Remember in the film Trading Places, when stock trader Dan Aykroyd finds himself beat up, broke, fired and friendless ... wearing borrowed pimp clothes ... wondering what the heck happened? I wonder if Starbucks Chairman Howard Schultz is feeling a bit like Aykroyd these days. His coffee chain has been reeling the past year, with slumping stock, stagnant sales, and a growing legion of uninspired (passionless) customers.
Unlike Akroyd's character, who gets shanghai'd into the role of a street person by his two evil bosses, I believe Starbucks has only itself to blame for its decent from coffee greatness. Today's Wall Street Journal article by Janet Adamy, McDonald's Takes on a Weakened Starbucks, tells of a massive new push by McDonalds into the premium coffee end of things, with new espresso stations and pricier fu fu drinks on the way. From the article:
The confrontation between Starbucks Corp. and McDonald's Corp. once seemed improbable. Hailing from very different corners of the restaurant world, the two chains have gradually encroached on each other's turf. McDonald's upgraded its drip coffee and its interiors, while Starbucks added drive-through windows and hot breakfast sandwiches.
We're on to something here. The two have been moving toward each other. But guess which one can get away with that type of move?
McDonald's is entering the sixth year of a successful turnaround, while Starbucks has begun struggling after years of strong earnings and stock growth.
And this is particularly interesting:
Starbucks increased the pace of its store expansion at the beginning of this decade. Some changes, including drive-through windows and breakfast sandwiches similar to the Egg McMuffin, mirrored techniques used by fast-food chains. This led to tensions among management and employees about whether the chain was eroding the core of the Starbucks experience, according to former employees and people close to the company.
I wrote about Starbucks in February of last year, a post called Back to Bean Basics, where I agreed with some things Schultz said in an internal memo, about Starbucks losing it's way. I am not anti-Starbucks. I have dropped zillions of dollars on its coffee (and scones) over the years. Despite some frustrating experiences, I still go once every week or two (down from five times a week two years ago). This blog is much more about the positive end of things, as I'd rather celebrate the great things companies are doing than wack them for the bad. But sometimes I feel inspired to get out the stick and offer some critical analysis and opinion. This is one of those times.
McDonalds is off track on this venture. It will never be a 'coffee house' to people looking for great coffee AND great coffee house atmosphere. If it wants to offer better tasting coffee, super. But instead of trying to upgrade its coffee fleet so it can offer fancy dancy drinks at a price point just below Starbucks, McDonalds should simply be trying to educate consumers about simple, great tasting coffee. Offer better quality, fresher coffee, and price it the same or just a bit more than before. And then try to kill both Dunkin Donuts and Starbucks, by 'demystifying' coffee. Tell people great taste isn't rocket science. It's high quality beans, ground fresh daily, and served hot and fresh. That's what the to-go crowd wants each day from McDonalds. They don't want some new Mickey Ds barista trying to mimic a Starbucks espresso slinger. Stop it. But ... if McDonald's fails in this effort, it's not that big a deal. The worst thing it's done is try to 'upscale', and the worst that happens is people laugh at the lonely new barista.
Starbucks, on the other hand, has been 'downscaling' for the past couple of years. By adding breakfast sandwhiches, and drive throughs, and automated espresso machines, it has taken the Henry Ford assembly line approach to the coffee house. And thus, the 'experience' is not so magical anymore. Coffee is in Starbucks' wheelhouse. Stick to it, do the upper shelf stuff better than anyone else, and be happy. By trying to beat McDonald's at its own game, you lost yours along the way. But you can still get it back ... and I'm rooting for you.
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