Starbuck's No Longer Can Afford To Be The Neighborhood Coffee Shop

Starbucks is still on the run. It has announced closing some 600 under-performing stores, which results in the layoff of around 12,000 employees.

There is a cover story in the newest issue of Portfolio on Starbuck’s chairman and CEO Howard Schultz. And the Wall Street Journal this week cited much haranguing of the coffee chain about its Pike’s Place blend being too thin and watery, and thus against the charter of the chain: providing hearty, rich, bold, deep coffee blends on every street corner, banishing the utterly undrinkable swills of yester-year (Brim, Yuban and the like) to the grocery museum.

Though, there are plenty of complaints about Pike’s Place, I want to take a minute to defend both the decision to sell it, and the product itself. Coffee, I have found, is one of the most subjective foods there is…along with beer and wine. A whole lot of people still drink Bud and Miller, and he swillian lite versions of both. I wouldn’t drink them unless I had a gun pointed at me.

A great many of the big bold blends Starbuck’s offered were, in fact, ordered by relatively few customers, especially after 12 noon. And the company’s research did, in fact, point to confusion by many non-habitual customers, by the constantly rotating coffees. There was a lot of wasted coffee in those urns that had to be dumped.

I personally like Pike’s Place, both as a respite from my usual latte (most Pike’s Place haters also deride lattes as expensive steamed milk…so be it), and as an ideal iced coffee. It is not so much thin and watery, to me, as it is reliably good, and rich, as well as even in its taste and body. But I have a sister who I’m sure, even without asking, would deride it as swill. Though she and I come from the same brood, we have wildly different tastes and preferences in coffee and, often, wine. Strangely, though, we like the same hard-to-find Vervain tea.

My point here is that Starbuck’s had probably reached some sort of Gladwellian point where it can’t be everything to everyone. And it probably should no longer try. If I am an exec at Starbuck’s, I’m saying, let’s makes sure out espresso drinks are top-notch, especially the lattes. Let’s be sure we can deliver a serious double espresso to whoever asks. Let’s keep pumping out the Frapuccinos. But let’s definitely cut back on the offerings of so many coffee blends. It will make the barristas better at what they do without the complexity, and it will cut back on costs. Starbuck’s was throwing out too much coffee. And the burned taste so many complained about? Probably because some of those exotic blends were in the tank too long.

That leaves a market opening for small independent coffee shops that every town should still have to provide the selection of coffee blends that those upper end drinkers demand. That’s not a bad thing. It’s a great thing.

Starbuck’s menu changes remind me of a decision Ford made a couple of years ago. The Focus was losing money. And it came in several versions—sedan, three door hatch, five door hatch and wagon. But the sedan accounted for around 80% of the volume. When Ford redid the Focus, it planned for only a sedan and coupe. That angered a small number of would-be buyers that all that complexity at the factory was eliminated. But now every Focus makes money.

It’s hard to know you will lose some customers when you make changes. But when you have a huge enterprise like some 12,000 stores to support, and every product decision is magnified to a huge scale, there are times you have to wave good-bye to the customers who don’t like the change in order to make money on the customers who stay.

The thing is, in the early days Starbuck’s customers thought they were not patronizing the “Ford” of coffee shops. It was more the Acura, Volvo or Land Rover brand. And at more than $3.00 for a cuppa Jo, who could blame them for feeling that way.

So, now Starbuck’s is struggling to right itself, just as Ford is. And some will argue that the moves made by both aren’t working for either company. I would disagree. Both companies are in a state of transition. And any transition born from hardship is usually painful and emotional.

To the Pike’s Place bashers, I say: For every one of you that thinks it’s swill, there are probably eight to ten who like it. If you feel that strongly about it, go seek out an independent coffee shop that feels the same way you do. In the end, I think, everyone will win.

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