Ted,

As I am a former partner at Starbucks, you know my love for the company. However, the executive team is far different today (Casey was the CFO when I was there and Schultz still sits at the top). I, too, wonder if Starbucks has forgotten its story.

The brand grew not only because of its coffee--any company can source, grind and brew great coffee. It grew because of its story, which centered on people more than it did on coffee.

Have the white shirts in Seattle forgotten? I don't know. But in the past year, the news has not been good from either inside or outside Starbucks.

Too big, too fast and the culture, "what makes this place special" gets lost.

With Starbucks I think we're seeing a watered down culture, loads of competition in a very profitable segment (creating viable alternatives), which is causing reduced margins, demoralized employees and defecting customers.

I know Bucks management is attempting to refocus, although I think they need a new "big idea". I hope they're working on it.

Ted,
From purely a consumer standpoint, value outweighs the upscale snotty atmosphere I've experienced the few times I've been to Starbucks.
Additionally, while traveling through Ohio, the coffee wizards behind the counter spoke little better than broken english. Perhaps the Seattle brass should meet me @ 7-11 one my way to work as I pick up my $1.55 large cup of fusion.

Thanks for your perspective, Lewis. You have unique insights having been a Starbucks corporate marketer. This is what happens when companies venture away from the things that make their brands strong and uniquely differentiated. Let's hope Starbucks gets it together, and soon.

Paul,

You are so right. You may recall that I wrote a post at the end of February concerning the Schultz memo that leaked to bloggers concerning the warning signs that Starbucks was losing the very elements that made its brand such a powerhouse.

For readers who may wish to see that post, please go to:
http://www.mpdailyfix.com/2007/02/starbucks_to_refocus_on_custom.html.

As Mr. Schultz stated to management back in February, competitors have seized on Starbucks' problems as the company expanded so quickly, and it was time to get back to those things that made the Starbucks brand so successful in the past.

What do you think of Starbucks raising its prices yet again in view of its current difficulties, Paul? Just happened this week. . .

Scott,

Many consumers feel as you do. In the same BW article I cited in this post, it was reported that in Needham, Massachusetts, an affluent Boston suburb, lines are out the door in the AM at Dunkin' Donuts and McDonalds for coffee while the Starbucks outlets located near the commuter rail are virtually empty. If that isn't a sign there's an image problem, I don't know what is.

Ted,

It is going to be interesting to see how this plays out. In fact, I think Starbucks history, meteoric rise, present problems and future response to its issues (either good or bad) are the fodder for a great case study.

Thanks for tracking this developing business story.

I don't know if there is a correllation between the greater emphasis on signing on new music acts for CD distribution and the company's declining fortunes. But you've got to wonder whether "third place" and "SBUX as a consumer brand" has replaced "great coffee" as the focus.

Further, their success has given birth to indi hyper-premium players on the street corners and has emboldened mass players like McD's. (Great move leveraging Newman's brand, too).

They have a tough road ahead of them. Their success is their biggest weakness at this point.

Over at BrandingWire.com (in June), a bunch of us addressed how a company can compete in the coffee marketplace. There is plenty of room for smaller entities to take on Starbuck, McDonalds, and any other "Big Coffees", and win with a focused strategy!

Thanks, Claire, for mentioning this. I have been tracking the Starbucks story with a number of posts over the past few months. It is a fascinating, unfolding case study.

Stephen, you are so right. Part of the gist of Schultz's memo to his top management cited the need to get back to making great coffee drinks while romancing the customer. The music deals and other side shows have likely become distractions.

McDonald's deal with Green Mountain Roasters' Newman Organic coffees has really paid off. Have you heard about McD's spin-off of McCafes in Japan? If not, check it out. This is obviously being tested with a view to possible expansion. Now wouldn't that give SBUX an additional run for its money?

Great observation, Steve. In just about any product or service category we can name, there is a huge amount of competition--and commoditization, as a result. Having said that, there are always opportunities for new businesses to be successful in spite of it. The trick is to be able to find a unique, differentiating niche. We'll have to check out your blog and the comments there. Thanks for weighing in.

I wonder if Stephen might have a point. Sometimes I feel as though Starbucks is trying to re-brand themselves as a music store that sells coffee.

I'm being slightly facetious, of course, but I do feel like some of the publicity surrounding their music business has taken the focus away from their coffee. No one has forgotten that Starbucks is a coffee place, of course, but I wonder if the expansion into the music business hasn't hurt the brand some what (even if it's only a temporary growing pain).

As an avid coffee drinker I find all of this very interesting. I prefer a plain cup of coffee with sugar and cream...I usually brew my own at home using freshly ground beans. The pomp and circumstance that surrounds ordering a cup at Starbucks has turned me off the brand from the very beginning. On the same note, all those "extras" are probably what draw a lot of folks in.

I think Starbucks seems to be complacent with their position in the coffee industry. I don't see much quality control. As I stated I drink coffee every day and I never step foot in Starbucks. I can make burnt, bitter-tasting coffee at home if that's what I'm looking for.

I'm honestly glad to see some other companies giving them a run for their money. Maybe then they will reevaluate their policies/products.

Ted,

I find it interesting that the major two competitors mentioned are companies that are best known for donuts and hamburgers.

I wonder if Starbucks saw McDonald's and Dunkin Donuts as legimate threats, and if not, maybe Starbucks doesn't fully understand its value proposition to at least some part of its target audience.

On another note, McDonald's should get some kudos for recognizing the opportunity with coffee and breakfast. (e.g. they are trying to get their franchisees to open their stores an hour earlier.)

Good point, Adam. CEO Schultz himself admitted in the famous February 2007 memo to management that the company had lost some of its focus on romanticizing the coffee experience for Starbucks patrons.

Ryan, many people feel as you do. And those who do, either brew their own coffee or buy from shops other than Starbucks. There is definitely a perception out there that some Starbucks shops' baristas appear snotty or unapproachable. Doesn't help when folks are plunking down $3.50+ for a java brew, does it?

Tim,

Thanks for weighing in with some nice insights.

While Dunkin' Donuts may have been perceived by some as being a donut shop, legions of fans have always favored the chain's coffee. In fact, coffee sales have really driven the growth at DD.

You're right: McDonald's saw a great opportunity to grow its breakfast business. With the fast food giant's experiment with McCafes in Japan, can a major push with coffee shops in the U.S. be far behind?

"While Dunkin' Donuts may have been perceived by some as being a donut shop, legions of fans have always favored the chain's coffee."

That's funny...as a consumer, I haven't thought of Dunkin' Donuts as a donut shop for years. I think of it as a coffee shop that also serves breakfast sandwiches... ordering a donut doesn't even enter my mind. :)

OK, I have to admit that I might darken a Starbucks doorstep once or twice a year. Seriously, I don't like their coffee. But McDonalds and Dunkin Donuts are their major rivals???

Maybe McDonalds in terms of sheer volumn of coffee sold, but you're more likely to spy me in a Starbucks. I could perhaps agree to Dunkin Donuts if I could FIND a Dunkin Donuts shop anywhere. They certainly aren't in my neighborhood.

However I am shocked at the company that isn't mentioned -- Caribou Coffee. Is it just not in enough cities? Caribou makes great coffee, their stores have a great ambience -- friendly and cozy, complete with pleather reading chairs).

Did I mention Caribou makes great coffee? That's why I've been going back almost every day for the past two years. One of those pleather chairs has my name on it. Caribou.