Tuesday, February 17, 2009

The end of the (Starbucks) era?

Is it me, or is Starbucks in the news more lately than ever? A recent Bloomberg article on coffee prices seems a perfect example of this. The article is not just about Starbucks--in fact in many ways it's not really about Starbucks at all--but you'd never know that unless you read the whole thing carefully through.

The Starbucks name is emblazoned in our consciousness in a way that almost no other brand is today. And right now, I think what's happening is the death of that brand. It has become too closely linked to what we have come to see as the excesses of the last decade. Our love affair with the comfy chairs, the jazz and the sipping of a latte while typing away on a Macbook might just be coming to an abrupt and ugly end.

Starbucks as a coffee chain has actually been around since the late 80s, but most people associate it with its rise to prominence in the mid-90s, when those big green signs started popping up on every street corner. Remember when its ubiquity was lampooned by Christopher Guest in "Best in Show"?

Starbucks had a starring role in the dot com era. The shine of that time stayed on the company long after the bubble burst. When I went to work at Red Herring, I was told that if you wanted to know what VCs were up to, the best thing to do was to hang around the Starbucks on Sand Hill Road. After the crash, Starbucks was there to soothe our frazzled nerves and remind us that a little luxury could still be had. The housing refi bubble, of course, meant we still had the cash for a $5 a day coffee habit.

It's hard to say when Starbucks started to flame out. Several commentators pointed out that the brand basically jumped the shark the day they started introducing breakfast sandwiches. And today's news that they're planning to introduce instant coffee is obviously the nail in the coffin. (Or should I say the nail in the coffee?) But whenever the exact date was, the little green mermaid is now starting to look like a symbol of times gone by--times, in fact, that many of us would like to forget.

The irony, of course, is that Starbucks is not just a symbol. It's a real company that is struggling to stay afloat in a down economy. It must cut costs and seek new revenue sources. The fall has probably been coming for many years now, and even Howard Schultz's hasty return as CEO a year ago can't change the course it's on. And so sadly, it must come up with new gimmicks and innovations, it must automate its processes, and introduce all kinds of other measures to remain solvent. (Amazingly enough, it is still offering its employees health insurance, despite the fact that this is one cost that is helping sink the company.)

So, who knows? Maybe Starbucks the company will live on, gradually becoming associated with something as mundane as the supermarket coffee aisle, where its instant packets will compete for market share with Maxwell House and Folgers Crystals. But the Starbucks that was--the brand that I might actually say defined my generation in many ways--seems to be fading away with each blast of steam from the automatic espresso maker.

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