Starbucks "Everyday": Can We Afford That?

Posted by: David Kiley on April 8, 2008

Starbucks “Everyday Coffee” offering is an effort to Dunkinize the brand a bit. Is that a good idea? To water down the brand, if not the coffee, is risky.

The idea here is that Starbucks has developed a new blend, Pike Place Roast, that it will have on hand all the time. Previously, if one wanted a “regular coffee,” there was a rotating selection of blends. Today, for 30 minutes, the chain offered free 8 oz. samples of the new brew.

Pike Place was blended to have a smoother, cleaner finish than Starbucks’ other blends. This goes to the most frequent criticism of Starbucks coffee by coffee meisters—that it tastes burned. Pity the folks who get Starbucks coffee off premise, either from catering services or in convenience stores. This stuff, brewed and stored in pump thermoses, is notoriously bitter and tired tasting. Howard Schultz visited BusinessWeek’s offices in 2005 where we had his own coffee on hand. “This was good…about six hours ago,” said Schultz, rolling the swill around in his mouth. We had it delivered right before his arrival. But that’s a lesson in how quality control can go terribly wrong when you relinquish it to too many far flung constituents.

Starbucks has been seeing McDonald’s in its rear-view mirror when it comes to espresso coffee. The fast-fooder launched McCafe, selling lattes and cappuccinos. Recently, it has begun running ads aimed at Starbucks, one featuring two women talking about how glad they are to be out of a pretentious atmosphere.

Last year, McD’s got a boost when Consumer Reports rated the hamburger joint’s drip coffee best. Of McDonald’s brew, CR said: “Decent and moderately strong. Although it lacked the subtle top notes needed to make it rise and shine, it had no flaws.” Starbucks didn’t fare as well, with tasters calling its coffee “strong, but burnt and bitter enough to make your eyes water instead of open.”

There has been a Starbucks backlash brewing for years. The coffee quality has been declining, especially as stores went from brewing coffee to pushing buttons on machines. The atmosphere of the stores has become all-too familiar. And with people so short of time, most stores are places to stop and go, rather than hang out.

The chain recently lost a class-action lawsuit brought by barristas who complained about the practice of Starbucks forcing them to share tips with shift supervisors. This is a practice forced on casino dealers by mogul Steve Wynn, as well, and it has cost both companies dearly. That’s not good company to share.

But the backlash is more than that. The atmosphere around the Starbucks brand has changed. The wind has literally changed around it. And that’s what worries chairman Howard Schultz. It reminds me a bit of the way the winds changed around Barack Obama the weekend before the Ohio primary. Obama had enjoyed a charmed run. People were intoxicated by his soaring rhetoric. But it changed. Obama lost Ohio and Texas primaries. He started to squirm over the video of his pastor. He suddenly looked ordinary, slugging it out with Clinton in the mud. The glow was off the brand.

It’s not for no reason that Obama and Clinton have been compared with brands in media reports: Obama is Starbucks, Apple and Chardonnay, while Clinton is Dunkin Donuts, Microsoft and beer. Obama has adapted to the new atmosphere by losing the soaring rhetoric in favor of bullet point speeches and eye-to-eye speechifying. One wonders if that will work for him in the end. Obama, in the end, must be Obama.

And Starbucks looks like its playing defense against McCafe. Yikes. Defense against McD's is not a good game to play. If Starbucks is going to hold on to its place in the brandscape, it needs to remain unmistakably Starbucks. That means make the coffee, especially the espresso (and, okay, Pike Place), the best Joe on the block. Keep the stores clean. Keep prices in check. Treat employees with common sense. And keep being Starbucks.

Starbucks recently launched www.mystarbucksidea.com, a digital suggestion box, not so much the social networking idea the company talked about when it began. The site has been lambasted in the blogosphere...again...part of the anti-Starbucks zeitgeist that has been building for a few years.

It remains to be seen if Schultz will be able to fly this brand kite in the changing wind.

