The Uncertain Future of Post-Pandemic Starbucks
How did the coffee behemoth get left behind in the pandemic?
In early 2007, the world seemed partly owned by Starbucks. It did not matter what country you were in, or what direction you walked — everywhere you were sooner or later bound to encounter one of the company’s outlets, habitués lined up, sometimes out the door, for some version of their four-dollar iced or frothed coffee. Inside would be a similar scene — laptops out at some tables, pals gabbing away at others, a cross-generational crowd drawn by one of the most iconic, desired, and ubiquitous brands of the era.
But Howard Schultz, the company’s visionary and former CEO, saw something different when he gazed over the same landscape. Revenue was enviably up, just like always, yet growth was slowing — by a lot. And Schultz thought he knew why: In a march for global dominance — efficiency and stores everywhere — Starbucks had lost its soul and its romance. You still got your latte, but as though on a conveyor belt. From a handcrafted, ultra-personalized product — a “third place” between the office and home, as Schultz called it — Starbucks had turned itself into a commodity. And that was a deadly wrong turn. Sure enough, over the subsequent months, Starbucks’ share price plunged by 45%.
By last January, if you had invested $10,000 in Starbucks stock at its nadir in December 2008, it would have been worth $236,290.
Schultz took back control of the company, and a few months later assembled some 10,000 store managers and executives in New Orleans. After an appearance by Bono, Schultz dropped the brutal news: Unless something dramatic was done, Starbucks would be insolvent in roughly seven months. It didn’t seem possible, yet it was true. Everyone present could lose their jobs, along with their staff, some 160,000 people in all. Starbucks needed to go back to basics — high-quality, aromatic coffee at front and center, and the kibosh on smelly hot breakfast sandwiches, DVDs, and exotic, noncoffee drinks.
Two months later, the share price bottomed out. By then, Schultz was already on a tear, cutting stores, laying off staff, and ridding the menu of malodorous foods…