Diversity Vs Identity

I’ve tried to avoid writing about the current economic climate, and the outlook for coffee in 2009, and using the two “c” words that lost any meaning months ago.

Nonetheless it has been interesting to see what they industry press are writing about, what advice is being offered, what strategies are being deemed wise.  A word I am seeing more and more is ‘diversifying’.

Starbucks are in a mess right now, and they have been for some time.  To me the problems are linked to a gradual loss of identity over the last few years.  Right now they are putting out mixed messages – on one hand promoting better coffee, on the other hand discounting it. Worrying about breakfast sandwiches, selling CDs, whilst still trying to claim that they are all about the coffee.

Photo by tonx
Photo by tonx

For a while, in the UK anyway, McDonald’s were all about salads.  Big money on big advertising campaigns telling us what a good idea it was to buy a salad at McDonald’s.  It didn’t work, that isn’t why we go to that place and walking past a branch on my way home I didn’t see a single salad image on display and I have no idea if they even still serve them.  The saw salad’s as a way to help stop declining sales, instead of actually making the food they had served very successfully taste, and be, better.

We’ve all visited businesses that have scrambled for turnover through diversification – coffees, teas, smoothies, soft drinks, pastries, panani are only the beginning.  Every item added seems to drag the average care and attention for each item down a little.  Nowhere does a huge range of things exceptionally well.  In the end, desperate to catch all consumer demands the business looses all identity.

Imagine I showed you a menu for two different Chinese 1 restaurants.  The first has a typically huge menu of maybe 50 or 60 dishes.  The second menu has a total of 15.  Would you expect a difference in quality between the two?  Would the smaller menu imply a lack of imagination or greater care and attention to each dish?  If each restaurant does two dishes incredibly well – in which menu do you have a better chance of a great experience?

Starbucks do the desert in a cup very well.  They brand it well, they sell it well and if you have a sugar craving then it probably tastes pretty good.  The gingerbread latte has become weirdly iconic, and endlessly imitated.  Those drinks built the Starbucks expansion, and for many consumers they justified the premium price.  2

Starbucks have done a poor job of redeclaring their own identity and it continues to hurt them.  Businesses are looking at a bleak year ahead and I think having a strong identity is key.  You need customers loyal to your business, customers that have a connection with what you do, with the positive experience they associate with you.  Diversity may be a way to sneak up the average customer spend, and I am not saying it can’t be done well, but often it reeks of desperation or overreaction to a natural dip in sales (such as in January…).  Coffee is still a long way from being written out of people’s budgets – as long it is worth the price per cup.

Dropping coffee sales say more about what people think your cup is worth to them than it does about your customers think about the size of your range of products.

  1. Or any cuisine with a typically very large menu  ↩︎
  2. I justify that simply by the numbers they sold!  ↩︎

15 Comments

  1. Nailed it. All of my favorite places in town specialize in a specific item or idea, rather than having a wide variety of products that are just ‘good’ – and I’m yet to see an exception.

  2. One of my most recent discoveries of late has been a Café here in Montréal called Myriade. They do specialize in coffee. Pure focus on coffee and interaction with the customer.

    They’ve set a new standard for customer service and though I’ve only been once it was an eye-opening experience; indicative of how diluted and impersonal the service-industry consumer experience has become.

    I don’t work for Myriade and I’m not related to their operation in any way. I was just that impressed.

    Great post.

  3. So true, up until about a month ago that was a key little phrase I was telling business owners – “This economic climate forces us to diversify”. It wasn’t until recently I changed my own view on that.

    Reading Al Ries and Laura Ries book on ‘The 22 Immutable Laws of Branding’ quickly had me questioning my own thoughts. In the book they note that the way any of the super-giant companies got that way was by doing one thing very well. It wasn’t until the brand was established that these companies diversified their product range. They also note – that for a business to be successful it pays to look not at what the super-giants are doing now but what they did to get them there.

    An interesting thought I thought….

  4. I agree largely with your post – find something you do relly well and stick to it – when a friend asks why I like a place I will often cite one item that stands out and often you find that is what people remember the place for – supermarkets call it a ‘hero’ item a phrase that I am not keen on.

    You mention that Starbucks have done a poor job at reclaiming their identity – I agree but wondered what is it they could do?

