AP
Starbucks Chairman Sees Danger to Brand
Friday February 23, 5:12 pm ET
Starbucks Chairman: Company May Be 'Commoditizing' Brand
CHICAGO (AP) -- In a blunt memo to executives, Starbucks Corp. Chairman Howard Schultz warned that the fast-growing chain may be commoditizing its brand and becoming more vulnerable to competition from other coffee shops and fast-food chains.
Schultz sent an e-mail to top Starbucks executives on Feb. 14. with the subject line "The Commoditization of the Starbucks Experience." It first appeared on the Web site starbucksgossip.com. A Starbucks spokeswoman confirmed the memo's authenticity.
"Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand," Schultz wrote in the memo.
"Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces," he wrote.
Schultz went on to write that when the company switched to automatic espresso machines -- which are now in thousands of its stores -- "we solved a major problem in terms of speed of service and efficiency," he wrote. "At the same time, we overlooked the fact that we would remove much of the romance and theatre." Starbucks used to have all its baristas pull espresso shots by hand.
That move "became even more damaging" because the new automatic machines "blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista," he wrote.
Schultz wrote that Starbucks switched to a "flavor locked packaging" for its coffees that eliminated the task of scooping fresh coffee from bins in stores and grinding it in front of customers. "We achieved fresh roasted bagged coffee, but at what cost?" Schultz wrote. "The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores."
Schultz also wrote that changes in the store design process had created "stores that no longer have the soul of the past ... Some people even call our stores sterile, cookie cutter," he wrote.
"While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated," he wrote."
"Let's be smarter about how we are spending our time, money and resources," Schultz wrote toward the end of the memo. "Let's get back to the core."
Starbucks spokeswoman Valerie O'Neil said the memo is "a reminder of how success is not an entitlement. It has to be earned every day," she said. "We can't embrace the status quo."
Starbucks Chairman Sees Danger to Brand
Friday February 23, 5:12 pm ET
Starbucks Chairman: Company May Be 'Commoditizing' Brand
CHICAGO (AP) -- In a blunt memo to executives, Starbucks Corp. Chairman Howard Schultz warned that the fast-growing chain may be commoditizing its brand and becoming more vulnerable to competition from other coffee shops and fast-food chains.
Schultz sent an e-mail to top Starbucks executives on Feb. 14. with the subject line "The Commoditization of the Starbucks Experience." It first appeared on the Web site starbucksgossip.com. A Starbucks spokeswoman confirmed the memo's authenticity.
"Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand," Schultz wrote in the memo.
"Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces," he wrote.
Schultz went on to write that when the company switched to automatic espresso machines -- which are now in thousands of its stores -- "we solved a major problem in terms of speed of service and efficiency," he wrote. "At the same time, we overlooked the fact that we would remove much of the romance and theatre." Starbucks used to have all its baristas pull espresso shots by hand.
That move "became even more damaging" because the new automatic machines "blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista," he wrote.
Schultz wrote that Starbucks switched to a "flavor locked packaging" for its coffees that eliminated the task of scooping fresh coffee from bins in stores and grinding it in front of customers. "We achieved fresh roasted bagged coffee, but at what cost?" Schultz wrote. "The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores."
Schultz also wrote that changes in the store design process had created "stores that no longer have the soul of the past ... Some people even call our stores sterile, cookie cutter," he wrote.
"While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated," he wrote."
"Let's be smarter about how we are spending our time, money and resources," Schultz wrote toward the end of the memo. "Let's get back to the core."
Starbucks spokeswoman Valerie O'Neil said the memo is "a reminder of how success is not an entitlement. It has to be earned every day," she said. "We can't embrace the status quo."
