Starbucks
9660 Transit Rd., E. Amherst, NY 14051
Web: Starbucks
Phone: 716.636.1794
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Breakfast Chains Coffee Drinks Tea

"Starbucks shut down the entire chain one day to retrain employees in making drinks, widely-publicizing its own quality problems without actually improving its troubled stores."

Just as business textbooks will one day include detailed case studies on Apple's unbelievable come-from-nowhere, conventional wisdom-bucking successes with the iPod and iPhone, they'll also likely discuss the rise and fall of Starbucks, a company that seemed to be hurtling at full speed towards a promising future, then hit the brakes so abruptly in 2008 as to near-simultaneously send its executives, employees, and customers right through its windows. Sure, many Western New Yorkers mightn't care what has happened to Starbucks over the last year - we're blessed with numerous independent and chain coffee shops, including some really good ones - but as formerly frequent customers from our California days, Buffalo Chow's editors have watched with a mix of fascination and horror as a one-time favorite has closed locations, alienated workers, and flip-flopped on recovery strategies, all suggesting that the chain may survive, but will only be a shadow of its former self. We realize that this article isn't going to interest all of our readers, but we wanted to publish it anyway for the ones who will care - the restauranteurs, the business students, and the coffee fans.

First, a full disclosure: before we returned to Western New York, we used to be Starbucks regulars. The first time one of us heard about the chain was 15 years ago, when a family friend talked about a coffee shop she was working for, and had just been given stock in - a shocking enfranchisement for a person who was making and selling cups of coffee. Years later, long after forgetting her story, we found ourselves visiting the chain at least twice a week when we lived in California, not entirely surprised by its happy employees or continued popularity. Despite the famous Lewis Black jokes, the idea that some Starbucks locations were only a short walk away from each other actually made some sense given that lines of people queued at each one, and collectively had urgent needs for quick cups of early morning energy. Family members gave us gift cards as gifts; we gave them as gifts, as well. And we've been reading Starbucksgossip.com for about as long as it's been around, finding the discussions of the company's business dealings and celebrity clientele to be interesting. We weren't patronizing Starbucks because we disliked independent coffee stores, or because we didn't want to support local businesses. Rather, in strip mall, big business-dominated California, Starbucks served the needs of the population particularly well, and whatever the difference was between the best cups of coffee we'd had elsewhere and there, it wasn't large enough to make up for the inconvenience factor of having to hunt down the specialty stores. In short, at least in California, Starbucks had won. Won us, won everyone we knew.

Beginnings of a Problem: Inconsistent Quality, Stinky Stores, and Dumb Deals. There were some rough patches in the relationship, though. Over time, we learned that certain locations - specifically the ones in supermarkets, airports, in some overseas venues, and anywhere else that Starbucks had franchised - were almost invariably bad at preparing specialty drinks, including the popular frozen Frappuccinos that kept Californians chilled in the heat. Some of the non-franchised locations slipped, too, to the point where fans of certain drinks would just stop going to their most convenient stores, citing the frustration factor of paying $4-$5 for beverages that weren't utterly satisfying. Low-priced competitors such as Dunkin' Donuts and McDonalds began to seize upon Starbucks' errors and pricing as opportunities to acquire customers. At some point, the chain introduced stinky breakfast items, filling its shops with unpleasant scents from hot cheese and eggs, and its hiring and training standards slipped further. Then there were were other bad signs, such as a failed iPhone-related partnership with Apple, which saw a Starbucks music and Wi-Fi feature disappear without a trace from iPhones at the point at which it was supposed to take off, and hints that the already extended company was signing real estate deals for locations that weren't as smart as their predecessors.

Picking the Wrong Solutions, and Eroding the Brand. Starbucks executives knew that all this was happening, but came up with a series of moronic solutions that only made the problems worse. They shut down the entire chain of stores for part of a day for a retraining of all employees in drink-making fundamentals, which turned out to be a widely-publicized, open acknowledgement of quality problems, while resulting in little to no actual improvement in troubled stores. Then, there were a series of chicken-with-head-cut-off layoffs and store closures, in which apparently panicked executives suggested that massive cuts were necessary to sustain the company through troubled economic times; this managed to decrease customers' confidence and send angry, laid-off employees onto message boards, where they railed against a corporate betrayal they deemed unprecedented in the company's history. Starbucks had lost its soul, they said, and they seemed to be right. Those who remained were left to do so much work in a shift that they were forced to decide which bases - sanitation, friendly customer service, and inventory restocking - mightn't get covered at a given point in time. Starbucksgossip began to run a column from a former barista who toured stores, rating them on how close they came to the chain's standards, including a question: "Was the bathroom cleaner than a gas station bathroom?" Sixteen of 39 locations reviewed so far received a "no" on that one.

Ruining Core Products Through Unnecessary Tinkering. Finally, there were the drinks, which Starbucks undermined in a staggering variety of ways. One was that it quietly tinkered with the recipes for its popular seasonal Pumpkin Spice, Gingerbread, and Egg Nog beverages, as well as others, leading customers to wonder whether their favorite drinks were being made improperly or just with new, less appealing formulas; it also started to play with price increases for drinks that it decided required too much work for the already-high prices. Under attack from Dunkin' Donuts and McDonald's for the quality of its hot coffee, Starbucks decided to heavily market a supposedly great new "Pike Place Roast" drip coffee that became its primary hot offering, a confidence that no one outside the company really understood, as many people found it to be mediocre - not the sort of thing to push in a taste test, which journalists and customers subsequently did because of the marketing.

