Starbucks recently disclosed its final list of 600 U.S. stores that will be shuttered as part of a larger downsizing plan. The company also recently announced that it will close 61 stores in Australia and cut 1,000 non-store jobs. Starbucks stock is hovering around $14.50, down from $35 at the start of 2007.
Most people assume that the company is simply being battered by a challenging economy, one in which money that used to buy mochas is now required to buy gasoline.
However, Starbucks’ biggest problem was identified before gas prices began soaring, and this problem is rooted more in marketing than the economy. Simply put, Starbucks lost its message, and consequently lost its identity. It got into the music business, the hot breakfast foods business, the expansion business, etc. Along the way, it seemed to lose track of the coffee business.
Eight months ago, Starbucks took decisive action to reclaim its identity. Howard Schultz, the “architect” of the original Starbucks brand, returned as CEO, a position he held from 1987 to 2000. Schultz stated: “We know that we can improve our performance by getting back to the essence of what drove Starbucks past success—our passion for the business and a complete focus on the customer and our relationship with our people.”
Six weeks later, Starbucks simultaneously closed 7,100 stores for staff retraining sessions. Starbucks also turned over the management of its music label to another company while announcing plans to reduce its in-store retail CD offerings and eliminate its hot breakfast sandwiches. Starbucks also put renewed focus on its Pike’s Place Blend, a daily brew that honors the company’s original store in Seattle (and its original focus on basic, reliable, fresh-roasted coffee).
While Starbucks isn’t out of the woods yet, its decisive marketing actions are to be admired. The lesson here is that even a company with ubiquitous brand recognition isn’t immune to the law of staying on message.
