Dr. Pepper - Classic!

It just occurred to me the other day while looking at a can of Dr. Pepper: Classic! Dr. Pepper has a very classic brand, a very classic image, and if they play their cards right, can gain considerable market share right now with one of the classic icons in the industry. People today yearn for more of a "classic" nature - simplicity - a honed image consistent with...Frank Lloyd Wright, Alice Waters, post modern idealism and good ole' Highway 66 Texas Dr. Pepper!!! (no official data on this "yearning" quite yet, but I'd bet an official study would pull up something along the lines of "in my favor - my sentiments aren't too far off the mark")

For the ultra hip in a classic can: remove the "shadow" gimmick outlay of the can and get rid of the (23) flavors at the bottom. Although an integral piece of the brand, they should shoulder this off to the side of the can. Go with a clean, no gimmick can with that classic DR PEPPER logo right in the middle.

Another ideas: a cane sugar version of this heavy laden, 40 gram sugar bomb of a product. I don't drink these anywhere near a 12 hour window of having to sleep. There is something else going on in the ingredients that keeps me wired way past normal waking hours, and I can usually mainline coffee through the 9pm hours and be fine. Not so w/ Mr. Pepper in the house.

Also - ditch the Axl gimmick as well and get down to the BASICS. A classic taste in a classic can. Although, that is a kind of a cool idea!

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Rubinfeld is back

Arthur Rubinfeld is back at Starbucks after a few year soujourn that saw him take over the helm of chief development officer at Potbelly Sandwich Works. His new position: president of global development. That's a big deal! Arthur took Starbucks from about a 100 stores to thousands. He's been here before and he's a winner. It sounds like Starbucks is getting the old band back together.





I would have loved to have heard that conversation. "Hey Arthur...seriously...we're going into hyper drive here - Int'l is going to save the day - you're our 'main man' once again...come on back - won't you please?". I'm not sure Howard was begging, but either way, it's a great move. It just rings of another all-star, 'Howard is righting the ship quick-fast' kind of move.

Side note: Potbelly. What's the deal here? Here's one of the all-star "up and comers" that has significant Starbucks money and executives behind it - ala Arthur Rubinfeld. Does this most recent move mean Mr. Rubinfeld merely set the blue print in motion for Potbelly to grow accordingly, or is the "Potbelly thing" just not that exciting anymore? Perhaps too slow of growth for the likes of hyper growth Rubinfeld? Perhaps Potbelly - with operating margins north of 20% in some stores - and mirroring Starbucks like returns in terms of profit generation selling SANDWICHES - isn't able to grow that model across the country like you might be able to if you were, say, selling a drug like caffeine. Just a notion. I'm not sure.

I do know that in Potbelly's backyard of Ohio, USA, their growth was er...slower than anticipated or, more precisely, hoped for. Stores in the Columbus area were not growing at the spectacular rates seen in Chicago or D.C. And stores in Dayton weren't pulling their "Potbelly Star Power" either.

I sure wish Potbelly would grow some legs enough to move out west! Look for California stores in '08? Perhaps '09?

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Howard Says: Close All Stores!!!!

"The notes and emails just keep coming" one barista told me just before flopping his head backward in a motif of exhaustion. He added: "Whatever Howard says....goes! Our wall says "Howard Says" and we have his emails posted there...."

Sudden impact!

$1 coffee, free wi-fi and now...the "emergency re-training" of baristas and the manner in which they make their drinks.

The hits keep coming. This is a man on a mission.

Howard says: close down every last store on Tuesday, February 26th starting at 5:30pm so every barista in each of the 7,100 Starbuck stores will learn how to improve the coffee. This is no doubt a fall out of years of declining quality in their core product: great, high quality coffee.

But how much can you change with an automated machine?

It turns out a few things are already taking place.

1. As of just today - February 13, 2008 - the partners are now pouring two shots instead of a single shot for each and every coffee made. 'Pulling' 2 shots improves the probability of a higher quality shot. It provides more balance and decreases the probability of a watered down shot of espresso.

2. As of today they are also administering shots of espresso into clear shot glasses. Before this change Starbucks baristas were merely administering them straigt into the paper cup. Pulling espresso into shot glasses allows the baristas to check for quality and consistency.

How do the partners feel about this "emergency" closing?

"It makes it seem like it was our fault when in fact the problems at Starbucks stem from decisions corporate made about the business in general over the last few yeasr...like growing too fast"

"This just makes it seem like its all our fault...."

Do others feel this way?

"Mostly...yes"

He added: "Other changes are coming...less knick knacks around the store....more focus on the coffee"

Amen.

Howard's next challenge: not only instituting long needed change, but maintaining and growing morale as Starbucks moves forward in the new era of Howard Says!

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We Now Have Wireless

Just one night before the big announcement, I created a post with the following opinion: Starbucks needs free wirless that works!

