It wasn’t that long ago that an overzealous Starbucks store manager in Philadelphia had two black men arrested for the crime of not making a purchase while they waited for a third person to show up for a meeting. It was a disaster, for the brand – as it should have been – but I was heartened by the Starbucks response at the time.
Former CEO Howard Shultz said, “I’m embarrassed, ashamed. I think what occurred was reprehensible at every single level.” Kevin Johnson, the active CEO at the time, stated that, “Creating an environment that is both safe and welcoming for everyone is paramount for every store…You can and should expect more from us.”
Starbucks then shut down each of its 8,000+ U.S. stores for the better part of a day, foregoing an estimated $16.7 million in revenue to conduct training with employees. In addition, Schultz noted that this was, “…just the beginning of what we will do to transform the way we do business and educate our people on unconscious bias.”
The response fit perfectly with Starbucks purpose and values, which can be traced back to the very origins of the brand’s success.
Schultz was the visionary behind Starbucks as it is today, transforming the local, wholesale coffee bean roaster from Seattle to a global behemoth in retailing. His epiphany moment occurred on his first ever trip outside the United States soon after joining Starbucks as a salesman. In Milan for a trade show, he discovered the Italian coffee house and its ethos of community. They made more than espresso; they made a place to connect and belong.
Met initially by fierce resistance by Starbucks’ owners, Shultz would not let go of his passion to build this new, “third place.” Not home, not work, but somewhere else you could comfortably while away time as you lingered over Italian style coffee.
Eventually, Howard Schultz forced out the owners, became the face of Starbucks, and realized his passion on a grand, global scale.
These “Brand Myths,” are important. Just like Starbucks, the DNA of brands like Apple, Coca-Cola, Luis Vuitton, McDonald’s, and other icons, are all rooted in their unique brand mythology.
Starbucks is now stagnant in the U.S. and is seeing its market share decline in China as a result of increased competition from Luckin and other local competitors. While there is no single cause of these struggles, one thing stands out to me.
Last week, the coffeehouse titan issued a new policy that requires customers to make a purchase if they want access to any part of the store:
“Starbucks spaces are for use by our partners and customers—this includes our cafés, patios, and restrooms.”
This is exclusion, the opposite of community.
Starbucks deserves some understanding on this issue. Their statement went on to say that the change was motivated by a desire to ensure the comfort and safety of paying customers and staff, addressing issues such as homelessness, loitering and disruptive behavior that had become more problematic in the “open-door” era.
Still, the announcement seemed to be the final nail in the coffin, Starbucks’ ultimate affirmation of getting out of the “community” business. It’s been going on for years but has gained momentum in recent years. Pre-pandemic, when the company started to close existing stores and delaying planned openings it realized how overbuilt they are. (Check out this brief clip from the 2000 movie Best in Show, where Starbucks’ ubiquity and other commercial icons are lampooned with spot-on perspective.)
At some point during the rapid expansion process, Starbucks they shifted from hand-made to machine-made espresso to serve more people faster. Then, a knee-jerk reaction to the pandemic forced more stores to close and switched company priorities to decidedly non-community but potentially more profitable efforts such as designing new stores with smaller footprints, adding more drive-thrus and creating low-overhead kiosks for the grab-and-go business.
Starbucks’ actions over the years seem to preclude a return to “community.” That would require risk and expense that shareholders are not likely to tolerate. We’ll see if this is the death blow signaling the end of Starbucks’ growth, or if they can pivot to a purpose and a human value as relevant and motivating as “community” to jump-start sales and marketing momentum.
The brand has inevitably lost a good deal its specialness since its major expansion began in the 1990’s. And if not “community” what best burnish its brand image?
Maybe that’s not the right question to be asking now. The more interesting challenge for the brand might be how to adapt and thrive as a mass player that’s lost its sheen.
