplicated by other equally trendy coffee competitors.
If you recall, in February all Starbucks stores were closed for three hours to re-train their employees. Even then they were reacting to chinks in their armor that started back in 2007. If your niche is coffee, connect with your customer by offering what they want, not what you want. Your future will be a lot brighter than Starbucks.
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