Reader Comments

random

April 9, 2008 8:22 AM

The problem for Starbucks or any other company that used to have a strong brand and over-expanded, is being too caught up in trying to put out fires. When dealing with a myriad of internal problems and serious competition, there's a tendency to focus on the issue at hand and make it go away rather than pausing and trying to think about the ultimate destination.

When competing with McDonald's, Starbucks just wants to sell more or just as much coffee as they've sold before. They're not pausing to think about their DNA and how they want to convey their branding. The reason why they have some 7,000 stores worldwide was their attempt to make coffee and the whole coffee shop atmosphere synonymous with Starbucks. But now that's working against them because the market is over-saturated and all their little booths and co-branded locations in places where people stop by for a quick fix between errands and take their coffee to run (not go, run), have recast Starbucks as the McDonald's of coffee. No wonder McDonalds and Dunkin Donuts feel ready to compete. They're all commodity brands at this point.

Gabe

April 9, 2008 6:27 PM

I'm from Seattle, and I go to Starbucks daily. But I tell you, I've hit just about every coffee place in Seattle, and its really hit or miss the kind of service you get--some coffee shops are awesome (small, friendly people, great coffee, hand pulled shots that kind of thing), but other places are just terrible--pretentious dude pulling the shots and chatting about some gig he's playing and ignoring the customers completely and would rather stare you down if you said he made the drink incorrectly than offer to remake it like they do at starbucks all the time--people that frequent starbucks are often asked if they'd like to just try a drink--if you don't like it they make you something else no charge. I do like the fact that starbucks tends to be pretty similar one to another--I know what to expect. One thing I hate with a passion are the starbucks in airports. I think they should really work on who they hire to work in those places--either they pull the shots and let them sit there for a long time, or heat the milk until its ridiculously hot or use wrong amount of syrups--I never get good drinks there--the big variety in starbucks quality in airports I'm not happy with. In some parts of the country I've been to, I've also noticed inconsistent quality--but I think if starbucks focuses on regular education for its barista's they will do well. Trying to change a bunch to compete with dunkin donuts will not make me happy--dunkin is terrible... I think what made starbucks so successful was that it has a level of exclusiveness associated with it. If you have $1 coffee in a cup that looks like a drink that probably cost $4, then that dilutes the brand... One thing I think is a great idea is getting the lower machines so the barrista's can look at the customers while they make the coffee. Part of the image of starbucks is that the people that work there are "different"--and they keep them by having benefits and helping to promote people (people often move around from store to store and eventually can become a store manager--and the store manager's make fairly good money). If they can retain that part of the image, I think they will keep things going for a long time.

Susan

April 9, 2008 7:07 PM

In the past couple years, Starbucks has put 4 stores in my town that frankly does not have the demographics to support high priced coffee that is average at best. The strategy for Starbucks was to force the little guy out just like Walmart did to all the little hardware stores laughing all the way to the bank. The thing is Walmart was successful because they could sell most everything cheaper than their competition just based on buying merchandise in bulk quantities and strong arming suppliers to accept what Walmart deemed a good price. Starbucks on the other hand doesn't sell their product cheaper nor does it sell a better product than any other coffehouse. The truth is that during a good economy Starbucks was able to scam the general public into thinking that if you want to be "hip" you need to be holding a Starkbuck's cup especially if you are a celebrity with a camera nearby. The cup looks fancy, looks like it ought to hold a superior product, but after getting to know the product it is all hype. I would say the same for Barack. I said a few years ago that Starbucks would get such a big head they would implode on themselves which is exactly what they have done. Choosing to oversaturate a market with the express interest of bankrupting all the other independents as a business practice may be legal, but it certainly is a strategy that causes each town to look like all other towns and lose their individually that makes each town unique.

hmm

April 9, 2008 7:45 PM

when I go to Starbucks, I tip for the person who is giving me a good customer service and good drink, just like when I go to a bar or restaurant. I won't know which of them are supervising or which of them are not, since all of them seem to provide customer service and make drinks.
So I hope my tip will go to the person who I intended for, whether he/she is supervising or not. It's an opportunist work to attack a big corporation as if they robbed their workers.
In my opinion, Starbucks didn't take the money from its workers, or didn't "forced" its workers to share the tip. workers just shared the tip because they worked for it.
The people who are suing the company is essentially taking the money from the other workers.

