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Where should Starbucks go after years of disadvantage
Written/Starry Night
Editor/Lee Ha-lin
One of the most important figures for Starbucks, Howard Schultz, returned to take over as CEO of the company.
On April 4, Starbucks President and CEO Kevin Johnson officially retired, and the board of directors appointed Howard Schultz as interim CEO. Howard Schultz, who has returned to the CEO position three times, has brought major changes to Starbucks in a critical situation each time.
Howard Schultz is the "father of Starbucks" and the well-deserved "fire captain", whether Starbucks suffers a financial crisis or a business strategy error, he can always come forward to solve everything.
This time, though, he seems to be facing a tougher problem. The Chinese market, which Howard Schultz attaches great importance to, has undergone earth-shaking changes, and in addition to Luckin's rapid occupation of the market with burn-out subsidies, emerging brands such as Manner, Seesaw, and M stand are also quickly sharing the cake.
Surrounded by entrants, Starbucks has repeatedly had negative events, continuing to consume starbucks' reputation accumulated in the past. In the face of many crises, can the appearance of Howard Schultz once again save starbucks that have been unfavorable for many years?
How long can the "Fire Captain" of the ancient rare year save Starbucks?
Howard Schultz, who is about to turn 70, has been a "fire captain" since he was a child. Howard Schultz, born in the poverty-stricken district of Brooklyn, New York, has lived a life of predicament. Whenever a creditor called, his parents would instruct Howard Schultz to lie and prevaricate; his grandmother's casino at home was always noisy in the middle of the night, and howard Schultz was embarrassed by the neighbor's cross-examination.
"I want life to be normal. The gamble made me feel anxious and ashamed, and I only hoped that my abnormal family would not be known to outsiders. Howard Schultz once said of his childhood.
It was this experience that gave Howard Schultz the ability to deal with crises from an early age. Growing up, Howard Schultz quit his $75,000-a-year job in 1982 to join Starbucks as a marketing and retail manager. But soon, Howard Schultz's plan to transform Starbucks was opposed by the original founders and eventually parted ways.
After leaving Starbucks, Howard Schultz opened several small coffee chains in Seattle and Vancouver, and raised a sum of money. Later, Starbucks suffered a financial crisis, and the original founder had to find Howard Schultz, so the money also became the original capital for Howard Schultz's acquisition of Starbucks.
Starbucks CEO Howard Schultz
With his research on coffee chains, Howard Schultz copied this model into Starbucks operations, and from 1987 to 1992, Starbucks stores expanded rapidly from nine to hundreds, setting off a "second coffee wave" and driving Starbucks to a successful listing in 1992. Soon after, in 2000, Howard Schultz stepped down as CEO.
In 2008, however, Starbucks was once again in crisis and had to close more than 600 stores. Internally, after Howard Schultz stepped down, Starbucks management made a series of measures to reduce costs and increase profits, such as replacing la Marzocco espresso machines with Verismo automatic coffee machines, and eliminating some in-store coffee bean grinding.
Externally, the catering industry has been hit hard by the global financial crisis. According to Ad Age, in the second half of 2008, 60 percent of Americans reduced their purchases of high-premium coffee. Another survey from RBC Capital Markets showed that in 2008, 29 percent of Starbucks users who planned to reduce their Starbucks expenses switched to home-made coffee.
To save Starbucks from the storm, Howard Schultz returned and underwent a full restructuring of management. The following year, even though the layoffs and large number of store closures incurred a one-time employee compensation and restructuring expense of $332 million, accounting for 3.4% of the year's revenue, the net profit still increased by 23.87% from the previous year, and the stock price rose by 143.76% for the whole year.
This time, Howard Schultz sat in the CEO position for nearly a decade, and by the time he stepped down in 2017, he once again pushed Starbucks to new heights, handing over a report card with annual revenue of $24.7 billion, profits of more than $4.5 billion and more than 28,000 stores.
There is no doubt that Howard Schultz is a well-deserved soul of Starbucks, and his every appearance has brought new life to Starbucks, and also given Starbucks more commercial and social value.
After the return, Howard Schultz said at the corporate meeting of the "Partner Open Forum" that Starbucks will enter the NFT business by the end of this year. However, at the age of nearly 70, in the face of the emerging coffee market that has been violated for four years, can he continue to use these new tricks to turn the tide?
The coffee desert is full of flowers, but the originator is almost out of food
From opening its first store in Beijing Guomao in 1999 to more than 5557 stores today, the Chinese market has always been valued by Howard Schultz. Shortly after leaving office for the second time, Howard Schultz said in a speech at Tsinghua University, "In the first few years when Starbucks first entered China, many stores have been in a state of loss, so analysts have expressed doubts. However, we are very optimistic about China's economy and prospects, we have made a lot of investment, and we have reaped corresponding returns. ”
Indeed, as Howard Schultz predicted, the Chinese coffee market has a strong momentum for development. According to Ai Media Consulting data, in 2021, the size of China's coffee market is about 381.7 billion yuan, Chinese consumers' dietary concepts have changed, coffee has gradually become popular in the lives of Chinese consumers, China's coffee market has entered a stage of rapid development, it is expected that the industry will maintain a growth rate of 27.2%, and the scale of China's coffee market will reach 1,000 billion yuan in 2025.
