Starbucks: closer to the end of Its universe?

Of all the stories about Starbucks, the best is comedian Lewis Black’s segment on the end of the universe, where he describes walking out of one Starbucks in Houston, only to see another across the street. Who, he wonders, would need two Starbucks within two steps of each other? After careful thought, he concludes that the only group would be people with Alzheimer’s. As Black says, “When you build a Starbucks across the street from another Starbucks, that’s it. Game over.”

Apparently the marketing and expansion plans for Starbucks must have been organized by folks who believe that people with memory loss are a growing segment of the population, since there are now hundreds of Starbucks within less than a mile of another. (There's even a great website with examples from around the country.) Even so, we still might be able to avert the end of the universe: today’s news is that Starbucks is planning on closing 600 stores across the U.S. Most of them are newer stores, (one analyst claims it’s about 20% of the stores opened in the last two years. While that affects approximately 12,000 workers, it’s not clear how many jobs will be lost overall, since some of these baristas may simply be transferred to the surviving store across the street.)   According to the Associated Press,

Starbucks estimated $8 million in severance costs. In total, the company forecasts up to $348 million in charges related to the closures, $200 million to be booked in the fiscal third quarter ended June 30... The locations were not profitable or were not expected to be profitable in the foreseeable future, and the majority had been opened near an existing company-operated Starbucks.

Two other bits of news signal a re-thinking of the “blanket the world with coffee” expansion strategies that have gotten Starbucks into trouble. One is that they are cutting back on their attempts to be a cultural marketplace, firing executives in the entertainment division and removing the large cd racks from the main store floor in order to concentrate on a few featured titles near registers. The second issue is with the coffee itself: the newer, mellower beans featured in Pike Place Blend have also been a source of controversy – not so good, say the majority of loyal Starbucks drinkers who prefer the more heavily caffeinated and “bolder” dark roasts that dominate the daily choices.

It’s no accident that Starbucks introduced this milder coffee at a time when both McDonald’s and Dunkin Donuts have explicitly challenged the coffee king with robust blends, cappuccinos, and lattes to go. Still, CEO Howard Schultz claims that Starbucks is holding its own ("we control our own destiny," he asserts) since he believes their coffee is better, more authentic, and fresher than the fast food competitors. But when you have the hubris to expand hundreds of stores directly across the street from yourself, perhaps it’s time to re-consider destiny and pull back before you're consumed by the black hole looming at the galaxy's edge. Here's a hint: it's not coffee.

Game over?

Image (inspired by Escher's Relativity) created by Alien Loves Predator.