In case you didn’t already know it, Startbuck’s Coffee has hit a rough patch lately. Their stock is down significantly, their visits are down from FY07 and their per store sales are down in many areas. They recently announced a significant reshuffling of upper level management, with some managers leaving to “spend more time with the family”, while others have been moved into different positions and the US sales force has reportedly been broken up into four quadrants. The potential reasons for Starbuck’s slowing growth are many and complicated and it appears that nobody knows which one, or which combination of factors it is.
- Could it simply be an economic anomaly and once house prices stabilize, gas prices go down and people start feeling okay about their finances again they’ll be back for their $4 mochas and $3 dollar muffins? Maybe?
- Could it be that the Boomers have been visited by the “Ghost of Future Retirement” and have realized that with their house debt at or near market value, a rented car (which marketing prefers to term leasing), and a neglected 401K, that their retirement years will be spent waiting by the mailbox for a paltry Social Security check and maybe a game or two a month of miniature golf instead of a nice club membership they’d been dreaming of.
- Maybe people have decided that they prefer to patronize a local company to a global behemoth – at 60% or 70% of the price that Starbucks charges?
- Is it simply that Starbuck’s took their eye off of their core competencies and the quality of their goods and services have really dropped by that much?
- Worst of all for Starbucks could be that they’ve run their course and that coffee is simply becoming a saturated product category – people have decided that they don’t need as much of their coffee as they did last year, and the year before. Or maybe they still need their coffee but they don’t believe it should cost $4 a cup anymore.
I just really don’t know which of these, or any other ideas it might be that has caused the massive slide in Starbuck’s share price in the past year or in their abrupt decisions to change their management team and reduce the growth of stores – but I do know that it has the attention of Starbuck’s shareholders and that’s where the problems will really begin for Starbuck's.
For those of you who own small businesses that sell products and services similar to those of Starbuck's this could be a great opportunity for you. This may be a good time to play to your advantages of uniqueness and character and create some special concoctions that Starbuck’s wouldn’t try because they only play in products where unit sales exceed 10,000 cups or more a month – and they can’t cater to more unique drinks.
Just a little Coffee For Thought,
Chris
PS - how about some brave souls comment on this article? If you do, I'll send you a nice little MR101 tchachka for being brave and chiming in!
