Ecommerce and Retail

Starbucks: Inflation and Devaluation of a Brand

The United States really didn’t understand what coffee could taste like. Coffee grinds were flavored with chips for a long time that helped maximize the profits of coffee companies. I had a friend of mine that worked in a packaging plant who worked on the equipment that filled and sealed coffee containers. He told me they changed brands all night, but never changed the beans. We were all getting fed the same crap, disguised in different coffee cans.

Then Came Great Coffee

About the time I started to pay attention to how my coffee tasted was about the time I found the Norfolk Coffee & Tea Company. To this day I’ll tell you that there’s nothing quite like getting fresh roasted beans directly from the oven.

If you’re imagining it as some new wave, modern place for coffee snobs to meet and hobnob, you couldn’t be further from the truth. The inside looked like an abused factory… there was a coating of coffee and peanut dust on everything you looked at. You simply walked in, ordered your bag of grounds, and walked out. I have no idea where the beans came from, but they were terrific. The owners taught me about the new coffee makers that were out with no burners and insulated carafes. No burnt coffee. Mmmm.

Then Came Starbucks

About this time, I moved to Denver and left my new found discovery behind. In Denver, I searched for some coffee roasters but it just wasn’t the same. Starbucks had come to town, though, and I got a flavor for the burnt beans of the ‘bucks. I don’t think I ever got used to the cost or taste of those beans, though! I was spending 10 times the money on coffee than I used to!

I did enjoy the stores. I loved sitting down, logging onto the wireless (before they were charging for it), and getting some work done. They played cool music there (before they were selling it).

Then Came Hard Seats

Hanging out at Starbucks when they first opened was pretty sweet. Comfy chairs throughout, making it a great place to hold the impromptu meeting. The comfy chairs invited people to spend more time at Starbucks, though. I’ve read that many retail establishments put in hard seats so people won’t stay as long. Starbucks switched to larger stores and hard chairs with a comfy seat nary around.

Then Came the Auto-Shots

I remember the great signs greeting you at the ‘bucks:

Your Barista is Jane

Jane may have a splash of green hair and a couple piercings in odd places, but as she pulled a shot, you watched as she practiced her craft. She’d discuss your likes and dislikes off the drink options and make a couple recommendations to you based on her wealth of experience. You felt cool just being there and being paid attention to. You felt special.

But the lines grew bigger and the assembly line had to grow more efficient. New machines were brought in that automatically ground, packed and poured the shot. The magic was gone… no imperfection, no shots that took too long, too short or had too many grounds. Worse yet, baristas lost their knowledge of the craft. Barista’s were no less artists than someone flipping a burger at the local Burger King.

Then Came the Retail

As you stood in line, you were now surrounded by bags of beans, cups, mugs, insulated containers, chocolates, coffee makers, espresso machines, music CDs, newspapers… The store was starting to look more like a store than a third place, the place away from home and work where I wanted to spend time.

Then Came the Drive-Throughs

The lines were too long to carry on a conversation. The baristas were too busy to get to know you. Shifts of new baristas came and went, the “Your Barista is” was left blank. To fight the lines, the drive-through was installed. It’s more convenient. It’s faster. Bigger profits. More customers.

There was no option of a taste of the out of ordinary tailored to your fancy. Just the typical recommended drink of the day or an upsell to a coffee cake.

No thanks. Non-fat, no-whip, grande mocha please.

Eight dollars, drive around.

I’d listen to the radio as I’d pull around and hand them my cash and head for work. No greetings, no discussion of the weather. Just me and my car. The magic was gone. Starbucks, the experience as I had known it, had died.

The truth was that I don’t know that I was ever really in Starbucks for the coffee. Oh – I needed my fix just like everyone else, but I was in love with the brand, the style, the personality of the coffee house. I loved going there because I felt important. And when I paid $5 for a specialty drink, I felt even more important.

Somewhere along the way, Starbucks began shaving off the special in turn for profits and efficiency. They stopped making me feel important. They stopped making me feel special. They stopped being special. Starbucks is an amazing story – they inflated the price of a common drink and got us all hooked. But they couldn’t keep us. Growth, profit and efficiency took over and eventually squashed everything out of the stores that was unique.

