Nearly two years ago, I wrote about Starbucks as a brand in decline. They were suffering because they had lost sight of what differentiated them from other companies competing for the “third place”: their product and the customer experience.
After years of focusing on cutting costs and driving efficiencies across their global footprint, the benefits of these activities plateaued in 2006 – as reflected in their all-time high stock price, just shy of $40.
They installed automatic espresso machines, introduced flavor lock packaging, ‘templatized’ store layouts and expanded their available selection of merchandise. While this all sounds good, it was implemented at the cost of the customer experience. The automatic espresso machines took all the romance and artistry out of pulling the perfect shot and the machines were so high that they blocked the line of sight between barista and customer. The flavor lock packages of coffee stripped the air of the rich scent of coffee beans. Stores became carbon copies of one another – sharing, for the most part, similar footprints and interior design. And their merchandise selection reflected a weakening focus on coffee.
By the time I wrote my post in 2007, Starbucks had lost 25% of its market capitalization. By the end of 2009, as bad as it was for just about every company, Starbucks shares had dropped to just under $10 – a whopping 75% loss of market cap.
Fast forward to today – something has changed. Starbucks is now a brand on the rise with a renewed focus and commitment to customer experience. Bruce Temkin put it well Monday when he said “Starbucks brews a comeback with purpose”. (Bruce wrote a post about Starbucks’ misfortunes in 2007 too.) Starbucks stock is now trading in the $22 range and is rising.
What lessons have they learned? (read more)
At the annual investors meeting last week, coffee brat Howard Schultz, Starbucks CEO, went on the