Business Channel 2007-02-25&27

Starbucks founder 1 and Chairman Howard Schultz with a warning and a challenge for his ever-expanding coffee empire, Schultz sees a threat to his brand, a problem that could impact everything that's made Starbucks the great American success and growth story it is, and tonight, we are going in-depth on this amazing turn of events. Our Darren Rovell on this fascinating warning from the Starbucks, Darren.

Melissa, you said it, it did come in the form of a memo 2 right into Starbucks gossip blogger Jim Romenesko's email box on Wednesday. That's a week after Howard Schultz wrote the notes to top executives. Romenesko told ON THE MONEY he read it yesterday, believed the note was real and posted it on his website, the Wall Street Journal confirming this afternoon that it was in fact genuine.

In the memo, Schultz says he worries about what he calls the commoditization of the brand, as a result of the company's massive expansion over the past decade. And the decisions company officials made that watered down the ideal experience. Many of these decisions were probably right at the time, Schultz writes, and on their own merit would not have created the dilution 3 of the experience, but in this case, the sum is much greater and unfortunately much more damaging than the individual pieces. Schultz's more specifically pointing out the effect of rapid growth on store architecture and ambiance.

One of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile 4, cookie cutter, no longer reflecting the passion our partners feel about our coffee. All these, Schultz concludes, could lead to loss of market share for the world's largest multinational 5 chain of coffee stores. While the current state of affairs for the most part is self-induced. That has led to competitors of all kinds, small and large coffee companies, fast food operators and mom & pops, to position themselves in a way that creates awareness 6, trial and loyalty 7 of people who previously 8 have been Starbucks' customers. This must be eradicated 9.

Despite the release of the memo, the stock hardly budging 10 on the day. The story hit the wires at 1:23 pm eastern time, shares dropping a mere 11 17 cents from that point, closing at $32.75. Perhaps, that was an admission to the fact that most of what Schultz was saying was already obvious. Many customers we talked to today already knew this.

It's lost a little of its romance.
It's not like the way it was in the beginning.
It's not an experiences at all, it's like McDonald's.

Some close watchers of the Starbucks brand think the memo reaching the public is a good thing for investors 12 and customers.

Though ultimately I believe that the message is something that needs to be both internal communication and external communication. This is kind of the, the shot over the bow to say, you know, if we don't get back to the things that create the intimate experience, the ubiquity of this brand is gonna work against us.

Now there is debate as to whether Starbucks wanted to leak this memo. One conspiracy 13 theory which is writing on Romenesko's blog, their, the release of the memo makes Starbucks look more human, more original and more weak, still there are others that say that the memo would have been more eloquent 14 if it were meant to be released.

(Melissa)
I don't know, yeah, it, it's seems to contrive 15, but yeah.
Yes, a stallion in there, you kind of wonder.
All right, thanks a lot, Darren.


Vocabulary


a shot over/across the bow phr. a warning to stop doing something
The lawsuit 16 is a shot across the bow to businesses that are competing unfairly.