After a year of record-low sales, Starbucks Corporation decided to revamp a new direction with an old CEO.
Instead, the coffee company has returned its reins to former Chief Executive Officer Howard Schultz, the visionary responsible for Starbucks’ monumental growth and success throughout the 1990s. Schultz will return from an eight-year hiatus to refocus the company.
Tiger Town Starbucks’ assistant manager Diana McVay is excited to have Schultz running the business.
“We are ecstatic,” she said. “He is a wonderful leader. He has a whole lot to offer and wants to bring Starbucks back to what we were originally founded upon.”
In a letter to the public on starbucks.com, Schultz outlined his goals.
“We are recommitting ourselves to what has made Starbucks and the Starbucks Experience so unique: ethically sourcing and roasting the highest quality coffee in the world; the relentless focus on the customer; the trust we have built with our people, and the entrepreneurial risk-taking, innovation and creativity that are the hallmarks of our success.”
The Web site also isolates what went wrong: “We are emerging from a period in which we invested in infrastructure ahead of the growth curve. Although necessary, it led to bureaucracy. That is going to change.”
In Schultz’s absence, the corporation raised coffee prices twice in 2007 alone. This resulted in anemic sales and a 42 percent slump in shares.
By some standards, Starbucks’ stocks were among the worst performers on NASDAQ for the past year.
Auburn economics professor Jack Johnson is not surprised by Starbucks’ financial woes.
“In anticipation of economic hard times, the demand for ‘double lattes with a pinch of Madagascar cinnamon’ may be one of the first things to go when it comes to budget tightening, being replaced by a cup of black coffee (maybe with Coffee Mate and Sweet’N Low) made at the office,” he said. “Starbucks is a relatively expensive luxury for which many fairly close substitutes exist.”
There are 10,600 Starbucks locations in America today.
While the company aimed to increase that number rapidly — to the tune of five new locations daily — Schultz will scale back the plans.
The sales slump calls to question if Starbucks has reached its saturation point in the American market; and how much Americans are willing to pay for a sophisticated cup of water strained through ground beans.
McVay insists that the two price hikes in 2007 did not affect her shop’s business. She said the company had waited a long time to raise prices and was forced to take account for the increased cost of supplies.
“We’re just on the verge of what we can do,” McVay said. “I don’t think anybody’s getting tired of Starbucks.”
McDonald’s, though, seems to disagree. The company revamped its Premium Roast Blend in 2007, and found the change to be popular among customers. The price is likely as pleasing as the taste: a large cup of the premium roast sells for $1.39 as opposed to a venti cup of Starbucks’ simplest house brew that costs $2.11.
While many students don’t think of McDonald’s when they go out for coffee, that may soon change. During 2008 the chain plans to employ baristas in 14,000 of its restaurants. The espresso specialists will create made-to-order coffee drinks for customers, just as Starbucks baristas have for years.
Yashica Frazier is the store manager at McDonald’s West Magnolia Avenue location. She is not sure if hers will be one of the chosen 14,000, but is excited at the prospect and hopes to know within the month.
“I just think we’re ready for a change,” she said