The irony is that Starbucks devalued itself, no one else did it. No competitor came in and challenged them. When Schultz came back in January, I had big hopes. Oh well.

Then Came the Discounts

Today, Starbucks began offering a $2 afternoon drink if you bring in a receipt from the morning. I stopped for lunch at Starbucks today and got my stamped receipt to come in later. I never did.

I think we’ve kind of hit the nail on the head, says Brad Stevens, vice president of customer relationship management. It’s easy for baristas to implement and it’s easy for customers to understand.

Easy. Yes, that’s the answer. I want to pay for easy.

IMHO, I think Starbucks has hit the final nail in the coffin. They’re no longer special enough to charge you $5 for a drink, they’re now resorting to discounting the single greatest product they touted. It’s a sad day for Starbucks.

Then Came the Private Coffee House

I’m writing this from my favorite coffee house in the world, which is a privately-owned shop. Tonight, my barista Cassie put together a fantastic raspberry Italian soda for me based on a discussion of my likes and dislikes (that she knows pretty well). And Alayna made me a wonderful heated roast beef sandwich on a toasted bagel (not on the menu).

I wrote this entire post on the free wireless and sat part of the time in a big ol’ comfy swivel chair. Cassy and Alayna are chatting, by name, with the customers and pouring shots (and repouring them if they’re too long or too short), packing them carefully based on the humidity.

There’s such an important story in here for other companies. You simply can’t continue charging for “special” and then whittling away at everything that was special. Starbucks didn’t discount an afternoon coffee this afternoon, they devalued their brand even further.

It’s a sad day for Starbucks, but a great day for the independent coffee shop. I never did go back and get that $2 drink this afternoon.

39 Comments

  1. 1

    I know what you mean, I tried a starbucks “espresso”, because I thought that there would be no way that such a large, well-known chain could be that bad. And it was. But I go to a nice place in Sydney, where they roast the beans in the cafe, and know me by name. It’s nice.

    • 2

      I’ve been a Barista for almost a decade. I’ve worked at one of the best coffee shops I’ve ever experienced, and I’ve seen what makes a coffee shop great. I worked at a Starbucks for about two months one summer, having known nothing about it. I had to quit that job. Every bit of skill I’d acquired from my experience as a Baritsa went out the window when I put on that apron. My job had nothing to do with coffee (which was horrible anyway). I’d say about 90% of job, on a daily basis, had more to do with upselling and “looking” busy.

      I don’t know why anyone would go to Starbucks except they simply don’t know any better. There are small privately owned coffee shops that are guilty of the same thing too though. Where I live, there isn’t a single place to get a decent cup of coffee.

  2. 3
  3. 4

    I completely agree with your commentary on the commercialization of Starbucks. I believe that most consumers out there enjoyed the “experience” of Starbucks, not the coffee. Ironic that they have given into the masses so quickly that you have to go someplace else for that experience now.

    I have not tried The Bean Cup yet, but did recently stop by the Monon Coffee Company. I highly recommend giving them a shot if you’re ever in the Broad Ripple area.

  4. 5

    I am about ready to sell my shares in Starbucks. I don’t think they can recover. They may have a brand equity, but when they start closing a few thousand stores, you can see the bubble has burst.

    Nowadays I roast my own coffee at home. It is cheap and fun.

  5. 6

    I used to work for Starbucks… Now I don’t even go in them anymore. I prefer Coffee Plantation where you can order anything to your liking and the baristas know what they’re talking about, like they should! They too have free wireless, a lot of comfy places to park yourself, and a wonderful ice cream shop next door. It’s a win-win-win situation.

  6. 7

    I’m the owner of a small independent coffeeshop in a small town (Dillard, GA). I can give my customers the attention they want, (or the privacy) I don’t mind if they stay on the WiFi all day on one cup of coffee, I fix the special orders just the way they want them, and they come back over and over! Big surprise, eh? In this business, as in nearly all businesses, service is EVERYTHING!!!!

