Is Howard Schultz On Track?

During Starbucks’ investor conference yesterday Chairman Howard Schultz declared that the US economy is in a “tailspin” and introduced a number of ways that his company is going to combat this environment. This is the first big step by Starbucks founder Schultz since he returned as head of the company at the beginning of the year.

Starbucks will start offering a customer-rewards card, a new brewing system for its coffee and is reportedly rolling out a new line of health and energy drinks for its customers, among other initiatives.

The company’s first-quarter same-store sales released earlier this year inched up 1%, and management announced that it will cut back its global store openings to 2,150 new stores this year from 2,500 in 2007.

Will these new initiatives help the coffee king? From what we’ve been able to tell so far in this economic downturn, discount chains, wholesale clubs and grocers are succeeding. Is Starbucks going down a path that will lead to similar results that others will soon copy? Or is the chain hurting from overexpansion?


4 Responses to “Is Howard Schultz On Track?”

  1. 1 Arthur Hutchinson March 20, 2008 at 10:28 am

    Starbucks needs to go back to being a service oriented company that serves coffee. The message is confused.They need to refocus on what made them great. Coffee/Service/ Relaxing atmosphere. Stop trying to upsell me energy drinks and stuffed animals.

  2. 2 Stuart Wernick March 20, 2008 at 12:14 pm

    this is not a tailspin. just because the economy was growing so feverishly and now starbucks is not expanding at an over expected rate does not warrant a tailspin. we are in an adjustment of value period. the economy is coming off a really hard sugar rush and it time to diet. let’s watch what we eat and stop being so piggish. enjoy what we have gained and find a good work out (no pun intended) program.

  3. 3 Nancy Hamel March 21, 2008 at 10:42 am

    I think that “tailspin” might be a little harsh. We are definitely in a slump, thanks to the sub-prime loan disaster and home sales being in the tank – not to mention it is an election year. I think Starbucks’ problems lie in their own marketing and sales mistakes – such as offering bags of their coffee for sale. Nothing tastes the same at home as it does in a restaurant or cafe – and they lost their exclusivity. I think they should stick to what made them great – they offered coffee that was unique and special that you couldn’t get anywhere else. They need to “ride the wave” and stick to their specialty. Offering health and energy drinks makes them look desperate, and cheapens the brand.

  4. 4 Robert March 24, 2008 at 8:22 am

    What needs to be done is fairly simple: clean up the stores, get staff (baristas) that are pleasant and simlplify the “ordering experience”.

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