  5. In reference to the McDonald’s thing—I think with regards to the salads promotions in the UK, it was actually a sequal to their salad promtion in the U.S. which turned out to be extremely profitable for them—they upclassed the salads with Paul Newman’s own Dressing, and in one stroke, through their attempts to look healther to Oprah-loving soccer moms (by also introducing apple slices instead of ice cream cones for happy meal desserts) became one of the biggest Vegetable Customers in the U.S. Currently they are the number one buyer of Apples in the country, and in things such as lettuce, tomatoes and carrots, certainly in the top 10 list.

    Not to refute your general point in any sense, just a clarification of the McDonald’s analogy. Could Starbucks do something similar? Most definitely not. McDonald’s sole existence is to sell fast food on prime real estate at a decent price—while not as fattening as their other offers, the salads still fit into that mission.

    Starbucks’ mission was originally to provide high quality coffee on prime real estate at a yuppie price—and they’ve failed on that account. Now they still bad to mediocre over-sugared americanized coffee at exorbitant prices, driving away the food lovers, and slowly losing ground to the smaller guys. However, in the UK mediocrity sells at an astonishing rate so I doubt they (or Caffe Nero/Coffee Republic/Costa/Illy Cafes, etc. will lose much ground here.

    Now the question remains: can a cafe sell a wide menu of foodstuffs and still provide quality coffee? In NYC, the coffee would be good but the pastries to go with, rather atrocious across the board.

  6. Great post James. I couldn’t agree more. I have been toying for the last two years with the concept of Transcend Two, which was to be both the replication of our first espresso bar, plus a high end wine tasting bar. It is only in the last couple of months that I have abandoned that concept, not because I all of a sudden don’t like wine anymore, but because I don’t want to blur the identity and brand of Transcend. We have worked very hard to build our brand, and then the thought of confusing the brand and product of Transcend with a wine experience would only serve to confuse our customers.

    We will likely still do a wine bar, as I have way too much wine cellared to not do it. But it will be a separate venture. T2 will be another coffee focused venture, with a clear identity and a continuation of our quality product. Keep writing James, it is nice to have some clear headed thinking in the midst of our global chaos.

  7. I suppose Starbucks could pick one clear message and really get behind it. If they want to be the desert in a cup company that is fine, and that is what they should shout about, focus on and tempt us with. If they want to be about how good their coffee is then they need to stop cheating with “scoop” dates not roast dates, start training better techniques and start shouting about that.

    Their efforts last year to try to be all about the coffee didn’t work for me, because the message remained too mixed.

  8. James,

    I’m in agreement on your suggestion for Starbucks – focus on one thing – coffee. I feel that the biggest thing for them right now that no new iniative is left long enough to bed in – they have got so used to churning out new promotions, new ideas, new blends etc that they are like a junkie looking for the next fix. They need to get back to basics – good coffee at a decent price – then again their latter day business model was not based on that (rents too high etc). So anyone wishing to bet on their stock as it is now under $10?

  9. Reading this article, I can’t help but draw a parallel with Woolworth’s in the UK. All over the media there have been umpteen dozen articles about the decline of a brand, and all of them seem to miss one thing – what was woolworth’s actually about? It seems to me to be a brand that diversified so many times, nobody actually knew what they sold. The only thing ever mentioned was pick ‘n’ mix, and I find it very hard to believe you can sustain an 800 store+ business with sweets.

    To get back to the original point though, what’s really hurt Starbucks is the lack of consistent thinking, not just in pushing different products, but in international divisions having different focus. Examples – in the US, they closed all their stores for training. In the UK, they didn’t – the training was done out of hours, with staff who were probably a bit miffed at having to work extra hours*. Again, in the US, Pike Place Roast was pushed heavily, in a ‘get back to the brew’ position. In the UK, we didn’t see it, and instead got a blended juice drink. The company’s suffering from schitzophrenia at so many levels.

    To finish the ramble, I’ve seen it with a few companies I’ve looked at in the last six months – all of them are about to try and diversify their product line, and I can’t help but have the same position I did when I was actually at Starbucks – in a situation like this, it’s not your once a week, £4 dessert-in-a-cup customers who are going to sustain you. It’s your once/twice a day, £1.50 latte customers, who want the same product, produced to the same standards they expect, who are the ones that’ll keep your business afloat in ‘lean’ times.

  10. This is going to be a rather unfinished thought designed for discussion rather than conclusion.

    I think it’s too easy for people like us to Armchair Quarterback (or Armchair Goalie). So many variables are at play for Starbucks that we can’t expect to know how we would do things. Certainly if I was running a company the size of Starbucks, I too would probably have made similar choices because of its’ sheer size.

