A Starbucks on Every Corner:
How Starbucks’ Growth Destroyed Brand Value
In a harsher economic climate, Starbucks’s green-and-white mermaid logo is about to become a little less ubiquitous.
Starbucks, the world’s largest coffee chain, closed 600 stores in the United States in 2008. It laid off more than 12,000 employees in the process, the most in its history.
For years, Starbucks was known for aggressive growth, opening some stores only a few city blocks away from others. About 70 percent of the stores that will be closed have been open for fewer than three years.
The coffee seller, bracing for its first full-year profit decline since 2000, has been grappling with the slowing U.S. economy and consumer spending at the same time that major competitors like McDonald’s Corp have begun attacking its core business.
Starbucks closed the company-operated stores by the end of March 2009. The related job cuts reduced the company’s U.S. workforce by about 8 percent.
In addition to the cutbacks, Starbucks also trimmed planned openings for its upcoming fiscal year ended September 2009. It now plans to open fewer than 200 new U.S. company-operated stores, down from 250 previously. Moreover, Starbucks said that it could take up to $348 million in charges and write-offs related to the closings, including costs tied to lease terminations and severance payments.
While investors cheered the announcement, analysts were quick to point out that a further worsening of the U.S. economy or steep increases in gas and food prices would put additional pressure on the company known for its premium-priced coffee drinks, such as $3 to $4 lattes.
The case shares three problems with the growth of Starbucks: alienating early adopters, too broad of an appeal, and superficial growth through new stores and products.
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