Making Starbucks Exciting Again

I think returning Starbucks (SBUX) CEO Howard Schultz is doing a good job so far. He's the one that put the coffee chain on the map and, as with Steve Jobs at Apple (AAPL), was exactly the right guy to come back and get the business back on track.

One of his best ideas so far has been seeking your ideas for how to improve Starbucks. The company has a website called My Starbucks Idea where you can throw out your ideas, see what other customers think, and even watch as the company puts various ones under review, shows which ones are already in development, and otherwise reveals status.

Some of my favorite suggestions from among the most popular are:

• Finally, offer free wi-fi access.
• Offer a free birthday drink.
• Create a punch card where frequent sippers get every 6th or 11th drink free.
• Sell a healthy breakfast.
• Make a swipe card so regular customers can scan or swipe it inside the door, pay directly with the card, and have the order go straight to the barista so the card holder can skip the register line.

This gathering of ideas from customers is a great, free way to see how to make Starbucks exciting again.

We're long SBUX because I don't see any reason it won't recover. Two years ago, the stock was almost $40. Today, it's under $18. Sure, there are reasons for the decline, chief among them a weak consumer in the midst of recession and higher food costs, but the business is a winner. Look at the revenue history in millions of dollars:

1998 $1,309
1999 $1,680
2000 $2,169
2001 $2,649
2002 $3,289
2003 $4,076
2004 $5,294
2005 $6,369
2006 $7,787
2007 $9,412

You don't want to miss that kind of revenue growth on sale.

Comments

[Malkiel:]

You forgot to add: do away with the hokey Italian size names. It creates confusion when "tall" and "grande" are sizes on the same menu, but not the sizes you would expect from their english equivalents. It gets even more infuriating when you say "medium" in English, hoping to get what you're accustomed to, and they fire back the question "'tall' or 'grande'"?

2008 Apr 10 10:23 AM

[Urbane Gori...:]

I refuse to order 'double-veinte machiado lattes'... If the staff does not understand what I want when I ask for a medium coffee, I leave... However, most buyers don't seem to be upset by the naming practices of the drink sizes... So I don't believe that this issue is pertinent to bringing Starbucks back in line..

I do agree that the Internet thing is an issue... I'm not affiliated with Cingular and I do go elsewhere at lunch so I **can** check my stock portfolio. Having said that, when I have been in a Starbucks and there are people on their laptops there... These people don't move.... They just occupy space... That's a poor use of occupancy and turn-over and if the place is busy, there are buyers that will go elsewhere.

My feeling is that they need to speed up the process..(hard to believe, huh!).. I think the card swipe idea is good.... I also think they need to reduce the store clutter.. When you have a line of purchasers at lunch time, there always seems to be someone discussing the purchase of espresso machines or other gift items.. Although I do understand the bottom-line benefits of 'add-on' purchases and such..But they sure do slow down the line and speed and quality seem to be the drivers of Starbuck's business, not the **image** of a nice relaxing European moment.

Thx jegan ;-)

2008 Apr 10 11:04 AM

[Jimymac:]

I strongly disagree. Arrogance and perception will make recovery long and painful. I loved Starbucks and in 2004 flew into San Diego and proceeded to hit almost every Starbucks all the way up to Vancouver. I was very disappointed and tried to convey my findings at Corporate in Seattle. I was met with arrogance and dismissed. I sold and haven't looked back.

2008 Apr 10 11:23 AM

[cswalker21:]

I don't think the hokey faux-Italian size names are mandatory. I always say "Medium coffee" and they always know what I mean. I'm always impressed that they can roll with a venti-soy-half-caff-ca... from one guy and a medium coffee from the next guy with such ease.
And maybe they were arrogant in 2004 but the 50% decline in stock price may just have humbled them, as they seem to be at least trying to listen more to what their customers want.

