Sunday, January 13, 2008

Food Business: On 'Curing What Ails Starbucks'

I'd been thinking about regular features I could write for the blog this year, when it occurred to me that the New York Times runs an article about food in their business section most Saturdays. Lest you think I'm some mutual fund obsessed food dilettante, I know this because the business section happens to also be the sports section.

This week's food article is Jose Nocera's Curing What Ails Starbucks. Should be interesting - I'm approaching this as a dyed-in-the wool Peet's fan. I pretty much only go to Starbucks when my wife competes in a triathlon someplace that doesn't speak Peet's. I was given a $20.00 Starbucks card in a white elephant gift exchange and, despite my daily coffee habit, I've used it just once. I purchased a large iced coffee for $2.50.

I had to wait five full minutes to receive my beverage while that automatic espresso machine spit out lattes. The coffee didn't taste as good as it does Peet's, it cost .70 more than it does at Peet's, and it took me at least five times as long to get. I made the switch to iced coffee a few years ago and have not looked back. It's easier on my stomach, less prone to lid issues, and at Starbucks I drink it black. I don't want it sweetened or blended. They have drinks that are sweetened and blended icy things, and they call them something else.

I'll recap Nocera's article this way, the founder of Starbucks hates the fact that they feel like a huge chain operation, so he's named himself CEO to restore the "romance and theatre" of a Starbucks experience that has become "watered down". Nocera's view is that this a bad idea, and that the competitive landscape has changed too much for Schultz to turn the ship around without doing things that he is unlikely to want to do - i.e. compete on price.

Along the way Nocera mentions some old news - apparently Schultz let the Stabucks executive staff hear about his unhappiness last year, in a memo that found its way to Schultz writes,"we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand."

The culprits include stay-fresh packaging that prevents Starbucks stores from smelling like coffee, and automatic espresso machines. In addition to eliminating the need for a barista to perform the act of creating an espresso drink, these new machines are tall enough to block,"the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista."

These decisions, combined with the ubiquity of the product, have resulted in Starbucks becoming what non-customers always thought it was - an over priced strip-mall version of an actual cafe where everything costs a lot more. Of course this makes sense to people like me, who think of drinking there as settling. What seems to be keeping Howard Schultz up at night is that is starting to make sense to people like my co-worker who treats himself to coffee there each Friday.

Premium brands and ubiquity don't get on well. This was on Seth Godin's mind last month.

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