Starbucks Became Day Old Coffee Long Ago

The end of the aspirational era is upon us, and many blame tightening consumer budgets for Starbuck’s (SBUX) sputtering growth. Starbucks started out as an exciting store concept with higher quality coffee than its chain competitors. Then it became an “exclusive” club with unlimited membership. The next step was habit for the addicted card carrying customers. Starbuck’s containers became jewelry in the office. Growth for the hip chain was exponential. Both the company and its customers really felt sophisticated.

All the while, competitors were caching up. Starbuck’s coffee quality stagnated. They did not offer any exciting improvement in flavor, while Dunkin Donuts did significantly improve taste. So now Starbucks customers were left with self actualization on Maslow’s hierarchy of needs.

After about 15 years I am bored with the Starbucks atmosphere. Being seen in or holding “meetings” in Starbucks is no longer cache. I think the self actualization is waning for most customers, leaving only habit and addiction to restart the business. Not good pillars.

To be successful again, Starbucks needs to recreate excitement in both coffee taste and atmosphere. The South Beach store in Miami Beach is an example of great eclectic atmosphere. It is a Hear Music café. Thoughtful integration of music and coffee enhances, not distracts from the stores. Throwing a few CDs on the counter adds nothing.

I will conclude with coffee taste. Instead of endless varieties, Starbucks needs a unique signature coffee taste. Think of Coke (KO). The next level of success will be achieved when customers can identify Starbucks coffee in a blind taste test.

Comments

[Boulderbiker:]

Coffee at the Bux has never been that good, and you are right, it has only gotten worse.

2008 May 22 09:38 AM

[wrongdog:]

Yet another silly personal experience article. Why is this mixed in with investment news? These days, along with opinions, blog soap boxes are like aholes. Everybody's got one. No facts are required to take a dump.

2008 May 22 11:55 AM

[sbux worker:]

Okay, so I have been with the company for almost five years, and I understand where your comments come from in some part. However, it is apparent you have not been keeping up on current events, as Starbucks now has an everyday roast called Pike's Place which is offered in stores all the time. The decaf is also Pike's Place. So, the company has developed a signature roast which is available at all hours of operation.

Finally, your reference to the Hear Music store is outdated. The company has already decided that concept really does not work. They had it right from the beginning....that customer loyalty comes from recognizing and getting to know your day to day regulars in a personal way. Besides quality, that is what encourages customer loyalty.

I agree with one of the posters above, you have no facts but simply your own opinion, which really isn't worth much.

2008 May 22 03:24 PM

[JSH:]

Interesting at first glance, but the analysis and analogy using Maslow's hierarchy of needs falls short and is inaccurate. The analysis is correct in part that many (current) SBUX drinkers have reached a sort of "self-actualization" in terms of coffee connoseuirism, however, the analysis seems to assume a static population without taking into account the dynamic influx of new people into the population. All of the aforementioned growth factors leading the large current population to "self-actualization" are still in play...and hence pre-teen and teen future coffee drinkers will continue to seek self-actualized coffee connoseuirism primarily through SBUX. Not to mention how incredibly subjective this article is..although much is stated as fact..."All the while, competitors were caching up. Starbuck's coffee quality stagnated. They did not offer any exciting improvement in flavor, while Dunkin Donuts did significantly improve taste." I definitely disagree (with these facts). Although competitors have recognized the continued growth and preference for SBUX among consumers and have started to try and mimic SBUX type coffee, I don't equate this with "catching up". I still think SBUX coffee quality is great..even if it has stagnated and can't get any better! That is the nature of being the best! And I completely disagree with Dunkin Donuts improving their taste. I tried to drink it and try different coffees, and after half a bag threw the rest away and dumped out the cup I had just poured. If that is improvement what did it tast like before!?

2008 May 23 11:40 AM

[pelican:]

In Tokyo, for example, customers line up 2-3 hours to buy donuts at KrispyKreme. And its not because they think its the best donut on earth. Does that occur in the U.S.? In China they go gaga over KFC. International markets are where the growth for Starbucks is. And I think they can milk that cow for several years. In the meantime, perhaps they can revitalize its domestic operations. I'm not saying the stock is a buy now - I'd like to see it fall to $14/share. But I doubt the situation, through challenging, will never improve.

2008 May 23 03:26 PM

[BuxCustomer:]

author has overlooked one thing.. Starbucks offers certain amenities not commonly found in other places.. such as soy milk. that said, if Dunkin' starts offering it, I WILL be going there and putting the difference in cost in to my IRA for an early retirement.

2008 May 29 11:51 AM