At the same time, more than 70% of Chinese coffee consumers are aged 22-40, and 6 are female users. Weekly consumption of coffee consumers accounted for 60.0%, daily consumption of coffee consumers accounted for 19.7%, Ai media consulting analysts believe that China has a stable consumer group, and most consumers have formed a weekly consumption of coffee habits, the coffee market will be further expanded.
However, the expansion of the Chinese market and the change of Chinese consumer habits have given Starbucks unprecedented challenges. In the year howard Schultz left Starbucks, Luckin turned out to be a spokesperson, Tang Wei and Zhang Zhen, holding small blue cups in their hands and saying "This cup, who doesn't love" Advertisements swept elevators across the country.
Luckin advertising has swept the elevator room across the country
"Open 6 stores a day, lose 4 million yuan a day" burning money expansion style, so that many people directly call "can't understand", Luckin also continues to be negative. But it is undeniable that Luckin has indeed cultivated the user's coffee consumption habits by burning money, and has also attracted other competitors to join.
In the past two years, emerging chain coffee brands such as Manner, Seesaw, and DoubleWin are expanding the scale of store layout and have strong influence. Overseas coffee brands such as BlueBottle, Tims, and Peet's have also entered the Chinese market and plan to continue to expand.
For Chinese consumers, Starbucks is no longer the most "fragrant" coffee. The pursuit of cost performance can choose Luckin, Manner, the pursuit of tone can find a variety of boutique cafes. Even the arrival of the new coffee drink wave has brought some crises to Starbucks.
New coffee brands such as Sandan and a Half, Yongpu and Shicui have made great efforts in product visual aesthetics and brand stories, so they are facing the dividends under the new retail scene, accelerating their running and harvesting new sales growth points. At the same time, new coffee drinks are or will soon go offline, trying to achieve the integration of online and offline.
Under siege, although no brand can really compete with Starbucks, even lions in the forest will be jealous of the hyenas that are besieging. Howard Schultz's efforts this time are probably not simple.
Not arrogant, is starbucks the salvation?
In fact, Howard Schultz's appointment as CEO this time, in addition to saving Starbucks' current decline, is more important to "teach people to fish." Starbucks' official statement said Howard Schultz returned to the Starbucks board as interim CEO for $1. During his tenure, Howard Schultz works with other board members to find, mentor, and train the next CEO.
After all, every time Howard Schultz leaves office, the corporate values and spirit he wants to convey will always change with the passage of time. Taking recent negative events as an example, in November and December 2021, there were cases of stores using expired ingredients in Shenzhen and Wuxi; in February 2022, there was a dispute over the "eviction of the police" in Starbucks stores in Chongqing. After that, the People's Daily commented on the Weibo of "Starbucks Please Take Back Your Arrogance", which was supported by netizens.
Whether Starbucks is proud or not may be difficult to define. But Starbucks is always one step slower, as if it were an indisputable fact.
Although Starbucks showed its boldness as a "big brother" when setting off waves and opening up the market, Starbucks never came up with enough powerful countermeasures in the subsequent stormy competition. As a result, since the beginning of the year, Starbucks stock price has continued to fall, falling by 18.8% during the year, and the total market value has evaporated by more than 26.1 billion US dollars (about 165.5 billion yuan). At the same time, Luckin has opened more than 6,000 stores in China, and Starbucks has lost its first throne.
While competitors continued to chase while the giants were resting, Starbucks was once slow to react. For example, digitalization and takeaway delivery are late, and the delivery fee of up to 9 yuan is really difficult for consumers to say "true fragrance".
Although the concept store for the shared space opened for workers has set off a hot discussion in the "atmosphere group", this strategy dedicated to expanding the "third space" does not seem to have successfully transfused Blood for Starbucks.
Many times of "ineffective marketing" not only did not let Starbucks rise, but also made its tail big trouble more and more obvious. The solidification of consumer groups has led to Starbucks' attraction to young consumer groups being weaker than new coffee brands, and this disadvantage will continue to have an impact on Starbucks as young consumers gradually take over the consumption banner.
In addition, Xu Xiongjun, founder of Jiude Consulting, once told the media, "From the perspective of Starbucks' positioning in China, even if it raises prices, it needs to be cautious." Unlike foreign countries, Starbucks has a relatively high price base in China, and frequent price increases will also affect the choice of loyal users. "On the basis of the difficulty of attracting new users, and losing loyal users, then the story of Starbucks will only become more and more difficult to tell."
In fiscal 2021, the Chinese market accounted for 12.7% of Starbucks' global revenue, making it its second largest market. Therefore, how to adapt to the ever-changing Chinese market is still a huge problem for the godfather of coffee.
Under the background, a chain of coffee, new coffee drinks, and new teas across multiple channels and multiple tracks is about to break out, and how Starbucks, which is good at storytelling and talking about value, can rebuild its connection with young people and how to seize the minds of consumers, we must wait for the new story after the return of Howard Schultz.
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