    • 8

      You hit the nail in Starbuck’s coffin right on the head. No more personality where there used to be one. No more srevice like there used to be. Instead of opening a billion stores, they could have made just as much money just making some of them larger, along with the staff. They thought to ‘hook’ with the addicting coffee, but literally ran themselves into the ground with taking away everything that made them special. You want customers? They’re out there!! But you have to offer something that no one else has, and at least act like they are the best customer ever! You will be successful as long as you chant the manta…..service IS everything.

  7. 9

    Great article. You really “hit the nail on the head”!! I much prefer to go to the smaller private coffee houses. They’re usually more spacious and serve lunch and dinner.

    There is a really nice shop in Munising, Michigan that has a bookstore attached. You walk in, place your order, and can browse through thier bookshelves while you wait.

  8. 10

    I come from a culture where drinking coffee is a big deal, you go to the hundreds of coffee shops, order Cappuccino, Espresso or a Macchiato for less than a buck, I am talking good quality coffee, no fancy shmanzy named drinks that require a Rosetta Stone program to learn the lingo.
    Here in Arizona, Starbucks is in every strip mall, grocery store and in anything with parking. I find my self stopping every morning for a tall coffee along with soccer moms getting breakfast for their babies and kids.
    Starbucks Coffee has no consistent taste, matter of fact it tastes really bad unless you get the 5$ Mocha Cappu? with Carmel something.
    may be its a marketing strategy to taste bad simple brewed coffee so that you can upgrade to the $5 drink, oh by the way don?t forget the fat free turkey bacon sandwich… its fresh.
    Douglas, thanks for the wake up call

  9. 11

    You had me hooked all the way through your post. Nice writing. I work in web design for a mega bank, and I see a lot of brand devaluation parallels. I’ll be forwarding this off to colleagues.

  10. 13

    Douglas:

    I almost never go to Starbucks because I’ve never been a coffee drinker and why pay for wifi when it’s free elsewhere?

    But frankly I think the problem is the public markets. Investors are always demanding growth and not caring about the extra little special you want in the companies whose stock they hold. If their stock doesn’t growth in value greater than the S&P they are sacking management and bringing out the lawyers.

    Problem is once you get to a certain scale you just can’t continue to grow at the same rate. With 95% market share where are you going to find 10% growth? So management starts cutting corners, shaving costs, getting cheesier with its approaches. And that’s especially true if the founder and/or management team with the winning ethos is no longer at the helm (just look at Apple during the John Sculley days.)

    So realistically it hasn’t been Starbucks killing itself, it has been the nature of the beast of public markets where investors are fully divorced from any involvement in the company’s operations and just demand more, more, more.

    It’s enough to make an idealistic capitalist want to stay private.

    • 14

      Agreed Mike. A great movie (that has elements that are very left of center but I still enjoyed it) is The Corporation. An important message behind the movie is that Corporations are living, breathing entities that only grow on profits. There’s no right or wrong in a corporation, only profitable or not profitable. That’s a scary thing because it’s almost doomed to fail the consumer!

  11. 15

    I agree with Eric, this was a well written and engaging blog post that has a valid point. What I want to know about is why Starbucks ever rose in the first place…are people that desperate to feel special that they have to pay (a lot!) not for some coffee, but for the attention of the person making the coffee? Are you likes and dislikes so important that you need them to be represented in your coffee? I just spent a week at the beach with my Father-in-law and he made the worst coffee each morning (Chock Full o’Nuts, why would you call a coffee that?) and those quiet mornings chatting with him made that coffee some of the best I’ve ever had. Spend the time and money on friends and family, they will make you feel special.

    • 16

      Great comment and I agree. There’s a book where Schultz talks about coffee houses becoming the ‘third place’. It’s a place where we meet with friends that’s outside of work and outside our home. It used to be the local bar or pub where this happened, but Starbucks took that away.

      My experiences are with friends and family – but often it’s in a warm environment away from home that provides strong feelings. We’re in our houses and at our work every day… we need somewhere else to go. For quite some time, that place was Starbucks.