Undermining Core Customers' Confidence. When it wasn't messing with the flavors of its drinks, Starbucks was reducing confidence in the process by which it prepared them. Seemingly out of nowhere, the company swooped in and purchased a company named The Coffee Equipment Co., maker of single-order Clover coffee machines that were helping independent coffee shops to blow away Starbucks with comparatively fresh, excellent flavors. Clover operators had focused attention on how Starbucks was brewing bigger pots of coffee and leaving them sitting for extended periods, ruining their flavor, and so Starbucks bought the company with plans to use its entire production capacity towards supplying machines to its own stores - a great plan. Then it engaged in what could only be called one of the slowest rollouts in corporate history: a year and a half later, Clover machines are only advertised by the company as being available in four cities, and even then, not at most locations. Savvy customers began to wonder why they should wait on a Starbucks to get a Clover-quality drink when they could look elsewhere.

Messy New Product Rollouts. The company also botched new product rollouts, most notably impacting its cold beverages. Last year, it tried to introduce gritty, nichey Vivanno fruit shakes, confusingly pitching them as a healthier alternative to the company's own, popular Frappuccinos. Vivanno launched with amateurish, Napoleon Dynamite-quality posters, and stores subsequently posted charts showing how much fat and caloric content the Vivannos included relative to the Frappuccinos. It was if someone was trying to run the company into the ground by combining bad advertising for an unappealing new product with attacks on one of its most popular current ones; those who like Frappuccinos and dislike Vivannos now have to consider ordering healthier (and less expensive) items such as tea, or smaller portions. Then there were Sorbettos, frozen yogurt drinks that resulted from a personal investment in popular frozen yogurt chain Pinkberry by the CEO of Starbucks. The Sorbettos were judged in a test market to be great - just what Starbucks needed to hear, really - but they were also incapable of surviving a national or international rollout because their machines required too much maintenance, impractical if not impossible at the now understaffed chain's locations.

Around, But Not Entirely There. So where does that leave Starbucks today? Even after finally posting its first profitable quarter in some time, the company's sales and revenues are still down, and the chain remains in a state of what can only be understood as transition. Its baristas - genuinely good people, from what we've seen at various company-owned stores we've visited - are starting to get their old smiles back after months of gallows humor, but for various reasons, they're still executing on a less than optimal set of strategies with less than optimal performance. Blended drinks have become a complete crapshoot from location to location, server to server, such that we've all but stopped ordering them in favor of ice tea lemonades on the rare occasions that we do stop by. Pumpkin Spice coffees, which are so popular that people have eBayed containers of the syrup to keep themselves supplied with the flavor year-round, continue to be a seasonal draw, albeit with diminished flavors that are eroding their appeal. And a chain-wide initiative to replace all or virtually all of the food products with new, supposedly healthier stuff from different suppliers hasn't led to any actual improvements that we've been able to spot: muffins we used to like have are now unnecessarily topped with strusel, rice krispie treats are now padded with big, flavorless marshmellow pieces, and other items seem to have become sweeter, but not better.

Diluting the Brand While Alienating Neighbors. Then there's the company's other initiative: the 15th Street Coffee & Tea business, which it has been testing in Seattle - amazingly, as an alternative to building the Starbucks brand. Over the past six months, the company made headlines in Seattle by sending teams of executives out to independent coffee stores in an effort to mimic them, going so far as to ask employees where they'd purchased their awnings, and copying the looks and feels of certain shops, angering owners, employees, and some customers of the places being copied. Then, Starbucks' copycat stores are then branded almost anonymously with the street names they're located on, and marketed as a little something different from the chain's other locations. Why go through all this trouble? As an experiment to see what would happen if the Starbucks name fades into the background, and to test new menu items such as beer and wine, added to appeal to customers later in the day. Trying new cosmetic strategies and menu offerings isn't a bad idea, but why do so in such a transparently inauthentic, community-angering way? Yet again, Starbucks found a way to do something relatively small that signaled a clear lack of confidence in the future a massive, 16,000-store chain.

In short, by simultaneously undermining the quality of its own products and brand through a combination of poor marketing and public relations, unimpressive quality control, and less than entirely positive changes to its recipes, Starbucks achieved a rare feat in business: cutting itself off at the legs at a time when it had no meaningful competition in its niche. If Starbucks was, as its executives once claimed, not just a coffee shop but a "third space" - a place to relax and/or work away from home or the office - it was the only such chain in the United States to focus on coffee, and have a brand name associated with luxury and deluxe offerings. Today, it has allowed itself to become a brand that people, even former devotees, identify with overpriced, underwhelming drinks and food, and if it recovers from its largely self-inflicted wounds any time soon, it will surprise a lot of people, including us. For now, Spot Coffee is at the top of our local list; will anyone else come along and do high-end coffee, better?