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.

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.

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%.

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.

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?

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

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.