What Is Starbucks Doing Out There?

This one is priceless...

On Wednesday, Starbucks (SBUX) announced its "transformational ideas" to bring life back to the company. Rather than recite them in detail, here they are in brief: new machines, ground coffee, rewards card, social site. I thought the same thing - "you kidding me?"

Now I read this little nugget in the USA Today:

"Consumers will be encouraged to submit ideas, to comment and vote on ideas from others, and even to follow along as ideas evolve into real products (on the new "social site"). Some 48 Starbucks employees will respond to comments on the site, and Schultz will have a blog. Alas, consumers will not be compensated for ideas that Starbucks adopts, says spokesman Brandon Borrman."

Is this what Schultz & Co. have been reduced to? Having employees pilfer ideas from customers? Guys, you sell coffee, you are not splicing DNA out there in Seattle. Go back to what you do best and stop all this ancillary garbage that clearly has taken your mind off the game. CD sales, not working, end it. Breakfast and lunch, done. If I want a book, I'll go to Borders (BGP), not the local coffee shop. Just because you have empty floor and counter space does not mean you need to put crap there to sell.

Howard, rather than blogging away the day, figure out how to get me a coffee in under ten minutes when there are more than 5 people in line. How about a location I can actually sit in? This is getting out of control.

The question is now this. What is Starbucks? Is it a coffee house chain? I mean, wasn't that the genesis of the whole thing? Wasn't Starbucks modeled after Italian style coffee houses Schultz visited in Europe? It is so far away from that now, and getting back may just require a complete "do over." It has now unequivocally lost its soul. No question.

Trolling the web for ideas........sad

Alas shareholders, Schultz, far from being the company's savior, may just be its largest hurdle...

Disclosure: No position.

Comments

[mjn185:]

You really need to get over your self-righteous self. You are the same bozo that thought that starbucks needed to become kid friendly. Although I am not sure who is the bigger dunce you for writing this crap or me for reading the article once I saw that it was you who wrote it. If you dont like starbucks and you dont own the stock then leave it be. You people claim to be these great visionaries when all you and your kind do is find the newest stock that has been beaten down and then opine about how you could do it better. I notice that there was not a peep out of you during the years of explosive growth under Howard Schultz. Somehow I am thinking that I am going to bet my money on Schultz genius and not your pathetic attempts to laugh and point at a great company that had a setback. Do us all a favor and write about something you know. I noticed that you did not draw your endless McDonalds comparisons or scream about KID FRIENDLY this time so I guess that is progress.

2008 Mar 23 09:28 AM

[PAAKO:]

You should really read wikinomics; then you will understand why this is being tried.

2008 Mar 23 09:50 AM

[CM in MA:]

- Don't know what Todd has written prior, but I think he's right on target here.

- Haven't read wikinomics either. Probably, make that definitely, won't.

- I loved Starbucks coffee and the whole Starbucks "experience." A long time ago. Wouldn't touch the stock the last few years because every time I was lured into a Starbucks, I left with a bad experience. There were inattentive baristas and counter staff, uneven drink quality, long wait times, and dirty facilities, to name just a few basic blocking and tackling items that Starbucks lost lock on. Could've been too much expansion too soon, or any one of several reasons (excuses) for the downhill slide in service. At the multiple it traded at, though, it seemed to be asking too much of the company to deliver the necessary results to justify the price. I hope that Starbucks can find its way back. A great brand, and perhaps still a great company. I'll still stop in from time to time to see how they're doing. Who knows, some consistent in-store improvement and a few dollars cheaper and perhaps I'd be interested in owning a small slice of it. But I can certainly live without both their coffee and stock at this time.

2008 Mar 23 05:41 PM

[TumAndEd:]

I can sympathize a bit about customers unhappy about US Starbucks stores as I too have experienced long waits and dirty stores when visiting the US. We own a little of the stock and are taking a real beating right now but hopefully the brand will prevail and the US outlets will shape up. For what its worth Starbucks in Asia is still a good experience and one that my wife and I enjoy every Sunday when we follow our ritual of Starbucks for breakfast. We live in Manila but have visited stores throughout Asia and have never been disappointed.

2008 Mar 24 05:39 AM

[Stiennon:]

Starbucks stores still hold an intractable allure for the coffee drinker. On top of the high quality brew Starbucks has become the meeting place of choice for business. I have been on dozens of sales trips where the sales teams congregates at the Starbucks closest to the client. Everyone is checking email and getting wired in preparation from the upcoming meeting. It is a new way of life. The biggest challenge may be 3G and EVDO. Gott go join that social site and get my two cents in....

-Stiennon

2008 Mar 24 11:22 AM

[Starbuck IP...:]

I attended the Starbucks annual meeting. I am an original Starbucks investor. The fact is that Starbucks held a RaRa meeting for the staff since most in attendance were staff who are now investors. They did not address mounting health expenses (the number one expense of the company), they did not address the fact that mall traffice is down 10% and what they can do to combat this loss. They need to cut and cut fast. Staff and Stores. They need to get rid of the 3 hour internet browser customer who has one coffee. They need to use the famous MBA staff to really find good ideas and not try to "find it" with customers. I was not impressed and will be watching carefully the next 6 months. I trust Howard did not tip his hat on expenses...since he would have had a riot with that many staff in attendance. His top staff are petrified. They could barely talk in the Q&A session. That is all for now

2008 Mar 24 12:13 PM

[GreenNetizen:]

