|February 29, 2008|
|Starbucks' Shutdown Rocks the Media; Now about those prices...|
|By Kevin McCauley|
|You got to hand it to Starbucks’ Barista-in-Chief Howard Schultz. The guy is a master of PR. |
The Seattle-based company is in the tank. Its stock trades at $18.62 near its $17.66 52-week low. Those same shares traded in the $40 range two years ago.
Starbucks has scaled back expansion plans and is actually closing 100 underperforming outlets. It announced Feb. 22 that 600 of its “partners” (e.g., workers) are getting the boot as the company seeks to put a jolt to its flat earnings.
Despite those woes, Schultz’ decision to close Starbucks’ shops for three-hours on Feb. 26 to allow staffers to re-acquaint themselves with the art of steaming milk (a massive amnesia break-out?) was treated by the media as a major happening.
Though Starbucks’ woes are based on the fact that people are finally realizing they are being hosed when they shell out $5 for a latte, the media dutifully ran stories about anxious (desperate) customers pressing their noses against Starbucks’ windows while riding out the “reeducation” sessions.
The New York Times quoted a Starbucks manager talking how inspired he was when talking to staffers about the quality of the espresso. [Starbuck’s workers earn about $8 bucks an-hour. Wal-Mart has a higher percentage of healthcare-insured workers than the coffee king.] The San Francisco Chronicle told of servers practicing the art of “foam, no foam, decaf, mocha frap, cappuccino, vanilla soy latte half caf with extra foam and a sprinkle of cinnamon.” The Los Angeles Times wrote about the shutdown giving caffeine-deprived people the jitters. The Associated Press pitched the indoctrination meetings as a quest for corporate perfection.
BiC Schultz puts Starbucks’ woes on the “commoditization of the Starbucks experience.” He returned to the helm to restore the “romance” and “theater” of visiting a Starbucks. In his “Transformation Agency Communication #8” released on the eve of the shutdown, Schultz wrote that Starbucks is the “coffee that brings people together every day around the world to foster conversation and community.” Schultz needs to come back to Planet Earth.
The shutdown did provide Starbucks priceless PR. Howard should capitalize on that momentum by taking a whack at the chain’s outlandish prices. (Full disclosure: I buy coffee each morning from the vending cart guy on the corner of Madison & 39th. He recently upped the price for a large coffee 25 cents to $1.25).
Schultz is on the right track, testing a $1 brewed “short cup” in Seattle. The company is evaluating whether the shorty “advances our business objectives, and “elevates further the premium coffee experience.”
Advice to Howard: bring shorty to New York. That will give the vending cart guys a run for their money and make the “Starbucks experience” more accessible.
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