CEO of Starbucks once more, Howard Schultz has his work cut out for him
You probably saw today that Howard Schultz, the founder of Starbucks, is to become CEO once more after 7 years away from the post, a job he’d held for 13 years up until 2000. The reason for his return is to revive the performance of the flagging brand, which has seen its share price fall 48% in the last 12 months. This follows a leaked memo last year that Schultz had sent to Jim Donald, the dude he’s replacing as CEO, warning of “the commoditization of the Starbucks experience.”
Schultz is right about the need for Starbucks to be seen as something special if it hopes to carry on charging $3 or more for a cup of frothy coffee with so much competition from McDonald’s and Dunkin Donuts, and he recognized how important it was in the book he wrote 10 years ago, “Pour Your Heart Into It: How Starbucks Built A Company One Cup At A Time.”
One problem is that there are so many Starbucks cafes (1,065 were opened last year to give a grand total of 6,700), making it difficult to support a position of specialness or distinctiveness. Schultz is convinced, however, that there’s still a lot of room for growth in the US - although it’s not yet clear whether he’ll stick to target of 20,000 cafes in the US (40,000 worldwide) that Jim Donald announced last October - and says that the drive for efficiency is to blame for depleted romance and theater of a visit to the stores.
I think that he needs to do a more serious overhaul than simply getting the barristas to put on a show when frothing the lattes. To stop the chain seeming like a chain, he needs to break the uniformity between stores, so that each one provides a unique and distinctive experience that reflects the neighborhood it’s in, the customers and the people who work there. Individual stores need to introduce special blends that you won’t find in the others (at least, not at the same time), chalkboards, community noticeboards and initiatives to help the local environment.
Customers used to talk about “my Starbucks,” but that sense of owneship has since gone. It’s become another faceless corporation selling undiferentiated products and, what with recession just around the corner, it’s going to become much more difficult to justify the price premium. The values people will seek in their purchases will be about discernment and frugality and Starbucks doesn’t not easily with either of those.