    Companies like Starbucks do many things because they’re looking for quarterly performance. Their stock price is based on current performance, and that performance is expected by Wall Street and stock holders who are always pushing for quarterly performance. And while it’s great for smaller companies like ours to stay focused on our vision, other companies don’t necessarily enjoy that luxury.

    That said, even at today’s recessed stock prices, if you had bought Starbucks stocks ten years ago, you’d still be ahead today – even after the stock crash from a near $40 high in 2006 to today’s close at $9.37.

    Add to that: what do you do when you’re Number One? When you’re nearest competitor (Caribou) is still light years (in terms of penetration) behind you?

    Let’s look at Coca-Cola. They’re another worldwide company who’s different divisions do things that don’t match other regions. Why? Different markets. It’s why Coca-Cola offers drinks like Ameyal in Mexico, Bankia in Bulgaria, Cappy in Europe, Chivalry in China and Quatro in Argentina, but not elsewhere. Each market is different and requires different focuses and approaches.

    Many years ago, I read a study about Coca-Cola and how it controlled 51% of the market. That’s a majority. Yet it spent millions on advertising and marketing (and releasing new brands). Why? Why would the world’s number one soft drink company do all this? They had control of the market. They weren’t spending millions and fighting for huge chunks, they were doing all of that just to gain one more percentage point of the market. Millions trying to get 52%.

  11. what makes differ to other business diversifying their nature of business? Starbucks still popular in our country for coffee yet enough that is not because of advertising on those TV or broadsheets but on word of mouth.

  12. Equation.

    1. Take the name of your business (example: Bloom Coffee and Tea)
    2. Focus on what is in your Name. COFFEE and TEA

    We serve 10 coffee drinks and 8 Teas. We focus on preparing those drinks to a level of quality that no one in our area has ever had before. And we are in one of the most densely corporate coffee areas in the country.

    If Starbucks Coffee wants to become successful again they should change there name to STARBUCKS SUGAR FILLED BEVERAGE EMPORIUM. Now there is a name that fits there Brand and Image.

    Customers will automatically feel that they are in good hands and know that they are receiving the best product if the know your focus.

    So focus on something.

    Thanks for an awesome blog James.

  13. Starbucks not have big market in my country , even hey not try to make any advertising at all !
    don’t wonder because i wonder too

  14. Maintaining your core is what can sustain you as a viable coffee business. But it is strengthening your core with innovation and education of your core products, coffee and espresso, that will propel you ahead of the competition.

    The problem that Starbucks has is many faceted. Since 3rd Quarter of last year, they have not gained in new customers– sales were/are coming from same customers spending more. Not a bad problem? Yes, for two reasons. First, lack of customer growth will be the death nail of any good business, and Second, sales increases were result of non-coffee products, which leads to a continued erosion of the “core” (supposedly) of Starbucks. Is Starbucks “coffee” or is Starbucks an “experience”?

    Starbucks has had bad coffee decisions compiled by worse PR. At each stage their core identity has weakened, and for better or worse, the reality of their operation has been exposed for even the most nearsighted to see.

    So Diversity vs. Identity? Whether Starbucks or Cafe Anonymous, you need to establish your identity, and continue to strengthen your core by educating your customers and “doing what you do” better and better each day. Selling steaks? — source better meat, learn new cooking techniques. Selling books? Pick a niche, understand your authors, become a literary expert… Selling coffee? Source better beans, inform your staff and your customer base about the beans, learn new brewing techniques, learn new roasting techniques, understand the nature of milk.. etc.

    But can you diversify and maintain your core? Certainly, if your Diversity is within your core Identity. Adding products to diversify your offerings doesn’t mean you have to extend to those outside of your Identity. Never offered SO espresso? Offer it. Never offered SO Americanos? Offer them. Thought about adding teaching as an item? Coffee 101, espresso 101, Press Pot Brewing, Moka Pot Brewing, etc. Now you are not only selling drinks, but you are now selling information and education to the customers… is this Diversity? At the least it’s an expansion of your offerings that ultimately leads to strengthening what you already have.

    As a small business, I am very calculated with any offerings that we have. We cannot afford to throw it at the wall at see if it sticks. Gobs of money in the bank does not shield you from the loss of identity. Just ask Starbucks.

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