Later, Latte.

Guest blog written by Ted Birkhahn.

Full disclaimer: I am a recovering Starbucks addict.  Every day on my walk from Grand Central to ourStarbucks
office, I pass five Starbucks.  Until recently, I always stopped in one of them and plunked down several bucks on a mediocre latte.  Why?  I loved the routine and the brand experience, not the taste of the coffee. 

But, as the recession loomed and with daily reminders that it’s time to stop spending and start saving, I decided to put the skids on my Starbucks habit.  At first, I tried to change my route to the office so I wouldn’t have to walk past a Starbucks but that didn’t work; no matter what route I chose, I was bound to run into one.  So I decided to show some self-control and just go cold turkey.

Am I indicative of a trend that is sweeping across the nation contributing to the vanishing profits of the world’s biggest coffee chain? It’s hard to pinpoint why Starbucks has suffered.  Did they grow too fast?  Are their prices too high?  Is the taste of the coffee just not that good?  Did the brand – and the experience it provides – run its course?  I suspect it is a combination of all these factors.

However, one thing is certain: If the U.S. finds itself in a prolonged economic downturn, Starbucks is a dead-man walking.  Although it is making major changes to the way it makes, serves and sells its products, I believe the company is too big and cumbersome to dig itself out of the hole that it’s in. 

Only time will tell what happens to Starbucks.  In the meantime, I’m off to the kitchen to grab a free cup o’ joe.

3 thoughts on “Later, Latte.

  1. Starbucks just warned that their Q2 earnings are not going to be good. This is likely a direct result of the economy but still, expensive coffee is going to be tough for the American consumer to swallow for some time. Cheap is now in vogue and Starbucks is far from cheap.

  2. Nice analysis, Caroline. I agree that Starbucks has lost its mojo as a ‘cool site’ to ‘chill.’ Before they can regain it, however, they need to first figure out how to fend off McDonald’s and others who are now making serious inroads. Btw, I’m hearing great things about Mickey D’s coffee. I still can’t see myself buying coffee at McDonald’s though.

  3. I think that you have a great point about the company being “too big and cumbersome” to save themselves from the harsh economic situation they are in. My personal thoughts are that just like any trend these days, it is slowly dwindling out. Back when coffee shops became so popular, it was because they were a third type of meeting place or hang out spot that was not work or the house. But today, maybe coffee shops aren’t as popular social hangouts as they first were. However, you can’t say Starbucks hasn’t tried anything special to increase profits. Rehiring their CEO and then holding a “Nationwide Training Day” was pretty risky. However, it accomplished one of its goals of generating quite the buzz and bringing attention to the fact that the company still values employee training for a better customer experience. I personally do not necessarily believe that they have seen such a downturn in profit because of lack of personal engagement or baristas failing to consistently make “the perfect drink.” I think that you touched on the fact that financial analysts everywhere, when giving advice on how to save, consistently mention cutting out that morning latte because that $3.50 you spend each morning can really add up.