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More Bad News for Starbucks

12:51 PM, Oct 16, 2008 • By JONATHAN V. LAST
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I've long thought that Starbucks was an excellent indicator of America's economic health because it was a well-run company whose product is the perfect embodiment of affordable, expendable luxury. If consumers really are anxious about their economic lives, a daily SBUX purchase is the easiest thing to do without.

Earlier this year SBUX announced the first store closings in company history on the heels of its first-ever decline in sales. That looked pretty grim. Chief Howard Schultz did a lot of other tinkering, including closing every store for a couple hours on a February to re-teach the "art of coffee." Schultz maintained that SBUX's core concept was still viable and that the problems the company was experiencing were of its own making: that they had gotten away from selling good coffee and become too invested in side-missions.

The blog Starbucks Gossip carries an item reporting on a new corporate directive from Seattle: During the "art of coffee" in service, baristas were taught to pull espresso shots into glass shot glasses so they could inspect the quality before tossing the shot into your drink cup. Now that's out the window: Starbucks baristas are being told to pull espresso shots directly into the end-user's cup.

Here's the note of one barista:

According to the action item, Starbucks labor scheduling system added 5 seconds labor for each drink to use the shot glasses. Apparently that five seconds per drink is just too expensive for the company and they will now withdraw the five seconds labor and allow baristas to drop shots directly into the cup.

Why is this noteworthy? Because it signals something foundational about Starbucks: The company has decided that the quality of its product isn't what has hurt them. Instead, the new espresso regime is an admission that it's the economic environment that is weighing on SBUX. This may seem obvious to you or me, but it wasn't obvious to the management at Starbucks. And now that they've come face-to-face with reality, they'll finally start grappling with the question of whether or not there's actually a market for $4 lattés in the current environment.

We should all hope the answer is yes.