Starbucks: Out with the New, in with the Old

January 12, 2008 03:10 PM
by findingDulcinea Staff
Starbucks founder Howard Schultz returns as the company’s CEO, a role he relinquished to Jim Donald in 2000. The company needs to boost sagging sales and stock prices.

30-Second Summary

Howard Schultz is widely regarded as the man responsible for making Starbucks the world’s largest chain of coffee shops. But over the past 52 weeks, Starbucks share performance has dropped by 48 percent.

Now Schultz is back in his former position as the company’s chief executive.

“I have said for 20 years that our success is not an entitlement and now is proving to be a reality. Let’s be smarter about how we are spending our time, money and resources,” Schultz said, in a Jan. 7 company conference call.

Several business analysts have speculated on the reasons behind the company’s recent stock market slump.

Restaurant analyst Howard Penney told The Guardian that the store owes many of its headaches to its rapid growth.

"They have to slow their growth—they've been growing far too fast," Penney said. "Act one—a great concept starts and grows, becomes a global behemoth and ultimately grows too fast."

Financial analyst Nicole Miller of investment bank Piper Jaffray told NPR that Starbucks' high prices have driven customers away: “What was once considered sort of an everyday convenience has really become a luxury for a lot of people now.”

The coffee giant is also feeling pressure from its café competitors. Dunkin' Donuts and McDonald's are both appealing to broader java audiences by offering more upscale coffee.

Headline Links: Donald out, Schultz in

Analysis: What is the problem and can it be fixed

Grew too quickly
Too expensive
Audience appeal
Can Schultz turn it around?

Related Topics: McDonald’s café and Schultz’ leaked e-mail

Reference Material: Starbuck shares up


Most Recent Beyond The Headlines