On Monday morning I woke up to the following story:

FREE WI-FI IN THE BREW FOR STARBUCKS

What a great deal. Both iniatives were addressed. This new service will, in large part, be free, and better still, this Wi-Fi will actually work! AT&T is most likely the stronger of carriers when compared to the T-Mobile Hot Spot Network.




Details:

* Unlimited Free Wi-Fi for AT&T subscribers and Starbucks partners.

* Card holders: All others only need to plop down $5 on a Starbucks Debit Card to have 2-free hours of wireless service per day.

* Beyond that, you'll need to pay $3.99 for two hours, unless of course you get the Starbucks ($5 minimum) debit card - a nice built in incentive to get the card.

Way to go Starbucks. You addressed all three major problems:

1. FREE v. PAID Wi-Fi
2. Wi-Fi that actually works
3. and kudos to addressing the stagnation problem mentioned in the below post.

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Free Wireless, That Works Please...

Starbucks wireless does not work!





I’ve been trying to establish connectivity at Starbucks cafe's for the past couple of years now, and I’ve found the service to be intermittent, moody and consistently unreliable. This always crosses me as very "Un-Starbucks-like" and I've never quite understood why they don't take this iniative seriously. Considering other "free wireless" opportunities out there, including Whole Foods , Panera Bread, Stumptown Coffee Roasters, Zoka Coffee, Tully’s, and Top Pot Donuts, it's apparently being established, at least in part, that retail wireless connectivity is both a workable opportunity and viable business option that would make sense on more than a few fronts for Starbucks.


Currently Starbucks offers a wireless “Hot Spot” option via an outside carrier – T-Mobile. The current package options at Starbucks, via T-Mobile, include a $10 day pass or a $39.99 monthly pass. If you're a T-Mobile cellular subscriber, the cost is $19.99 / month.


That’s pretty steep considering the available opportunities out there are $Free.00, but it's not entirely prohibitive, especially if you're an avid user i.e. someone who does business online a lot outside of the office or who travels a lot.


But the concurrent and more pressing issue is that the T-Mobile's “Hot Spot” option is mostly unreliable. I’ve talked with many, many customers across the country and the feedback is similar: T-Mobile hot-spots are spotty at best. You can connect but will often lose connection.




Because of this, Starbucks wards off the prospect of housing a drone colony of single purchase, low spending, single coffee cup drinking internet zombies that occupy single tables for hours on end. This is the worst case scenario associated with offering free-wireless at Starbucks, and apparently a consideration for top management to keep the status quo. This status quo of expensive wireless connectivity that doesn't even work is very inconvenient if you’re someone like me who loves Starbucks coffee and The Starbucks Experience. I am increasingly put off by the impractical nature of not being able to consummate a portion of my working day in one of their café’s because I know I can’t have a reliable connection to the internet. I either have to stay at home, stay at the office or go to another “3rd place” option.

And I'm not the only one. It has been my experience that when Starbucks is less than full capacity, even a quarter capacity, other outlying retail operations that do have reliable free wireless options are humming along at near full capacity. And they don't have the drone colony fall out either. Sure, people stay there for hours at a time, but others stay for brief periods of time to check email or the daily news and then move on with their day. This is why, in part, Starbucks is ultimately missing the boat.

There are additional considerations for a reliable free wireless initiative at Starbucks:

1. It provides an additional entry point for new customers, a very relevant consideration in today’s increasingly competitive environment.

2. Right now, internet connectivity that is both expensive and does not work is a poor feature to their brand. The message currently being conveyed is that Starbucks is behind the times, slow and unwilling to adapt to the current environment of wireless technology. This insinuates that Starbucks isn’t really paying attention. This type of execution, or lack thereof, does not bode well for the brand that is Starbucks. With free wireless that works, I'd get a different message altogether, especially if they were to strike up some sort of savvy deal with a company and brand like Google.

3. Who’s inclined to be on computers surfing the internet using wireless devices? From afar I would assume its part of the overall demographic target of Starbucks – upwardly mobile, $5 coffee purchasing, sometimes buys a bag or two of Starbucks coffee roast kind of people.

4. Reliable free wireless increases the probability of generating a fresh repeat customer base i.e "an additional entry point".


5. Similar to point #2, free wireless connectivity at Starbucks offers a better brand proposition – and the opportunity to expose people to that proposition for longer periods of time.

6. A renewed increase in store over store sales and # of transactions.

Perhaps Starbucks fears café’ stagnation! This is a valid concern. They might fear an inability to turn tables sufficiently to generate and operate the business they envision. There are multiple ways to address this concern and the benefits and opportunities as mentioned above outweigh the risks. Starbucks can implement time signatures that kick people off after an hour or two. Starbucks can politely request, via digital sign through, that people limit their time to 60 or 120 minutes. There are various options available to increase flow through the cafe's.

Starbucks will figure it out. I just hope that whatever they do, they do something other than the same old thing - at least than I’ll know Starbucks is, once again, paying attention!

