Starbucks is entering a new era — and 4 jokes reveal the biggest problems haunting its business (SBUX)

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  • Starbucks is sandwiched between inexpensive fast-food chains and high-end “Third Wave” coffee shops. 
  • While it built its empire on its cool, Euro-inspired image, Starbucks is increasingly known for “basic” drinks like the Unicorn Frappuccino. 
  • Moving away from the core brand sent Starbucks “over its skis” in the past, the CEO told Business Insider — and he’s well aware of past mistakes.
  • Starbucks’ new mission: to be everything to everyone. 

The other weekend I went with my family to a coffee shop that my mother deemed “the most beautiful” Starbucks she’d ever seen.

It was a sprawling, comfortable space on the main street in suburban Michigan, where we were visiting family. The exterior was covered in wood shingles and river rocks. Customers lounged in chairs outside and tapped away on their laptops at tables indoors. Chatty baristas were happy to help us with my mom’s low-cal venti iced-coffee order, my cold brew, my dad’s tea, and my brother’s request to use a bathroom.

StarbucksIt had little in common with the drive-thru Starbucks my parents visit in North Carolina or the crowded store where I pick up my mobile coffee orders in New York City.

These differences show the central tension of what Starbucks has become: all things to all people, and in the process, a brand that’s become intermittently muddled and decidedly middlebrow. 

Once the chain that persuaded Americans to spend $4 on a cup of coffee with Italian names for drinks and sizes that made coffee an elite experience bordering on pretentiousness, the Starbucks of 2017 is just as known for the super-sweet Pumpkin Spice Latte and the made-for-Instagram Unicorn Frappuccino. 

Starbucks is sandwiched between low-end brands like Dunkin’ Donuts and McDonald’s, which siphon off some of Starbucks’ customers with lower prices, and, at the other end, the “Third Wave” coffee chains such as Intelligentsia and Blue Bottle, with their precise pour-overs and baristas who make art out of latte foam.

As Starbucks enters a new era, with plans to open 10,000 locations in five years, and the move of longtime CEO Howard Schultz (the man behind the brand’s most revolutionary choices) from chief executive to chairman of the board, the company is trying to figure out if it can be everything to everyone.

The means serving Unicorn Frappuccinos for Instagram-obsessed college students, nitro cold brew for snobs, and a morning cup of joe for commuters on the go. All the while, it needs to fend off competition that its own success helped create at both ends of the market.

At Starbucks image is key. And, what some customers think about Starbucks has long been reflected by the jokes about the chain.

The “Venti” joke

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When Chris Allieri visited Starbucks in Boulder, Colorado, as a freshman at the University of Colorado in 1992, he had to call his parents.

“It was magic, like a temple to coffee,” Allieri, the founder and principal of marketing firm Mulberry & Astor, told Business Insider.

The location, built in a former gas station, was modern, light, and airy. The smell of coffee wafted through the air, as employees ground beans in the store. Baristas — a new word to Americans back then — gave off a perfectly cool vibe, and the coffee options were seemingly endless. Everything about the store was different from the cafés and convenience stores where most people purchased stale-tasting coffee in the ’90s, if they even bought the beverage instead of just making it at home from Folgers Crystals.

On the phone from his dorm, Allieri told his parents he was convinced that Starbucks would be the next big thing.

“I kept saying, ‘This is bigger than coffee — you don’t get it!'” he recalls telling his father. “And I remember him saying, ‘Well, you should buy the stock.’ As if. I was a broke college student. If only I had the money, or the foresight.” If Allieri had purchased $1,000 in Starbucks stock back in 1992 — the year the company went public — he’d have $180,000 today.

The Starbucks experience

Howard SchultzStarbucks has made billions of dollars by creating something that didn’t exist: a space where customers could not only treat themselves to fancy Italian-style beverages but also relax and socialize. It was a brand that immediately felt sophisticated and elite, making customers like Allieri feel as if they were joining an exclusive club.

When the first Starbucks opened in New York City, The New York Times had to define what a latte was and explain it was pronounced “LAH-tay.” Starbucks played up its exotic nature in everything it did, down to its sizes, with “grande” and “venti” providing a connection to the Italian coffee culture that inspired Schultz.

Starbucks 1994 annual report

“Starbucks was an affordable way to get luxury,” Craig Garthwaite, an assistant professor of strategy at Northwestern’s Kellogg School of Management, told Business Insider. While Starbucks was clearly pricier than your average cup of coffee, it was a small luxury in the grand scheme of things. Most people couldn’t afford to buy a BMW, but they could treat themselves with a “grande vanilla latte” as a small symbol of their expensive tastes.

In the 1990s and 2000s, the little details that set Starbucks apart and allowed it to charge a few extra dollars, were new and foreign — and ridiculed by many. As Starbucks expanded, the chain was mocked for calling its beverage sizes tall, grande, and venti instead of small, medium, and large.

In 2004,“Mr. Language Person” Dave Barry published an article in The Times that hit on the tropes of the venti joke:

Starbucks decided to call its cup sizes “Tall” (meaning “not tall,” or “small”), “Grande” (meaning “medium”) and “Venti” (meaning, for all we know, “weasel snot”). Unfortunately, we consumers, like moron sheep, started actually USING these names. Why? If Starbucks decided to call its toilets “AquaSwooshies,” would we go along with THAT?

