Starbucks and their plans for growth

February 28th, 2012

Some time back in late 2010 (I think) I made a comment on twitter about Starbucks’ direction in the US. 1  An intriguing response to this turned up fairly rapidly in my direct messages – an invitation to go for coffee with the then MD of Starbucks UK, Darcy Willson-Rymer.

I’d met Darcy before at an event we’d both been speaking at – and I’d be grateful to him that day for helping make a point about the value of brewed coffee by agreeing to pay £5 for the presspot of the Kenya I was brewing on stage.  2. I’d enjoyed meeting him and he had wanted to engage me on Via, as I’d been a little negative onstage about the timing of their move to promote this.

We met for coffee at their recently remodelled Conduit Street location, and shared another presspot of coffee as we talked downstairs.  Around that time I thought a lot about posting some exerpts of the conversation – but something about the meeting seemed so genuine, and it was so enjoyable, that it felt like a betrayal.  This despite the fact that he was talking to me because I write this blog, so aware that anything could be reported on afterwards.

It was a disarming conversation, I’d talked myself into certain opinions which he did an impressive job of reversing.  In particular I remember his approach to growth.  He didn’t want to grow for the sake of growth.  He didn’t want to fight legal battles to open stores (something seen often in the UK with regards to chain coffees stores and planning permissions/protests), instead he wanted to open where people actually wanted a Starbucks.

I told him I was surprised that they were pushing brewed coffee so heavily, especially in an economy where the high margin, desert in a cup style drinks were surely priced at the right point as little luxuries that didn’t break the bank in a recession.  His response was that they had doubled their brewed coffee sales, without canibalising sales from other items.  It is hard to argue with that.

So – if I didn’t feel it was appropriate to write up that conversation then, why do I feel differently now?  Firstly – Darcy has moved on from Starbucks and has been replaced by Michelle Gass.  Michelle has moved across from the US, where she apparently worked closely with Howard Schultz, to take on the role of President of Starbucks Europe, Middle East and Africa.  I met her briefly when I was in Berlin at an event with her, but didn’t get much of a chance to chat.

Secondly I happened upon this article today that got my brain whirring.  Starbucks is back on the growth kick again – with plans for another 300 stores in the UK.  Without being party to the exact details, it is interesting that their solution to Europe under-performing is to add more stores.   I’m not aware of the macro economics of Starbucks, but if you’re looking to redress operational profit as a percentage of takings spending more to increase the number of stores seems at odds, while making the existing stores more successful/profitable would seem an obvious choice.  However – I know nothing about running an business with 17,000 outlets and I’m fairly sure they’ve done the modelling/projections on it.  Interesting, though, that the reaction of the market was a drop in share value to the announcement of the focus on Europe.

I’m most interested in the choice of word for this European expansion plan – it is to be the Starbucks Renaissance program.  I’m under the impression that their intended meaning of renaissance is to be a renewed interest in Starbucks – rather than them embracing the arts in any serious way beyond selling Bob Dylan CDs at the point of sale.  For a company mocked in the past for ubiquity, the posterchild of globalisation (and the window of choice to smash at any demonstration…), it seems a brave tactic to try and renew interest and consumer uptake by being ever more present when everyone already teases you for being everywhere.

  1. It was a reaction them trialling the sales of salami and beer in their stores – to which I mentioned my concern that they had forgotten why people visited in the first place.  ↩︎
  2. He actually ended up splitting this with Louie Salvone, head of Espresso Service  ↩︎

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