an interesting piece here. I still can't fathom people in Hamilton saying "we've arrived" because this chain is opening a new store. It's just an expensive Hortons.
Starbucks struggles in the U.S.
New York Times Service
KANSAS CITY, Mo. (Feb 6, 2008)
When a Starbucks moved in next door, the coffee fanatics who run the Broadway Cafe trembled. Sure, they roasted their own beans and served up handmade espresso drinks to a loyal clientele. But would it be enough to fight off a corporate behemoth?
That was nearly 10 years ago, and now the results are in: The Starbucks is about to shut down. The store had a funereal air the other day as a handful of loyal customers sipped beverages and jotted goodbye notes in what mounted to a book of condolences.
Next door, the Broadway Cafe bustled with customers. "You win because of the coffee," said Jon Cates, one of the owners.
After more than a decade of sensational buzz, Starbucks is struggling across the U.S. as it faces slowing sales growth and increased competition.
The man who built the chain, Howard D. Schultz, has retaken the reins in an effort to revive it. He is expected to shut down more stores in the United States while accelerating expansion overseas.
Schultz has said he wants to refocus on the "customer experience," recapturing some of the magic of the chain's early years, when employees -- who had heard the term "barista" before Starbucks came along? -- made the drinks by hand and customers were excited by top-notch coffee.
Schultz faces a difficult task: He has to slow down the company to make stores feel more like hip neighbourhood coffee houses while also delivering the steady growth that investors have come to expect from Starbucks.
Can he pull it off?
Details of Schultz's plan remain under wraps. Officially, he has not given up the goal of opening 40,000 stores worldwide, which no food or beverage chain has ever achieved.
After going head-to-head with Starbucks for nine years, Cates, the Broadway Cafe owner, said he no longer worries much about competition from the company. Starbucks, he said, has lost its focus on coffee, noting that the company switched from making espresso by hand to robotic machines that pump the beverage out with a button push.
"For them, the move to fully automated machines was inevitable but they lost something," Cates said. "If you are a barista, you have to roast your own coffee. It's a necessity. You cannot compete by selling music or WiFi."
Even some loyal Starbucks customers here concede that something has changed, and not for the better.
"It's lost its mom-and-pop, home-away-from-home feel," said Aga Machauf, a 26-year-old event planner, while sipping a grande Caramel Macchiato. "It feels more corporate now."
It was not too long ago that the arrival of a new Starbucks was a major event, a recognition that a town or neighbourhood was worthy of the chic, Seattle-based chain.
But in the last five years, every street corner, airport concourse and roadside rest stop in America seemed to attract a Starbucks.
As the company grew and customer traffic increased, Starbucks expanded its food offerings while introducing efficiencies like those automated espresso machines.
Gradually, complaints surfaced that Starbucks felt more like a fast-food restaurant than a coffee house. In five years, Starbucks nearly tripled the number of stores worldwide, from 5,886 in 2002 to 15,011 in 2007.
The company is by no means losing money: It earned $673 million in profit on $9.4 billion in net revenues for 2007.
But Starbucks has been hurt by increasing costs and stiff competition. Last summer, its customer traffic declined for the first time since the company went public, sending the stock tumbling.
By the end of the year, Starbucks' stock, once seemingly invincible, had declined by 42 per cent.
Earlier in January, Starbucks ousted its chief executive, James L. Donald, and brought back Schultz to try to invigorate the company.
Schultz had already outlined many of the problems in a now-famous Feb. 14, 2007 memo entitled, "The Commoditization of the Starbucks Experience," in which he acknowledged that rapid growth had diluted the Starbucks magic.
Some Wall Street analysts have pointed to specific problems that Starbucks needs to tackle, from a lack of new products to a failure to adequately handle morning traffic in crowded stores. Sales of breakfast sandwiches and drinks like Frappuccinos have been disappointing.
Marc Greenberg, an analyst at Deutsche Bank, questioned Starbucks' initiatives that encourage competition with fast-food chains, such as drive-through windows and an expanding menu of food.
"Starbucks is all about fresh-ground coffee," he said. "As for the food, there's no kitchen in the store. How fresh can it be?"
Even so, he said the primary problem for Starbucks is simple.
"It's being overbuilt, classic oversaturation," he said. "How many places do we need? Aren't we there? Is it hard to find a Starbucks?"
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