Starbucks versus Dunkin’ Donuts

In 2006, the venti jokes were so common that Dunkin’ Donuts launched a campaign lambasting a “certain competitor” for using elitist words that were a perplexing mix of French and Italian. In the ad, which it called “Fritalian,” customers stand, slack jawed, looking at a coffee shop’s menu board filled with a nonsensical mishmash of words, such as “Limon Au Deau,” “Lattcapssreso,” and “Isto Cinno.”

“Delicious lattes from Dunkin’ Donuts — you order them in English, not Fritalian,” the narrator says in the commercial’s conclusion.

Dunkin’ advertising “lattes” shows how mainstream the beverage had become over the last decade, in large part due to Starbucks’ influence. As Starbucks grew, lattes had become a symbol of elitist liberals, out of touch with the average American. In 2004, a conservative PAC ran an ad during the Democratic Caucuses featuring an Iowa couple telling Howard Dean to take his “tax-hiking, government-expanding, latte-drinking, sushi-eating, Volvo-driving, New York Times-reading, body-piercing, Hollywood-loving left-wing freak show” back to Vermont.

Yet in 2008, Dunkin’ Donuts was selling more inexpensive versions of Starbucks’ semi-Euro beverages, while maintaining the brand’s all-American identity.

Starbucks didn’t want an all-American identity. For Schultz, confusing, potentially elitist naming conventions weren’t a bug; they were a feature.

“Customers believed that their grande lattes demonstrated that they were better than others — cooler, richer, more sophisticated,” Bryant Simon wrote in his book about Starbucks, “Everything But the Coffee.” “As long as they could get all of this for the price of a cup of coffee, even an inflated one, they eagerly handed over their money, three and four dollars at a clip.”

Starbucks’ strategy has long been different from that of McDonald’s or Dunkin’ Donuts. While Dunkin’ Donuts attracts customers with low prices and convenience, Starbucks’ strategy has been rooted in attracting customers to what Schultz called the “romance and theatre” of the coffee-shop experience.

“Any retailer can throw a few ingredients in a cup and say here’s your latte, but Starbucks has differentiated themselves with the experience,” Melody Overton, the creator of the blog Starbucks Melody, said.

When customers are making venti jokes, Starbucks is at its best, as an aspirational brand that’s unlike any other. The chain’s problems come when the venti becomes the norm.

The Starbucks on every corner joke

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Throughout the ’70s and much of the ’80s, Starbucks was a coffee roaster first and a coffee shop second. But in the early ’80s, Schultz joined the company and became convinced that Starbucks could achieve a seemingly impossible goal: remain premium while becoming ubiquitous.

Schultz had never wanted Starbucks to stay small, like other regional chains such as Peet’s. In fact, Schultz left the company for a brief period in the mid-’80s because he was unable to convince Starbucks founders that the company could be an international chain, not just a coffee roaster. In 1987, Schultz acquired the Starbucks’ brand and 17 locations from its founders, who decided to focus their energy on Peet’s. Then Schultz began planting the seeds for one of the most ambitious retail expansions in history.

Between 1998 and 2008, Starbucks grew from 1,886 stores to 16,680.

Starbucks stores

“From the beginning, what they were hoping to be is the third place between home and work,” Garthwaite said, referring to the chain’s sociology-inspired mission to become a meeting place. “To achieve that goal, you have to be everywhere.” And soon Starbucks was.

Even when Starbucks had just 700 stores, the chain seemed pervasive, with NPR’s “All Things Considered” announcing as an April Fools’ joke in 1996 that Starbucks’ was building a “transcontinental coffee slurry pipeline” as part of efforts to become omnipresent. In 2000, an Onion headline read “New Starbucks Opens In Rest Room Of Existing Starbucks.” That same year “The Simpsons” aired an episode in which Bart visits a mall in which every store was swiftly being turned into a Starbucks. Lewis Black had a joke in 2002 about seeing a Starbucks across from a Starbucks, which he declared a sign of the end of the universe and evidence against a loving god.

It wasn’t an exaggeration. Around that time, if you stood at just the right spot in New York’s Astor Place, you could see three Starbucks without moving your head.

But unlike the venti jokes, these jabs spelled trouble for the company. 

Overexpansion

The Simpsons Starbucks

“The number of new stores got ahead of Starbucks’ ability to have the [employees] to staff those stores,” Starbucks CEO Kevin Johnson told Business Insider. The company “got over its skis,” sacrificing training and upscale marketing for speedy growth and shareholder returns without thinking of the consequences.

As a result, Starbucks made decisions that would leave the company reeling as it moved away from its roots as a sophisticated, luxury brand.

Schultz had stepped down as CEO in 2000. While he remained on the board, new leadership was more focused on expansion than safeguarding Starbucks’ unique brand.