2008 Apr 10 12:23 PM

[vodka_tonic:]

1. $4 lattes, cmon now...were in recession.
2. no free internet, huge problem....should be solved by mid summer though.
3. nobody buys the other crap, they should dispense with that and stick with more coffee offerings. i like the snacks though. banana nut cake, yum :)

2008 Apr 10 07:48 PM

[James O'Reilly:]

I too have always loathed the Italian names for the drinks, and the weak coffee/high prices mean I only go to a Starbucks when there isn't a Peet's around. I must say though, Starbucks does tend to have very pleasant employees.

2008 Apr 11 01:21 AM

[Taxigringo:]

I hear a lot of negatory things about Starbucks, the worst of which is their liberal political leanings. But here is the deal. I need a good cup of coffee in a friendly environment more than I need my conservative politics affirmed. I go there about twice a day to get a medium coffee. The people are congenial. The coffee is more to my liking than that of other vendors. It isn't as good as my own home brew, but I repeat: I go about twice per day for a medium cup. My fifteen year old daughter enjoys me spending $4 on a dessert drink for her.
I wouldn't offer free internet as it will be a hangout for non-spending students who will take up all the comfortable seats. I like the place for some reason, and though I'm reading warnings about buying this stock I'm thinking of buying a hundred shares in the morning simply because I like the business as a consumer.

2008 Apr 11 01:59 AM

[vodka_tonic:]

it's not about your spendthrift daughter taxigringo, the US is facing a recession, $4 coffee in the past was fueled by subprime dollars, in the future that will go to gas. the upside is limited. free internet is all over the place and it adds to the decision making process. i like the starbucks atmosphere and their employees, but if i have another nice / cool alternative, me and a lot of other people are going to check it out.
nothing in life is fixed, brother.

2008 Apr 11 03:06 AM

[Guinness' Mom:]

Well, interesting comments to say the least and everyone is entitled to their own opinion, so let me throw my 2 cents in for what it is worth. I like a lot of things and one of them is coffee. I have found that my trips to Starbucks are routinely enjoyable. I enjoy a number of drinks and I am more than happy to pay $2-$5 for a cup of my favorite beverage. I'm not a millionaire, but I enjoy this small bit of heaven 2-7 times a week depending on my schedule. Ghastly to some, I know, but well worth even going out of my way in my opinion. I've tried others, brewing at home, etc., but if you truly enjoy Starbucks it's not just about the coffee, but the atmosphere and experience. Mickey D's and Dunkin Donuts are not going to cut it for those of us who enjoy the coffee as well as the experience. Recession...whatever!?... If you have been living within your means all along, then you can afford to continue to partake in small purchases like coffee. Some days I liken coffee to a necessity of sorts and just as I'm not giving up food, water or buying gas, I am not going to stop enjoying Starbucks any time soon and I do not think that I am alone. Further, I don't go to Starbucks to obtain "FREE" anything...I agree with Taxigringo, if the "FREE" will bring the atypical Starbucks clientele, then how will that improve the situation besides driving away those of us that enjoy the atmosphere that currently exists?!? In the end, I am happy to see that they are getting back to their basics of good coffee b/c I think that is what made them popular in the first place. Further, I just recently purchased Starbucks stock b/c I don't think they are going anywhere, but back up in stock value. I hope that I am correct, but if not, then many of you will not have to worry about that darn Italian lingo in the future...

2008 Apr 11 02:40 PM

[Et tu, Brute!:]

Well said, Guinness' Mom!

If internet access is what you're after, take it anywhere from Barnes & Noble to Denny's Restaurants.

As for the recession we are everywhere hearing about... It's easy to grasp: I am 50-something, and as far back as I can remember, unfailingly, everytime a two term President leaves office, there's a recession! Has nothing to do with Party. Everyone tightens up when faced with an uncertain political climate.

Think about it!

Meanwhile, I am going to my Starbuck's and have a vente of whatever they're brewing today! Maybe I'll see Guiness' Mom and Taxigringo spending time with his daughter while I'm there!

