Wake Up And Smell The Coffee

On February 26, some 7,100 Starbucks across the US will be closed from 5:30 - 8:30 PM to retrain its employees on pulling the perfect shot of espresso and steaming milk.  (Read the Seattle Time story) Much of this can be traced to Howard Schultz's return as Chief Executive after one of the company's worst sales and quarterly returns ever.

What I find interesting is that Howard is coming back to the helm of the company of which he founded because the company needs to get back to its core values and direction. But in a Bloomberg interview from a year ago, Howard talks of the future and how the company has moved into other industries and selling various items such as books, music, etc.  (See Howard Schultz's interview)

So where will the coffee behemoth go now? They are truly the 800 pound gorilla in the room and with other concepts well on their heels such as Dunkin Brands and McDonald's, I think the company needs to seriously think about it future.  According to press releases, the company is getting rid of hot sandwiches and it will be slowing down the opening of new US stores.  It was only a matter of time before the company realized that self cannibalization was only going to hurt the company in the long run?

I believe that one aspect of the company that has hurt it over the past several years is the fully automatic espresso machines.  Several years ago, the company went away from the venerable La Marzocca manual machines to a fully automatic one. These automatic machines were to help with ensuring quality and speed of service. What I really think it did was take away the charm of the company. Howard in his book mentions how the espresso machine is the heart of the store.  By essentially taking a great machine for a lifeless automaton, Starbucks took away its core value of being true to the bean and coffee.  While many did not notice the change, the hard core fans are not happy with the change. (Read Chowhound.com posting) This almost seems to be against what Howard originally set out to accomplish when he started the company.

The Coffee segment is an interesting one.  According to some at the National Restaurant Association, some feel that this is the one that will have the most bang in 2008 and with a looming recession here in the US, I wonder is many patrons may forego that extra latte or cappuccino and maybe save a few extra bucks so they can fuel up the BMW!