Chantico

Opening locations across the US and beyond meant adding menu items that appealed to a wider swath of customers, from the failed cocoa-butter Chantico, which launched in 2005 and lasted a year, to the fruity Sorbetto, which launched in 2008 and was pulled after one year. To speed up operations, stores swapped high-end La Marzocco espresso machines for automatic machines. Starbucks no longer smelled like coffee as the chain had begun brewing from flavor-locked packaging.

On their own, each change would have likely gone unnoticed, but taken as a whole they were almost deadly.

“The damage was slow and quiet, incremental, like a single loose thread that unravels a sweater inch by inch,” Schultz says in his book “Onward.”

While customers may not have been able to pinpoint the changes, they noticed a different environment at Starbucks. “They lost a little bit of their luster — a little bit of their chutzpah, a little bit of their sparkle,” Allieri said of Starbucks in the mid-2000s.

As quality slipped at Starbucks, McDonald’s and other fast-food competitors smelled opportunity, adding lattes and other specialty coffee beverages to their menus at lower prices. Customers began buying their coffee elsewhere.

“More and more people were asking themselves, ‘Why am I paying $4 for a cup of coffee?'” said Oded Netzer, an associate professor of business at Columbia.

It was a grim situation. Starbucks had built a business on its sophisticated brand. Then, as it became ubiquitous, the chain became sterile and corporate. Further, in the recession, expensive coffee was no longer an affordable luxury.

The breaking point

Starbucks closure

The chain finally reached a breaking point in 2008.

In January of that year, Schultz returned as CEO, with the mission of “re-igniting” customers’ “emotional attachment” to Starbucks. In February, Schultz closed all 7,100 US Starbucks locations for three and a half hours to retrain baristas on how to make the perfect espresso. And in July, Starbucks announced it was closing 600 underperforming stores.

As the company’s fabled “visionary,” Schulz began trying to bring the company back to his roots, a role he took with zeal. Beans were once again ground in stores, a new type of espresso machine was installed across all locations, and stores were redesigned to “recapture the coffeehouse feel,” adding touches like local decorations and secondhand furniture.

He righted the sinking ship financially. The company’s stock has increased by 1,140% from Starbucks’ low in late 2008, and the company has opened 10,000 new locations around the world.

starbucks timeline

But few would say Starbucks fully recaptured the premium image it had crafted in the ’90s. Instead, it entered a period of appealing to both the wealthy and the working class, serving the urbane and the moms in minivans who go through its drive-thrus. Shoppers expect a Starbucks to be nearby, and they no longer wince calling a drink “grande.”

This is a big reason Starbucks is stuck in the middle now, sandwiched between chains focusing on no-frills value, like Dunkin’ and McDonald’s, and the “third wave” of high-end shops. Some are independent; others are fancier chains, like Intelligentsia and Blue Bottle.

Starbucks’ ubiquity empowered rivals at both ends. Over the past year, these problems have once again reared their heads as Starbucks’ stock stagnated. Store traffic slowed after years of growth post-2008.

Instead of being mocked for being pretentious, Starbucks now finds itself with something like the opposite problem.

The “basic” joke

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The story of Starbucks’ current place in Americana can be summed up in one drink: the Pumpkin Spice Latte.

The PSL, as it’s known, sometimes derisively, is a seasonal concoction of cloves, nutmeg, and other spices synonymous with fall. It’s been on the menu since 2003, when Starbucks decided it wanted to create an autumn drink.

According to lore, the PSL was created while brainstorming ideas for a new espresso-based seasonal beverage. The innovation team sat with a pumpkin pie on one side and an espresso machine on the other, alternating shots of espresso and bites of pie in an attempt to deconstruct how best to combine the two flavors.

The drink has become an autumnal tradition. Over the past 13 years, Starbucks has sold 200 million cups of its Pumpkin Spice Latte. It’s even created an entire category of PSL products, from breakfast cereals to Pumpkin Spice Peeps. It has a Twitter account.

It also happens to be the defining drink of the “basic b—h.”

The dangers of being basic 

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If you are an American between the ages of 10 and 30, being basic isn’t necessarily a definable term; it’s a feeling you get about a certain kind of person, almost always female. To be a “basic b—h” is to buy into an unoriginal image of what is enjoyable and feminine, and to broadcast these uninspired tastes to the world. It’s the opposite of being edgy or cool — it’s behaving as expected, buying into a certain degree of groupthink. Wearing Uggs and leggings? Basic. Instagramming your fingers, coated in Essie nail polish, clutching a rainbow bagel at brunch with your girls? Basic. Pumpkin Spice Lattes? The most basic thing of all.

Thought Catalogue listed “liking Pumpkin Spice Lattes” as No. 2 on the list of “21 Signs You’re A Basic B*tch” in 2012.

By fall 2014 the topic had exploded. Twitter was flooded with jokes about “basic white girls” loving PSLs. More than one group of white people released a parody rap video about Pumpkin Spice Lattes (“pumpkin spice latte rap” yields more than 2,000 results on YouTube). BuzzFeed published a think piece about PSL and class anxiety, “breaking down why we’re actually dismissive of all things pumpkin spice.”

<img src="http://static2.thisisinsider.com
Source: http://www.thisisinsider.com/how-starbucks-got-stuck-in-the-middle-in-4-jokes-2017-4

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