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Posted: Fri Mar 21, 2008 10:42 am Post subject: Starbucks reveals plan for recovery, buys CLOVER
Overall this is very good news for the consumer AND the industry. Starbucks will be getting back to basics and once again be focusing on the coffee......After all that's what we all care about!
Chad
Starbucks will 'fight to the death,' Schultz says
CEO unveils five-point plan to revive business
By DAN RICHMAN
P-I REPORTER
A new espresso maker, a new drip blend and a gourmet coffee machine acquired by buying a tiny Ballard company -- all those figure into Starbucks Corp.'s planned recovery during what it called exceptionally difficult economic circumstances.
The Seattle coffee giant Wednesday introduced a five-point plan to revive its business in an economy that could make long-affordable luxuries such as a $4 coffee seem extravagant.
An above-capacity crowd of 6,000 shareholders, who gathered at Seattle's McCaw Hall for the company's 17th annual shareholders' meeting, gave Chairman, President and Chief Executive Howard Schultz a long round of applause as he strode onstage in a dark suit.
"I didn't know what to expect," Schultz confessed to laughter.
An understandable concern, perhaps, with share prices down nearly 50 percent since last year and the company's first drop in U.S. customer visits reported last quarter.
Before the meeting, shareholder Irene Ulvenes, 66, of Olympia, said she and her husband were "sure feeling the crunch" from the stock's decline.
Schultz squarely addressed shareholders' worries.
"I share your concern and disappointment with how the company has performed and how that has affected your investment. And I promise you: This will not stand," he said.
Among the threats Starbucks faces are rising milk prices, declining store visits, competition from McDonald's and Dunkin' Donuts, and a tightening economy that has cut U.S. mall traffic by up to 10 percent, Schultz said.
To stimulate growth, Starbucks will focus on coffee, striving to make both its espresso and drip coffee the best available. Yes, the company will make an entrance into the health and wellness arena and into energy beverages -- but those are for another day, he said.
"Above all else, we are and have been the most respected coffee company in the world," he said. "We're going to fight to the death and not allow any company to take that position away from us."
Shares closed down 74 cents, or 4 percent, at $17.50, gaining 20 cents in after-hours trading. The stock is trading near its lowest level in more than four years and is worth half what it was at the beginning of 2007.
In the five initiatives, the company introduced:
A new espresso machine. The Mastrena espresso machine, from Thermoplan AG of Switzerland and made exclusively for Starbucks, will be the sole espresso machine installed in all new stores.
The Mastrena is low enough to see over and can be stacked with cups -- two traditions that vociferous bloggers and baristas alike regret Starbucks has lost.
"It's an unbelievable tool that will provide us with the highest-quality, consistent shot of espresso" and will give the company a five-year technological lead, Schultz said.
Mastrena will replace existing espresso machines in half of all stores by the end of 2009. It will be in 30 percent of all U.S. company-owned stores by year-end and in 75 percent of them by the end of 2010.
More conservation. The company said it will give $2.5 million in each of the next three years to Conservation International of Arlington, Va.
The money will be used to help minimize deforestation, which the group said accounts for 20 percent of worldwide annual carbon emissions. Starbucks currently gives $100,000 a year to the group.
A new Web site. The company on Wednesday launched MyStarbucksIdea.com, where customers are encouraged to submit new ideas for discussion and rating by other visitors. About 48 Starbucks employees will monitor the site daily, and the highest-ranked ideas will be considered for implementation.
Loyalty benefits. Starting in mid-April, customers who use registered Starbucks cards in select U.S. and Canadian stores will get several benefits:
Starbucks will not charge for any syrups, milk alternatives and other extras added to drinks, no matter how numerous or complex. Senior Vice President Michelle Gass said she isn't concerned that will lead to more expensive, time-consuming orders.
Refills of brewed coffee will be free during the same visit. They now often cost 50 cents. And any tall drink will be free with the purchase of one pound of beans.
A new blend. Starting in mid-April, the company said, it will introduce Pike Place Roast, a blend Schultz called "transformational" and various shareholders called some combination of bold, mild, smooth and light.
Each store will offer brewed Pike Place Roast in regular and decaf at all times, plus a rotating coffee of the week, Gass said.
Executives also said the company will quit using flavor-locked bags of preground coffee next month. Instead, it will grind beans in most of its U.S. stores, to bring back the aroma that's been missing since it started using sealed grounds years ago.
Late in the two-hour meeting, Schultz revealed that Starbucks has bought The Coffee Equipment Co. of Ballard, for an undisclosed sum. Its product, the Clover, custom-makes individual cups of coffee from fresh-ground beans, using a combination of French press and vacuum techniques.
Many stores will be getting a Clover, but probably not those with low foot traffic or short hours, Gass said. Very busy stores may get two. About 30 percent of U.S. stores will get Clovers by year-end, Schultz said.
Stores with Clovers will offer up to six specialty coffees to be ground and brewed one cup at a time. That's in addition to brewed Pike Place Market blend and the coffee of the week, Gass said.
Schultz said stores in New York are charging $7 a cup for Clover coffee. He wouldn't say what Starbucks may charge but admitted he was "very encouraged" by the price Clover coffee can fetch. The cost of a cup of Clover coffee may reflect the cost of the coffee from which it's made.
After some routine company business, singer k.d. lang performed two songs toward the end of the meeting.
