Seattle – With a growing crowd of millions lining up for its fancy coffee drinks in the 1990s, Starbucks Corp. was tantalized by seemingly endless opportunities to expand its brand.
A chain of full-service restaurants? Seems like a good fit. A hip tavern with coffee undertones? Hey, sounds sexy. A literary magazine? Why not! It didn’t take long for those ventures to fall flat.
And as the coffeehouse titan readies for a long-term explosion of growth, some Starbucks- watchers warn the company may again be stretching its all- important brand too far. Even company chairman Howard Schultz frets that the efficiency improvements driving Starbucks’ dominance have robbed stores of their authenticity.
Starbucks’ leaders say they haven’t forgotten the past.
Seattle-based Starbucks has more than 13,000 locations around the globe, with a long- term goal of 40,000 stores, half of them outside the U.S. The company had annual sales of $7.8 billion in 2006, and is projecting 20 percent growth for this fiscal year. In some markets, the company is saturating densely populated areas with more stores.
The company’s rapid growth helped popularize upscale coffee in the U.S., and its success has enticed McDonald’s, Dunkin’ Donuts and other retailers to upgrade their coffee.
But not everything Starbucks touches turns to gold.
Starbucks has led investors on a rocky ride over the past 52 weeks, with shares now 20 percent lower than a year ago.
In the ’90s, the company experimented with several strategies for capitalizing on its hot brand. Among the bigger ventures were attempts to open separate food- and-drink outlets: a full-service, sit-down restaurant called Cafe Starbucks and a computer-friendly bar under the name Circadia.
Starbucks also partnered with a few Web portals and pushed further into merchandise and media, including a periodical called Joe Magazine and a line of journals and desk supplies.
None of those ideas lasted.
Some skeptics question whether Starbucks’ recent media ventures, particularly its new Hear Music record label, are the type of moves that could distract Starbucks from its bread and butter: selling $4 coffees.
Starbucks is wary of casting the company’s abandoned ideas as evidence that its all-important brand has a weak spot. Instead, Anne Saunders, senior vice president of global brand strategy, said such ventures fell victim to difficult logistics or poor execution.
The company’s penchant for self-examination was put on display in February when a memo from Schultz was leaked to the blog starbucksgossip.com.
In the e-mail to top executives, Schultz worried that the automation that is helping to drive the company’s expansion is sucking the romance out of the Starbucks experience.
The memo set off a flurry of speculation that the luster was gone, and that Starbucks might slow its ambitious growth plans.