  12. 17

    And you have no idea how hard it is for the artistic barista having to make the big switch (due to “the economy”) from a locally owned coffeeshop where she can have green hair, piercings, and a perfected art to the automated, corporate-robot world of Starbucks… It sucks.

  13. 19
  14. 20

    i’ve never been to starbucks. hope to die having never had a $5 1,000 calorie coffee beverage from starbucks.

    i drink coffee. black. yuban seems good enough from a grocery store. and the pot from the morning is good any time during the day when you reheat it in the microwave.

    i’m thinking of getting a french press coffee maker. that’ll be the day when i too am a coffee snob.

  15. 21

    Along with being public, it’s part of the high tech/high touch conundrum. And it’s an indication of how much real community matters to people. Our clients at Rubicon want connection and counsel as well as smarts and methodology when they work with us.

    Here’s my take on community – http://tinyurl.com/58skzn

  16. 22

    Great Post. This has turned into one of my favorite blogs to read!

    I only go to Starbucks when I forget to set my coffee pot the night before. The drive thru line is easy on work mornings. One thing to mention about the free wifi is that not all Starbucks have it anymore. I went for the Wifi to one on the road last week and was greatly disappointed. I believe Starbucks is one of many companies that just simply lost their way while growing fast.

    They are now just ordinary.

  17. 24

    Hi Doug,
    Wonderful article. There is a such a profound and a humbling lesson in this for all the businesses which want to keep growing faster and faster…..richer and more richer. It was a wonderful conversation tonite at the Bean Cup. Little did I know, that my questions on Web stuff will turn me on to some real good info. Thanks.
    See ya around.
    Sachin

  18. 25

    You are absolutely right. I was never a fan of Starbucks in the first place. By the time one came to Terre Haute, it was already that crazy chain. In you are ever in Terre Haute, hit up Coffee Grounds or Java Haute. Both are still locally owned and make one hell of an imperfect coffee. Even then though, I’ve seen the commercialization of the two. They both seek to compete with Starbucks on some level and I don’t blame them. There are three ‘bucks here now versus maybe four local coffee shops. That’s a small pie to slice.

  19. 26

    It’s kinda like your favorite band. At first, you love to see them play because they’re playing in a place where you can go and enjoy yourself with friends and drinks and they play great music. It feels like they are putting on a show just for you. Then they get a little more publicity and you’re happy because they have a music video and sell a few more albums. Then it sucks because their songs are co-written by big shot producers and they play huge stadiums where the sound is terrible and the parking is a brisk 5 mile walk to the venue. Everything good is fleeting… enjoy it while you can!

  20. 27

    Your article is right on the spot. There is no Starbucks Experience any longer, and I never even liked the burnt beans to begin with.

    So perhaps a great, brave local coffee shop will open in one of the locations Starbucks is moving out of, and show them how it should be done!

  21. 28

    I too love “real coffee shops” (Starbucks, at least for me, doesn’t qualify). I live at several…all serve Certified Fair Trade, shade grown coffee. There is something almost magical about surrounding yourself with great company, great coffee (that is more than reasonably priced AND doesn’t destroy rain forests AND supports the growers), and wireless…while seated in a old but comfy chair…it is HEAVEN!

  22. 29
  23. 30

    Yeah, I never really liked Starbucks, but It was a lot better before – although the Massachusetts shops all seem the way you remember. Either way, I think it helps preserve the little shops, as weak as they usually are.

  24. 31

    I’m from Washington State, land of the 5 coffee shops on every corner. Their newest craze in the smaller areas is Woods Coffee shop. They’ve got the comfy couches by the stoked fire place and an enormous compilation of board games. There’s live bands on the weekends and yes you can do your work there.

    Starbucks is no longer on top, only more convenient. Soon enough their convenience will wear completely. I haven’t visited a Starbucks in months. I can’t stand their fluff drinks and obnoxious attendance. Nobody goes for real coffee… They might do better if they admitted they’re really making candy bars in cup full of froth.

  25. 32

    I remember when starbucks started coming around here. There were a lot of little shops to stop in for a coffee and a sandwich, and they put them out of business.