In a Q&A afterward, Schultz said the company will be mindful of how the economy performs in considering whether to close more than the planned 100 stores -- or to reopen some, should conditions allow.
He said Starbucks will back away from movie production to focus on building the coffee business. China, with 600 stores now, could have thousands, he said. Other international markets targeted for expansion are the U.K., Japan and Canada, he said.
Analysts reacted favorably to the new strategy.
"The initiatives we heard about today strategically build a moat around the business from a competitive point of view," said Sharon Zackfia, an analyst at William Blair & Co. "They're giving no one any room to say their coffee is better than Starbucks."
So did individual investors.
Ulvenes, reached after the meeting, called Schultz "a creative genius." She said that whether his plan will turn things around "has yet to be seen, but what impressed us was the enthusiasm and support he gets from his employees. They seem enamored of their company, and that's a good sign."
IN-STORE CHANGES
NEW MASTRENA ESPRESSO MACHINES
For better crema and to let customers, baristas see each other better
NEW EVERYDAY DRIP COFFEE
A "transformational" new blend, Pike Place Roast, in both regular and decaf
CUSTOMER LOYALTY BENEFITS
Free extras on drinks, free refills and free drinks with a beans buy
RETURN TO IN-STORE BEAN GRINDING
The aroma has been missing since sealed grounds were introduced years ago
This report includes information from The Associated Press and Bloomberg News. P-I reporter Dan Richman can be reached at 206-448-8032 or danrichman@seattlepi.com. _________________ 140+ Coffee Pods from The Coffee Artisan, Fratello, Cafejo, Reunion Island, Timothy's and Black Mountain Gold
Grindmaster and BUNN Brewing Equipment
Baratza Grinders
Store: http://www.thecoffeeartisan.com
Blog: http://blog.thecoffeeartisan.com
I suspect the new blend is designed to compete with Dunkin and Mickey-D's. The American consumer is used to a middle-of-the-road Columbian. If SBUX is wise, Pike's Place will offer a twist on that idea; sort of a "tricked up" version of Dunkin Donuts main blend.
I'm glad to hear about fresh grinding in store. Currently, the only beverage I really enjoy from SBUX is French Press. I always order a press pot of some blend not being offered that day- which means they will open a fresh bag and grind it up just for me. Doing it that way, I get some pretty darn good coffee in their stores. (I also get annoyed glances from many a barista. The real coffee geeks who work there, though, are always glad to hook me up.)
I'm hoping that when they roll out the new espresso machines they will let us order shots of their Espresso Regalo blend which, in my opinion, is better than their normal espresso blend. I'd pay an extra for it. _________________ K-cup reviews Pod reviews
Gear:
Keurig B40
Delonghi EC155
Aeropress
French Press
Posted: Sun Mar 23, 2008 5:03 pm Post subject: Re: Starbucks reveals plan for recovery, buys CLOVER
TheCoffeeArtisan wrote:
A new blend. Starting in mid-April, the company said, it will introduce Pike Place Roast, a blend Schultz called "transformational" and various shareholders called some combination of bold, mild, smooth and light.
Each store will offer brewed Pike Place Roast in regular and decaf at all times, plus a rotating coffee of the week, Gass said.
So "Bold, Mild, Smooth, and Light" means NOT dark-roasted? I would be interested in trying this one. I sure wish our local coffee-roaster would get smart and offer ONE bean that's not roasted Over-The-Top!
We have a Starbucks now at one of our local grocery stores. There is one bean they have that looks like it's not a dark roast. I'll probably be buying a bag this weekend to check it out!
I used to love Starbucks' coffee when I lived down in Portland. I didn't know there was such a thing as a non-burnt coffee bean back then! _________________ Cafe My Bunn! ~~ Keurig B40 ~~ KitchenAid Compact 4-Cup Coffeemaker ~~ Keurig B30
Late in the two-hour meeting, Schultz revealed that Starbucks has bought The Coffee Equipment Co. of Ballard, for an undisclosed sum. Its product, the Clover, custom-makes individual cups of coffee from fresh-ground beans, using a combination of French press and vacuum techniques.
Many stores will be getting a Clover, but probably not those with low foot traffic or short hours, Gass said. Very busy stores may get two. About 30 percent of U.S. stores will get Clovers by year-end, Schultz said.
That news came as a bit of a shock to thousands of independent coffee retailers. I suspect they're reeling at the implications still. More on the other side of a shameless self-link...
Oh well - at least Clover will be around but I would have liked it to be the defacto new small cafe machine and see more indy shops as well. _________________ - Jay Brewer
- Editor, http://www.singleservecoffee.com
- Current arsenal: Dolce Gusto, Bunn My Cafe, Senseo, GPOD, OPOD, Keurig B40, B50, B60, B70, & Assorted (N)espresso Machines...
Starbucks HAS changed! I hadn’t been in a store for a while, but I stopped in recently to buy some coffee. Their customer service wasn’t bad before, but now it’s top-notch! I was a little confused since they changed the signage (took down the signs with the prices of whole beans.) Someone who was clearly on break asked if she could help, then hopped up to show me where the new pricing is and to check in the back to see if they had any more of the “limited edition” beans. The cashiers were also more helpful and attentive than before. And I got the free cup of coffee with my bean purchase. So far I like the new Starbucks!
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