Has Starbucks Lost Its Way?

I couldn't help but notice that same-store-sales in the quarterly results announced today fell short of expectations. For me, this did not come as a total shock.

ETF Monkey has loved Starbucks for years. In the course of my work travels, I frequented their locations in Seattle back in the days when they were small. They were amazing. The quality of everything they served was top-notch. I wanted to meet their HR person, because my experience was that virtually every employee went above and beyond your expectations. It was like they had enjoyed a little too much of their own product, but in a good way. Cheery, bubbly, upbeat.



And then they got big. Very big.

Inevitably, things began to change. To be fair, not too significantly at first. But as time went on, the pace of what I perceive as the negative changes picked up speed.

A huge turning point was the La Boulange deal. Not only have the majority of the original La Boulange stores simply disappeared, taking a really nice concept with them, the version of the "La Boulange" offerings now peddled by Starbucks are, in short, an insult to the original concept.

Recently, they made changes to their rewards program, making it much less "rewarding" unless one is a fan of their expensive hand-made beverages. Never mind that at an average price of well over $2.00 a cup for drip coffee they are making quite a handsome chunk of change. I understand that there were some problems with the old rewards program. But the changes have made it much less interesting to all but certain customers.

And that brings us to the matter of price. Here's a Motley Fool article from barely a year ago that offers a little history. In my area, the price of a Grande drip coffee rose from $2.05 to $2.25, a 9.8% increase, Just yesterday, I discovered that the price has gone up once again, to $2.45. That's another 8.9% increase, or an overall 19.5% over the past two years.

I don't know about you, but my salary hasn't increased anywhere close to 19.5% over the past two years. It doesn't take an mathematical whiz to decipher what that means. Were I not to change my habits, an increasing percentage of my income would be going to one place. Interestingly, the Motley Fool article I linked above argues that Starbucks knows it, and people accept it. My question is; Yes, but for how long?

But that's not the worst of it. For my money, the quality of the coffee feels like it is declining at the same time. As two recent comparisons, I have had cups of coffee that I viewed as clearly better from  both Peet's Coffee and Tea in my local area and Pret A Manger in New York City.

It's a little sad when the coffee from Pret A Manger tastes better than that from a place with "coffee" in the name.

I have to admit that I have began to vote with my dollars. It's not that I have totally abandoned Starbucks. But where it used to be the case that a coffee run almost invariably involved a Starbucks, now I split my dollars with other providers. I also bought a top-quality machine for home and have started to brew for myself several days in the week. These recent results appear to indicate that I am not alone.

And that brings me full circle to the title of this article. Has Starbucks lost its way?

What do you think? Drop a comment below.

Comments

Popular posts from this blog

Quick Take: Vanguard Core + REIT vs. Vanguard Core - 7/25/16

Index - 'ETF Monkey Focus' Series

Solid Anchors For Your Portfolio