Starbucks in the news today

I started to mention yesterday that I hadn’t seen any Starbuck’s headlines for a little while, but forgot to. There are two Starbucks stories in the news this morning. The nuts and bolts of the articles are as follows:

Starbucks has seen a 28% decline in domestic sales, due to decreased customer counts.
Profits are down over 18% for the last quarter.
They will be closing a number of locations that are performing poorly.
They are cutting back on the number of new store openings in the US this year.
They are cancelling sandwiches sales.
They are introducing smoothies.
They will start of a broad effort to offer healthier drinks and expand beyond coffee beverages.
They will begin selling energy drinks.

The good and the bad of this for independents like us.
1. The good is that Starbucks has lost its magic hold on the coffee buying public. They introduced the specialty coffee culture to America, and we owe our existence to that. However, consumers are realizing that there are better tasting, higher quality coffee options out there at independent locations.
2. It can never hurt an independent for Starbucks to close a few stores, and cut back on new store openings.
3. We already offer 100% fruit smoothies, healthy supplements (protein powder, vitamins, bee pollen, etc), and energy drinks. These items are not the core of our business, but they make substantial contributions to our overall sales. If Starbucks has been studying what independent shops are offering (and you can bet that they have been) and plan to do the same, it could have an impact.
4. Howard Schultz knows what he is doing. He created the Starbucks icon experience in our culture to begin with. When he gave up the reins to the company, Starbucks quality and performance began to slide. He knows how to be successful, and make no mistake, he will improve the Starbucks experience once again. Do I think he can get it back to what it was in 1995? No… My reason for that is the sheer size of the company, and you just can’t have the highest quality when you are supplying the needs of 16,000+ stores. They are continuing to use super-automatic espresso machines, which will never match the performance of a La Marzocco or Synesso style semi-automatic…

Overall assessment: Howard Schultz will make a difference by improving the Starbucks experience once again. However, independent shops like Nemo’s Coffee and others have carved out an existence for themselves. We have created a core group of regular customers based on quality of product, customer service and interaction, and a beautiful, inviting atmosphere and environment. Starbucks will improve from where they are now, and don’t forget that Dunkin Donuts and McDonalds are moving forward with espresso bars in their shops. I do not believe that any of the corporate chains will be able to match our quality or customer service. Having an increasing number of competitive and convenient options out there will be our motivation to maintain, or even improve, on our product line and customer interaction. As long as we do that, we will maintain our core customer base.

JD