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Starbuckling Down

Perhaps it’s because it’s one of the most visible brands out there, but Starbucks has been all up in my face in this recession. I remember vividly when I knew this whole economic collapse was real… and it was literally the day last summer I read in the paper that Starbucks—one of the most ubiquitous and iconic brands of my generation—was going to close the doors on several hundred stores.

Perhaps it’s because it’s one of the most visible brands out there, but Starbucks has been all up in my face in this recession.

I remember vividly when I knew this whole economic collapse was real… and it was literally the day last summer I read in the paper that Starbucks—one of the most ubiquitous and iconic brands of my generation—was going to close the doors on several hundred stores.

Soon after this massive shuttering, I walked into my neighborhood “bucks” for a quick cup to go. Upon ordering my usual Venti Iced Americano—extra ice, easy water—the barista gave me my change and asked me for my name. Even though there were only a handful of people in the store, she wrote it on the cup, then called it when my drink was ready.

Within weeks, the morning ladies knew me by name and I realized that Starbucks had gotten strategic. Instead of being known by its yuppy, corporate logo-centric image, Starbucks was trying to become my friend—the neighborhood coffee house where they knew my name.

More changes have elapsed over the past year. One more publicized venture has been Starbucks’ launching of several “European-style” coffee houses under a different brand name: 15th Avenue E Coffee & Tea. These self-proclaimed ‘stealth’ stores are disassociated with the Starbuck’s brand, but serve the corporation’s coffee and teas. The environment in the first (Seattle) location is said to be a rustic and modern mix, vastly different than the coffee giant’s existing spots.

This morning, I came across another new endeavor. Starbucks was launching its own brand of instant coffee.

Instant? This was kind of a record scratch moment for me.

For a company that positioned itself as a high end coffee chain, has Starbucks taken it too far? I’ve been corrected numerous times by the register attendant when I brashly attempted to circumvent using a language I don’t speak. What could be a bigger display of arrogance than forcing your patrons to speak Italian? Now Starbucks is providing instant coffee—the coffee snob’s most degraded form of caffeine next to Mountain Dew.

My concept of the Starbucks brand is starting to get fuzzy, and I’m not sure if this is a good or a bad thing. There’s a danger in trying to be all things to all people, especially when you sell yourselves on being a premium brand. Is now the time to stick to these guns, assuming your customer base—to use a tired phrase of defeat—is what it is? Perhaps it’s most imperative now that you not lose focus in a desperate attempt to diversify.

But at the same time, maybe Starbucks has it right. The company took a hit last summer: its aggressive attempt to open thousands of new stores in a short period of time backfired with the economy. So what now? So they get aggressive again. This time it’s in the form of marketing strategies, and penetrating markets it perhaps never would have touched before the downturn.

My speculation here is simply food (or caffeine?) for thought. Do you think Starbucks will see success in this aggressive diversification? Or do they have their coffee in too many pots? Do you have a story to tell about your own brand diversification? Email me your thoughts at [email protected].



A "record scratch moment?" I haven't heard that before, but it fits, even though you are far too young to have any vinyl.

Having built a brand on excess, and finding competitors like McDonalds and Dunkin' Donuts offering an alternative that is indistinguishable based on taste tests but at a lower price, Starbucks is fighting for its life. But all they know is all they know, so they are trying new twists on old paradigms. That might have worked a year to two ago, but the "new normal" is crashing the party.



I read your column with great interest, being a rabid coffee fiend.

I rarely drink Starbucks but, as an ad/PR guy, I can certainly appreciate their aggressive brand-building.

However, there are several intersections in downtown Chicago (my home) where THREE corners have Starbucks on them. That's overkill.

The secondary brand maneuver is comparable to all the thinly disguised alter-brand strategies tried, over the years. Most have failed.

Even on our level, we've had clients who've tried a toned-down brand of their own top quality product, in an effort to court the lower-end buyer. One did it with a funny costing procedure, one did it through a shadow distributor, where they simply relabeled their own product as a private label item for a fictitious firm etc.

There's a bit of savvy marketing, but more greed, usually at work in such cases.



I'm presently taking a course in Strategic Planning towards my MBA. According to my training, Starbucks has it just about right. Focus too closely -- even exclusively -- on your current customer base and you're a sitting target. Starbucks remains an innovative company. My hat's off to Howard Schultz!



Interesting observations. Even more for me since I gave up on Starbucks several years ago, when they stopped serving coffee in ceramic cups and mugs.

I know that perhaps I am not typical coffee drinker but I never care for coffee-to-go.

When it's coffee time, I want to sit down and enjoy my double espresso or macchiato at ease, possibly with a cigarette.

There are very few places like that in USA. And that's why I tend to spend my vacation in Europe.



I'm glad to read your post on Starbucks recent trends. I'm a trend watcher and have been noticing a lot of different trends not just Starbucks related. As an investor in other companies, I've got a particular interest in coffee since my folks named me Maxwell... somewhat due my pop's favorite coffee during the 70's. The last couple of weeks I've been forming some thoughts on Starbucks and hadn't really decided who to talk to about it. Your post has me writing about it now.

Basically, coffee drinking, while a permanent fixture in the world kitchen, has experienced an above normal cycle of trendiness that isn't necessarily here to stay. As in any cyclical product fad, I was trying to understand how to determine if coffee was on its way out from the peak of demand here. The Starbucks growth trend and stock price are pretty good indicators of this. Their somewhat distant peak in share price, dictated they needed to do much more to sustain their torrid growth pace. Now in the face of steep competition from retailers who know how to deliver on food to the masses (MCD) they are not looking so calor. Indeed as American consumption of coffee has increased, the country's proud tradition of shifting to more 'value' product hasn't changed a bit and McDonald's has shown the boss they can deliver similarly addictive coffee (if coffeed-down syrup can be called the same.) This blood-letting in business will eventually grind the bean pushers down to their fundamental value. If I liked the taste of Starbucks and the experience it was to exchange a good chunk of hard earned cash for the heavily roasted espresso, I would be quite afraid at this point. Concerned that my usual habitat is an endangered refuge now reserved for video clips of the last decade.

I also wanted to know how Starbucks would fare as a company if their primary product outlet was drying up. With so much retail presence, the price of a cup'o'Joe must stay high to maintain the facilities and current staffing. Upon the launch of their new freeze dried product, it became apparent to me that at the end of the day, Starbucks will be considered fortunate to share the same shelf space with Maxwell House & Folgers as America's coffee passion wanes. They have begun the process of ensuring their fossil record is in place from their humble beginnings in Seattle to mainstream American street corners. It isn't at all clear to me yet what will become of their store front space, only that their coffee branding and current power status must shift into every American kitchen even as they undermine their own business model with what you have pointed out as a loathesome caffeine delivery experience. Enjoy the Latin chastisement while its conveniently located at a street corner near you!



As a marketing communicator (and unrepentant coffee snob), Starbucks’ subtle attempt at rebranding struck me as a deeply humbling experience for a company that, in lean economic times, many view as “luxury.” It is, if nothing else, a sign of the times. Virtually every restaurant chain that advertises on TV now speaks about the quantity of the food you receive your money as much as – or more than – the quality. Likewise Starbucks, once bitten by over-shooting its store openings (and it was extremely painful when the store 200 yards from my place shut its doors), now seems twice shy about doubling down on the perception it is a cut above other, more plebian coffee products. In tough times, people draw lines and have money only for what’s essential. “Luxury” coffee, for many people, doesn’t fall into that category.