Publication Date

2010

Abstract

[Excerpt] Is the coffee empire that Starbucks built beginning to fall? In a memo sent to the senior management of the company in February 2007, Howard Schultz warned that Starbucks was in danger of losing its romance and theater, which he believes are fundamental to the Starbucks experience. He noted, “Over the past ten years in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have led to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.” Calling the memo subject “The Commoditization of the Starbucks Experience,” Schultz questioned corporate decisions to use automatic espresso machines and eliminate some in-store coffee grinding. He worried that store design decisions to gain scale efficiencies and higher sales-to-investment ratios had turned stores into sterile cookie-cutter properties, without the warmth of a neighborhood cafe. Streamlining store design was a financial decision, but the result was that stores no longer have the soul of the past. Schultz envisioned the cafes as a “third place” where people gather between home and work and feel some of the romance of the European cafe, but this feature may have disappeared, to be replaced by a chain store feel versus a neighborhood store.

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Required Publisher Statement
© Wiley. Final version published as: Enz, C. A. (2010). Case 7: The commoditization of Starbucks. In C. A. Enz (Ed.), Hospitality strategic management: Concepts and cases (2nd ed., pp. 564-581). Hoboken, N.J.: John Wiley & Sons. Reprinted with permission. All rights reserved.

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