My investment club owns Starbucks stock so I make an effort to shop there. I have one drink that I indulge myself in: Chai latté tea. Since I pay a premium for this drink I feel I have a right to tweak it to my specifications: Venti Chai Latte, all soy, no water, extra hot, 1 1/2 extra pumps of the Chai syrup, stirred well, no foam and cinnamon sprinkles on top. I could go into an explanation why each of these requirements are so important to make the drink "just right" but will spare you. I pay $4.30 for this drink. Shouldn't I have the right to expect it to be "just the way I like it?" At first it was a once or twice a week thing but I went through a phase where I had to have one about every day. (stress in my life) I would visit different stores, order the same drink. In the early years of Starbucks, it was a good experience. The drink was consistent; the workers were polite and acted like they enjoyed their jobs. In the last year though, I began to notice that service, the atmosphere, and taste, and the drink itself varied from store to store. The price even varied. Some people would charge me the extra 40 cents for the soy and others would not. Some would try to charge me and extra 40 on top of the soy for the extra shot of chai. When I tried to talk to the district manager, was given the brush off and eventually contacted by an e-mail, which I never responded to.

So what do I think of the company now? I think it has lost some of its authenticity. I began to feel like it was an artificial experience, the whole coffee shop thing. It was becoming "just another store that wants your money."

I disagree with Todd about Shultz coming back. This is probably a good thing. I hear that the employees are very happy and excited about his return. What Starbucks was able to do when he was running the business was to create an experience and a connection with the community. People found a place where they could go and hang out and meet with their friends. Our book group would meet there and talk about the book we were reading. It lost that when it became "just another store." It made the Chai tea taste not as good and made me question whether I was being an idiot for spending that much money for a drink!

If they can create new products and recapture that sense of community that made them such a hit to begin with, they may have a chance. Not everyone wants coffee in five minutes or less. The Starbuck stores in our town that do the best are the ones who have friendly employees, support community events, provide a secular gathering spot, have good food, and it just feels good to walk into the place. That is what they have lost. That is what they need to get back if they are going to stay "unique."

2008 Mar 25 08:55 AM

[Todd Sullivan:]

mj,

please do you homework. my first post on the subject was in Jan.2007 when the stock was just off an all time high....

one could hardly call that "finding the latest beaten down stock".

also, I called their "dairy cost" issue before management admitted it last year also....

self-righteous? no.... just "right"

2008 Mar 25 02:04 PM

[grimmer:]

Todd,
Don't act all high and mighty. A cursory look shows that you thought that Borders was "excellent." Now the company is for sale. Since your post $10 to $5. You are also high on Wachovia. Down from 40 to 30 since you wrote your post. I just did that after looking for about 2 minutes. I'm sure that I could find more. You should publish your own results kind of how Jim Jubak does it.

Maybe "right" on SBUX but "wrong" on a whole lot of others.

2008 Mar 26 12:37 AM

[mjn185:]

Thank you Grimmer. And though I may have been more rude then necessary I am just sick and tired of analysts continuing to take initiatives made my companies and being the naysayer. It is easy to sit on the sidelines and shout when you are not held accountable for your calls. It is another thing like you said when you have to publish all of your rights and wrongs. If these guys were this wrong in the business world any company they ran would be bankrupt and I still hold to my premise that his last article on how he would solve the company is ridiculous. So as far as the " not self-righteous just right" comment it is important to understand that a broken watch is right twice a day but that does not make it a good watch.

2008 Mar 26 07:26 AM

[brewboy:]

The issue for SBUX now is that need to SPEND MONEY to fix the issue. Look at the market and close the lower performers that can transfer sales to another unit PROVIDED the service does not suffer. AND, if they make a decision to close a unit and transfer sales, they should also spend any necessary $$ to make sure the store that will get the transfered sales is up-to-snuff. This means write off for the closed store and FF&E PLUS cost to make the 'keeper' look it's best. PLUS, they have the write off for the ill-fated 'warming' to deal with. They need to get this pain BEHIND them and it is my opinion they are attempting to spread the pain over a sequence of quarters instead. RIP off the bandage PLEASE dont pull it off slowly!

2008 Mar 26 07:53 PM

[Todd Sullivan:]

grimmer,

never claimed perfection (who would?). simply responded to a comment on this issue.

by the way, bought Borders recently at $4.50 (documented on my blog). that is 33% in a week according to my math?

Still hold Wachovia. As my "intro" states my holding period is "several years". Time will tell on that one..

I simply pointed out I was far from a "bandwagon" analyst on Starbucks...there is nothing "high and mighty" about that..

I also do "best and worst" calls on my blog, admitting errors is not a problem for me....

2008 Mar 27 11:13 AM

[NYCTraderC:]

Since when is listening to your customers a sad idea? I agree with many of your assessments, but your tone is obnoxious and your take on customer feedback is ill-thought-out. Admittedly, I have the advantage of knowing at this point that MyStarbucksIdea.com has been a huge success in terms of feedback volume, but still. Arrogantly denouncing listening to your customers as "sad" is far from quality analysis.

Also, visit your local Starbucks. They are making a lot of the changes you suggested.

2008 Apr 09 06:38 PM

[WAL:]

I would love to see a dividend from Starbucks. Beaten down as they are, with no growth on the horizon, I think a P/E ratio of 24 is pretty high. $7 per share might be a good entry point into the stock if all you're looking at is growth. There will be no growth in the stock price if Starbucks can't find any reason to entice new investors. Closing stores makes good sense to me, but at the same time it signals investors to wait another year before jumping in. In that time period I would expect more unhappy stock holders to dump their stock. I'll check back when the price is around $6.50.

2008 Sep 09 10:09 AM