2008 Apr 12 12:25 PM

[joecoffee84:]

I work for Starbucks. I feel that all these new ideas, marketing, and procedures (hand scooped coffee) are all great and will eventually raise the bottom line (we're saving a lot of money hand scooping coffee and brewing 1/4 batches). But I also believe that if the employees were paid better, things would be better. I believe in the law of reciprocity; if Starbucks pays a better wage, the employees will be happier, do better, and more customers will come. In the west coast, we get paid minimum wage + tips. We ending up getting maybe...$9 an hour. It's ridiculous. How can you pay rent, buy healthy food, and pay for all the other things (utilities, transportation, insurance, etc.) and live a comfortable life. Not in California.

2008 Apr 13 11:20 AM

[udirtyrat:]

Article is out of touch with what is going on. Means nothing that Schultz is back at the helm. S. Jobs never left to really come back. CEOs come and go. M. Dell came back! Did that make an instant impact?.....NO! At least in technology things are constantly changing and the money being spent is for something that is better than before. Problem is that when "tastes" change there's nothing else to take its place. Sandwiches was idea or the breakfast play and that was a dead loser.
It's fast food liquid! but with coffee you have customers who really DO care how the drink is made. For one thing it takes a lot longer than 3 lousy hours to make a difference. Teenagers aren't "Barista's" by a long shot and the espresso for dummy machines were a bore. It's an INSULT to the profession that they're called Barista's with those machines....really! Just call them partners....end of story. They can't tell you the perfect timing of an espresso! Why the grind needs to be adjusted depending on the weather! The machine was only there to make the drinks "FASTER" not better....that was the biggest failure. Now you'll have the cost to change back, but will he? Workers in this environment change too often to waste time on proper training...that's why the stupid machine was put in....WRONG!
I guarantee you a so-called Barista couldn't tell you what bean to use if you ran out of espresso beans! Or what makes the perfect shot!
I love my espresso and I visit the Starbucks EVERY SINGLE DAY but that doesn't mean I like it. Problem is that there's nothing else to take its place that is close by.
Listen....it DOES make a difference on customer service, but if you go every single day and you order the same drink, EVERY SINGLE DAY, wouldn't you expect that at least they'll remember your name! Never mind the drink....this is what makes me sick. What it really comes down to is kids don't give a damn and they move on. Building more stores is like issuing more stock....it dilutes the value. Starbucks HAS lost the edge.....and value. Of course time will tell.

2008 Apr 14 12:02 AM

[Christian:]

Dirty's post is excellent. I'm long on SBUX (accumulating shares at this level) and LOVE Starbuck's. I don't mind paying $3-$5 for a latte/mocha/what-have-... and have been a loyal customer for many years.

But reading the previous post does have me agreeing: Starbuck's may have become too "fast food". I don't feel the magic I did long ago when I first discovered my "latte" fixation. I'm still a regular customer, but wonder where the brand is going. Maybe the stores get too crowded to deliver the "coffee shop" experience. Pleasantness aside, a really good barista ought to know your name and the details on the coffee nirvana they serve.

Too many stores - when there's three stores within eyeshot standing outside a Starbuck's at a mall in SoCal, there's no wonder the employees can't keep track of the regulars and the drive-by's. I do like convenience, but would not mind having to drive a few more minutes to get to a shop that can recollect who I am and what I love to drink.

The changes Howard are pursuing are good, and I'm willing to purchase shares this cheap to invest in the roadmap. Hopefully he can rediscover the small Starbuck's coffee shop "magic".

Think I'm gonna get me a grande white mocha...

2008 Apr 14 04:17 PM

[distion:]

i think i wouldn't want to miss that kind of revenue growth on sale

Dec 04 02:21 AM

[distion:]

My feeling is that they need to speed up the process..(hard to believe, huh!).. I think the card swipe idea is good.... I also think they need to reduce the store clutter.. When you have a line of purchasers at lunch time, there always seems to be someone discussing the purchase of espresso machines or other gift items

Dec 06 02:58 AM

[alisa:]

Nice writing. I will check back to read more.

Dec 09 04:38 AM