The Commoditization of Starbucks, by Howard Schultz

Because I live in a great, coffee-abundant city, I can be a bit disparaging toward our hometown heroes, Starbucks. I have nothing against the company, and they rightly deserve credit for pushing up the quality of espresso in America. But I find their coffee to be just okay. One of the company’s biggest advantages is the fact that a Starbucks latté tastes pretty consistent whether you’re in Seattle or Los Angeles or Humboldt, Tennessee.

Over the past couple of years, Starbucks has retooled its equipment, abandoning their La Marzocco espresso machines in favor of super-automatic machines that deliver espresso at the push of a button. On the surface, you’d think this would be a good thing: the time it takes to make a latté (or, more importantly, several hundred lattés during peak hours) is drastically reduced, and you get a level of consistency in temperature and other settings that, as I understand it, tend to fluctuate more with the La Marzocco or other machines. But coffee from a super-automatic often tastes a bit watery or flat to me.

People who really know coffee have expressed this point of view for a while, but now there’s a new voice, one that carries quite a bit more weight: Starbucks Chairman Howard Schultz. In a memo this month to the Starbucks CEO and others (which Starbucks has verified is legitimate), Schultz notes that the switch to automatic machines is having unintended negative effects:

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista.

He also talks about store design:

…one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee.

However, I think the heart of this criticism is that the stores are so similar everywhere, not that they’re necessarily sterile. I’d rather sit in a Starbucks for the atmosphere than a lot of little coffee outfits, but maybe that’s because I’m not a fan of linoleum tile and garage-sale furniture.

Schultz concludes with something that tells me he’s on the right track:

I have said for 20 years that our success is not an entitlement and now it’s proving to be a reality. Let’s be smarter about how we are spending our time, money and resources. Let’s get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others.

The question becomes: Will the company follow the founder’s advice, or streamline its way into McDonald’s style blandness? I’m hoping for innovation.

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