In announcing his return Monday as chief executive officer at Starbucks, Howard Schultz would seem to be telling his company to wake up and smell the coffee.
Calling for a renewed emphasis on the ambiance that made the chain distinctive before it became a coffee giant, Schultz joins the ranks of charismatic CEOs, most notably Steve Jobs at Apple Inc., who couldn’t stand aside as their companies hit troubled times.
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Starbucks’ stock, which was at $36.61 a year ago, had dropped almost 50 percent to $18 before Schultz’s announcement. It gained back some of the loss on the news of his return and was trading at $21.10 at noon today.
Schultz, who remains chairman of the Starbucks board, replaces CEO Jim Donald, who has left the company.
In a letter to Starbucks employees, Schultz said he would be in the CEO job for the “long term.”
In addition, he said he would “slow the pace of U.S. store openings and close a number of underperforming locations.”
He also said he would improve employee training and launch new products, and that the company would focus again on what it calls the “Starbucks experience.”
In a memo to Donald last February, Schultz had lamented what he called the “watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”
In his 1997 memoir, Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, Schultz emphasized that from the beginning he wanted Starbucks to be a “third place.”
As such, the coffee shop would offer a comfortable and inviting space that was neither home nor work. The staff would be friendly; the aromas would be rich; the coffee would be distinctive.
As Schultz acknowledged, growth made it hard to maintain the ambiance. The coffee aroma disappeared when the shops stopped grinding the beans on the premises.
And Starbucks couldn’t be seen as distinctive when it had several shops within minutes, or even within eyesight, of each other.
Schultz, 55, joined Starbucks in 1982 as director of marketing and operations when the company was a small provider of coffee beans in Seattle. He left Starbucks three years later to start Il Giornale, a business modeled on Italian espresso cafes.
In 1987, Schultz and Il Giornale bought Starbucks and began its expansion. The company went public in 1992 when it had 119 stores.
As Schultz wrote in his letter, Starbucks, which is in 43 countries, now has more than 15,000 stores and serves more than 50 million customers a week.
Despite its expansion and success, there have been clouds in Starbucks’s coffee of late.
In addition to the plunge in its stock price, it saw a one-percent drop in average transactions per customer during the fiscal quarter ending in September 2007. However, revenues and earnings were up 20 percent in the same quarter.
The company also faces increased competition from Dunkin’ Donuts and McDonald’s Corp.
The Wall Street Journal reported Monday that McDonald’s plans to install coffee bars in its nearly 14,000 U.S. locations this year.
In his letter to employees, Schultz also said he would streamline management and that he would stress a “relentless focus on our customers.”
Comments submitted to the online site Starbucksgossip.com, indicated general approval for Schultz’s agenda.
“I am most excited to hear this news,” commented one contributor. “Uncle Howie to the rescue!”
Turning the company back to the future won’t be easy, however, analysts suggested, if only because the competition for customers is so fierce.
It may be even harder for the smaller players in the market. Daryl Brewster, the CEO of Krispy Kreme Doughnuts, will leave his job at the end of the month, after being there for a little over a year. Expansion efforts by the company have not gone well and its stock has taken a beating.
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