Starbucks' Schultz finally shaking things up

Posted by: Aaron Pressman on January 07, 2008

“Well, we have read that McDonald’s is going into a premium cup of coffee, to serve a premium cup of coffee, and we are in that business. We are in the premium bean segment, and we think that the more the consumer gets educated on premium coffee, the more (that) bodes well for all of us that are serving that type of coffee. We watch it closely, but at the end of the day, we think that it helps educate the customer on what really a great cup of coffee is all about.”
Former Starbucks CEO Jim Donald, February 8, 2005.

When a stock drops 50% in a year, it’s tough for the CEO to hang on. When that CEO appeared to be, time after time, oblivious to the causes for that drop, well, see Exhibit A of 2008: Starbucks suddenly former CEO Jim Donald. It’s almost one year ago that Starbucks sort-of-founder, chairman and just now CEO again Howard Schultz issued a call to arms in a memo ackowledging that the coffee chain had opened the door to competitors. Anyone can sell coffee or lattes or even carmel macchiatos. What made Starbucks special was the atmosphere. Despite Schultz putting his finger on the right problem, Donald seemed slow to craft a solution or actually do much of anything. With Howard back in charge, shares of Starbucks (Symbol: SBUX) all the way down in the $18 range (about where they were four years ago adjusted for a stock split) and Wall Street’s most bullish analysts having thrown in the towel and yanked their “buy” ratings, now is the time for re-entry.

You’ll probably read a lot about founders coming back to save their foundering creations over the next 24 hours. Michael Dell, Steve Jobs, and on and on. Schultz return is definitely of the Jobs variety - not only does he have vision, it’s vision that his company is so clearly lacking. As Schultz says in a statement the company put out a little while ago: “We know what needs to be done.” And he’s got a multi-point program to get things in order, starting with enhancing the customer experience, slowing the pace of U.S. store openings and spending more capital to expand overseas where the opportunities are richer.

p.s. Blogger and investor Todd Sullivan was ahead of the curve on this move. Commenting on the Wall Street Journal story today on McDonald’s coffee forays, Sullivan posted some of Donald’s more clueless comments. Then he called for the CEO to be fired, a slowing of U.S. Starbucks openings and an overhaul of the customer experience. Looks like Sullivan was right on.

TrackBack URL for this entry: http://blogs.businessweek.com/mt/mt-tb.cgi/

Reader Comments

Harald Felgner

January 8, 2008 04:12 AM

Recently we asked: Why Do CEO/ CIO Employments End? Today it's: Why Do CEOs Return? Citations: Howard Schultz, Starbucks, January 2008: "We will focus on what is most important. We are committed to customer experience."
Michael Dell, Dell, December 2007: "The old model ran its course, now it's time for a new course." http://www.felgner.ch/2007/12/ceos_return.html

Post a comment

 

About

Businessweek’s Emily Thornton, Amy Feldman, Ben Levisohn, and Ben Steverman focus on matters great and small for investors, from the views of a hot fund manager to an explanation of the latest products devised by Wall Street’s rocket scientists. Exploring trends in any area, from bonds and stocks to closed-end funds and futures, always with an eye towards giving investors a better understanding of the sometimes confusing and often chaotic world of finance. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

BW Mall - Sponsored Links

Buy a link now!