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Not Recession Proof After All - Back to the $1 Menu Drawing Board

Wall Street is not very forgiving! MCD's found this out on Monday. The conversation might have gone something like this: 'Oh, so you had ONE bad month...no biggie! It's ok...you've had, let's see...FIFTY-SIX CONSECUTIVE MONTHS of higher year-over-year U.S. comprable same store sales. We'll let this one slide."


NOT! Mr. Wall Street pushed McDonald's down to a 4 1/2 month low. Said another way, MCD's went from a nice $54.36 stock price on Friday down to a relatively hard hit $50.80 by close of bell Tuesday. That's not very nice...but it was the worst quarter in 5 years. A flat December is not pretty. And worse yet, it's not a good sign.

What did McD's have to say for itself? Excuses, excuses. Mr. Wall St. hates 'em. Especially if their not believable. MCD's did it's best though, blaming it on the weather - "It was COOOOOLLLLDDDD outside.." If that were to be believed, things would be OK in Oak Brook, but things are a little shakey because people believe otherwise: It's the economy, stupid!

Higher food costs, higher energy costs, an overall weak economy tied to the housing "downturn"...these are more likely culprits. And if McDonald's is feeling it, that is NOT a good sign. A canary in the coal mine!

What shocks me is that, considering McDonald's "not lucrative" price point, they are suffering at all. Do people REALLY not go spend...$5, $6, maybe $8 at McDonald's and apparently make their lunch and save...a $1? Apparently they do.

What will McDonald's do? What will be their "corporate mission" in such an environment?

They'll go even CHEAPER. "You want cheap...we've GOT cheap" is what their gearing up to do. How so? They'll look at their trusty balance sheets and recognize a couple things: 1. their value meals account for 14% of their TOTAL REVENUE. That's a lot of cash. They will start going to their strengths and cashing in on that little tid bit of information in the form of...more Happy Meals! And two...$1 Menu. Yup...it's what got 'em out of their first jam, and they'll bet it will carry them through this pickle, too.

Look for slight changes to their menu in '08 emphasizing their creme' de la' creme: cheap!!!!

Interesting Update:

Burger King is seeing NO slowdown in it's same store, Q1 sales...hmmm...it's actually experiencing an "uptick".

http://www.reuters.com/article/marketsNews/idUKN3157440020080131?rpc=44

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Starbucks: $1 coffee? Who Knows?

I entered the Starbucks on 8th Ave. & 102nd the other day asking if they knew anything about a $1 cup of coffee, with free refills. I was greeted with "Where did you hear that?" The friendly barista / partner continued: "I was watching the local news today and I didn't see anything regarding a $1 cup of coffee!" I went on about Reuters, CNN, The Associated Press, blah blah blah - and it occured to me: the problems at Starbucks goes beyond store growth and economic downturns - there's a basic operations situation going on here, a major operations and communcations crack.

This was my main concern. Forget about what it does to the brand. This company is apparently so rife with bureaucracy that their own local, Seattle area store managers and "partners" are not even aware of major product initiatives & campaigns that have been highlighted in the national media for over 36 hours. They served me the advertised 8oz short cup of drip coffee for $1.66. I got one $0.55 refill.


On the same day - Thursday January 24th 2008 - I went to the Starbucks Music Store on Bellevue Way in downtown Bellevue. Again, confusion! A partner explained to me that it was an initiative that Starbucks was experimenting with in a "...few counties in Maine.." What? Maine? That's not what I was reading, but perhaps the national press got it wrong. They decided to honor it anyway, which was obviously a little uncomfortable.



It's a fascinating conversation: what will the reverberations of this "experiment" be? Did it work? Will they move forward with a reduced cup of "joe" at Starbucks to compete with McDonald's and Dunkin' Donuts? How will this effect the sterling brand that is Starbucks? Will this dilute the brand or does this usher in long needed change and adaption to a growing market place for high quality coffee? Does it really create "segmentation" and beneficial and new "entry points"? Those are great conversations, of which I have clear and strong opinions on (*Yes, they need to institute free refills and no longer implement price increases for "drip" coffee in order to subsidize raising dairy costs - AND they need FREE WI-FI) but that's for another post.


My point here: There is a significant problem in Seattle w/ Starbucks that goes beyond national product experiments, brand prestige and positioning, competition with McDonald's, Dunkin' Donuts and strong 'independents', falling stock prices, the economy, store growth, etc. etc. These are all interesting and serious topics to be addressed, but Starbucks needs to get back to 'brass tacks' and concentrate on the basics like corporate to store communication, communication amongst Regional Managers, District Managers and Store Managers and overall execution on operations. Without these basic fundamentals in place, and it's obvious that this has been in decline for awhile, all those other high minded initiatives won't be as important. It's a coffee shop. They need to execute on the fundamentals first. And because of all these other moving parts and increased competition, which shows no signs of subsiding, the time to act is now!

Warch for Howard - he will be making some major improvements in short order!

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