Is Starbucks in Danger of Losing Focus - and Market Share?

As part of the research for an Advertising Age piece I'm writing I spoke with Steve McKee, president of full-service ad agency McKee Wallwork Cleveland of Albuquerque. We were discussing a study his company had done of fast growth companies and the factors that derailed progress at the businesses. A major one was losing focus - easy enough to understand. But the practical implications are interesting. Look at Starbucks, for example, which has branched out into music and books. On the surface it all seems to make sense - you listen to music and read books at a place like Starbucks. But, in McKee's view, “What is the Starbucks brand exactly and how far is too far? You've got a charismatic founder who’s still in place [keeping things together] and they’re playing dangerously close to a lack of focus. If he was gone, it would be really easy to make a misstep."

I think the evidence supports McKee. Maybe Starbucks is doing well in these new lines and maybe management is right. Yet consider something simple, like wireless access. Sure, most Starbucks (maybe even all) have wireless available - and given how people have turned the company's locations into places to work and study, that makes sense. However, the access costs money. There there are plenty of competitors, from local coffee shops to chains like Panera Bread, that have free WiFi. Are Starbucks products really so unique and desirable that customers won't defect to alternatives? I doubt it. People go where other people are, and Internet users follow high bandwidth and free access. When the coffee lifers head someplace that isn't so overexposed and that offers unmetered Internet along with places to plug in the laptop, it's only a matter of time until other business goes also.

Another sign of the potentially impending times is how they roast coffee. Starbucks likes heavy dark roasts and genuinely thinks that is good coffee. I remember a number of years ago visiting the Starbucks east coast plant and talking to the people there. I asked why the coffee so often tastes burnt and they looked genuinely puzzled as though completely taken aback by the question. I think they are sincere in their affection for how they do coffee, and that's fine. But what if customers aren't so crazy about it? That doesn't matter if you're tightly focused and serving a particular niche, but when you want that logo everyplace people are, you have to reconsider your strategy.

In 2004 I interviewed Rick Schnieders, the CEO of food giant Sysco. We were talking about the intricacies of managing the supply chain of products coming in one door and then going out the other to customers. He mentioned bacon. “The food service business is one that is varied," he said. "The bacon flavor in the southeastern part of the US is different than in Denver. It’s phenomenal the differences regionally and city to city. In Sysco brand bacon, we may have a supplier from the southeast producing [one style of] bacon and a producer from the west coast [making another]." The company doesn't do that for the sake of being complicated. It is complicated for the sake of customer demands. I find it hard to believe that coffee tastes are really that uniform. Maybe Starbucks is already producing regional varieties, but I've got to wonder, because everywhere I've gone, it still tastes the same - burnt. And when I travel, I look for the other places with non-paid WiFi access - many of which also serve coffee that doesn't taste like charcoal.