With news that McDonald's is entering the premium coffee biz with its own McLattes and baristas, Starbucks says "Basta!"
The company fired its CEO, who presided over a precipitous stock slide, and brought back Howard Schultz, the visionary who built the company.
This is reminiscent of Apple, where Steve Jobs came back on board in the dark days of a steep slide when the company's very existence was in question. The rest is history. Jobs not only managed to turn the company around but do something much more difficult: he transformed Apple into something new, a media company whose products fly off the shelves and commands hefty market share in addition to sex appeal.
So can Schultz pull off something similar with Starbucks? Lattes have gone mainstream, Starbucks sales are stagnant, and now it faces McDonald's. Or does it? The Wall Street Journal, which published the McDonald's story, notes that Dunkin' Donuts might take the bigger hit in this coffee war and makes another good point: The entry of the mainstream companies presents new competition but it also enlarges the market in a way that might ultimately benefit Starbucks.
According to Schultz's statement, Starbucks lost its way. It opened too many stores, became too bureaucratic and lost touch with the experience that was at the heart of its success. (Schultz had touched on these points nearly a year ago in a highly revealing memo -- nod to Romenesko's Starbucks Gossip blog).
Schultz says "he will bring a “laser-like focus” to improving the customer experience and in making sure that the 'Starbucks experience' is markedly different from rivals..." the Times notes.
Another interesting point: So many highly successful companies lose their way when the founding CEO steps down. Managers, often from outside the company, are recruited and too often they just don't get it. It's not in their blood. It happens time and again. This is a case study of that process. But Apple is the rare exception where the founder came back and brought focus and purpose to the company again.
Odds on Schultz succeeding: I'd say 7-to-3. But I'll stay loyal to DC's rockin' Murky Coffee whose high quality brew is only exceeded by its long lines. Yep, Starbucks grew the market too in a way that made it possible for independents to steal the frothy high-end. May the macchiato's always be strong, damn strong.
- Samuel Fromartz