    Starbucks was about branding and bullying. Ask any of the residents of New Hope, PA how they felt when starbucks all but forced out their local shop to cater to the tourists and visitors.

    starbucks succeeded by catering to people looking for something different, grew by feeling upscale and special, then slit their own throat by letting it all go to their heads. Now it’s just a fashion statement and another designer label.

    Just look at the number of iPhones you will see being used in there, and the number of designer bags, and macbooks. Doesn’t take long to figure most of the people go there to show how cool they are. Most wouldn’t know a decent espresso or cappuccino if some talented young barista with green hair and piercings threw it in their face for being annoyingly trendy.

  26. 33

    What a good story — something chain store operators should make required reading for their employees.

    I never acquired a taste for Starbucks, preferring to plunk down a $1.50 for a large cup of Panera Bread’s light roast coffee. Also, Panera never charges for internet access, making their stores the ideal place to hang out.

    Is Panera perfect? Nope. Just like Starbucks they go through frequent employee and management changes with quality levels varying from day to day.

    I guess that is why I prefer to make and drink my coffee at home.

  27. 34
  28. 35

    ME: FORMER SEATTLE STARBUCKS BARISTA
    Good post Doug! … Same in Seattle. Thank god there’s always better “real” coffee shops around. Of course, Starbucks is big and always busy, but their service and quality keeps falling.

  29. 36

    Good analysis of how the brand was eroded, and I believe, lost. I’ve been watching this for the past couple of years. What was once an experience that made Starbucks different was lost as the chain became less attentive to the way customers were treated. It became impersonal, the ultimate expression of which is a drive-through. You can drive through MacDonalds and get coffee. Starbucks was no longer the “third place.”
    Thanks for a keen analysis.

  30. 37

    Douglas-

    I am a barista at Starbucks. I’ve worked there for 2 years and counting…my last day is next Saturday. Not only am I going off to school, but I am sick of Starbucks. I could transfer to a store in the area where I will be attending school, but I have absolutely no desire to do that.

    I used to love my job. I used to love my store. I used to love Starbucks. I started out in a nice lobby store in Gresham, OR. It was fairly busy, but I still had time to get to know and enjoy my customers, and I still had time to get to know and enjoy my co-workers. Not to mention my manager was one of a kind. Then I had to make the switch to a store in Vancouver, WA. In Vancouver, I work at the infamous store that is “always really really busy” (I get that from every single person of which I tell what store I work at). Really really busy is an understatement and we are the epitome of the Starbucks that you talk about in your article, and I’ve had enough. There are great local coffee shops, and I enjoy going to them rather than to my own company! That is a sad day for Starbucks when your own employees rather not give you the time of day.

    To my defense and that of other Starbucks baristas, we work well with what we are given. Not to toot my own horn, but after two years, I am a great barista. I care about the drinks I make and the customers I give them to. I do take the time to chat with my customers and get to know them when they are at my drive-thru window or at my counter while I’m on bar. I know many baristas have taken on the “burger-flipping” mentality and have set aside their love for the job, but many haven’t and they are the ones that are holding what’s left of Starbucks together.

    Personally, I’ve lost my faith and love for Starbucks not only because my store is a burn-out store, but because of the way we are treated as employees. Maybe it’s just my store, but it is really bad there and because of it and stores like it, Starbucks has become a sinking ship. I also work at Red Robin and get treated very well there. In fact I love my job there. I love going to work and it makes me a better employee because of it.

    I went through all the training and grovelling that Howard Schultz did early this year and at first I was gung-ho, but I’ve since lost my faith and have resorted to quitting my job altogether. Your article is one that Schultz should see. Then maybe it’ll be the wake-up call he needs.

  31. 38

    You know how you tell yourself you are studying because you have your certification books opened in front of you? But you are really clicking on Stumble Upon to find interesting posts to read?

    Yeah well, I came across yours and had to write to tell you I enjoyed it very much. I gave it the thumbs up, so more people can come across it and enjoy it also.

  32. 39

    You know what has surprised me. How good the Mc Cafe line is. Mc Donald’s coffee for over $3 cup seemed a bit much.

    After trying it I am saddly hooked and have been going there more and more as of late.

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