Once Starbucks reached its saturation point (one location on practically every block), it had nowhere else to go but down – and that’s exactly where it went. Stores were underperforming, the stock price plummeted, and the brand was forced into a steamed-milk showdown when the McCafé coffeehouse concept began brewing front and off-center at most McDonald’s restaurants.
But less than two years after Howard Schultz returned as CEO, following an eight-year hiatus, Starbucks’ future looks as sweet as a Strawberries & Crème Frappuccino.
Every brand experiences growing pains, and Starbucks, which opened new locations at an arguably pathological rate, was no exception. Speaking at Thursday’s Ernst & Young Strategic Growth Forum, Schultz felt his brand lost its focus after 15 years of infallibility: “Somehow, along the way, the level of that feeling” – the love inspired by a people-based business – “got somewhat blurred by success.”
Schultz made some difficult decisions, but they were essential for the brand’s survival. If your brand is in trouble, or isn’t as successful as it once was, you can learn a lesson or two from Schultz’s boldness.
In February 2008, shortly after returning to the company, Schultz ordered all stores closed for three hours to focus on barista training, a move that subjected the brand to ridicule from its competitors. He shuttered some 900 stores, a very public admission that “we had stretched the brand beyond its demography,” as he told the forum.
He insisted that the company focus on its core principles, cut waste, and innovate, and when a certain fast-food franchise with even more locations than Starbucks decided to hone in on its core business, Schultz claims it was a blessing in disguise.
“McDonald's made us better,” he said, not quite elaborating. Did McCafé somehow inspire the development of Starbucks’ Via instant coffee? Not necessarily, but the McDonald’s competition and what Schultz called “a death march of people saying Starbucks’ days were over” forced the brand to execute drastic decisions that made it a leaner (by comparison), profitable company again.
Are you ready to make those kinds of decisions for your brand?
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