Feb. 24th, 2007

Starbucks losing focus: Schultz writes a letter.

Starbucks visionary Howard Schultz is concerned the international coffee store behemoth is losing focus and commoditizing its own product.

"In a blunt Feb. 14 memo, he warned executives that the chain may be commoditizing its brand and making itself more vulnerable to competition from other coffee shops and fast-food chains. The nearly 800-word memo questioned whether Starbucks’ automatic espresso machines, new store designs and elimination of some in-store coffee grinding may have compromised the "romance and theatre" of a visit.

The criticisms pinpoint Starbucks’ biggest challenge. Mr. Schultz, the company’s resident visionary, wants Starbucks to become one of the world’s most recognized brands, with 40,000 locations around the globe, or more than triple its current count of about 13,000. But to do that, Starbucks must improve its efficiencies and make other changes that threaten to erode the virtues that made it so successful — which in turn could jeopardize its ability to charge premium prices.

"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 lead [sic] to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand," Mr. Schultz wrote in the memo."

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