Starbucks Slows Ship, Begins Return To Safer Harbor

As he took back the reins as Starbucks CEO on Monday, chairman Howard Schultz admitted that much of the company's problems have been self-induced, and promised Wall Street that it will "revitalize the romance, theater and warmth of experience" that made the company famous and successful.

Out as CEO was Jim Donald, who the company said is leaving.

In a conference call with analysts on Monday, Schultz noted that the Starbucks brand has been eroded by rivals that have been able to copy a lower-profile experience that Starbucks has settled for over the past several years.

In fact, it was last Valentine's Day that Schultz issued an internal memo to Donald, which was leaked, that criticized the "watering down of the Starbucks experience and what some might call the commoditization of our brand."

Monday's news comes hours after rival McDonald's announced that it will launch Italian-style coffee bars serving the very fare that will allow it to directly compete with Starbucks.



Schultz said the switch in focus and the replacement of Donald as CEO is not a response to McDonald's recent announcement or to the rising costs of commodities. "The roots of this change precede the holidays," he said. "These steps don't address current trends, but position us to stay ahead in the future by remaining unique."

Schultz and other company executive declined to answer some specific questions, referring analysts to the company's planned quarterly conference call on Jan. 30.

Schultz served as CEO from 1987--when he bought the company after serving as director of operations and marketing for five years--to 2000. During that period, the company went public in 1992 and enjoyed exceptional U.S. and international growth. From 2000 onward, in his role as chairman, Schultz focused on the company's global strategies and expansion, which now include a growing presence in 43 countries.

"We have gotten a little soft," he told analysts on Monday, promising to bring "courage, curiosity and commitment to do things that haven't been done before."

Some industry observers could see this coming. Gerry Khermouch, executive editor of Beverage Marketer's Insights, wrote in the newsletter's Jan. 4 issue that one trend to watch in 2008 is "fast-feeders trying to edge further upscale vs. Starbucks and fast-casual chains. In that sense, paranoia is a healthy thing."

Next story loading loading..