Starbucks Earnings sink 21%

(1)
The coffee shop reported a 21 percent earning drop in Q2.

Recently, Starbucks suffered a loss in housing market, particularly in California and Florida.

But the fundamental problem is a sharp drop-off in customers. In the face of competition, the company has to maintain its differentiation, and thus the premium. But, the chairman Howard Schultz said, its customers were simply not visiting Starbucks at the rate they once did.

(2)
“Fiscal 2008 is a transitional year for Starbucks,” the chairman said. “We will reinvigorate the Starbucks Experience for our customers.” A turnaround plan is expected:

1. Cost cutting, and
2. Addition of a line of fruit smoothie drinks, the start of a broad effort to offer healthier drinks and expand beyond coffee beverages.

But the plan doesn’t seem very consistent with the “reinvigoration” promised. Few months ago, it is expected to be “back to the basic” by introducing “an improved automated espresso machine that grinds coffee for each drink and has a lower height that will allow customers to see baristas making their beverage”.

Is it losing its way? Or as Mr. Schultz said, “Don’t believe the media hype. There’s no coffee war going on. This is about us.” McCafe wouldn’t agree with him.

Starbucks’s Sandwich

(photo: Elaine Thompson/Associated Press)

Starbucks will discontinue its warm sandwich sale in America.  Howard Schultz said:

In short, the scent of the warm sandwiches interferes with the coffee aroma in our stores.

But no such action in Hong Kong.  is it telling something about the quality of coffee drinkers in Hong Kong?  “At the very least, Starbucks will smell like coffee again,” the report said.  Yes, in America.