Lessons We Can Learn From Starbucks Failure

By Tom Dougherty

10 July 2014

Starbucks Failure


Starbucks failure

Starbucks needed a kick-start

What is it about the Starbucks failure? If anything, Starbucks is a victim of its own business success. It is a case study in what happens when a business confuses its business success with brand success.

For years, brand experts cited Starbucks as an example of a successful brand. The Starbucks brand was lauded and copied. Throwing around words like “experience” and “destination” as the Starbuck’s brand attributes. Experts even lauded the company for building such preference without advertising.

For many, it was a case study in how a brand can build preference through the strength of equities alone. Because of Starbuck’s recent business contractions, all of this seems to beg for some revisionist history. But I think it really asks for a hard and critical look at the Starbucks business from a brand perspective. (See our writings on brand perspective). What has it done right and what is it doing wrong?

Starbucks Brand Evolution

The issues surrounding a Starbucks failure provide a clinic on brand evolution and the changes that a brand must make as a category, even a changing category, moves from immature to mature. In effect, Starbucks is a victim of its own success.

Starbucks Failure was loss of focus

It was a new old idea. Coffee Shop

In the US (not in Europe and especially not in Italy), Starbucks changed the coffee drinking habits of a nation. Americans discovered the difference between Arabica and Robusta beans. They developed a taste for a better brew than what was promised by the supermarket retailer giants of Maxwell House, Sanka, Folgers, and Chock full o’Nuts. As we “discovered” the difference as consumers, we reveled in the “experience” of being a coffee connoisseur.

I remember the first time, years back, when I first “discovered”- through a Starbucks shop – the difference between drip coffee makers and a new French Press. It goes without saying that I had long ago abandoned the trusted percolator given me by my parents who thrived on “good to the last drop” Maxwell house.

Back in the day, you felt like an authentic coffee expert when you experienced a Starbucks. Seeking out a Starbucks, you watched baristas bag your fresh beans (because Starbucks had helped the coffee expert recognize the importance of fresh beans) and grind it to your specification.

In those days, a latte was exotic. The in-store display of beans in Starbucks showed the progression from fresh picked coffee berries to the dark roast of espresso. It helped you experience the feeling of expertise as you “bought your precious beans” from the source. Amazing to say, but the Starbucks brand has not caught up with the movement they themselves created.

What Happened?

Starbucks failureWhile the coffee category grew, Starbucks did not. Thus, a Starbucks failure. It didn’t realize we had changed. The reason Starbucks is now failing is that we are thinking we need to abandon the “date we brought to the dance” because another date has caught our eye and seems like a better fit for who we now are.

To be fair, a few things about Starbucks have changed. It now has drive-through windows in suburban stores. That promises a new experience but is really the illusion of “fast” service and the “more convenient” ability. You can also purchase beans in pre-packaged vacuum-sealed bags and K-cups.

The latter may deliver fresher beans, but the experience now is more akin to a supermarket. It has the same authenticity of purchasing a sweet roll, donut, scone, or specialty sandwich. We all know they are not made on site but shipped in from a warehouse along with the pre-packaged beans.

Inside the shop, Starbucks has decided eclectic is a more appealing ambience than comfortable. But there is no service unless I walk up to the counter and stand in line again. Those important anti-brand values aside, the real changes are in the customers and the brand’s lack of adaptation.

Things Changed

What we owe to Starbucks is a change in us the coffee-drinking customer. Starbucks taught us that, as “coffee experts” we must demand more from our coffee experience.

The key here is “more.” It means that the bar is always rising and the experience needs to, at the very least, keep up. In the best possible scenario — lead the way.

Unfortunately, Starbucks believes that means instant coffee. (As if anything could be more instant than a Keurig K-Cup maker.) Or that it means the convenience of having a Starbucks in the supermarket or at a book store (another dying category). The “experience” or expectation of “more” is lost because now Starbucks believes I want to run into my local supermarket for a cup of coffee. Buy my beans pre-packaged where I buy my Velveeta and Wonder bread.

Solving Starbucks problems requires a thoughtful and detailed process. But every brand that takes the lead in any category through innovation in product or experience will have to change adapt and continue to evolve. If it does not, pretty soon you will begin to look like Starbucks, one of the world’s largest and most successful failed brands.

Other articles of interest

Starbucks needs to think about starting over

QSR Market Study