Is Starbucks (NASDAQ:SBUX) a broken brand? The answer is no.
But hearing former and incoming CEO Howard Schultz on the company’s conference call yesterday, after he unexpectedly returned as CEO, it’s clear that he was worried it might become one and that the memo was a shot across the bow, of sorts.
He referred to his now famous leaked memo of last February, in which he worried out loud about the “commoditization of our brand.” He also worried about the use of automated espresso machines versus “the romance and theatre” of the manual machines; the use of flavor-locked bags as opposed to aromatic barrels of beans, and the “streamlined” design of stores that removed “the soul” of the stores.
These were among the issues that he said the company needed “to solve.” He added that “I have said for 20 years that our success is not an entitlement and now is proving to be a reality. Let’s be smarter about how we are spending our time, money and resources.”
On yesterday's call, there was a strong sense of urgency in Schultz’s comments, which underscores his concerns. But it also highlights the genius of his management style by not waiting around for the brand to fail. “You never want to count a strong brand out,” says marketing strategist Laura Ries of Ries & Ries in Atlanta. “A strong brand, like a strong celebrity, can come back if the right choices are made going forward.”
The choices include announcing that Starbucks is closing an unspecified number of under-performing U.S. stores, an acknowledgment that it may have gotten ahead of itself. “We have a lot to do,” Schultz said.
And while not disclosing any financial information, he made it clear that his reputation is at stake.
Now he he has to prove he hasn’t lost his touch at execution. Considering that in 2004 I named Schultz CEO of the decade, even though by then he was chairman, my guess (and bias) is that he’ll do just fine. As will Starbucks, the brand.