Steven

April 9, 2008 10:34 PM

Hats off to you Gabe- Well said.

James Kane

April 10, 2008 11:42 AM

In 1958, the Rexall Drug Company was the largest drug store franchise in the U.S. with a 20% market share and more than 11,000 stores, predominantly located in the most populated areas of the country. (For comparison, McDonald's has less than 12,000 restaurants in the U.S. today).

Sound familiar?

And yet, despite its complete dominance of the drug store market in the late 1950’s, Rexall Drug was in serious decline less than a decade later and sold to private investors in 1977 for a paltry $16 million.

The moral to the story is that companies, like people, eventually die, no matter how invincible they may appear at their peak. History is littered with businesses that had the same cultish following that Starbuck’s has enjoyed over the past decade, only to be pushed aside for the next great thing that eventually came along. Woolworths, Montgomery Ward, A&P Stores, Automat, Polaroid, RCA, even the likes of Sears and Ford today, all had their Starbuck’s moments - times when they could do no wrong and when any talk of their demise would have been cast aside as utter nonsense. The truth is, in business nothing lasts forever. Rexall died, TWA died, Wang Laboratories died, IBM almost died, (and in all likelihood, eventually will, along with Wal-Mart, Toyota and GM some day). Of course, maybe they will evolve into some other new entity, be re-born under some new name or new organization, but most business models have a shelf life. Cultures and lifestyles change, and so must the businesses that serve them.

To steal from Mark Twain, perhaps the reports of Starbuck’s death are being greatly exaggerated, but turning around a company built completely upon “mojo” is a very difficult task. Starbuck’s sells coffee. They aren’t manufacturing computer chips, creating fuel efficient cars, or curing cancer. They are selling coffee. What made Starbuck’s so different and so appealing, however, was they also sold mojo. A feeling of something new, an experience we never had before that manifested itself in everything from the smells to the names to the presentation. It was that “third place” - not home, not work - that we never knew we wanted until Howard Schultz delivered it.

The problem today is most people need a fourth place (their car) a fifth place (their computer), and a sixth place (their PDA). That is where they spend their time and where they meet up and connect with friends. Our focus today is on better designed cup holders for the car we will take to the drive-thru, wifi connections to access Facebook and MySpace, improved text messaging features on our phones, and places to play Guitar Hero and Call to Duty on our Wii during lunch breaks. Oversized leather-chairs, 400-calorie Grande Caffe Mocha’s, and Miles Davis playing in the background is not the place most people are at anymore and its not the place most people need. Cultures and lifestyles change. Businesses die. Life moves on.

Great post, David!

rodney durso

April 23, 2008 5:21 PM

Nice post about Starbucks slow-down as a brand to be reconed with. Here in NYC there is a feeling that Starbucks are a little seedy and showing their age, the phyisical store that is. I call it the Burger King Syndrome. When you walk into many NYC Starbucks lately they have the charm and charecter of some of the newer Burger King stores. This sounds harsh I know, but I am actually with Starbucks in that I am wanting them to succeed and do love some of thier products. I have to admit to really liking Dunkin Donuts coffee more for it's smoother flavor and think that thier lattes (new a few years ago) and quite good, and are made to order with real esppresso. Naysayers will be suprised!

But what is my point? well in response to the posting I would say that the new Pikes blend is still too bitter and burnt tasting for my taste, so they loose me on that front, but I do really appreciate the brand-roots that are being exposed, and the retro branding that is being used. It does actually make me feel more warm and fuzzy about the brand, so kudos to Howard for this move. I would like to now see a system-wide redesign of all stores. Obviously this is a tall order but is very do-able in a given time frame. I am hoping that they are already working behind the scenes with designers on new test stores or in the ideation stage, looking at fresh ideas for possible new design directions. It's funny, that in NYC all the Dunkin Donuts stores are very new and feel fresh and pleasant and bright, while Startbucks is dark and kind of dingy and worn. I have a feeling all of this is in the works, and it will be a welcome change, if and when it happens.

Rodney Durso
Principal Consultant,
Stormhouse Partners, Inc.
New York, 10011

Midwest

April 23, 2008 9:57 PM

Susan called it right (except maybe for the Obama comment...) as she noted that Starbucks took a prosaic product and somehow added a luster that was unwarranted and quite thin if looked at too closely. Essentially, they made their product cool by hoodwinking people into thinking theirs was the better product to buy. Coffee is coffee is coffee. True, some is better than others but it's still coffee and the extravagances that drove our economy for all these years are about to come to a screeching halt and Starbucks is going to shrink once people quit plopping down money on a product they don't need.

Panzzer

April 25, 2008 10:08 PM

I say - great post, Mr. Kane!

I also agree with the observation that Starbucks at airports sucks (Starbucks sucks - that was unintentional). The one time I ventured into one was at LAX - an airport that surprisingly does not offer too many options for drinks or snacks (and the two adjoining joints were closed at around 5-6 am that morning).

The strawberry syrup in my drink was just bad. I don't know if it was within the expiry date, but I decided not to waste my sleepy energies with a very busy staff, dump the thing, move on, and never look back at Starbucks the way I used to.

Now I pass by the Starbucks outside USC (LA) and I understand that it's hard to find a place to sit - only because there's no decent place around.

Good Coffee...Please

May 1, 2008 10:56 AM

Starbucks...where are you? Where is the brand that I discovered years ago and determined that it was a great place to get coffee & tips from baristas on how to brew my own pot. My observations are simple on why SB is faltering a bit:

* Barista training & knowledge of coffee vary from different locales producing inconsistent results.
* Partnerships w/Barnes & Nobles and other vendors are ruining the brand because Starbucks doesn't train the baristas, they are just store employees who wear a Starbucks apron. They don't have the Starbucks DNA.
* You don't have to plop down a store everywhere. Starbucks was more novel when there were less locations. It gave you more of a community feel.
* And lastly, charge a decent price for the joe. There are mom & pops and of all places Mickey D's that are putting out great coffee for a fraction of your costs.

Make some changes or become less relevant.

Mocha

May 7, 2008 10:07 PM

It is not a pleasant experience to start the day with a Wrong taste Mocha.

Nowadays Starbucks is even exist in most of the rest area aross the country.I guess it is time to improve on the taste of the coffee then overexpand.

It is easier to find a Starbucks around you then find the right Mocha. I paid $5 dollars to the person who wear a Starbucks apron. Should I drink it or dump it?

LOLA

May 9, 2008 12:12 PM

I was in Puerto Vallarta last of January and they have put a huge brand new Starbucks(their first) at the end of the Malecon, in Old Town. Now who will buy coffee there? As the prices are the same as in Seattle! ONLY THE TOURISTS, as the Mexican people can not afford it...It was nice for us to go in and sit down and have a Starbucks, but the local people can not afford it...
And I agree that the airports have horrible coffee. Las Vegas is one of the worst airports for the lack of employees that know what they are doing.

Bryan

May 12, 2008 10:37 AM

Simple! Serve GOOD coffee! I don't mind a premium price for GOOD coffee, but when mine is better than yours, it just doesn't make it. Get back to it. It's really that simple.

Kate

May 16, 2008 12:54 PM

How about more realistic prices for a cup of coffee at Starbucks? I mean, when you can get an iced coffee at McD for under $2, and it costs twice that much at Starbucks, it doesn't take a genius to figure out where people will go. Especially if McD is the superior product. I also agree with making the product consistently good. A lot of the times, it is hit and miss with my coffee when I go to Starbucks. Sometimes it is absolutey wonderful, other times I wonder why I wasted $4 or $5 bucks for my drink.

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News, opinions, inflammatory meanderings and occasional ravings about the world of advertising, marketing and media. By marketing editor Burt Helm, Innovation Editor Helen Walters, and senior correspondent Michael Arndt.

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